By Jeff Birren
Gold Medal LLC makes Run Gum chewing gum (“Run Gum”) which contains caffeine, B vitamins and taurine; an amino acid used in energy drinks. Advertising with track and field athletes thus appealed to Run Gum. It therefor sought to sponsor athletes during the U.S. Olympic Trials due to its perception of the heightened public interest in those events. Run Gum wished to include its logo on the apparel of various competitors. The USA Track & Field (“USATF”) and the United States Olympic Committee (“USOC”) prevented them from doing due to their rules which limit what competing athletes may wear.
Stymied, Run Gum turned to Michael Hausfeld, an active antitrust plaintiff’s lawyer. Hausfeld predictably sued the USATF and USOC, claiming that the rules violated the Sherman Act, 15 U.S.C. §1. Run Gum alleged the rules as enforced were both a horizontal and vertical agreement to artificially limit the number of individual sponsors and the price paid to athletes for sponsorships. It also claimed that the rules were an unlawful group boycott, and sought an injunction to prevent enforcement of the rules. The defendants hired several firms, including Covington & Burling and Loeb & Loeb. The defendants asserted that USATF and USOC were immune from such suits, based on a statute passed by Congress in 1978.
The American Athletic Union (“AAU”) was established in 1888, and it oversaw much of American amateur athletics. Over time, life was changing, but less so for the AAU. Thus, through the 1960’s women were banned from participating in road races. When the AAU finally allowed women to participate in marathons, they were required to run a separate course from the men, or start either ten minutes prior to or ten minutes after the men. In the face of continued and mounting criticism, Congress stepped in.
In 1978 Congress passed 36 U.S.C. 220501, ET seq. Section 220501 says it “may be cited as the ‘Ted Stevens Olympic and Amateur Sports Act'” (“ASA”). Section 220502 created a federally charted corporation to oversee Olympic sports. Section 220503 states that this corporation would establish goals for amateur sport activities, Section 220503(1); “…coordinate and develop amateur athletics in the United States, directly related to international athletic competition…” (Section 220503(2)); “… exercise exclusive jurisdiction, directly or through constituent members of committees, over—(A) all matters pertaining to United States participation in the Olympic Games, the Paralympic Games, and the Pan-American Games, including representation of the United States in the games; and (B) the organization of the Olympic Games, the Paralympic Games, and the Pan-American Games when held in the United States” (Section 220503(3)).
Section 220506 gave the new corporation the exclusive use of the Olympic name, seal, the five interlocking rings, the interlocking rings with a torch, as well as other words and phrases related to the Olympics. This led to decades of litigation, even though the Supreme Court affirmed the USOC’s exclusive right to use the Olympics name and marks over a First Amendment challenge (San Francisco Arts & Athletics, Inc. v. United States Olympic Committee, 483 U.S. 522 (1987)). The USOC has continued to file lawsuits to protect its exclusive use of the Olympics name and marks, and as late as 2002 it filed eleven such suits. It wins.
So when the USOC and USATF had to defend the Run Gum case, litigation was hardly a new experience. They immediately filed a motion to dismiss. The United States District Court for the Oregon District Court agreed with the defendants, and dismissed the case in a mere twelve-page published opinion, Gold Medal LLC v. USA Track & Field, 187 F. Supp. 3d 1219 (D. O. 2016). The District Court determined that the defendants were acting pursuant to an implied antitrust immunity created by Congress in the ASA.
“[A]t its core, Congress passed the ASA in order to secure financing for the U.S. Olympic Team, particularly through the fundraising capabilities of a new organization established by the Act… As the only nation that does not provide its Olympic team with federal funding or subsidies, the United States instead relies on the USOC to raise the financial resources necessary to organize Team USA and to compete in the Olympic Games” (187 F. Supp. 3d at 1228 (citations omitted)).
The court acknowledged that antitrust immunities are generally “disfavored” (Id. at 1229). In this instance, however, “the text and purpose of the ASA likewise confirm that, when the USATF and USOC promulgate logo regulations which restrict commercial advertising on athlete apparel, they are entitled to antitrust immunity” (Id. at 1230). After all, “these provisions enable the USOC and USATF to issue regulations that restrict apparel advertising in order to protect the value of the Olympic brand” (Id.).
“The logo restrictions in this case directly implicate USOC’s ability to generate revenue for the United States Olympic Team; allowing any company to advertise on competitor apparel would unduly interfere with USOC’s fundraising mission. First, the Regulations prevent a dilution of the Olympic brand. The Regulations permit the USOC and USATF to play a gatekeeping function, which preserves the exclusivity — and thus value — of the Olympic symbols and name. By strictly limiting the advertisements that can appear on the field of competition itself, the Defendants can control the use of the Olympic brand and preserve the integrity of their primary fundraising mechanism. Second, the Regulations bolster the value of USOC’s and USATF’s corporate sponsorships. If, instead of purchasing an official sponsorship through USATF, would-be advertisers could instead place their logos directly on high-profile athletes, the value of these corporate sponsorships would necessarily decrease. Accordingly, the Regulations are necessary to implement the clear intent of Congress and to make the ASA’s statutory scheme work. Without them, USOC’s revenue-generating capabilities would be compromised in a way that is plainly repugnant to the text and purpose of the Act” (Id.).
Consequently, the defendants “are impliedly immune from Run Gum’s challenge to their regulations” (Id. at 1231).
Run Gum appealed to the Ninth Circuit. Oral argument took place at the Circuit’s Portland, Oregon Courthouse on May 8, 2018. Sathya S. Gosselin argued for the Hausfeld firm, and Covington’s Derek Ludwin represented the defendants. The panel included Judges Rawlinson, Nguyen and Garbis, though after the oral argument, Judge Garbis resigned. Judge Wardlaw took his spot on the panel and read the briefs, reviewed the record and listened to the oral argument (Gold Medal LLC DBA Run Gum v. USATF & USOC, No. 16-35488, August 7, 2018, FN. 1 at 1). The argument video is at: https://www.ca9.uscourts.gov/media/view_video.php? pk_vid=0000013606.
A mere two months later, on August 7, 2018, Run Gum’s hopes were dashed, as the Ninth Circuit affirmed the District Court in a 15-page opinion certified for publication. Judge Rawlinson, writing for the majority, held that the implied antitrust immunity defeated the claim.
Judge Rawlinson noted that both the grant of a motion to dismiss and the finding that there was implied immunity from the antitrust laws were reviewed de novo. Implied antitrust immunity is not favored “and can only be justified by a convincing showing of clear repugnancy between the antitrust laws and the regulatory system” (Id. at 7), (citation omitted). The panel noted that the Circuit had not addressed the issue under the ASA, so it looked to other circuits, and the cases analyzed by the District Court.
It began with JES Props., Inc. v. USA Equestrian, Inc., 458 F. 3d 1224 (11th Cir. 2006). JES Props dealt with a mandatory mileage requirement between events that was unsuccessfully challenged by the plaintiff. The Ninth Circuit quoted the Eleventh’s Circuit holding that because “the ASA requires [a national governing body] to promulgate rules to minimize conflicts in schedules, the imposition of antitrust liability for the promulgation of such a rule is plainly repugnant to the ASA” (Id. at 8).
The Court next discussed Behagen v. Amateur Basketball Ass’n of the United States, 884 F. 2d 524 (10th Cir. 1989). Behagen won a jury verdict after filing an antitrust claim against the Association. The rule in question banned from its amateur competition athletes who had previously competed as a professional. The Tenth Circuit reversed. “Behagen complains of exactly that action which the [ASA] directs–the monolithic control of an amateur sports by the [national governing body] for that sport” (884 F. 2d at 529). The Ninth Circuit agreed. “We are persuaded that we should follow the analysis reflected in the decisions of our sister circuits applying the antitrust immunity under the ASA” (Gold Medal at 9).
The opinion distinguished a case from the Fifth Circuit, Eleven Line, Inc. v. N. Tex. State Soccer Ass’n, Inc., 213 F. 3d 198 (5th Cir. 2000). In Eleven Line, the court declined to apply the implied antitrust immunity to the actions of a non-profit, volunteer soccer organization. The national youth soccer governing body had not promulgated the rule in question, nor did it expressly approve it. The Fifth Circuit stated that Behagen had been correctly decided but the facts of that case did not cover Eleven Line (Id. at 205).
The Ninth Circuit “conclude(d) that the decisions of the Tenth and Eleventh Circuit provide a sound basis for affirming the district court’s application of implied antitrust immunity to the advertising and logo restrictions enforced by the USATF” (Gold Medal at 11). After all, “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” (Id. at 11-12).
“The district court properly applied implied antitrust immunity under the ASA in dismissing Run Gum’s complaint based on the ‘convincing showing of clear repugnancy between the antitrust laws’ and the provisions of the ASA to advance the Olympic Committee’s mission to fund and administer Olympic events, (citation omitted). As the district court observed, an injunction preventing enforcement of the advertisement regulation ‘would open the floodgates’ to potential advertisers, some of which might enhance the Olympic brand and some of which might devalue the Olympic brand. See Gold Medal LLC, 187 F. Supp. 3d at 1230. The regulation avoids placing the Olympic Committee in the unenviable position of having to face this conundrum in fulfilling its mission to finance American Olympic athletes. We thus view the regulation as protected from antitrust challenge” (Id. at 14).
Judge Nguyen concurred in the judgment because Run Gum had failed to prove a viable product market and that as the defendants gained no economic benefit from the restrictions, the antitrust laws do not apply. However, she disagreed with the majority that the ASA gave implied immunity to the defendants. She noted that Run Gum would “normally be entitled to amend its pleadings, but here any amendment would be futile. Either the defendants receive no economic benefit, in which case the apparel manufacturer exception is nonactionable, or they are exercising their statutory right to finance the Olympic Games with implied immunity” (Id. at 16), (citations omitted). Thus, the complaint was properly dismissed with prejudice (Id.).
It is hard to imagine that Run Gum can find relief either by requesting a hearing en banc, as the panel was unanimous that the case should have been dismissed, or by a petition for a writ of certiorari, given that the Circuits that have faced this issue all agree. It is hard at a distance to be too sympathetic, since Run Gum wanted exposure similar to the mainline advertisers, but at a far lower cost. Any relief would seem to lie with Congress. Good luck, and good night with that.
Birren is an adjunct professor at Southwestern University School of Law and former general counsel of the Oakland Raiders.
