O'Bannon team calls NCAA a 'cartel,' while NCAA defends business model

OAKLAND, Calif. – The O’Bannon v. NCAA trial is often portrayed as a trial about whether college athletes should be paid. Thursday’s hearing was a stark reminder that it is actually about novel and occasionally perplexing applications of antitrust law and sports economics.

Throughout the day, U.S. District Judge Claudia Wilken, witnesses and attorneys debated the meanings of key economic terms. “Damages”, “injury”, “market”, “cartel”, and “joint venture” all sparked frequent interruption and looks of bewilderment. Even the introduction of dictionary definitions failed to generate consensus.

The day ended with NCAA attorney Greg Curtner stunning reporters outside the federal courthouse by calling the NCAA a cartel. That’s right, a cartel. Don’t read too much into the remark, at least not yet. Curtner also said the NCAA “is a cartel that does good things as opposed to a cartel that does bad things.”

It was a fitting way to end a day where no key term had clear meaning.

There were important developments on Thursday. The NCAA clarified its central argument: amateurism rules attract fans to college sports and removing those rules would damage intercollegiate sports. This argument potentially strengthens the NCAA’s antitrust defense against O’Bannon. The NCAA must show that amateurism rules are more pro-competitive than anti-competitive. To do so, the NCAA has claimed the existence of pro-competitive effects, such as increased consumer demand and enhanced coordination, resulting from amateurism rules. O’Bannon seeks a court order that would enjoin the NCAA from continuing amateurism rules.

Testimony of Daniel Rubinfeld

Pro-competitive effects of amateurism rules were highlighted during the testimony of Dr. Daniel Rubinfeld, the NCAA’s top economist.  Rubinfeld is a professor of law and economics at Berkeley and he designed the U.S. Department of Justice’s antitrust case against Microsoft in the 1990s. 

Rubinfeld insisted that college sports fans are attracted to college sports largely by the amateur status of student-athletes. From this perspective, fewer fans would attend college games, buy merchandise and watch television broadcasts if amateurism rules were lifted. From an antitrust perspective, amateurism rules thus commercially distinguish amateur sports from pro sports. 

To bolster his testimony, Rubinfeld compared consumer interest in college sports with that of minor league sports, including the NBA’s D-League. He stressed that while the talent level in minor league sports eclipses that of Division I sports, attendance and TV ratings for minor league games pale in comparison. Rubinfeld deduced that because Division I sports do not attract fans by offering inferior quality of play, amateurism must be the enticing quality. Removing amateurism rules would therefore downgrade men’s hoops into a less talented and less polished version of the D-League. Or so Rubinfeld asserted.

Rubinfeld also disputed O’Bannon’s contention that “pay-for-play” is a different economic concept from athletes negotiating for the use of their name, image and likeness.  He emphasized that no amateur sports association pays athletes for their labor, endorsements or the use of their name, image and likeness. Rubinfeld cited other college sports organizations, including the NAIA, NCCAA, MCAA, NWAAC and CCCAA, as well as high school sports associations, amateur golf leagues and the U.S. Tennis Association, as not compensating athletes for their play or identity. Why, Rubinfeld wondered, should the NCAA be obligated to act differently?

Rubinfeld also raised concerns for Wilken to consider when she deliberates next month (she is expected to issue a decision by early August). He warned that if colleges must pay student-athletes for their name, image and likeness, some schools would drop out of Division I or drop their sports programs altogether. This would lead to fewer teams for fans to follow and perhaps fewer games, as well. He also admonished that paying athletes in any form would destroy competitive balance in men’s basketball and football.  

Higher revenue colleges would enjoy a major recruiting advantage in a world without amateurism rules, Rubinfeld stressed. Fans would also be less interested in college sports if only a small number of teams enjoyed a realistic chance of success. To illustrate this point, Rubinfeld cited data on the Big East and Atlantic 10 conferences recruiting the same high school student-athletes. Despite Big East schools’ more considerable resources, they only enjoyed a modest advantage in recruitment over the Atlantic 10.  Without amateurism rules, Rubinfeld reasoned, the advantage of big money colleges would be extreme, and conferences like the Atlantic 10 could fold.

Debunking Rubinfeld

O’Bannon’s lead attorney, Michael Hausfeld, began his cross-examination of Rubinfeld before the day concluded. He asked Rubinfeld to explain his choice of the title “The Cartelization of Intercollegiate Athletics” for a section of Rubinfeld’s casebook, and what Rubinfeld meant when he wrote that the NCAA is “an extremely profitable industry.” Rubinfeld insisted that he did not mean the NCAA is an illegal cartel. He also rejected Hausfeld’s assertion that intercollegiate athletics seeks to maximize profits. Rubinfeld pledged the NCAA embraces a “broader set of goals” than merely making money and he referenced academic and other policies contained in NCAA bylaws as evidence.

Hausfeld also questioned Rubinfeld about the anti-competitive aspects of amateurism rules. Notably, Hausfeld led Rubinfeld to acknowledge that while college coaches negotiate salaries in a free and open market, the NCAA and its members have restrained student-athletes from that same market. Student-athletes are limited in compensation to their grant-in-aids. Rubinfeld rejected Hausfeld’s insinuation that the limit was anti-competitive, saying instead it was consistent with the educational goals of the NCAA.

Wilken herself also raised concerns with Rubinfeld’s testimony. For starters, she seemed unconvinced that the integration of academics and athletics counts as a “pro-competitive” quality under antitrust law.  Antitrust law is an area of law concerned with economic markets; its precise relationship with academics is less certain. Rubinfeld responded that educational services should count as a pro competitive quality, since the NCAA operates in an economic market devoted to student-athletes receiving a better education.

Wilken also questioned Rubinfeld’s description of the potential economic harm that would be caused if she lifted amateurism rules. Her questioning should be a source of concern to the NCAA  She intuited that colleges might generate the same revenue in a world without amateurism but merely have to share some of that revenue with student-athletes. This reasoning belies Rubinfeld’s logic that paying student-athletes, in any form, would lead to less revenue for colleges.

Expect more difficult questions for Rubinfeld as his cross-examination continues on Friday, the last day of the trial.

Michael McCann is a Massachusetts attorney and the founding director of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law. He is also the distinguished visiting Hall of Fame Professor of Law at Mississippi College School of Law.