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O'Bannon Ruling in Antitrust Case May Save the NCAA In the Long Run

There can be little doubt that yesterday's ruling in the Ed O'Bannon case is a major blow to the NCAA. I would argue, however, that the courts may have just saved the NCAA from itself.

Former UW President and current NCAA President, Mark Emmert, is considering his next step in the Ed O'Bannon case.
Former UW President and current NCAA President, Mark Emmert, is considering his next step in the Ed O'Bannon case.
Jamie Squire

The bad news in yesterday's ruling by Federal Judge Claudia Wilken against the NCAA in the so-called "Ed O'Bannon" case is that no matter how appeals turn out, we are about to witness a disruption in college athletics that makes conference re-alignment feel like it was a simple walk on the beach.

The really bad news is that our resident lawyer, Randall Floyd, is not available to write this piece. You'll be stuck with me.  Pity.

Through the course of this editorial, I'm going to try to layout a case for you as to why this ruling may not be as bad as it is being spun in the media - at least on the specific issue of the ongoing viability of college athletics.  The bottom line here is that the NCAA has been given some wretched medicine that, I think, will help arrest a progressing disease.  However, the path from here to there is full of land mines.

Before we get into my editorial opinion, we must set a baseline for what exactly happened yesterday.  The truth is, a lot happened yesterday - so much so that it would be impossible for me to summarize it for you in just a few dots.  So, to make this easy, you can link to an excellent CBS Sports summary right here.

The bottom line here is that the NCAA has been given some wretched medicine that, I think, will help arrest a progressing disease.

The critical issue here is that Wilken found that the NCAA was in violation of antitrust laws due to the fact that the NCAA organizes amongst member institutions to "set the market value" of a college athlete (in the form of scholarships) AND that they conspired to quantify the value of each individual athlete's name, image and likeness (referred to as NIL) at zero.  The latter point is critical to understanding her ruling.  Wilken is saying that the universities captured value for themselves off of NIL and conspired together to not compensate athletes for that.  The presumption is that the value of the athlete's contribution to the sport they play is what is measured in the value of a scholarship.

Wilken's point is absolutely valid and really cannot be disputed by even the biggest NCAA apologist  The question is what can be done about it.

The remedy laid out by Wilken is the reason that the pundits are calling this a "major loss" for the NCAA.  Much of this perceived "loss" is attributable to the damages that the NCAA are going to have to pay to the plaintiffs - an penalty that will no doubt reach millions of dollars.  Of course, plaintiff attorneys are giddy.  They are in a for a huge payday when and if they get through appeal.

However, the impact on current student athletes isn't as invasive as you think.  The major remedy put forth yesterday the requirement that the NCAA begin a trust fund for current athletes that will pay them out, upon their departure from school, an amount up to $5000 as compensation for their NIL.  This $5000 is a cap per year (in 2014 dollars) for their full college experience and, in fact, could be a lower number at the discretion of the individual schools.  She also outlined some new rulings related to "full cost of attendance".  Beyond that, Judge Wilken actually confirmed the NCAA's approach towards regulating amateurism.  In particular, she noted that the NCAA made its case when it came to preventing players from trying to cash in on their own NIL in the open market.

That last point is one that cannot be overstated in its overall importance.

As college sports has exploded in popularity over the last twenty years, the NCAA has been painfully slow in modernizing and retrofitting its policies to match the times.  There is little doubt that it has evolved into a monopolistic enterprise that exerts its market power in defining the market value for its labor force while cashing in on its productivity.  This is indisputable.  However, Judge Wilken, in her ruling, allowed for the fact that the NCAA has legitimate legal principles to stand on in exerting that influence and maintaining monopolistic powers as long as it does not overtly harm its athletes in doing so.

This is fundamentally a good thing if you are a college football fan.

No matter what happens with trust funds and full-cost-of-attendance, the NCAA's ongoing existence is pretty much assured.  Its power to enforce rules that level the playing field and maintain - at least to some degree - competitive balance remains intact.  Its ability to put up a fence around its member institutions to keep out the commercially-driven agents and hangers-on has not been compromised to any great extent.  Its capabilities to safeguard the sanctity and pageantry of the sports, those things that are at the very essence of why we love the games, still exist.  Nothing about these rulings change that.

What these rulings do accomplish is to ensure that the NCAA's growth is checked and that the rights of the athlete do not get crushed in the process.  The remedy that Wilken has proposed is a fairly humble offering considering the billions of dollars that are at stake in the world of College Football and Basketball.  In fact, the issue of full-cost-of-attendance is one that is already getting addressed proactively by universities, particularly in the "Big  5" conferences.  It is important that the NCAA and their money-driven conference organizations have this check.  It won't necessarily stop the exploitation of these sports, but it will at least ensure that the NCAA thinks twice about every future decision that gets made related to television contracts, video game contracts, playoff system revisions and conference re-alignment.  There is a new stakeholder at the table and their points of view will need to be heard.  In my mind, this will have the net effect of slowing down some of the more ostentatious changes as they get proposed.

This is a good thing.

This is good for the players - they'll have a little more skin in the game.  This is good for the NCAA as certain question marks and gray areas - in particular concerning how they can negotiate with third parties when it comes to the usage of player NIL - are now mostly resolved.  This is good for the fans, too.  First, they are assured that their sport will continue to evolve along a track that more closely aligns with the underpinnings of the sport.  Second, the modern experiences of television, multimedia, and video game offerings that leverage player NIL are now back on the table as possibilities that can be negotiated by the NCAA with the full legal standing provided through this ruling.  Win-Win-Win.

You would think that the NCAA would be turning cartwheels given how badly this could have all turned out.  Obviously, they are not.  I am not blind as to why the NCAA is very disturbed by this ruling, which they are sure to appeal.  The damages to the plaintiffs, of course, are going to be painful.  The specifics of how to implement the remedy will also be a major headache for them as figuring out the details is going to be both expensive and time-consuming for resources that I'm sure the NCAA would much rather spend, ironically, on business development.

The biggest issue, and I am very sensitive to this, is so-called opening of Pandora's Box when it comes to the rights of athletes in Football and Basketball.  Significant questions remain to be asked and answered.  Does this open the door to broad unionization.  Does this create an opening for future liability claims?  What about Title IX and all the non-revenue sports that were excluded from this ruling?  Will the NCAA's ability to make certain strategic decisions related to "good of the game" be compromised in the future?

These are all really good questions to which I have no answers right now.  Those are issues for another day.  Today is all about how the NCAA was saved from itself.