Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Ex-college football players allege restraint of trade in NCAA’s compensation ban for licensing of name, image, and likeness, (Mar 12, 2014)

By Linda O’Brien, J.D., LL.M.

The National Collegiate Athletic Association, a video game developer, and a licensing marketer unlawfully engaged in a restraint of trade by conspiring to deprive current and former student athletes of their rights to compensation and continued use their names, images, and likenesses, in violation of the Sherman Act, according to a complaint filed in the federal district court of Harrisburg (Kegans v. National Collegiate Athletic Association, March 10, 2014).

The National Collegiate Athletic Association (NCAA) is a nonprofit organization of approximately 1,200 educational institutions that organizes athletic programs in many of those institutions in the United States. Electronic Arts, Inc. (EA) is an interactive entertainment software company that develops and distributes globally interactive software for video game systems, personal computers, cellular handsets, and the Internet. Collegiate Licensing Company (CLC) is a collegiate trademark licensing and marketing company.

Through the NCAA Constitution and By-Laws, the NCAA adopted regulations governing all aspects of college athletics, including the conduct of member schools and conferences, student athletes, and NCAA business partners. Regarding compensation for student athletes, the NCAA has adopted rules to ensure that student athletes do not receive benefits that could be construed as remuneration for athletic participation, do not trade on their public standing as a student athlete, and are not exploited by professional or commercial interests that would abridge their status as amateurs in their sport.

Bryan Kegans and Ian Smetona were members of the football team in one of the NCAA conferences and had their names, images, and/or likenesses incorporated in NCAA licensed video games, photographs, apparel, and other memorabilia.

Kegans and Smetona filed suit against the NCAA, alleging that NCAA, EA, and CLC violated antitrust laws by engaging in a conspiracy to (1) fix the amount current and former student athletes are paid for licensing, use, and sale of their names, images, and likenesses at zero and (2) foreclose current and former student athletes from the market for the licensing, use, and sale of their names, images, and likenesses.

The complaint alleges that the right to license one’s name, image, and/or likeness is a property right with economic value. Although every current and former student athlete possesses that right to control the use and attendant revenue from the use of their name, image, or likeness, the defendants have received billions of dollars in revenue from the license and sale of broadcast rights and game footage, video games, apparel, photographs, and other memorabilia containing the names, images, and likenesses of current and former student athletes without compensating those whose names, images, and likenesses were used. The NCAA, EA, and CLC have colluded to artificially depress and fix at zero the prices paid to current and former student athletes for the use of licensing and sale of their names, images, and likenesses in the United States.

The conspiracy to deny compensation to current and former student athletes for the use of their names, images, and likenesses arises from commercial regulations by the NCAA, according to the complaint. The NCAA and its member schools and conferences require student athletes to sign form releases to be eligible for intercollegiate athletics. The release grants a limited license to the NCAA to use the student athlete’s name or image generally to promote NCAA championships or other events, activities, or programs. The student athletics receive no consideration for executing the release. While the NCAA rules, on their face, apply only to current student athletes, they are viewed as binding on former student athletes as well.

The complaint states that the NCAA, through its total control of intercollegiate athletics and gross disparity of bargaining power, requires student athletes to sign forms containing non-negotiable terms and bars any athlete that declines to accept the NCAA terms from all intercollegiate athletic competition. Additionally, the NCAA releases are notable for their failure to indicate that legal rights are being relinquished and failure to counsel student athletes, who are sometimes minors, that they may wish to seek legal advice in connection with the release of future compensation rights.

The conspiracy has both horizontal and vertical aspects, according to the complaint. The horizontal aspects emanate from an agreement by NCAA member schools not to compete for student athletes on the basis of monetary compensation—promised, current, or deferred. The vertical aspects emanate from agreements by the NCAA and its member schools with EA, CLC, and other business partners to impose the same restrictions. The NCAA and its members control the collegiate licensing markets for the United States and have the ability to control price and exclude competition.

EA produces the NCAA football and basketball video games franchises and its video game titles simulate football and basketball games between NCAA member schools. Pursuant to a license with CLC, EA replicates team logos, uniforms, mascots and member school stadiums using computer generated images. Although the NCAA license does not permit EA to use player names or likenesses, EA extensively uses actual player names and likenesses with the knowledge and approval of the NCAA and CLC, the complaint charges. Virtually every NCAA Division 1 football and basketball player has a corresponding player in EA video games with the same jersey number and virtually identical height, weight, build, and home state. The only detail omitted from the EA video games is the player’s name on the jersey. At no time has EA paid a current or former student athlete for the use of his name, image, or likeness in those games.

Kegans and Smetona assert claims for unreasonable restraint of trade, refusal to deal, unjust enrichment, deprivation of rights of privacy, misappropriation of name and identity, and violations of Section 1 of the Sherman Act. The action seeks an accounting, declaratory and injunctive relief, disgorgement of profits, damages, and any other just and proper relief.

The case is No. 1:14-cv-00444-SHR.

Attorneys: Steve D. Shadowen (Hilliard & Shadowen LLP) and Robert C. Hilliard (Hilliard Munoz & Gonzales LLP) for Bryan Kegans and Ian Smetona.

Companies: National Collegiate Athletic Association; Electronic Arts, Inc.; Collegiate Licensing Company

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