By E. Darius Sturmer, J.D.
USA Track & Field ("USATF") and the United States Olympics Committee ("USOC") were shielded by implied antitrust immunity from an energy chewing gum manufacturer’s allegations that they had engaged in an unlawful anticompetitive conspiracy by imposing "severe" advertising restrictions on track and field athletes during the high-profile 2016 Olympic Trials that precluded it from sponsoring any athletes at the event, the U.S. Court of Appeals in San Francisco has ruled. Immunity applied because the advertising restrictions at issue were integral to the performance of USATF’s and USOC’s duties under the Ted Stevens Olympic and Amateur Sports Act, the appellate court said. Dismissal of the claims with prejudice was therefore affirmed (Gold Medal LLC v. USA Track & Field, August 7, 2018, Rawlinson, J.).
Underlying dispute. The plaintiff in the case, Gold Medal LLC, does business under the name of the product it manufactures: Run Gum, a "compressed functional chewing gum" containing a proprietary mix of caffeine, taurine, and vitamins. The company markets its product to athletes, particularly runners. As part of its marketing scheme, it sponsors a team of professional runners who promote its product by wearing Run Gum branded apparel in competition.
Run Gum alleged that USOC and USATF, the U.S. governing body for the sport, have the power to exclude certain individual sponsors from the Olympic Trials through their authority to disqualify athletes that do not comply with their rules. The restrictions are purportedly the result of a horizontal and vertical conspiracy between USOC, USATF, and unnamed "pre-approved" apparel and equipment manufacturers, whose products could be worn at the Trials despite containing those manufacturers’ logos and names. According to Run Gum, as a result of the conspiracy, it was unable to have its sponsored athletes compete in branded apparel at the 2016 Olympic Trials. As a result, it sought injunctive relief to allow its logos on the uniforms of competitors at the track and field trials.
Lower court ruling. In dismissing the lawsuit, the federal district court in Eugene, Oregon, determined that Congress intended to shield the USATF and USOC from antitrust attack when promulgating logo regulations that restricted commercial advertising on athlete apparel. The Amateur Sports Act of 1978 (ASA), which was later amended as the Ted Stevens Amateur Sports Act, granted the USOC the exclusive jurisdiction over matters pertaining to U.S. participation in the Olympic Games. In light of the exclusive and unfettered power that Congress delegated to the defendants in the ASA, the challenged regulations were a proper exercise of their statutory authority, in the district court’s view.
Based on the "sweeping grants of authority," courts had conferred the USOC and the relevant governing bodies for individual sports, such as USATF, limited implied immunity from antitrust liability on issues stretching from the scheduling of individual competitions to athlete eligibility, the court stated. The ASA expressed congressional intent to financially support Team USA through USOC fundraising. Allowing any company to advertise on a team member's apparel would unduly interfere with USOC's fundraising mission, the court reasoned. Thus, the ban on athletes serving as human billboards at the Olympic Trials was necessary to finance Team USA. Moreover, the court explained, the advertising restrictions "prevent[ed] a dilution of the Olympic brand" and permitted USOC and USATF "to play a gatekeeping function that preserved the exclusivity—and thus value—of the Olympic symbols and name."
Immunity and the ASA. Citing cases from the Tenth and Eleventh Circuits that recognized implied immunity for the U.S. Equestrian Foundation’s "mileage rule" for sponsored competitions and the Amateur Basketball Association’s amateur eligibility rules, respectively, the appellate court agreed with those circuits’ finding of a "clear repugnancy" between the ASA and antitrust laws. "In light of the broad authority bestowed upon national governing bodies to fund the Olympic Mission, the challenged advertising and logo restrictions precluding advertisers from impinging on this delegated authority falls within the mission to protect the value of corporate sponsorships and maximize sanctioned fundraising," the court stated.
Forcing the USOC and USATF to permit any would-be advertiser to sponsor individual athletes without national governing body approval "would unduly interfere with the operation of the ASA." Although it did not explicitly provide for antitrust immunity, the ASA did establish "funding for the Olympic mission as a central responsibility of the Olympic Committee and its national governing bodies," the appellate court explained.
A Fifth Circuit holding that the exclusionary activities of non-profit, volunteer-run soccer organizations should not be afforded antitrust immunity was distinguishable from the present appeal, the appellate court said, in that the rule involved in that case was not sanctioned or approved by a national governing body, in the court’s view.
Dilution. A contention by Run Gum that the district court had "engaged in improper fact-finding that the advertising and logo restrictions prevented dilution of the Olympic brand" was rejected by the appellate court. The lower court’s analysis was not premised on any improper factual findings, the appellate court explained, "as the district court merely made the obvious and common-sense observation that elimination of the advertising restrictions would dilute the Olympic brand."
Concurrence. A concurring opinion disagreed with the majority’s determination that the defendants were immune from the antitrust claim. However, the concurring opinion concluded, the complaint nevertheless failed to state a claim under Sec. 1 of the Sherman Act because it contained no allegations that USATF or USOC received any economic benefit from the restrictions.
The case is No. 16-35488.
Attorneys: Swathi Bojedla (Hausfeld LLP) for Gold Medal LLC d/b/a Run Gum. Douglas N. Masters (Loeb & Loeb LLP) and Robert E. Sabido (Cosgrave Vergeer Kester LLP) for USA Track & Field. Bruce L. Campbell (Miller Nash Graham & Dunn LLP) and Philip J. Levitz (Covington & Burling LLP) for United States Olympic Committee.
Companies: Gold Medal LLC d/b/a Run Gum; USA Track & Field; United States Olympic Committee
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