NCAA’s Licensing Pacts Could Have Amounted to Illegal Conspiracy

This posting was written by E. Darius Sturmer, Editor of CCH Trade Regulation Reporter.

A computer software company, the National Collegiate Athletic Association (NCAA), and the NCAA’s licensing arm could have participated in a price fixing conspiracy or group boycott that violated federal antitrust law by not compensating current and former student-athletes for the use of their names, images, and likenesses in products such as video games and by preventing former student-athletes from participating in the collegiate licensing market, the federal district court for the Northern District of California has ruled separately in two related putative class action suits. The defendants’ motions to dismiss each of the suits were denied.

An argument by the software company that its alleged participation in unlawful conspiracy was based solely on the assertion that it agreed not to compensate the former student-athletes—a charge it claimed was "conclusively refuted by the actual terms of the licensing agreements"—was rejected by the court. The actual terms of the licensing agreements did not refute the plaintiffs' allegations, the court found.

Use of Names, Images Without Payment

Student-athletes were required each year, in accordance with NCAA bylaws, to sign an NCAA form consenting to use of their names, images, and likenesses without payment before they could take part in intercollegiate athletics events, the court explained. However, the NCAA and its licensing body allegedly interpreted these forms as existing in perpetuity, allowing them to enter licensing agreements to distribute products containing names, images, and likenesses without payment to those student-athletes even after they had ended their collegiate careers.

The software company's agreement, in the licensing pacts, to not encourage or participate in any activity that would cause an athlete to violate NCAA rules could amount to a "meeting of the minds" with the other defendants not to compensate former student-athletes, when viewed in the context of the NCAA's interpretation of the licensing consent form, in the court’s view.

Evidentiary arguments related to the existence of the form (or a precursor to it) when the plaintiff in one suit attended school in the 1950s, to his signing of such a form or its precursor, and to his proof of allegations involving the agreements between the computer software company and the other defendants were inappropriate on a motion to dismiss, the court held. Materially identical allegations of the defendants’ commercial efforts had already been found sufficient to show an agreement in the other case, the court noted.

Statute of Limitations

The statute of limitations did not bar the claims asserted in one of the suits, the court also held. Though one of the anticompetitive schemes alleged by the former college basketball star who was the named plaintiff in one of the suits—the restraint of competition among schools for his athletic services by "preventing him from negotiating for a share in post-graduation licensing revenue"—took place in the 1950s, it could not be separated from the other type of wrongdoing asserted, which took place later and involved the NCAA’s entry into agreements with third parties to use his image without compensating him. The allegations simply concerned different actions that were taken in furtherance of the overall, multifaceted conspiracy.

An argument that the two alleged schemes should be divided because each involved different actors lacked merit, the court said. The NCAA was a primary part of each scheme, and there was no requirement that all involved in the conspiracy had to have participated in each part of it. The harms alleged were not easily divisible either, the court added.

The former student-athlete sufficiently alleged that the continuing violation doctrine applied, based on the NCAA's continued practice of entering into agreements that allowed the use of his image without compensating him. The complaining athlete pointed to an agreement between the NCAA and a company to offer “classic” college basketball games online, which was among the allegations brought to light in the other suit—a lawsuit that had acted to toll his claims sufficiently to render them timely. The agreement supported an inference that his image as a former college basketball player was included in that agreement.

The decisions are In re: NCAA Student-Athlete Name & Likeness Licensing, 2012-1 Trade Cases ¶77,903, and Russell v. National Collegiate Athletic Association, 2012-1 Trade Cases ¶77,904.