For those weekend warrior athletes, marathoners and triathalon participants, the Olympics are events that we watch with great interest, while pondering our dashed dreams of having participated at a younger age. Wearing shirts emblazoned with the USA across our chests has brought many a proud moment to American athletes. What words would be allowed to appear next to the “USA” was the crux of this litigation.
Plaintiff Gold Medal, doing business under the “Run Gum” name, (Gold Medal) challenged the Defendants, the national governing body for track & field, USA Track and Field, and the US Olympic Committee under Section 1 of the Sherman Act. Gold Medal claimed that the Defendants illegally restrained trade by forbidding athletes from competing at the 2016 Olympic Trials in apparel bearing individual sponsorship. The US District Court for the District of Oregon held for the Defendants. The principal basis of the Court’s decision rested on its finding that the Ted Stevens Olympic and Amateur Sports Act of 1978 (the ASA) provided the Defendants with implied immunity under the antitrust laws. The case is now on appeal to the US Court of Appeals for the Ninth Circuit .
The purpose of this article is to apprise both the securities industry and the amateur sports organizations, both of whom enjoy implied immunity from the antitrust laws, of this pending litigation and to explain how their rights might be affected.
While the Defendants put forth four bases for the Court’s dismissal of the Complaint, the Court was satisfied to rely on only one for its dismissal-implied antitrust immunity. The other three theories for dismissal were: no plausible agreement; no plausible relevant market; and, no per se violation.
In contrast with other governments where financial support was provided to the respective olympic committees, Congress vested the US Olympic Committee with financing US participation in the Olympics by preserving the value of the Olympic brand. The US Olympic Committee delegates its exclusive jurisdiction over US participation in Olympic Games to the national governing bodies. In finding implied immunity, the District Court reasoned that to otherwise limit the Defendants’ exercise of control over apparel worn by competitors at the Olympic trials would “undercut the (Defendants’) mission” of self-financing by licensing the Olympic brand. Moreover, violation of the advertisement and logo rules could result in an athlete’s disqualification from the Olympic Trials.
2. LEGAL ANALYSIS: IMPLIED IMMUNITY
Congress passed the ASA to secure financing for the US Olympic Teams, particularly through the fundraising capabilities of the US Olympic Committee, which was newly established under the ASA, and granted the Olympic Committee with unfettered control over the commercial use of Olympic-related designations. The national governing bodies, which were recognized by the Olympic Committee, are fundamental to coordinating amateur athletics in the US. They exercise monolithic control by: (i) establishing governance structures; (ii) setting national goals; and (iii ) recommending membership in Team USA. Regarding amateur sports activities, Courts have extended the implied immunity to scheduling and athletic eligibility. See, JES Properties, Inc. v. USA Equestrian, Inc., 458 F. 3d 1224, 1232 (11th Cir., 2006) and Behagen v. Amateur Basketball Ass’n. of U.S., 884 F.2d 524, 529 ((10th Cir., 1989).
A. Securities Industry
The origin of implied immunity from the antitrust laws arises from the securities industry, where a conflict arose between requirements of the securities laws with the antitrust laws. In Silver v. New York Stock Exch., 373 U.S. 341, 357 (1963), the US Supreme Court held that a defendant is immune from antitrust liability when his/her actions are permitted by overriding federal law. While repeal of the antitrust laws by implication is neither favored nor casually allowed, repeal will be allowed only where there is a “plain repugnancy” between the antitrust and regulatory provisions. In short, such a repeal will be implied only if necessary to make another federal law work and only to the minimum extent necessary. This is the guiding principle set down by the US Supreme Court. See, also, Gordon v. New York Stock Exchange, Inc., 422 U.S. 659 (1975) (Holding that the New York Stock Exchange had immunity from antitrust liability because the power to fix commission rates was specifically conferred by the Securities Exchange Act.) and Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264 (2007) (Holding that Initial Public Offerings regulated by the Securities and Exchange Commission were exempt from the antitrust laws).
B. Amateur Sports
In Behagen v. Amateur Basketball Ass'n., the Court held that the defendants' actions were exempt from the antitrust laws. See, Eleven Line, Inc. V. North Texas State Soccer Ass'n., 213 F. 3d 198 (5th Cir., 2000) (Although agreeing with the decision in Behagen, the Court did not exempt defendants' conduct but the Court did recognize the concept of implied exemption. 213 F. 3d at 204).
A more recent case from the US District Court of California, TYR Sport INC. V. Warnaco Swimwear Inc., 679 F. Supp. 1120 (C.D., 2009), highlighted some limiting language from the JES Properties case. There the Court pointed out that, "...when properly exercised (emphasis supplied), the monolithic control a [national governing body] has over its particular sport may excuse actions that would otherwise violate antitrust laws." 679 F. Supp. at 1135, citing approvingly to JES Properties, 458 F. 3d at 1230-1231. As a result, the implied immunity that the Courts have been willingly granting to national governing bodies and other amateur sports organizations could be readily challenged and rejected if a Plaintiff could successfully assert that the national governing body or other organization failed to properly carry out its rules.
III. Conclusion: Advice Going Forward
While some comfort can be derived from Court’s decision in Gold Medal as well as the cases cited above where implied antitrust immunity was granted to either a securities firm, a national governing body or an amateur sports organization as concerns their conduct in carrying out their statutory obligations, we cannot rest assured that some party could not commence an action against a securities firm, a national governing body or an amateur sports organization challenging their procedures and allege that the their procedures were incorrectly followed or violated. These Court rulings provide ample warning that rules and procedures of a securities firm, a national governing body or an amateur sports organization must be followed for it to secure antitrust immunity for its conduct. The outcome of this case in the U.S. Court of Appeals would be critical to ensure the continued application of implied antitrust immunity to these organizations.
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