On 8 August, U.S. District Judge Claudia Wilken ruled in favour of former UCLA basketball player O'Bannon and 19 others, declaring that NCAA's longstanding refusal to compensate athletes for the use of their name, image and likenesses (NILs) violates US antitrust laws. In particular, the long-held amateurism justification promoted by the NCAA was deemed unconvincing.

On 14 November, the NCAA has appealed the judgment, claiming that federal judge erred in law by not applying a 1984 Supreme Court ruling. One week later, the NCAA received support from leading antitrust professors who are challenging the Judge Wilken’s reasoning in an amicus curiae. They are concerned that the judgment may jeopardize the proper regulation of college athletics. The professors argued that if Wilken’s judgment is upheld, it

“would substantially expand the power of the federal courts to alter organizational rules that serve important social and academic interests…This approach expands the ‘less restrictive alternative prong’ of the antitrust rule of reason well beyond any appropriate boundaries and would install the judiciary as a regulatory agency for collegiate athletics”.   

Background 

The plaintiff, Edward O’Bannon, competed for the University of California, Los Angeles (UCLA) during the 1991-1995 seasons. In the 1994-95 season, O’Bannon was elected MVP of the UCLA national championship basketball team and also received the John R. Wooden award as the nation’s most outstanding men’s basketball player.  

In 2009, O’Bannon saw his likeness in a video game authorized by the NCAA for which he provided no consent and received no compensation. In July 2009, he filed a class action lawsuit on behalf of current and former NCAA student-athletes against the NCAA, alleging that college football and men's basketball players should be allowed to sell their NIL to the NCAA.

The defendant, the NCAA, is an unincorporated organization consisting of colleges, universities, and conferences. The NCAA rules impose strict limits on the amount of compensation that cannot exceed the value of a full “grant-in-aid” consisting of tuition and fees, room and board and required books.[1] As such, the NCAA prohibits current student-athletes from receiving any compensation from their schools for the use of their NIL, suggesting that the whole college sport relies upon “amateurism”. To participate in NCAA athletics, however, the NCAA requires each student-athlete to sign Student-Athlete Statement (Form 08-3a), which grants the NCAA the right to use the athlete’s NIL to “promote NCAA championships or other NCAA events, activities or programs.”  

Arguments of the parties

Plaintiff  

O’Bannon’s complaint alleged that the NCAA’s college sports amateurism rules harmed student-athletes as it constituted a price-fixing agreement among FBS football and Division I basketball schools. Under antitrust law[1], O’Bannon asserted that the violation unreasonably restrains trade in the market by foreclosing current and former NCAA men’s basketball and Division I-A football (FBS) players from receiving compensation for the use of NIL. The NCAA accomplishes this unreasonable restraint of trade in part by requiring all student-athletes to sign Form 08-3a. Mr O’Bannon asserts that the Form 08-3a is used by the NCAA to mislead and compel uninformed student-athletes to forfeit their rights not to be compensated for their NIL.  

Claimant

 The NCAA put forth a number of procompetitive justifications for amateurism:

• compensating athletes would negatively impact competitive balance among FBS football and Division I basketball teams;  

• paying players would adversely affect the integration of academics and athletics on campuses. In practice, athletes would spend more time doing sports than studying;

• restricting compensation increases output of its product and if lifted, schools might disregard Division I;

• preservation of amateurism is essential to its core identity, as it protect the popularity of sport. The claimant cites the example of the Olympics, which are deemed popular because athletes are not compensated.  

The decision 

On 8 August 2014, the Court found that the NCAA is a cartel that exercises market power, fixes prices, and restrains competition. The NCAA, therefore, must allow schools to redistribute to athletes some of the money it generates by licensing an athlete’s name, image and likeness to companies. In her injunction, Judge Wilken issued that the NCAA is restrained from prohibiting an athlete from getting deferred compensation of $5,000 or less per student-athlete per year. The money is to be paid in a trust fund that could be tapped after college. Furthermore, the NCAA cannot cap the value of a scholarship below the full cost of attending college (which is few thousands more than the current scholarship).[2]

The Court rejected each of the NCAA’s pro-competitive justifications to defend amateurism. Wilken ruled that the NCAA failed to consistently adhere to a single definition of amateurism. In short, Judge Wilken put the longstanding model of amateurism (the core principle of college sport since 1906) at risk in a few sentences: 

“The historical record that the NCAA cites as evidence of its longstanding commitment to amateurism is unpersuasive. This record reveals that the NCAA has revised its rules governing student-athlete compensation numerous times over the years, sometimes in significant and contradictory ways. Rather than evincing the association’s adherence to a set of core principles, this history documents how malleable the NCAA’s definition of amateurism has been since its founding.” 

Additionally, the Court also held that people would not stop watching college sports if players are paid.[3] The fans care about watching football, but not whether athletes are paid or not.

Analysis 

This ruling is a “game-changer” because the Court jeopardizes the long-standing fundamental principle of amateurism on which the whole economic and social system of the NCAA lies. Wilken had no use for the amateurism defence to justify the restraints on paying players. It is particularly ironic that the NCAA seems to be a victim of its own success. No one would have imagined at the time when the NCAA came to existence in 1906, that college sport would grow into such a big business.

Ironically, again, the NCAA was also a victim of its own witness. Daniel Rubinfeld, a prominent antitrust expert, claimed that NCAA operates as a “joint venture which imposes restraints” on trade. This confession is definitely reflected in the Court’s subsequent finding, suggesting that Mr Rubinfeld never denied that the NCAA restricts competition among its members for recruitment.[4] To make matters even more complicated, Mr Rubinfeld had called the NCAA a “cartel” in a prior microeconomics textbook: “The NCAA restricts competition in a number of important ways. To reduce bargaining power by student-athletes, the NCAA creates and enforces rules regarding eligibility and terms of compensation.” Nevertheless, he still considered that the anti-competitive restraint was lawful because it serves procompetitive purposes.

Despite the appearances, however, the situation is not as bad as it looks for the NCAA. It is true that student-athletes will probably be compensated in some form or another. Nevertheless, the cap of $5000 to the compensation could have been higher and it is to be paid to a trust fund. Furthermore, the NCAA can continue preventing student-athletes from endorsing commercial products or selling their NIL rights individually, as the NCAA and its schools have the right to protect them against “commercial exploitation”. Hence, it is likely that Judge Wilken did not intend to blow up the entire NCAA’s system, but to change it gradually. From the point of view of the NCAA, it would have been way worse if the Court had issued an injunction to enter in a collective bargaining agreements with student-athletes.[5] Nevertheless, the ruling opens a space for broader pervasive changes to college athletics in the future.

Appeal 

On 14 November, the NCAA appealed the judgment. The NCAA argues that a federal judge erred in law by not applying a 1984 Supreme Court ruling that the NCAA believes protects amateurism in college sports. The Supreme Court held that “athletes must not be paid” in order to preserve the character and quality of the product. Furthermore, the NCAA argued that other lower district courts have upheld the 1984 ruling.

In support of the NCAA’s appeal, fifteen antitrust-law professors filed an amicus brief. They argue that U.S. District Judge Claudia Wilken “misapplied” the “less restrictive alternative prong” of the rule of reason when she found that the NCAA violated antitrust law. The professors added that precedents show that the Court overstepped its bounds. Furthermore, allowing antitrust courts to “impose their own views” could leave other organizations open to suit. They also argued that following Judge Wilkin’s reasoning in the O’Bannon case, a court could even “require compensation for Little League baseball players” at whatever level that seems ‘fair’ by a district judge.

What’s next? 

If the NCAA loses the appeal, the injunction will take effect the next recruiting cycle; it will affect athletes entering school after 1 July 2016. In such scenario, the ruling will open more space for competition between the schools, in the form of the design of compensation packages. It seems that the volcano did not erupt yet. However, the volcano might finally and irremediably erupt if the next legal battle against the NCAA is successful: the Jeffrey Kessler case. He seeks to remove all scholarship limitations imposed by the NCAA and not only be tied to the NIL.  Kessler aims to introduce a free market in college sport with players receiving salaries in addition to scholarships. In short, he wants to turn recruits into free agents.  An outcome in his favour would change US College Sport forever. I will keep you posted!

[1] O’Bannon v  NCAA, No. 09-3329  CW, at 19  (N.D. Cal. Aug. 8, 2014)

[2] Sherman Antitrust Act, 15 U.S.C.A.  §1 (2011): “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”

[3] Cost of Attendance at Buffalo, for example, is $36,483 while Athletic Scholarship is $33,566. See http://www.ubbullrun.com/2014/6/25/5840110/full-cost-of-attendance-scholarships-what-does-it-mean-at-buffalo

[4] O’Bannon v NCAA, at 28-30.

[5] O’Bannon v NCAA, at 22.

[6] For example, in NBA collective bargaining agreement is the contract between the NBA (the commissioner and the 30 team owners) and the NBA Players Association that dictates the rules of player contracts, trades, revenue distribution, the NBA Draft, and the salary cap, among other things.

Editor’s note: Rhys Lenarduzzi is a final semester Bachelor of Law (LL.B) and Bachelor of Philosophy (B.Phil.) student, at the University of Notre Dame, Sydney, Australia. As a former professional athlete, then international sports agent and consultant, Rhys is interested in international sports law, policy and ethics. He is currently undertaking an internship at the T.M.C. Asser Institute with a focus on Transnational Sports Law.

As recently as September 2020, questions were raised in the European Parliament on the non-application of training compensation to women’s football. Whilst this blog will predominantly consider potential inconsistencies in reasoning for and against training compensation in men’s and women’s football, the questions before the Commission were largely on the theme of disrespect and discrimination. Somewhat unfortunately, the questions raised were side-stepped, with Ms Gabriel (Commissioner for Innovation, Research, Culture, Education and Youth) simply stating that: “The TFEU does not give the Commission the competence to interfere in the internal organisation of an independent international organisation such as FIFA.” This might be true in theory, though one might feel some degree of uneasiness if privy to the Commission’s role in the 2001 FIFA regulatory overhaul.

It is currently explicit in the regulations and the commentary, that in women’s football, signing clubs are not required to compensate training clubs for developing players, through the training compensation mechanism that exists in men’s football. Though it is a contentious comment and as will be expanded below, this may not have always been the case.

At Article 20 of the FIFA Regulations on the Status and Transfer of Players (RSTP), one will find that the principles of training compensation shall not apply to women’s football. Further, in FIFA’s recently released Women’s Football Administrator Handbook (the handbook), it states that disputes relating to training compensation are limited for the moment to male players only.[1]

Regulations on solidarity contributions on the other hand do apply to women’s football, but given transfer fees are not so common, the use of the mechanism is not either. As an indication of how uncommon the activation of the solidarity contribution mechanism in women’s football might be, FIFA reported in the handbook just four claims with the Players’ Status Department in 2016 (three claims involving the same player), and zero since.[2] That is in comparison to hundreds of claims made per season in men’s football, where signing and owing clubs had not fulfilled their obligation to pay the solidarity contribution.

Given the aforementioned, this blog will largely focus on training compensation and how it came to be the case that this mechanism, often presented as critical in the context of men’s football, does not apply in women’s football. To do so, I will first discuss the reasoning advanced in an unpublished CAS award, which one may reasonably suspect played a fundamental role in shaping the current exemption. I will then turn to FIFA’s timely response to the award and the adoption of its Circular No. 1603. Finally, I will point out the disconnect in FIFA’s decision to adopt two radically different approaches to the issue of training compensation in male and female professional football.

1. CAS 2016/A/4598 WFC Spartak Subotica v FC Barcelona

This little-known, David vs. Goliath, Court of Arbitration for Sport (CAS) award on appeal of a FIFA Dispute Resolution Chamber (DRC) decision, might be what prompted FIFA to make the relevant changes excluding women’s football from the scope of Article 20 RSTP in 2017. Though not a public case, one might reasonably suspect the decision was the nudge that led FIFA to change the regulations and explicitly state that training compensation does not apply to women’s football, given the timing and the fact that this was ultimately a decision that went counter to the internal decision at the DRC.

A significant consideration for the CAS and one which needed to be made clear by the panel, was the distinction between whether training compensation should apply versus does apply. The CAS deemed its task was not to consider the former, regarding the latter it found the Serbian women’s club reasonably interpreted the then applicable RSTP as covering women’s football, given in other places within the same regulations there is a concerted effort to make no discriminatory distinction between the genders, and, the regulations at this stage did not explicitly state that the mechanism did not apply to women’s football.

Consequently, the award provided that FC Barcelona was to pay 2.5 years at the category 1 rate of EUR 90,000, amounting to EUR 225,000 (plus 5% interest and costs) to WFC Spartak Subotica despite numerous attempts from FC Barcelona’s legal team to aver training compensation does not apply to women’s football.

Some of the ill-received arguments were attempts to raise the question of whether training compensation should exist, largely pointing at the commercial differences and size of the game in women’s and men’s football. The panel would not deal with these questions and instead insisted on considering whether it does exist, per the regulations as they were. FC Barcelona attempted a comparative argument with Futsal where the training compensation mechanism does not apply. This was also dismissed and deemed an improper comparison. Not due to the comparison per se however, but rather the panel concluded the point may well go against the respondent, given:

“the fact that FIFA included an express exception of futsal but no equivalent exception of women’s football is at least some indication that it did not intend to exclude women's football.”[3]

The applicant relied heavily on that which was stated at the “General Provisions’ section of the RSTP (2012), namely “Terms referring to natural persons are applicable to both genders.” The tribunal saw the provision as favourable for the applicant and that the burden was with FC Barcelona to show that the RSTP ought to be interpreted another way, by either providing some additional context, history, intention or similar. The respondent was unable to do so and instead relied heavily on the previous DRC decision in its submissions and did not submit much by way of evidence at all. The panel paid particular attention to the lack of evidence given by the respondent and that this case may have looked differently had FIFA accepted an invitation to join, as FIFA may have been able to shed light on how the regulations ought to be interpreted, had they been able to provide the context and intention that FC Barcelona could not.[4]

Ultimately when it came to FC Barcelona’s submissions and the prior decision of the DRC, the CAS was uncomfortable with “a distinct undercurrent of a policy decision that the RSTP should not apply to women's football”[5] when a rigorous interpretation of the RSTP (2012) as it stood then was what was required. Furthermore, the panel landed at “an overall conclusion that the DRC reasons are flawed at various points and did not sufficiently grapple with the arguments for the Appellant.”[6]

2. 2017 amendments and FIFA Circular No. 1603

Though FIFA declined an invite to join the above CAS case,[7] it is in a sense as though the submissions made by FC Barcelona’s legal team were simultaneously on behalf of FIFA, given a heavy reliance on the prior DRC decision and what followed. In what may have appeared a clarificatory exercise at the time, it appears the 2017 amendments announced via FIFA Circular No. 1603 were at least in part a response to the above CAS case.

Within that circular, FIFA announced that the regulations “now explicitly specifies that the principles of training compensation do not apply to women's football.” It made a point that the express amendments pertaining to training compensation now reflect existing DRC jurisprudence and “clarify the always intended meaning”. Whilst that clarity is direct, it may also contain an undertone of frustration in relation to the above CAS case. FIFA were undoubtedly addressing what it perceived as a problem, though it is the following from Circular No. 1603 that might raise more questions than offer solutions: “It should be noted that the existing training compensation formula would act as a deterrent to the movement of female players and consequently stall the development of the women's game.” Sound familiar? This will be expanded upon below.

Finally on training compensation and women’s football and before addressing other issues therein, Circular No. 1603 states that “FIFA administration is working on a specific concept to be applied to the women's game in consultation with the stakeholders, bearing in mind the overall objective to promote and enhance the development of women's (professional) football.” Whilst this is for another blog and for another day, one can reasonably wonder what has been done. Or might it be the case that refraining from more regulation has resulted in more growth in the women’s game?

Noteworthy in hindsight, given the CAS case is and was not public, is that FIFA did not have the pressure it may have otherwise had to explain its regulatory amendments regarding training compensation in women’s football, that were contrary to the CAS decision. Whilst the CAS left the door open for sound arguments to be made against training compensation in women’s football, they found serious flaws in the arguments made by FC Barcelona, as well the reasons given by the DRC in the initial decision. Most notable on this front might be an out-and-out rejection of a comparison with futsal, as well rejecting a general distinction between the men’s and women’s game as being useful.  Despite this, it appears FIFA proceeded to explicitly enshrine in the RSTP that training compensation does not apply, without dealing with the fundamental questions raised but not necessarily answered in the CAS case. It is just interesting to note, that the CAS award that was challenging FIFA’s rationale was coincidentally kept confidential. This might speak for greater (and systematic) transparency with regard to the CAS’ appeal awards.

3. The Incoherence of a Double Standard Between Men’s and Women’s Football

It is certainly true, in a very general sense, that women’s and men’s football are in a different place commercially inter alia. However, as mentioned in my introductory blog, men’s football has since the late 1800s in the form of the ‘retain and transfer’ system, and now with the current mechanisms, had systems that were claimed to be imperative to incentivise training by compensating clubs for developing players (not to mention the growth and survival of the game). So why is the same rationale not applied to women’s football? Might it be reasonable to conclude that women’s football in its current stage of economic development is at an equivalent stage to where men’s football was at some point between then and now, where a system for compensating training clubs and incentivising clubs to develop youth did exist?

In any case, the rationale appears flawed, as comparing men and women’s football in the general sense is not a useful exercise. Just a brief analysis of the gap between the richest and poorest clubs in men’s football exposes it so. Other than the fact both entities are football clubs, what is the same about Real Madrid of Spain and Rèal Comboni of the Central African Republic? What are we to make of a comparison of Olympique Lyonnais Féminin (the most successful women’s football team in history and a commercially successful club and story), and Liberty Professionals F.C. men’s team of the Ghana Premier League (who do not always fill their 2,000 seat stadium)?

At paragraph II. 19 of the prior DRC decision to the above CAS case “the DRC deemed necessary to stress that the award of training compensation for the transfer of female players could possibly even hinder the further development of women’s football and render the previous efforts to have been made in vain”. A near identical claim to that made in the aforementioned FIFA Circular. This may be the case, but isn’t this just an extension of the “hindrance effect” I referred to in my previous blog regarding African players? Though not the exact same flavour of hindrance, as in the case of the African player I was largely referring to the mechanism hindering an individual from being able to transfer freely. In this instance the hindrance might be more macro in that, a growing women’s club may be set back if forced to pay compensation to the training clubs of the players they sign and in turn the women’s game suffers. In any case, the notion that training compensation might act as a deterrent or hindrance being exclusive to women’s football is absurd in theory, and even more so in my experience in practice.

The commercial differences are widely stated and perhaps overstated as reasons why signing clubs ought not or could not pay training compensation in women’s football. Whilst such a claim may at least contain a grain of truth, the commonly used argument overlooks the fact that the cost of developing and training players at grassroots level, that which is the subject of compensation, is often similar within nations and certainly across the genders. In the above CAS case, the only witness and the president of both Spartak Subotica men’s and women’s clubs, Mr Zoran Arcic, stated that the costs were almost identical for men and women and that they were paid approximately the same amounts of monthly salaries or scholarships.[8]

It has been argued that Futsal is comparable in its development with women’s football commercially, and that is why the principles of training compensation apply to neither. At paragraph II.16 of the DRC case prior to the appeal at CAS, it was averred that "the grade of professionalism reached in futsal also lies far behind the one of eleven-a-side men’s football insofar, according to the DRC, the situation may be considered as comparable to the one of the women’s game.” However it has been reported that some futsal players are signing contracts in excess of EUR1 million. How then could one conclude that training compensation regulations should apply to a small men’s club in South America or Africa, or any confederation for that matter, with entire budgets much smaller than individual players’ salaries in futsal or women’s football, when the evidence suggests the commerciality of futsal and the women’s game in size and opportunity trumps many men’s football entities.

In 2019, FIFA initiated a Club Solidarity Fund for the Women’s World Cup, which compensates or rewards clubs that trained and developed players from the age of 12 who participated in the World Cup.[9]  What is one to draw from this positive though peculiar commitment? Are only training clubs that had the fortune of one of their players going on to a world cup, worthy of being compensated? This appears inconsistent with far reaching societal effects training compensation was said to have and why it was deemed justified in the relevant cases, commentary and media. Might it be the clubs that are not able to produce players of a high enough quality to go to a World Cups that need the funding? Further, this fund will not trigger the same alleged incentives to train players that the training compensation mechanism apparently has.

An array of arguments and justifications made for a system that hinders free movement to a considerable degree, though incentivises training, was embraced in the Bernard[10] ruling of the Court of Justice of the EU. So how come women’s football should fall outside of this widely acknowledge necessity to encourage training according to FIFA? Nowhere in Bernard can one find a specific reference to men only when the importance of encouraging training is explored at length. Elsewhere in EU policy documents one finds instead the explicit recognition that “investment in and promotion of training of young talented sportsmen and sportswomen in proper conditions is crucial for a sustainable development of sport at all levels”.[11] Until the CAS award discussed above, FIFA had appeared to argue that such investment only eventuates if a training compensation system is introduced. Hence, this strange double standard between men and women’s football might deserve a much more elaborate explanation than the one put forward by FIFA.[12]

4. Conclusions

If it is the case that training women is the same or similar in cost as training men, and it is that actual cost that the training compensation mechanism is geared towards incentivising clubs to spend on youth and then be compensated for, then one might have difficulty in concluding the principles of training compensation should apply to one and not the other. If it is the case that there is vulnerability of women’s clubs and in turn of the women’s game if they had to pay training compensation, and there exists a myriad of men’s clubs in the same economic predicament, might that say something about the appropriateness of the mechanism more broadly?  Ought a player’s free movement be prioritised simultaneously with the financial viability of mid to low wealth clubs, which raises questions about the suitability of the mechanism across the genders, yet is significantly amplified by its apparent inappropriateness for women's football. 

The identification of the various flaws in the justifications for the regulations is to say nothing of whether the systems ought to exist. Rather, it is to highlight that two sets of contradictory rules are operating within the FIFA regulations and the arguments for the current state of affairs are philosophically and economically flawed.

It appears that the women’s football community has bought into this notion around transfer fees, etc. What is culturally happening then is that clubs are more likely to let a woman follow her dreams and not stand in the way in the form of demanding transfer fees (and cannot in the form of training compensation), as the concept of fees is a relatively foreign one in comparison to the men’s game. This can at first glance appear unfortunate that women’s clubs are not being compensated, but it could just as plausibly be uncovering that the important principles of free movement ought to trump a flawed redistributive system, and that in fact a system of redistribution in football could (and maybe should) be entirely divorced from the transfer system and the movement of players.

[1] FIFA Women’s Football Administrator Handbook 2020, 125.

[2] Ibid, 118.

[3] CAS 2016/A/4598 WFC Spartak Subotica v FC Barcelona at 54.

[4] Ibid at 49.

[5] Ibid at 55.

[6] Ibid at 55.

[7] Ibid at 104.

[8] CAS 2016/A/4598 WFC Spartak Subotica v FC Barcelona at 73.

[9] Women’s Football Administrator Handbook 2020, 151.

[10] Case C-325/08 Olympique Lyonnais SASP v Olivier Bernard and Newcastle UFC, ECLI: EU: C:2010:143

[11] Commission’s White Paper on Sport of 11 July 2007,6.

[12] Consider also at Annex IV to the Conclusions of the French Presidency from the European Council meeting in Nice, where it was said the “training policies for young sportsmen and women are the life blood of sport, national teams and top-level involvement in sport and must be encouraged”