Last week, the Antitrust Division of the Department of Justice (“DOJ”) announced a proposed settlement in its lawsuit against leading college sports multimedia rights provider Learfield IMG College. See U.S. v. Learfield Communications, LLC, et al., No. 1:19-cv-00389 (D.D.C. Feb. 14, 2019). This proposed settlement comes only a few weeks after the DOJ approved the long-awaited merger of IMG College, LLC (“IMG College”) and Learfield Communications, LLC (“Learfield”). In its complaint, which was filed alongside the proposed settlement, the DOJ alleged that for several years IMG College and Learfield agreed to limit competition between one another for multimedia rights contracts for college athletic programs.

With decreasing revenue drawn from public financing, major university athletic programs have turned to other revenue sources to fund their growing budgets. Multimedia rights are the advertising and promotional rights associated with the athletic teams. For example, if a university’s football team has a post-game radio show that is sponsored by an advertiser, it is part of the university’s multimedia rights. Due to their size, almost all major university athletic programs hire multimedia rights management firms to manage their print and digital advertising, game sponsorships, promotions, and other various sponsorship opportunities.

According to the complaint, prior to their merger, IMG College and Learfield were the leading multimedia rights management firms for college athletics. The DOJ alleged that in the absence of their unlawful coordination, IMG College and Learfield, along with smaller multimedia management firms, would have competed against each other to win multimedia rights contracts with major university athletic programs. Instead according to the DOJ, IMG College and Learfield began to coordinate under the guise of joint ventures, which denied universities the benefit of competition between the firms.

On one particular occasion, the DOJ alleged that IMG College and Learfield were both initially planning on submitting independent bids, but determined that it would be advantageous to not submit competing bids and instead submitted a joint bid. In the absence of competing bids, the university accepted the joint bid, which “offered less revenue to the school than at least one of [the] planned independent bids.” The DOJ further alleged that when the firms unwound such joint arrangements, they would reach non-compete agreements in order to continue to limit competition.

The DOJ also alleged this anticompetitive behavior extended to smaller multimedia rights management firms. According to the complaint, in one instance, IMG College entered into a joint venture with a smaller firm, which led to the smaller firm agreeing to “not bid on any IMG’s schools for over a year.”

In settlement of the DOJ’s claims of non-compete agreements, Learfield IMG College has agreed in the proposed settlement to the following prohibitions:

• It cannot communicate with other multimedia rights providers concerning any competitively sensitive information relating to a bid.

• It cannot participate with any competitor in any joint bid.

• It cannot propose a joint bid to any competitor.

• It cannot agree with any competitor that either the competitor or Learfield IMG College will not bid for any multimedia rights contract.

• Without the written consent of the DOJ, it cannot enter into, renew, or extend any joint venture with any competitor relating to the management of multimedia rights.

The proposed settlement permits, among other conduct, the following conduct by Learfield IMG College:

• It may communicate with a college, university, athletic conference, venue, or any other person (other than a competitor) seeking to contract for the management of such entity’s multimedia rights.

• It may communicate with an actual or prospective advertiser.

• It may communicate with a competitor if the competitor was engaged in a joint venture with either Learfield or IMG College as of July 1, 2018, and the communication relates solely to the operation of the joint venture; or if the competitor and Learfield IMG College are engaged in a joint venture approved by the DOJ.

The proposed settlement would also require Learfield IMG College to ensure compliance by appointing an internal antitrust compliance officer. The antitrust compliance officer must then develop and implement compliance procedures and submit a written report on compliance.

This settlement agreement comes on the heels of a 15-month DOJ investigation of the merger between Learfield and IMG College. The DOJ’s approval of the merger came with two significant conditions.  First, Learfield IMG College will not have an exclusive negotiating window with its clients.  Second, the non-compete clauses in Learfield IMG College employees’ contracts are void.

With the merger conditions as well as the proposed settlement, the DOJ is clearly hoping that despite the merger, the world of college sports marketing will stay competitive. But only time will tell whether the smaller providers can indeed survive.