THE SPORTS REPORT: Sports, Consumer Protection, and Antitrust What s Hot in 2015!

Transcription

1 THE SPORTS REPORT: Sports, Consumer Protection, and Antitrust What s Hot in 2015! June 16, 2015 Noon to 1:30 PM Eastern Presented By: Trade, Sports, & Professional Associations and Consumer Protection Committees

2 Agenda Brief introduction, followed by: Update on O Bannon v. NCAA, presented by Chelsea Black Current Cases: The MLB Exemption, presented by Christopher Ries Legal Issues in Fantasy Sports, presented by Marc Edelman Student-Athletes, or Just Athletes?, presented by Swathi Bojedla Antitrust and Secondary Ticket Markets, presented by Erika Douglas 2

3 Update on O Bannon v. NCAA Presented By: Chelsea Black McDermott Will & Emery 3

4 Overview Plaintiffs: Class action comprised of current and former NCAA Division I men s basketball and FBS football players Named Plaintiff Ed O Bannon Source: 4

5 Overview Allegation: NCAA s rules prohibiting member schools from allowing studentathletes to receive compensation for the use of their names, images and likenesses in television broadcasts, video games and archival footage violated 1 of the Sherman Act 5

6 Ed O Bannon in Action Source: Avatar from EA Sports NCAA Basketball Video Game Source: 6

7 District Court Rules for the Plaintiffs Northern District of California conducted full rule of reason analysis. Rules promoting amateurism deemed procompetitive only to the extent they were necessary to maintain the popularity of FBS football and Division I basketball. Held that, because challenged restraints play a limited role in driving consumer demand, they might justify a restriction on large payments to student-athletes while in school, but they do not justify the rigid prohibition currently in place. 7

8 But There s a Catch Injunction prohibits NCAA from restricting member schools from offering recruits a limited share of the revenues generated from the use of their names, images, and likenesses, but NCAA can cap compensation paid while in school, provided cap is not below cost of attendance NCAA can cap amount of compensation paid after leaving school, provided cap is not below $5,000 per year in 2014 dollars Injunction does not take effect until July

9 NCAA Appeals Central dispute on appeal is proper interpretation of Supreme Court s 1984 opinion in NCAA v. Board of Regents of the University of Oklahoma. NCAA: Preserving the tradition of amateurism in college sports is a legitimate procompetitive goal for the NCAA to pursue because amateurism is essential to the character and quality of the [NCAA s] product. Plaintiffs: Quoted language is dicta, and NCAA lost in Board of Regents. 9

10 Will the Ruling Stand on Review? Oral argument took place on March 17, 2015, before a three-judge panel of the Ninth Circuit. Judge Bybee asked whether a $5,000 cash award for players upon leaving university would violate a theoretical notion of amateurism, remarking, it looks to me like we ve crossed the line and even though the line was not clearly drawn, that at least it crosses some theoretical line about pay for play. Judge Quist asked for clarification on the guiding principle behind the $5,000 figure. "Who's to say that $5,000 or $6,000 or $10,000 whether put in trust or not who's to say that it's going to stop there?" 10

11 Current Cases: The MLB Exemption Presented By: Christopher Ries U.S. Department of Justice, Antitrust Division 11

12 Background San Jose MLB Rules 30 member clubs must play within their designated operating territory. No franchise shall be granted an operating territory within the operating territory of a member without 3/4 club approval. Bay Area Teams The As Alameda and Contra Costa Counties (The East Bay) The Giants San Francisco and Silicon Valley Oakland wants to move to Santa Clara/San Jose San Jose sets aside land for stadium 2009 to Present MLB investigating Potential Move San Jose files suit MLB moves to dismiss under Baseball exemption The views expressed in this presentation are not purported to represent those of the U.S. Department of Justice. 12

13 Background Lerner Horizontal Agreements between MLB, RSNs, MVPD Content Exclusivity MLB teams agree to grant regional sports networks (RSNs) exclusive broadcasting rights within an operating territory Non-nationally televised Home and Away games Territorial Exclusivity RSNs agree with MLB teams to broadcast their content only to Cable, Satellite or Internet (MVPD) providers in a specific operating territory Outside of operating territory, RSN content can only be sold by MLB bundled with all other games Game Exclusivity Blackout of non-rsn content within operating territory 13

14 Background Lerner Example Bay Area MLB Broadcast choices 2 RSN choices in Bay Area (Cable or Directv) San Francisco RSN CSN Bay Area Oakland CSN California Suit MLB Bundle ( Cable, Directv, Internet) All Teams Except Oakland San Francisco Team Playing Oakland Team Playing San Francisco Bundle Purchasers who wanted to purchase RSNs instead of bundle MLB moved for summary judgment on baseball exemption 14

15 The Baseball Exemption Baseball s Antitrust Exemption The Supreme Court s Baseball Trilogy Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs concluded that MLB was not engaged in interstate commerce: business of baseball purely state affairs Toolson v. New York Yankees, Inc. affirmed Federal Baseball and offered a new justifications for the exemption: stare decisis concerns and positive inaction by Congress Flood v. Kuhn rejected Flood s antitrust challenge to the reserve clause in MLB player contracts, reaffirming exemption, cited need for legislative action Curt Flood Act passed by Congress on 1998, making only player employment issues subject to the Sherman Act 15

16 Application of the MLB Exemption San Jose 9 th Circuit San Jose argued limitations to exemption: Reserve Clause Restraint must be sufficiently related to baseball s unique characteristics and needs. Exemption extends to the business of baseball Geographic Franchise location is key to organization of league Distinguished collateral activities Finley 512 F.2d 164 stadium concessionaires Inferred Congressional Intent - Curt Flood Act Supreme Court Cert. Abolishment of Exemption Need for clarification on scope of business of baseball 16

17 Application of the MLB Exemption Lerner S.D.N.Y. Exemption Does Not Apply to Broadcasting Agreements Inferred Congressional intent The Sports Broadcasting Act (1961) Limited immunity for broadcasting Excluded most territorial restrictions, except within operating territory But see Flood Act Not central to business of baseball Henderson, 541 F. Supp. 263 Broadcasting is separate and distinct Emergency Appeal to 2 nd Cir. denied. Court recently granted 23(b)(2) certification 5/15/

18 Legal Issues in Fantasy Sports Presented By: Professor Marc Edelman Zicklin School of Business at CUNY Baruch College 18

19 Legal Issues in Fantasy Sports State Gaming Law Issues Federal Gaming Law Issues Intellectual Property Issues Professor Marc Edelman s Fantasy Sports Law Takeaways 19

20 State Gaming Law Issues The Three Elements: Consideration Chance Reward 20

21 Federal Gaming Law Issues Interstate Wire Act Illegal Gambling Business Act Professional and Amateur Sports Protection Act UIGEA 21

22 Intellectual Property Issues Patent Copyright Trademark Right of Publicity 22

23 Professor Edelman s Fantasy Sports Law Takeaways Legality of fantasy sports contests varies by format and state Issues are more complex than often presented by the media Contact Professor Edelman: Webpage: Marc@MarcEdelman.com 23

24 Student-Athletes, or Just Athletes? Presented By: Swathi Bojedla Hausfeld 24

25 Student-Athletes, or Just Athletes? Background O Bannon pro-competitive justifications Mark Emmert: What we live for is the education of our athletes. Myles Brand: [T]hose who participate in athletic events are students, and students first. Performance in exchange for education 25

26 Student-Athletes, or Just Athletes? Baseball Men s Basketball Division I Football All Other Men s Sports Women s Basketball All Other Women s Sports Average Time in Hours % Reporting Sport 6+ Hours/Day 48% 38% 52% 32% 32% 29% Baseball Men s Basketball Football (FBS/FCS) All Other Men s Sports Women s Basketball All Other Women s Sports Athletic Hrs

27 Student-Athletes, or Just Athletes? UNC Men s Basketball-Related Revenues, UNC Football- Related Revenues, $10,448,595 $12,243, $11,019,438 $15,152, $12,485,719 $15,156, $13,494,692 $15,120, $15,016,479 $17,332, $17,216,083 $17,407, $17,215,199 $18,147, $17,831,583 $20,687, $19,852,544 $24,163, $20,551,168 $22,077, $19,672,012 $26,385, $24,011,268 $27,626, $19,632,779 $31,481,105 27

28 Student-Athletes, or Just Athletes? UNC academic fraud AFAM department Paper classes 28

29 Student-Athletes, or Just Athletes? 29

30 Student-Athletes, or Just Athletes? 30

31 Student-Athletes, or Just Athletes? UNC NCAA SoL No Contract SoL No Duty No Material Breach 31

32 Antitrust and Secondary Ticket Markets Presented By: Erika Douglas Davies, Ward, Phillips & Vineberg, LLP 32

33 Past Antitrust Consideration of Ticketmaster Remedies in Ticketmaster Entertainment Inc. merger with Live Nation Inc. (2010) " The proposed settlement will protect competition for primary ticketing, which will in turn maintain incentives for innovation and discounting" (DOJ Press Release) Anti-retaliation provisions to protect venue owners, focus on primary ticket sales Ticketmaster settles with FTC re: bait-and-switch tactics to sell event tickets (2010) 33

34 Growth of Secondary Ticket Markets Then: " entry by new competitors appears to be difficult for reasons of both technology and reputation " Rapid growth of secondary ticketing sales: Liberalization of state anti-scalping laws Establishment of reliable secondary ticket exchanges (StubHub, Vivid Seats, TicketsNow) Estimated $5 billion in sales 34

35 StubHub v. Golden State Warriors & Ticketmaster March 29, 2015: StubHub files complaint against Ticketmaster/the Warriors (N.D. Cal) Challenges the enforcement of Ticketmaster exclusivity arrangements with Warriors: Ticketmaster exclusivity for "primary" NBA ticket sales and as "secondary" ticket sales platform operator (NBAtickets.com) Warriors season ticket holders contractually required to use Ticketmaster platform for secondary ticket sales Claims under Sherman Act s. 1 (unlawful tying and restraint of trade), s. 2, tort, state Cartwright Act and unfair competition laws 35

36 StubHub v. Golden State Warriors & Ticketmaster StubHub claims Defendants engaged in anticompetitive scheme involving: Preventing or threatening to prevent season ticket holder renewal/playoff ticket purchases Monitoring resale and cancelling season ticket subscriptions False and misleading advertising re: secondary ticket platforms Denying competing secondary ticket exchanges the ability to technologically integrate Claims these actions foreclosed StubHub from competing, harmed consumers and competition 80% drop in Warrior ticket listings on StubHub in

37 The Year Ahead Similar claims against Ticketmaster? Ticketmaster exclusivity for 25 NBA, 32 NFL and 25 NHL teams Retaliatory litigation against StubHub? Revival of legislative solution? Version of California Assembly Bill 329 (2013 Leg.) 37

38 Fair Play, Canadian Competition Bureau 38

39 Questions? THANK YOU FOR PARTICIPATING TODAY!

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