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March Madness – On the Court, and in the Courtroom
March Madness – On the Court, and in the Courtroom
27 March 2024
Series
Blogs
27 March 2024
The extensive antitrust challenges facing the National Collegiate Athletic Association (the “NCAA” or the “Association”) continue to mount, challenging the Association’s positions on everything from student-athlete Name, Image, and Likeness (“NIL”) to its transfer policies.
A newly proposed non-conference basketball tournament slated to be held in Las Vegas this coming November, offering up to $2 million in NIL deals, may eventually challenge the dominance (or monetary terms) of the NCAA’s marquee, March Madness tournament, which is financially critical to the NCAA’s operations. And the Dartmouth men basketball team’s recent vote to become the first unionized college sports team in the United States, if nothing else, promises that more challenges to the NCAA’s aging amateur model are coming.
Against this backdrop, and with the excitement of the NCAA tournament tipping off, we take stock of three important antitrust cases – two NIL related, and one transfer rules focused – that will shape where the NCAA goes next.
As previously explored, NIL collectives are organizations that are generally independent of a school or university whose business model includes pooling together cash from a variety of sources, including boosters, businesses, and fans. NIL collectives are typically founded by well-known, influential alumni and their purpose is to help create or facilitate paid NIL opportunities for student-athletes. State attorneys general and players alike are aggressively challenging the NCAA’s NIL guidelines, alleging issues with compensation, lost revenues, and collusion with third parties illegally depriving players of revenue.
Tennessee v. NCAA
On January 31, 2024, the state attorneys general of Tennessee and Virginia brought a lawsuit against the NCAA in the U.S. District Court for the Eastern District of Tennessee, alleging that it violated antitrust law by restricting its athletes from fully earning compensation. The complaint states that while the NCAA’s guidelines permit current athletes to pursue NIL compensation, the guidelines also impermissibly ban “prospective college athletes (including current college athletes looking to transfer to another school who are in the ‘transfer’ portal) from discussing potential NIL opportunities before they actually enroll” and seeks injunctive relief barring the NCAA from enforcing the NIL-recruiting ban.
On February 23, 2024, the court issued a Temporary Restraining Order (“TRO”) preventing the NCAA from enforcing any rules that would restrict college athletes or recruits from negotiating with collectives or boosters for NIL deals prior to their commitment to a university, and barring the NCAA from enforcing its Rule of Restitution, which would allow the NCAA to impose, retroactively, punishment if the TRO were to be vacated by the Court of Appeals in the future.
The Court’s granting of the TRO dealt the NCAA a significant blow, as illustrated by the NCAA’s decision to halt investigations into third-party NIL deals just a week after its courtroom loss.
House v. NCAA
Similarly, on June 15, 2020, three NCAA current and former student-athletes filed a class action lawsuit in the U.S. District Court for the Northern District of California against the Association, among other college-level sports associations including the Big Twelve Conference, Inc., the Atlantic Coast Conference, the Pac-12 Conference, and the Southeastern Conference, seeking backpay for lost NIL revenue, including lost revenues from broadcasting, video games, and third-party NIL agreements that began after the NCAA modified its NIL rule, which went into effect on July 1, 2021.
On November 3, 2023, the court certified three proposed damages classes: a damages class comprised of football and men’s basketball athletes, a damages class comprised of women’s basketball athletes, and a damages class comprised of athletes who play additional sports. Obtaining class certification is a major hurdle in antitrust litigation, and significantly increases the legal risk to the Association and conferences. If antitrust liability and damages can be established, the NCAA is potentially facing over $4 billion in damages, which would be a major legal and financial defeat for the Association.
Ohio v. NCAA
Earlier this year, several states as well as the District of Columbia and the Department of Justice filed an amended complaint challenging NCAA bylaw 14.5.5.1, or the “Transfer Eligibility Rule” (the “Transfer Rule”), which imposes a one-year delay “in the eligibility of multi-time college athletes transferring between NCAA member institutions” and, according to Plaintiffs, “unjustifiably restrains the ability of these college athletes to engage in the market for their labor as NCAA Division I college athletes.”
Plaintiffs alleged that the Transfer Rule violates Section 1 of the Sherman Act for several reasons, including by harming college athletes by discouraging them from transferring to a different institution where they may benefit academically or athletically; subjecting second-time transfers to a waiver process that applies only after they have been accepted and have enrolled at their new institution; and denying second-time transfers the opportunity to participate in NCAA Division I sports for an academic year after transferring, thereby limiting professional and economic opportunities. On December 13, 2024, a West Virginia federal judge issued a TRO, which was extended to a preliminary injunction prohibiting the NCAA from enforcing the Transfer Rule, and from imposing retroactive sanctions if an ineligible student-athlete competes under an order that is later vacated, stayed or reversed.
This wave of litigation illustrates that stakeholders have been emboldened to raise alleged violations of federal antitrust laws against the NCAA on all fronts. Likewise, the support of multistate AG offices and an aggressive Department of Justice raises the stakes for the NCAA, as it struggles to enforce its own rules and regulations. It is undeniable that the legal environment for the NCAA, and other college associations, is rapidly evolving where the notion of “amateurism” often associated with student-athletes is eroding, and antitrust enforcement has become one of the most critical tools for effectuating change. There may only be two weeks of March Madness left, but these high stakes NCAA cases playing out in courts across the United States will continue – and we will be watching.
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