O'Bannon Trial: Antitrust issues surface in key ways

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OAKLAND, Calif. -- Nearly three weeks ago, on the first day of the O'Bannon v. NCAA trial, the plaintiffs notched an early victory during the direct testimony of Dr. Roger Noll, their expert witness on antitrust economics.

Plaintiffs' attorney Michael Hausfeld revealed an exhibit featuring a "Microeconomics" textbook written by Dr. Daniel Rubinfeld, the NCAA's rival expert on the same topic. In the book, which is now in its eighth edition and can be purchased for around $200, Rubinfeld includes a section called "The Cartelization of Intercollegiate Athletics," which states that the NCAA is a cartel that restricts competition by reducing the bargaining power of its athletes. This allowed Noll to agree with the NCAA's own witness when he classified the NCAA as a cartel.

"To be in a textbook it has to be something that the majority of economists agree to," Noll said that day.

O‘‍Bannon Trial: Day 14
 
Developments: With two days left in the trial, the NCAA continued with its top two antitrust experts. Lauren Stiroh gave her opinion that the plaintiffs have not proven that the NCAA's rules restricting players from profiting from their names, images and likenesses have resulted in an antitrust violation. She said the reason is because their claim hasn't accounted for a reduction in output. The plaintiffs disregarded her testimony as a bogus way of looking at antitrust cases. Daniel Rubinfeld acknowledged that the NCAA was a cartel but said within that it is a "joint venture," which means it has procompetitive justifications for the restraint.

Impact: It will be up to Judge Claudia Ann Wilken to decide if the procompetitive justifications the NCAA provides outweigh the anticompetitive effects of the restraint.

What’‍s ahead: Rubinfeld will finish being cross-examined today. Later in the day, Judge Wilken will ask both sides a series of questions she has that will serve as closing arguments. In the coming weeks, she will issue a judgment.

Thursday, with just two days left for both sides to argue in this historic class-action antitrust case, the NCAA and Rubinfeld would have their chance to set the record straight. But to do so, they would have to find a workaround for that looming problem of Rubinfeld's textbook. He had instructed America's undergraduates for decades that the NCAA was a cartel, so he couldn't disregard his original assertion.

NCAA attorney Glenn Pomerantz jumped right into the issue. There was no point in waiting. They had to address it. Rubinfeld did not back away from the NCAA being a cartel, but he said within the definition of cartel there are two subsets -- a "classic cartel" that overtly conspires to fix prices in order to maximize profits and a "joint venture" that sets a restraint but might have benefits that promotes competition and causes more good in the marketplace than harm.

The NCAA is a joint venture, not a classic cartel, Rubinfeld, said.

"Your view is that the NCAA is not a profit-maximizing industry?" Hausfeld asked in cross-examination.

"I don't think it's totally focused on maximizing profits," Rubinfeld said. "The NCAA has a much broader set of goals."

"Did you identify that broader set of goals other than being extremely profitable in your textbook which has been in publication for over 25 years?" Hausfeld asked.

The answer is no, but to the NCAA, that was beside the point.

With a few turns of phrase and alterations to definitions, it brought into question whether its rules restricting athletes from profiting from their names, images and likenesses amounted to an antitrust violation.

Speaking outside the United States Courthouse after the trial, NCAA legal counsel Greg Curtner described the organization this way:

"It is a cartel that does good things, as opposed to a cartel that does bad things. It is not a classic cartel as Dr. Rubinfeld used the term. But it's a joint venture in the sense that it creates a new product of amateur sports and the things that go with that."

Asked why Rubinfeld did not make that delineation in his textbook, Curtner said that it was meant for students just beginning their study of economics and did not delve into much detail.

Rubinfeld acknowledged that a joint venture can be in violation of antitrust law like any cartel, but it can avoid antitrust injury with its procompetitive justifications. Thursday, he spent most of his direct testimony backing up the NCAA's arguments that the principle of amateurism is necessary to have such a high demand for college sports, that there is integration of academics and athletics and that the restraints that are in place promote competitive balance on the field and in recruiting. For those in the courtroom the last three weeks, those were not new ideas.

But Thursday was plenty interesting.

In the morning, the NCAA's other antitrust expert, Dr. Lauren Stiroh, said that she did not believe the plaintiffs had shown that the NCAA is in violation of antitrust law.

Her theory was that the restraint alone was not enough to prove the plaintiffs' claim and that there has to be evidence of reduced output in a given market.

Stiroh was right that the plaintiffs have not cited a reduced output -- in this case, a reduction in the number of players choosing to play Division I-A football and Division I basketball and in the games that can be enjoyed by consumers -- because the plaintiffs believe the restraint itself is what matters.

In trying to understand Stiroh's point, Judge Claudia Ann Wilken interrupted with a hypothetical scenario: Say there's a drug that helps save children's lives. It is the only drug of its kind, and if drug companies conspired to double the price of that drug, parents would still have to buy it because there are no other options.

The output wouldn't be reduced in that case, so Stiroh said that wouldn't be an antitrust violation.

As an analogy for this case, the NCAA is the group of drug companies and the players are the parents. The drug is the ability to play high-level college athletics, and the NCAA is the only option for that pursuit.

"They are saying it doesn't matter what we do to the players as long as there's no effect on the number of games or the quality of games," plaintiffs' attorney Bill Isaacson said after court.

Added Hausfeld, "It makes no difference that the consumer can't go anywhere else to buy the necessary drug, it makes no difference that the athlete that wants to play big-time college sports has no place else to go other than Division I."

J. Brady McCollough: bmccollough@post-gazette.com and Twitter @BradyMcCollough.


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