Key Takeaway: A federal district court ruled that NCAA Bylaw 18.104.22.168 is not commercial in nature and, therefore, does not violate the Sherman Antitrust Act.
The federal district court (Eastern District of Kentucky at Lexington) in Bleid Sports, LLC v. National Collegiate Athletic Association (E.D. Ky. 2013) on September 26, 2013, issued a memorandum opinion and order concerning, inter alia, a motion to dismiss filed by the National Collegiate Athletic Association (“NCAA”) against Bleid Sports, LLC (“Bleid”). The Court granted the NCAA’s motion to dismiss.
Bleid filed the initial complaint in the case on December 13, 2012. Bleid was an LLC in the business of promoting and organizing high-school and middle-school basketball tournaments. The Court described the NCAA as “an unincorporated, voluntary association that adopts rules that govern the athletic programs of its many university members.” The Court determined the “relevant bylaw in this case is bylaw 22.214.171.124, which states: An institution . . . shall not host, sponsor or conduct a nonscholastic basketball practice or competition in which men’s basketball prospective student-athletes . . . participate on its campus or at an off-campus facility regularly used by the institution for practice and/or competition by any of the institution’s sport programs.”
The Court noted “Bleid alleges in its complaint that the first Bleid tournament of the 2011-2012 season was ‘Rumble at Rupp,’ scheduled for November 25, 2011 at Rupp Arena. Bleid also alleges that it had contacted the NCAA in advance of Rumble at Rupp to ensure that the tournament would comply with the bylaw. Bleid asserts that a Rupp Arena representative also contacted NCAA to ensure that the event complied with the NCAA rules. On both occasions, Bleid alleges the NCAA assured all parties that the event was in compliance. On November 23, 2011, the University of Kentucky filed a Legislative Relief Waiver with the NCAA to again ensure compliance with the NCAA rules, but the NCAA denied the University’s request. Rupp Arena officials then refused to hold the event. Bleid relocated the event to a local high school, but alleges it suffered lost sales and registration fees because of the move.” Bleid filed a lawsuit and asserted claims of fraud, negligent misrepresentation, tortious interference with contractual relationships, and tortious interference with prospective business relationships. Further, Bleid contended “[t]he NCAA’s unreasonable and arbitrary interpretation of bylaw 126.96.36.199 with respect to Bleid Sports has limited competition in this market,” in violation of the Sherman Act (15 U.S.C. § 1).
Bleid alleged the NCAA violated Section 1 of the Sherman Act by arbitrarily interpreting Bylaw 188.8.131.52 The Court rejected the claim because it ruled the Sherman Act pertains to commercial activities. The Court cited the Sixth Circuit’s ruling in Bassett v. Kentucky Athletic Ass’n., 528 F.3d 426, 433 (6th Cir. 2008) as precedent: “Similar to the eligibility rules in Smith, NCAA rules on recruiting student athletes, specifically those rules prohibiting improper inducements and academic fraud, are all explicitly non-commercial. … In fact, those rules are anti-commercial and designed to promote and ensure competitiveness among NCAA member schools.”
The Court determined Bylaw 184.108.40.206 “is clearly a recruiting rule” since it references, “prospective student-athletes” and “nonscholastic . . . competition[s],” both of which would obviously indicate its recruiting nature. The Court rejected Bleid’s contention that the bylaw is technically a recruiting rule, but still has a commercial effect. The Court relied on the Sixth Circuit’s rationale: “[i]f the rules themselves and the corresponding sanctions are not commercial . . . then the enforcement of those rules cannot be commercial.” Bassett, 528 F.3d at 433.
Bleid also argued the bylaw is commercial because of the Sixth Circuit’s dicta in Worldwide Basketball and Sport Tours, Inc. v. National Collegiate Athletic Association, 388 F.3d 955 (6th Cir. 2004), which noted that the NCAA’s “Two in Four” rule “has some commercial impact.” The Court explained “Two in Four” rule was an NCAA rule that restricted the number and type of games individual schools were permitted to play. Further, the Court noted “while the ‘Two in Four’ rule did have a recruiting component, the plaintiffs in World Wide Basketball alleged that the rule ‘was adopted purely to deny outside promoters the opportunity to make money from the certified events.’” The Court explained Bleid’s argument failed because “the rule [does not exist] purely for commercial reasons” and “if the rule at issue is not commercial, than the enforcement of the rule is also not commercial.”