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Antitrust UCL and Privacy

Ninth Circuit Applies Antitrust Immunity to National Sports Governing Bodies Accused of Violating Federal Antitrust Laws Through Imposed Advertising and Logo Restrictions

Elizabeth T. Castillo
Cotchett Pitre & McCarthy LLP

On August 7, 2018, the U.S. Court of Appeals for the Ninth Circuit affirmed the U.S. District Court for the Northern District of California’s dismissal of a complaint alleging that the United States Olympics Committee (Olympic Committee) and USA Track & Field (USATF) engaged in an anticompetitive conspiracy in violation of Section 1 of the Sherman Act by imposing advertising and logo restrictions during Olympic Trials of track and field athletes. Reviewing the case de novo, and relying on the objective of the Ted Stevens Olympic and Amateur Sports Act (ASA) as well as rulings from the Tenth and Eleventh Circuits, the Ninth Circuit concluded that “the advertising and logo restrictions applied by the Olympic Committee and USATF to sponsorship of individual athletes should be afforded implied antitrust immunity under the ASA.” Gold Medal LLC v. USA Track & Field, No. 16-35488, 2018 U.S. App. LEXIS 21928, at *16 (9th Cir. Aug. 7, 2018).

In an opinion by Circuit Judge Johnnie B. Rawlinson, the Ninth Circuit acknowledged that “implied antitrust immunity is not favored” and “can be justified only by a convincing showing of clear repugnancy between the antitrust laws and the regulatory system” Id. at *7-8. The appeals court nevertheless agreed with the district court’s application of implied antitrust immunity under the ASA given the “convincing showing of clear repugnancy” and the finding that advertising restrictions were integral to the Olympics Committee and USATF’s performance of duties under the ASA. Id. at *16-17.

Summary

Appellant Gold Medal LLC d/b/a Run Gum (Run Gum)—created by track star Nick Symmonds—manufactures “compressed functional chewing gum” containing “a proprietary mix of caffeine, taurine, and b vitamins” and sought to sponsor track and field athletes during the Olympic Trials. Id. at 4. Appellees Olympic Committee and USATF are national sports governing bodies that Congress empowered to “promote and finance the participation of American athletes in ‘international amateur athletic competition.” Id. at 3. Run Gum filed a complaint alleging the Olympic Committee and USATF’s advertising restrictions limited the sponsorships of athletes during Olympic Trials. Specifically, the Olympic Committee and USATF restrict the type of individual sponsors that athletes can display on their athletic apparel at Olympic Trials, allowing the logo and names of certain pre-approved manufacturers (e.g., Nike) and excluding other would-be sponsors (e.g., Run Gum).

In a published opinion, the district court dismissed Run Gum’s action based on the ASA’s grant of implied antitrust immunity. Gold Medal LLC v. USA Track & Field, 187 F. Supp. 3d 1219, 1222 (D. Or. 2016). The lower court found the advertising restrictions enabled the Olympic Committee and USATF to fulfill their statutory obligations under the ASA—that is, to raise finances required to organize Team USA and to compete in the Olympic Games. Id. at 1228. The trial court indicated such restrictions “prevent a dilution of the Olympic brand” and permit the Olympic Committee and USATF to “play a gatekeeping function which preserves the exclusivity—and thus value—of the Olympic symbols and name.” Id. at 1230.

In affirming the district court’s dismissal, the Ninth Circuit addressed implied antitrust immunity under the ASA for the first time. The Ninth Circuit found persuasive the Eleventh Circuit’s decision in JES Props., Inc. v. USA Equestrian, Inc., 458 F.3d 1224 (11th Cir. 2006). In JES Properties, the Eleventh Circuit upheld the United States Equestrian Foundation (Equestrian Foundation)’s rule imposing a distance of a minimum of 250 miles apart for A-rated equestrian competitions. Gold Medal, 2018 U.S. App. LEXIS 21928, at *8. The rule’s purposes were to create the most competitive international equestrian team by concentrating elite riders into fewer competitions and to promote equestrianism nationwide by holding recognized competitions in more diverse locations. Id. The appeals court noted the “monolithic control” exercised by national governing bodies and reasoned that applying antitrust laws there would unduly interfere with the operation of the Equestrian Foundation and the ASA. Id. at *8-9. The Eleventh Circuit emphasized it was not required to “focus on whether the rule is an effective or wise way of implementing [the Equestrian Foundation’s] powers” or to “consider whether the particular eligibility rule was necessary or otherwise examine the wisdom of the rule.” Id. at *9.

The Ninth Circuit likewise found persuasive the Tenth Circuit’s decision in Behagen v. Amateur Basketball Ass’n of the United States, 884 F.2d 524 (10th Cir. 1989). In Behagen, the Tenth Circuit reversed a jury verdict in favor of a basketball player who challenging an eligibility rule developed by the Amateur Basketball Association of the United States of America prohibiting a player from participating in amateur events if the player had participated in professional games. Gold Medal, 2018 U.S. App. LEXIS 21928, at *9-10. The Tenth Circuit stated that the antitrust issue should not have gone to the jury because the eligibility rule was exempt from antitrust laws under the ASA. Id. at *10. The appeals court noted the “monolithic control” exerted by the national governing body directly resulted from the congressional intent expressed in the ASA. Id. at *10.

The Ninth Circuit stated reversal of this case was unwarranted under the Fifth Circuit’s decision in Eleven Line, Inc. v. N. Tex. State Soccer Ass’n, Inc., 213 F.3d 198 (5th Cir. 2000). In Eleven Line, the Fifth Circuit declined to afford implied antitrust immunity to nonprofit, volunteer run soccer organizations. Gold Medal, 2018 U.S. App. LEXIS 21928, at *11. The nonprofit organization in that case imposed a rule—which the national governing body for youth soccer did not approve or challenge—requiring soccer players, coaches, and referees to conduct soccer games at sanctioned facilities. Id. Eleven Line’s for-profit soccer facility was not a sanctioned facility. Id. The appeals court recognized, however, the propriety of applying implied antitrust immunity under the ASA when a national governing body develops or approves—as is the case in Gold Medal. Id.at *2.

In summary, the Ninth Circuit ruled JES Properties and Behagen provided sound reasons for affirming the district court’s application of implied antitrust immunity to the advertising and logo restricts promulgated by the Olympic Committee and the USATF. Id. at *13. Pursuant to the ASA, these governing bodies were authorized to “organize, finance, and control the representation of the United States in the competitions and events of the Olympic Games, the Paralympic Games, and the Pan-American Games, and obtain, directly or by delegation to the appropriate national governing body, amateur representation for those games.” Id.; 36 U.S.C. § 220505(c)(3). The broad authority enabled the Olympic Committee and USATF to protect the value of corporate sponsorship and maximize sanctioned fundraising by imposing advertising and logo restrictions. Gold Medal, 2018 U.S. App. LEXIS 21928, at *13-14. The panel majority remarked that “an injunction preventing enforcement of the advertisement regulation ‘would open the floodgates’ the Ninth Circuit held that potential advertisers, some of which might enhance the Olympic brand and some of which might devalue the Olympic brand.” Id. at *17.

Judge Jacqueline Nguyen issued a short concurrence, stating that she disagreed with the majority’s conclusion that defendants are immune from the antitrust claim. She nevertheless opined that the complaint failed to state a claim under Section 1 of the Sherman Act, because it lacked allegations that the USATF or ISOC received any economic benefit from the restrictions. Id. at 18-19.

Implications

In Gold Medal, the Ninth Circuit became the third appellate court to find that implied antitrust immunity applies in the amateur sport context, despite the fact that the ASA does not expressly mention antitrust immunity. This decision illustrates the breadth of antitrust immunity and deference to the defendant’s judgment that federal circuit courts have afforded amateur sports governing bodies under the ASA.

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