iAn antitrust lawsuit filed by Run Gum, a manufacturer of energy-enhanced chewing gum founded by two-time Olympic runner Nick Symmonds, was recently dismissed with prejudice by District Court Judge McShane in the District of Oregon.[1] Run Gum had alleged that the United States Olympic Committee’s (USOC) rules prohibiting runners from displaying individual sponsorships on their apparel during the upcoming 2016 qualifying Olympic Trials constituted a restraint of trade in violation of the Sherman Act.
Judge McShane held that the claim was barred by implied antitrust immunity under the Amateur Sports Act, and that the USOC may exercise control over the apparel worn during competition at the Olympic Trials. Additionally, Judge McShane expressed skepticism regarding Run Gum’s attempt to define a relevant market consisting solely of a specific type of sponsorship opportunity at a single event, but declined to rule definitively on whether a relevant market had been sufficiently pleaded, given the court’s determination of antitrust immunity.
Run Gum alleged that the USOC and USA Track and Field (USATF) had illegally agreed, along with other unnamed athletic apparel co-conspirators, to prevent some businesses (while allowing others) from sponsoring individual runners competing in the upcoming July 2016 U.S. Olympic Track & Field Team Trials in Eugene, Oregon. Run Gum described the event as the “zenith of track & field in this country.” The challenged USOC policies, which USATF had agreed to enforce at the Olympic Trials, prevent runners from displaying the names or logos of their individual sponsors, while allowing the display of the names and logos of the manufacturers of the apparel worn by runners. Because Run Gum does not manufacture athletic apparel, it alleged that it was unlawfully excluded from a purported market for purchasing advertisements that can be worn or displayed by runners at the 2016 Olympic Trials.
Judge McShane determined that Run Gum had plausibly alleged an agreement between the USOC and USATF, but held that the agreement could not be subjected to antitrust inquiry without unduly interfering with the goals of the Ted Stevens Olympic and Amateur Sports Act (ASA). The ASA grants the USOC unfettered control over the commercial use of Olympic-related designations and trademarks, for the purpose of financing the U.S. Olympic Team. The court noted that although implied antitrust immunity is disfavored as a matter of statutory construction, Congress’s designation of exclusive rights to control the Olympic brand must necessarily allow the USOC to “issue regulations that restrict apparel advertising in order to protect the value of the Olympic brand.”
Run Gum had contended that the advertisements that it sought to place would not undermine the Olympic brand or the USOC’s ability to finance the Olympic Team, and thus would not create any express conflict with the ASA’s statutory scheme. However, the court found that Run Gum “clearly seeks to capitalize on the unique nature of the Olympic brand generally, and the Olympic Trials in particular, in order to promote its product,” and in seeking to associate its own brand with the Olympic brand, would “tread on ground that Congress reserved for USOC.”
Because Judge McShane held that the ASA precludes an antitrust inquiry into the challenged apparel restrictions, the court did not resolve the alternative basis for seeking dismissal of Run Gum’s complaint based upon the sufficiency of the antitrust allegations. However, Judge McShane did analyze those allegations, and noted that the USOC and USATF had raised “strong arguments” that Run Gum’s alleged relevant market was impermissibly narrow. The court also cited with approval a recent district court decision in which a similar theory of market definition was rejected at the motion to dismiss stage. Hicks et al. v. PGA TOUR, Inc., Case No. 3:15-cv-00489-VC (N.D. Cal.).
As in Hicks, Judge McShane found that the alleged market “appears unnatural,” because Run Gum “seems to have started out with what it wanted to accomplish—the ability to advertise on individual athlete apparel during in-play competition at the Trials—and drawn up a relevant market to accomplish those ends.” The court noted that other advertising opportunities allowed by USOC rules, such as banners that are visible in the field of competition, were potentially available substitutes for the sought-after advertisements. The court also expressed skepticism regarding Run Gum’s attempt to define a relevant market with respect to a single event—the Olympic Trials—noting that the USOC’s policies do not prevent Run Gum from sponsoring runners during other USATF events or other “hallowed” events, such as the Boston marathon.
While the court did not rule definitively on the relevant market issue, this case, like Hicks, provides support for a pro-competitive assertion of control over a promoter’s own sponsorship rights to promote investment in a brand and protect against free riders. While the implied antitrust immunity recognized by the Judge McShane may be narrow, the USOC and the various sport-specific National Governing Bodies such as USATF will be granted latitude to carry out their statutorily-defined roles, even when the challenged policies are not strictly essential to any core function. The court’s inquiry focused not on whether the prohibition on sponsorships was essential to the USOC’s promotion and financing of the Olympic Team, but whether the challenged policies fell within the USOC’s “broad authority to restrict advertising” in order to “play a gatekeeping function which preserves the exclusivity” and value of the Olympic brand.
With respect to the “unnatural” relevant market, this case also supports the proposition that courts will generally reject a plaintiff’s attempt to define a relevant market so as to align with the scope of a single market participant’s business or promotional rights. Run Gum’s alleged market was limited to a particular business opportunity (advertisements) with respect to a particular location (worn by runners during competition) during a single event (the 2016 Olympic Trials). When a relevant market is this narrow, courts may dismiss even at the pleading stage, due to the difficulty in demonstrating that there are no available substitutes outside of the unnaturally drawn market. Here, Judge McShane easily identified advertising opportunities not foreclosed by the USOC, including other advertising opportunities that would be visible during in-play competition at the Olympic Trials. When a plaintiff can only allege market power by defining the relevant market so as to include only the defendant, the defendant can likely prevail by identifying other market opportunities, and by arguing that its control over its own brand (to exclude free-riders) is lawful and pro-competitive.
[1] Gold Medal LLC d/b/a/ Run Gum v. USA Track & Field et al., Case No. 6:16-cv-00092-MC (D. Ore.), Dkt. 52.
