O'Bannon v. National Collegiate Athletic Ass'n , 802 F.3d 1049 ( 2015 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
EDWARD C. O’BANNON, JR., On Nos. 14-16601
Behalf of Himself and All Others 14-17068
Similarly Situated,
Plaintiff-Appellee, D.C. No.
4:09-cv-03329-
v. CW
NATIONAL COLLEGIATE ATHLETIC
ASSOCIATION, AKA The NCAA, OPINION
Defendant-Appellant,
and
ELECTRONIC ARTS, INC.;
COLLEGIATE LICENSING COMPANY,
AKA CLC,
Defendants.
Appeal from the United States District Court
for the Northern District of California
Claudia Wilken, Senior District Judge, Presiding
Argued and Submitted
March 17, 2015—San Francisco, California
Filed September 30, 2015
2 O’BANNON V. NCAA
Before: Sidney R. Thomas, Chief Judge, Jay S. Bybee,
Circuit Judge and Gordon J. Quist,* Senior District Judge.
Opinion by Judge Bybee;
Partial Concurrence and Partial Dissent by Chief Judge
Thomas
SUMMARY**
Antitrust
The panel affirmed in part and reversed in part the district
court’s judgment after a bench trial in an antitrust suit
regarding the National Collegiate Athletic Association’s rules
prohibiting student-athletes from being paid for the use of
their names, images, and likenesses.
The district court held that the NCAA’s amateurism rules
were an unlawful restraint of trade in violation of Section 1
of the Sherman Antitrust Act. The district court permanently
enjoined the NCAA from prohibiting its member schools
from giving student-athletes scholarships up to the full cost
of attendance at their respective schools and up to $5,000 per
year in deferred compensation, to be held in trust for student-
athletes after they leave college.
*
The Honorable Gordon J. Quist, Senior District Judge for the U.S.
District Court for the Western District of Michigan, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
O’BANNON V. NCAA 3
The panel held that it was not precluded from reaching the
merits of plaintiffs’ Sherman Act claim because: (1) the
Supreme Court did not hold in NCAA v. Bd. of Regents of the
Univ. of Okla., 468 U.S. 85 (1984), that the NCAA’s
amateurism rules are valid as a matter of law; (2) the rules are
subject to the Sherman Act because they regulate commercial
activity; and (3) the plaintiffs established that they suffered
injury in fact, and therefore had standing, by showing that,
absent the NCAA’s rules, video game makers would likely
pay them for the right to use their names, images, and
likenesses in college sports video games.
The panel held that even though many of the NCAA’s
rules were likely to be procompetitive, they were not exempt
from antitrust scrutiny and must be analyzed under the Rule
of Reason. Applying the Rule of Reason, the panel held that
the NCAA’s rules had significant anticompetitive effects
within the college education market, in that they fixed an
aspect of the “price” that recruits pay to attend college. The
record supported the district court’s finding that the rules
served the procompetitive purposes of integrating academics
with athletics and preserving the popularity of the NCAA’s
product by promoting its current understanding of
amateurism. The panel concluded that the district court
identified one proper less restrictive alternative to the current
NCAA rules¯i.e., allowing NCAA member to give
scholarships up to the full cost of attendance¯but the district
court’s other remedy, allowing students to be paid cash
compensation of up to $5,000 per year, was erroneous. The
panel vacated the district court’s judgment and permanent
injunction insofar as they required the NCAA to allow its
member schools to pay student-athletes up to $5,000 per year
in deferred compensation.
4 O’BANNON V. NCAA
Chief Judge Thomas concurred in part and dissented in
part. He disagreed with the majority’s conclusion that the
district court clearly erred in ordering the NCAA to permit up
to $5,000 in deferred compensation above student-athletes’
full cost of attendance.
COUNSEL
Seth P. Waxman (argued), Leon B. Greenfield, Daniel S.
Volchok, David M. Lehn, Weili J. Shaw, Matthew J. Tokson,
Wilmer Cutler Pickering Hale and Dorr LLP, Washington,
D.C.; Glenn D. Pomerantz, Kelly M. Klaus, Luis Li, Rohit K.
Singla, Carolyn H. Luedtke, Thane Rehn, Justin P. Raphael,
Jeslyn A. Miller, Munger, Tolles, & Olson LLP, San
Francisco, California; Gregory L. Curtner, Robert J.
Wierenga, Kimberly K. Kefalas, Suzanne L. Wahl, Schiff
Hardin LLP, Ann Arbor, Michigan, for Defendant-Appellant.
Michael D. Hausfeld (argued), Hilary K. Scherrer, Sathya S.
Gosselin, Swathi Bojedla, Hausfeld LLP, Washington, D.C.;
Michael P. Lehmann, Bruce Wecker, Hausfeld LLP, San
Francisco, California; Jonathan Massey, Massey & Gail LLP,
Washington, D.C., for Plaintiffs-Appellees.
Jonathan M. Jacobson, Daniel P. Weick, Wilson Sonsini
Goodrich & Rosati Professional Corporation, New York,
New York, for Amici Curiae Antitrust Scholars.
Allen P. Grunes, Maurice E. Stucke, The Konkurrenz Group,
Washington, D.C., for Amici Curiae Law and Economics and
Antitrust Scholars.
O’BANNON V. NCAA 5
Nathan Siegel, Patrick Kabat, Levine Sullivan Koch &
Schulz, LLP, Washington, D.C., for Amici Curiae A&E
Television Networks, LLC, ABC, Inc., CBS Corporation,
Discovery Communications, LLC, Fox Broadcasting
Company, National Public Radio, Inc., NBCUniversal Media,
LLC, The Reporter’s Committee for Freedom of the Press,
and Turner Broadcasting System, Inc.
Martin Michaelson, William L. Monts III, Joel D. Buckman,
Hogan Lovells US LLP, Washington, D.C.; Ada Meloy,
General Counsel, American Council on Education,
Washington, D.C., for Amici Curiae American Council on
Education, Association of Governing Boards of Universities
and Colleges, and National Association of Independent
Colleges and Universities.
Duncan W. Crabtree-Ireland, Danielle S. Van Lier, Screen
Actors Guild-American Federation of Television and Radio
Artists, Los Angeles, California; Jonathan Faber, Luminary
Group LLC, Shelbyville, Indiana, for Amici Curiae Screen
Actors Guild-American Federation of Television & Radio
Artists and Luminary Group LLC.
James B. Speta, Chicago, Illinois; Ernest A. Young, Apex,
North Carolina, for Amici Curiae Intellectual Property and
First Amendment Scholars.
Steve W. Berman, Hagens Berman Sobol Shapiro LLP,
Seattle, Washington; Jeff D. Friedman, Jon T. King, Hagens
Berman Sobol Shapiro LLP, Berkeley, California, for Amicus
Curiae Alston Kindler Group.
6 O’BANNON V. NCAA
Jeffrey L. Kessler, David G. Feher, David L. Greenspan,
Timothy M. Nevius, Joseph A. Litman, Winston & Strawn
LLP, New York, New York; Steffen N. Johnson, Winston &
Strawn LLP, Washington, D.C.; Derek J. Sarafa, Winston &
Strawn LLP, Chicago, Illinois, for Amici Curiae Martin
Jenkins, Nigel Hayes, and Alec James.
Steven N. Williams, Adam J. Zapala, Cotchett, Pitre &
McCarthy, LLP, Burlingame, California, for Amici Curiae
Economists and Professors of Sports Management.
Richard G. Johnson, Richard G. Johnson Co., L.P.A.,
Cleveland, Ohio, for Amicus Curiae Andrew A. Oliver.
Michael J. Boni, Joshua D. Snyder, John E. Sindoni, Boni &
Zack LLC, Bala Cynwyd, Pennsylvania, for Amici Curiae
Sports Management Professors.
David Martinez, Robins Kaplan LLP, Los Angeles,
California, for Amici Curiae Twenty-Six Scholars of
Antitrust and Sports Law.
O’BANNON V. NCAA 7
OPINION
BYBEE, Circuit Judge:
Section 1 of the Sherman Antitrust Act of 1890, 15 U.S.C.
§ 1, prohibits “[e]very contract, combination . . . , or
conspiracy, in restraint of trade or commerce.” For more than
a century, the National Collegiate Athletic Association
(NCAA) has prescribed rules governing the eligibility of
athletes at its more than 1,000 member colleges and
universities. Those rules prohibit student-athletes from being
paid for the use of their names, images, and likenesses
(NILs). The question presented in this momentous case is
whether the NCAA’s rules are subject to the antitrust laws
and, if so, whether they are an unlawful restraint of trade.
After a bench trial and in a thorough opinion, the district
court concluded that the NCAA’s compensation rules were an
unlawful restraint of trade. It then enjoined the NCAA from
prohibiting its member schools from giving student-athletes
scholarships up to the full cost of attendance at their
respective schools and up to $5,000 per year in deferred
compensation, to be held in trust for student-athletes until
after they leave college. As far as we are aware, the district
court’s decision is the first by any federal court to hold that
any aspect of the NCAA’s amateurism rules violate the
antitrust laws, let alone to mandate by injunction that the
NCAA change its practices.
We conclude that the district court’s decision was largely
correct. Although we agree with the Supreme Court and our
sister circuits that many of the NCAA’s amateurism rules are
likely to be procompetitive, we hold that those rules are not
exempt from antitrust scrutiny; rather, they must be analyzed
8 O’BANNON V. NCAA
under the Rule of Reason. Applying the Rule of Reason, we
conclude that the district court correctly identified one proper
alternative to the current NCAA compensation rules—i.e.,
allowing NCAA members to give scholarships up to the full
cost of attendance—but that the district court’s other remedy,
allowing students to be paid cash compensation of up to
$5,000 per year, was erroneous. We therefore affirm in part
and reverse in part.
I
A. The NCAA
American colleges and universities have been competing
in sports for nearly 150 years: the era of intercollegiate
athletics began, by most accounts, on November 6, 1869,
when Rutgers and Princeton met in the first college football
game in American history—a game more akin to soccer than
to modern American football, played with “25 men to a side.”
Joseph N. Crowley, In the Arena: The NCAA’s First Century
2 (2006), available at https://www.ncaapublications.com/p-
4039-in-the-arena-the-ncaas-first-century.aspx. College
football quickly grew in popularity over the next few decades.
Fin de siècle college football was a rough game. Serious
injuries were common, and it was not unheard of for players
to be killed during games. Schools were also free to hire
nonstudent ringers to compete on their teams or to purchase
players away from other schools. By 1905, these and other
problems had brought college football to a moment of crisis,
and President Theodore Roosevelt convened a conference at
the White House to address the issue of injuries in college
football. Later that year, the presidents of 62 colleges and
universities founded the Intercollegiate Athletic Association
O’BANNON V. NCAA 9
to create uniform rules for college football. In 1910, the IAA
changed its name to the National Collegiate Athletic
Association (NCAA), and it has kept that name to this day.
The NCAA has grown to include some 1,100 member
schools, organized into three divisions: Division I, Division
II, and Division III. Division I schools are those with the
largest athletic programs—schools must sponsor at least
fourteen varsity sports teams to qualify for Division I—and
they provide the most financial aid to student-athletes.
Division I has about 350 members.
For football competition only, Division I’s membership
is divided into two subdivisions: the Football Bowl
Subdivision (FBS) and the Football Championship
Subdivision (FCS). FBS schools are permitted to offer more
full scholarships to their football players and, as a result, the
level of competition is generally higher in FBS than in FCS.
FBS consists of about 120 of the nation’s premier college
football schools.
B. The Amateurism Rules
One of the NCAA’s earliest reforms of intercollegiate
sports was a requirement that the participants be amateurs.
President C.A. Richmond of Union College commented in
1921 that the competition among colleges to acquire the best
players had come to resemble “the contest in dreadnoughts”
that had led to World War I,1 and the NCAA sought to curb
1
The Dreadnought was a British battleship that featured large, long-
range guns. The term came to refer to a class of super battleship. In
drawing this comparison, Mr. Richmond showed himself to be a historian
ahead of his time. See generally Robert K. Massie, Dreadnought: Britain,
10 O’BANNON V. NCAA
this problem by restricting eligibility for college sports to
athletes who received no compensation whatsoever.2 But the
NCAA, still a voluntary organization, lacked the ability to
enforce this requirement effectively, and schools continued to
pay their athletes under the table in a variety of creative ways;
a 1929 study found that 81 out of 112 schools surveyed
provided some sort of improper inducement to their athletes.
The NCAA began to strengthen its enforcement
capabilities in 1948, when it adopted what became known as
the “Sanity Code”—a set of rules that prohibited schools
from giving athletes financial aid that was based on athletic
ability and not available to ordinary students. See Daniel E.
Lazaroff, The NCAA in Its Second Century: Defender of
Amateurism or Antitrust Recidivist?, 86 Or. L. Rev. 329, 333
(2007). The Sanity Code also created a new “compliance
mechanism” to enforce the NCAA’s rules—“a Compliance
Committee that could terminate an institution’s NCAA
membership.” Id.
Germany, and the Coming of the Great War (1991) (explaining how the
naval arms race between Britain and Germany contributed to the outbreak
of World War I).
2
The rise of the NCAA roughly paralleled that of the International
Olympic Committee (IOC) and the Amateur Athletic Union (AAU), both
in time and in philosophy. Like the NCAA, both organizations have had
to adapt to increasing professionalization and commercialization in sports.
In the late twentieth century, the IOC abandoned its amateurism
experiment. The AAU, meanwhile, continues to operate as a sponsor of
amateur sports programs and tournaments; it is currently best known for
its many boys’ basketball teams, which have struggled to deal with the
influence of professional agents and outside money. See, e.g., Jason
Zengerle, Breaks of the Game, N.Y. Times, Dec. 26, 2010, at BR8 (calling
it “a commonplace for sportswriters to describe A.A.U. basketball as a
cesspool of corruption”).
O’BANNON V. NCAA 11
In 1956, the NCAA departed from the Sanity Code’s
approach to financial aid by changing its rules to permit its
members, for the first time, to give student-athletes
scholarships based on athletic ability. These scholarships
were capped at the amount of a full “grant in aid,” defined as
the total cost of “tuition and fees, room and board, and
required course-related books.” Student-athletes were
prohibited from receiving any “financial aid based on
athletics ability” in excess of the value of a grant-in-aid, on
pain of losing their eligibility for collegiate athletics. Student-
athletes could seek additional financial aid not related to their
athletic skills; if they chose to do this, the total amount of
athletic and nonathletic financial aid they received could not
exceed the “cost of attendance” at their respective schools.3
In August 2014, the NCAA announced it would allow
athletic conferences to authorize their member schools to
increase scholarships up to the full cost of attendance. The 80
member schools of the five largest athletic conferences in the
country voted in January 2015 to take that step, and the
scholarship cap at those schools is now at the full cost of
attendance. Marc Tracy, Top Conferences to Allow Aid for
Athletes’ Full Bills, N.Y. Times, Jan. 18, 2015, at SP8.
In addition to its financial aid rules, the NCAA has
adopted numerous other amateurism rules that limit student-
athletes’ compensation and their interactions with
professional sports leagues. An athlete can lose his amateur
3
The “cost of attendance” at a particular school includes the items that
make up a grant in aid plus “[nonrequired] books and supplies,
transportation, and other expenses related to attendance at the institution.”
The difference between a grant in aid and the cost of attendance is a few
thousand dollars at most schools.
12 O’BANNON V. NCAA
status, for example, if he signs a contract with a professional
team, enters a professional league’s player draft, or hires an
agent. And, most importantly, an athlete is prohibited—with
few exceptions—from receiving any “pay” based on his
athletic ability, whether from boosters, companies seeking
endorsements, or would-be licensors of the athlete’s name,
image, and likeness (NIL).
C. The O’Bannon and Keller Litigation
In 2008, Ed O’Bannon, a former All-American basketball
player at UCLA, visited a friend’s house, where his friend’s
son told O’Bannon that he was depicted in a college
basketball video game produced by Electronic Arts (EA), a
software company that produced video games based on
college football and men’s basketball from the late 1990s
until around 2013. The friend’s son turned on the video
game, and O’Bannon saw an avatar of himself—a virtual
player who visually resembled O’Bannon, played for UCLA,
and wore O’Bannon’s jersey number, 31. O’Bannon had
never consented to the use of his likeness in the video game,
and he had not been compensated for it.
In 2009, O’Bannon sued the NCAA and the Collegiate
Licensing Company (CLC), the entity which licenses the
trademarks of the NCAA and a number of its member schools
for commercial use, in federal court. The gravamen of
O’Bannon’s complaint was that the NCAA’s amateurism
rules, insofar as they prevented student-athletes from being
compensated for the use of their NILs, were an illegal
restraint of trade under Section 1 of the Sherman Act,
15 U.S.C. § 1.
O’BANNON V. NCAA 13
Around the same time, Sam Keller, the former starting
quarterback for the Arizona State University and University
of Nebraska football teams, separately brought suit against
the NCAA, CLC, and EA. Keller alleged that EA had
impermissibly used student-athletes’ NILs in its video games
and that the NCAA and CLC had wrongfully turned a blind
eye to EA’s misappropriation of these NILs. The complaint
stated a claim under Indiana’s and California’s right of
publicity statutes, as well as a number of common-law
claims.
The two cases were consolidated during pretrial
proceedings. The defendants moved to dismiss Keller’s
right-of-publicity claims on First Amendment grounds. The
district court denied the motion to dismiss, and we affirmed
that decision, holding that “[u]nder California’s
transformative use defense, EA’s use of the likenesses of
college athletes like Samuel Keller in its video games is not,
as a matter of law, protected by the First Amendment.” In re
NCAA Student-Athlete Name & Likeness Licensing Litig.
(“Keller”), 724 F.3d 1268, 1284 (9th Cir. 2013).
In November 2013, the district court granted the
plaintiffs’ motion for class certification. The court held that
certification of a damages class under Rule 23(b)(3) was
inappropriate, but it certified the following class under Rule
23(b)(2) for injunctive and declaratory relief:
All current and former student-athletes
residing in the United States who compete on,
or competed on, an NCAA Division I
(formerly known as “University Division”
before 1973) college or university men’s
basketball team or on an NCAA Football
14 O’BANNON V. NCAA
Bowl Subdivision (formerly known as
Division I-A until 2006) men’s football team
and whose images, likenesses and/or names
may be, or have been, included or could have
been included (by virtue of their appearance
in a team roster) in game footage or in
videogames licensed or sold by Defendants,
their co-conspirators, or their licensees.4
After class certification was granted, the plaintiffs
voluntarily dismissed their damages claims with prejudice.
The plaintiffs also settled their claims against EA and CLC,
and the district court preliminarily approved the settlement.
O’Bannon and Keller were deconsolidated, and in June 2014,
the antitrust claims against the NCAA at issue in O’Bannon
went to a bench trial before the district court.
4
As this class definition indicates, O’Bannon and Keller limited their
suits only to high-level (Division I/FBS) college football and men’s
basketball players. They likely did so in part because almost all of EA’s
college sports video games have been football and men’s basketball
games, and in part because those two sports generate far more revenue
than any other college sports. See, e.g., Richard Sandomir & Pete Thamel,
Tournament Stays at CBS, Adding Cable and 3 Teams, N.Y. Times, Apr.
23, 2010, at B9 (describing CBS’s agreement to pay $10.8 billion for the
TV rights to the NCAA Division I men’s basketball tournament for a
period of 13 years); Marc Tracy & Tim Rohan, What Made College
Football More Like the Pros? $7.3 Billion, for a Start, N.Y. Times, Dec.
31, 2014, at A1 (describing ESPN’s agreement to pay “$7.3 billion over
12 years to telecast seven [college football] games a year”); Nat’l
Collegiate Ath. Ass’n, 2004–2013 NCAA Revenues and Expenses of
Division I Intercollegiate Athletics Programs Report, at 37 (2014),
available at https://www.ncaapublications.com/p-4344-division-i-
revenues-and-expenses-2004-2013.aspx. Thus, although NCAA member
schools sponsor teams in a variety of other sports, both the district court’s
analysis and our own focus on football and men’s basketball.
O’BANNON V. NCAA 15
D. The District Court’s Decision
After a fourteen-day bench trial, the district court entered
judgment for the plaintiffs, concluding that the NCAA’s rules
prohibiting student-athletes from receiving compensation for
their NILs violate Section 1 of the Sherman Act. O’Bannon
v. NCAA, 7 F. Supp. 3d 955 (N.D. Cal. 2014).
1. The Markets
The court began by identifying the markets in which the
NCAA allegedly restrained trade. It identified two markets
that were potentially affected by the challenged NCAA rules.
a. The college education market
First, the court found that there is a “college education
market” in which FBS football and Division I basketball
schools compete to recruit the best high school players by
offering them “unique bundles of goods and services” that
include not only scholarships but also coaching, athletic
facilities, and the opportunity to face high-quality athletic
competition. Id. at 965–66. The court found that very few
athletes talented enough to play FBS football or Division I
basketball opt not to attend an FBS/Division I school; hardly
any choose to attend an FCS, Division II, or Division III
school or to compete in minor or foreign professional sports
leagues, and athletes are not allowed to join either the NFL or
the NBA directly from high school.5 Id. at 966. Thus, the
5
The NFL has never allowed high school players to enter its draft. The
NBA did at one time, and a number of NBA stars (including LeBron
James and Kobe Bryant) came to the league directly from high school, but
in 2005, the NBA adopted a rule requiring draftees to be at least nineteen
16 O’BANNON V. NCAA
court concluded, the market specifically for FBS football and
Division I basketball scholarships is cognizable under the
antitrust laws because “there are no professional [or college]
football or basketball leagues capable of supplying a
substitute for the bundle of goods and services that FBS
football and Division I basketball schools provide.” Id. at
968.
b. The group licensing market
The second market identified by the district court was a
“group licensing market” in which, but for the NCAA’s
compensation rules, college football and basketball athletes
would be able to sell group licenses for the use of their NILs.
Id. The court broke this “group licensing market” down into
three submarkets in which players’ NILs could be profitably
licensed: (1) live game telecasts, (2) sports video games, and
(3) game rebroadcasts, advertisements, and other archival
footage.6 Id. With respect to live game telecasts, the court
noted that the TV networks that broadcast live college
football and basketball games “often seek to acquire the
rights to use” the players’ NILs, which the court concluded
“demonstrate[s] that there is a demand for these rights” on the
networks’ part. Id. at 968–69. With respect to video games,
the court found that the use of NILs increased the
attractiveness of college sports video games to consumers,
years old and one year out of high school, a rule it has retained to the
present day. See Howard Beck, N.B.A. Draft Will Close Book on High
School Stars, N.Y. Times, June 28, 2005, at D1.
6
Although the plaintiffs presented some evidence of other licensing
opportunities for merchandise such as jerseys and bobbleheads, they
abandoned these claims and the district court did not consider such
markets further. O’Bannon, 7 F. Supp. 3d at 968 n.4.
O’BANNON V. NCAA 17
creating a demand for players’ NILs.7 Id. at 970. And with
respect to archival footage, the court noted that the NCAA
had licensed footage of student-athletes—including current
athletes—to a third-party licensing company, T3Media,
proving that there is demand for such footage. Id. at 970–71.
2. The Rule of Reason
Having concluded that the NCAA’s compensation rules
potentially restrained competition in these two markets, the
court proceeded to analyze the legality of the challenged
NCAA rules with respect to those markets, applying the Rule
of Reason. Id. at 984–1009. The district court found that the
NCAA’s rules have an anticompetitive effect in the college
education market but not in the group licensing market. It
then concluded that the rules serve procompetitive purposes.
Finally, it determined that the procompetitive purposes of the
rules could be achieved by less restrictive alternative
restraints and that the current rules were therefore unlawful.
a. Anticompetitive effects
At the first step of the Rule of Reason, the court found
that the NCAA’s rules have an anticompetitive effect on the
college education market. Were it not for those rules, the
court explained, schools would compete with each other by
offering recruits compensation exceeding the cost of
attendance, which would “effectively lower the price that the
7
The court acknowledged that the NCAA had recently terminated its
relationship with EA by declining to renew its license for such video
games, but the court found that there was no evidence that the NCAA
would not renew the relationship in the future. O’Bannon, 7 F. Supp. 3d
at 970.
18 O’BANNON V. NCAA
recruits must pay for the combination of educational and
athletic opportunities that the schools provide.” Id. at 972.
The rules prohibiting compensation for the use of student-
athletes’ NILs are thus a price-fixing agreement: recruits pay
for the bundles of services provided by colleges with their
labor and their NILs, but the “sellers” of these bundles—the
colleges—collectively “agree to value [NILs] at zero.” Id. at
973. Under this theory, colleges and universities behave as
a cartel—a group of sellers who have colluded to fix the price
of their product.
The court found in the alternative that the college
education market can be thought of as a market in which
student-athletes are sellers rather than buyers and the schools
are purchasers of athletic services. In the court’s alternative
view, the college education market is a monopsony—a
market in which there is only one buyer (the NCAA schools,
acting collectively) for a particular good or service (the labor
and NIL rights of student-athletes), and the colleges’
agreement not to pay anything to purchase recruits’ NILs
causes harm to competition. Id. at 973, 991.
By contrast, the court found that the NCAA’s rules do not
have an anticompetitive effect on any of the submarkets of
the group licensing market. The court explained that
although these submarkets exist, there would be no
competition in any of them if the challenged NCAA rules
were abolished. The court reasoned that the value of an NIL
license to a live game broadcaster or a video game company
would depend on the licensee’s acquiring every other NIL
license that was available. A live game broadcaster, for
example, would need to acquire a license from every team or
player whose games it might telecast. Similarly, a video
game producer would want to acquire NIL rights for all of the
O’BANNON V. NCAA 19
teams it needed to include in the game. Given these
requirements, the court deemed it highly unlikely that groups
of student-athletes would compete with each other to sell
their NIL rights; on the contrary, they would have an
incentive to cooperate to make sure that the package of NIL
rights sold to buyers was as complete as possible. Id. at
993–98. With respect to archival footage, meanwhile, the
court found that the NCAA’s licensing arrangement with
T3Media did not deprive student-athletes of any
compensation they might otherwise receive because T3Media
is prohibited from licensing footage of current athletes and
must obtain the consent of any former athlete whose NIL
appears in its footage. Id. at 998–99.
b. Procompetitive purposes
At the second step of the Rule of Reason, the NCAA
proffered four procompetitive purposes for its rules
prohibiting student-athletes from receiving compensation for
the use of their NILs: (1) preserving “amateurism” in college
sports; (2) promoting competitive balance in FBS football and
Division I basketball; (3) integrating academics and athletics;
and (4) increasing output in the college education market. Id.
at 999. The court accepted the first and third justifications in
part while rejecting the others.
(1) Amateurism. The NCAA argued to the district court
that restrictions on student-athlete compensation are
“necessary to preserve the amateur tradition and identity of
college sports.” Id. It contended that amateurism had been
one of the NCAA’s core principles since its founding and that
amateurism is a key driver of college sports’ popularity with
consumers and fans. Id. at 999–1000.
20 O’BANNON V. NCAA
The district court rejected the NCAA’s contention that it
had a “longstanding commitment to amateurism,” concluding
instead that the NCAA’s definition of amateurism was
“malleable,” changing frequently over time in “significant
and contradictory ways.” Id. at 1000. The court suggested
that, even today, the NCAA’s definition of amateurism is
inconsistent: although players generally cannot receive
compensation other than scholarships, tennis players are
permitted to accept up to $10,000 in prize money before
enrolling in college, and student-athletes are permitted to
accept Pell grants even when those grants raise their total
financial aid package above their cost of attendance. Id. It
thus concluded that amateurism was not, in fact, a “core
principle[]” of the NCAA. Id.
The district court was not persuaded that amateurism is
the primary driver of consumer demand for college
sports—but it did find that amateurism serves some
procompetitive purposes. The court first concluded that
consumers are primarily attracted to college sports for
reasons unrelated to amateurism, such as loyalty to their alma
mater or affinity for the school in their region of the country.
Id. at 977–78. It also found much of the NCAA’s evidence
about amateurism unreliable. For example, the NCAA
provided a survey conducted by Dr. J. Michael Dennis, a
“survey research expert,” which purported to show that
Americans “generally oppose[] the idea of paying college
football and basketball players.” Id. at 975. The court
deemed the Dennis survey “unpersuasive” for a couple
reasons, one of which was that it believed the survey’s initial
question skewed the results by priming respondents to think
about illicit payments to student-athletes rather than the
possibility of allowing athletes to be paid. Id.
O’BANNON V. NCAA 21
But the district court ultimately found that the NCAA’s
“current understanding of amateurism” plays some role in
preserving “the popularity of the NCAA’s product.” Id. at
1005. It found that the NCAA’s current rules serve a
procompetitive benefit by promoting this understanding of
amateurism, which in turn helps preserve consumer demand
for college sports.
(2) Competitive Balance. The NCAA argued before the
district court that restricting compensation to student-athletes
helps level the playing field between FBS and Division I
schools in recruiting, thereby maintaining competitive
balance among those schools’ football and basketball teams.
Id. at 1001–02.
The district court acknowledged that promoting
competitive balance could be a valid procompetitive purpose
under the antitrust laws, but it concluded that the challenged
NCAA rules do not promote competitive balance. The court
noted that numerous economists have studied the NCAA over
the years and that “nearly all” of them have concluded that
the NCAA’s compensation rules do not promote competitive
balance. Id. at 978. The court also explained that although
the NCAA forbids its member schools to pay student-athletes
anything beyond a fixed scholarship, it allows schools to
spend as much as they like on other aspects of their athletic
programs, such as coaching, facilities, and the like, which
“negate[s] whatever equalizing effect the NCAA’s restraints
on student-athlete compensation might have once had.” Id.
at 1002. The court concluded that competitive balance was
thus not a viable justification for restricting student-athlete
compensation.
22 O’BANNON V. NCAA
(3) Integrating Academics and Athletics. The NCAA’s
third procompetitive justification for its restraints on student-
athlete compensation was that these restraints integrate
academics and athletics and thereby “improve the quality of
educational services provided to student-athletes.” Id.
According to the NCAA, student-athletes derive long-term
benefits from participating fully in academic life at their
schools, which the compensation rules encourage them to do.
Id. at 979–80.
The district court allowed that this was a viable
procompetitive justification for the NCAA’s regulating the
college education market, but it concluded that most of the
benefits of academic and athletic “integration” are not the
result of the NCAA’s rules restricting compensation. Rather,
these benefits are achieved by other NCAA rules—such as
those requiring student-athletes to attend class, prohibiting
athletes-only dorms, and forbidding student-athletes to
practice more than a certain number of hours per week. Id. at
980. The court explained that the only way in which the
compensation rules might facilitate the integration of athletics
and academics is that, by prohibiting student-athletes from
being paid large sums of money not available to ordinary
students, the rules prevent the creation of a social “wedge”
between student-athletes and the rest of the student body. Id.
at 980, 1003. It held, however, that even though the
avoidance of such a “wedge” is a legitimate procompetitive
goal, it does not justify a total, “sweeping prohibition” on
paying student-athletes for the use of their NILs. Id. at 1003.
(4) Increasing Output. The fourth and final
procompetitive justification alleged by the NCAA was that
the restraints on student-athlete compensation “increase
output” in the college education market by increasing the
O’BANNON V. NCAA 23
available opportunities for students to play FBS football or
Division I basketball. Id. at 1003–04. The NCAA contended
that its rules accomplish this goal by attracting schools with
a philosophical commitment to amateurism to compete in
Division I and by enabling schools to compete in Division I
that otherwise could not afford to do so. Id. at 1004.
The district court rejected this justification. The court
found the idea that schools join Division I because of a
philosophical commitment to amateurism “implausible,”
noting that some major-conference schools had lobbied to
change the NCAA’s scholarship rules to raise compensation
limits. Id. at 981. The court also explained that schools in
FCS, Division II, and Division III are subject to the same
amateurism rules as Division I schools, making it unlikely
that schools choose to join Division I because of the
amateurism rules. Id.
The court likewise found no support in the record for the
notion that the NCAA’s compensation rules enable more
schools to compete in Division I. The court found that,
because Division I schools do not share revenue, there is no
reason to believe that the cost savings from not paying
student-athletes are being used to fund additional scholarships
at low-revenue schools or to enable those schools to join
Division I. Id. at 1004. The court also noted that the
plaintiffs were not seeking to require that all schools pay
their student-athletes; rather, they sought an injunction
permitting schools to do so. Schools that could not afford to
pay their student-athletes would not need to do so if the
plaintiffs prevailed and would therefore not be driven out of
Division I by a ruling in the plaintiffs’ favor. Id.
24 O’BANNON V. NCAA
c. Less restrictive alternatives
Having found that the NCAA had presented two
procompetitive justifications for “circumscribed” limits on
student-athlete compensation—i.e., increasing consumer
demand for college sports and preventing the formation of a
“wedge” between student-athletes and other students—the
court proceeded to the third and final step of the Rule of
Reason, where it considered whether there were means of
achieving the NCAA’s procompetitive purposes that were
“substantially less restrictive” than a total ban on
compensating student-athletes for use of their NILs. Id. at
1004–05.
The court held that the plaintiffs had identified two
legitimate, less restrictive alternatives to the current NCAA
rules: (1) allowing schools to award stipends to student-
athletes up to the full cost of attendance, thereby making up
for any “shortfall” in their grants-in-aid, and (2) permitting
schools to hold a portion of their licensing revenues in trust,
to be distributed to student-athletes in equal shares after they
leave college.8 Id. at 1005–06. The court determined that
neither of these alternatives to the total ban on NIL
compensation would undermine the NCAA’s procompetitive
purposes. The court also held that it would be permissible for
the NCAA to prohibit schools from funding these stipends or
trusts with anything other than revenue derived from the use
of players’ NILs. Id. at 1005.
8
The district court rejected a third proposal: permitting student-athletes
to receive compensation from school-approved endorsements. O’Bannon,
7 F. Supp. 3d at 984. The court found that this proposal would undermine
the NCAA’s efforts to protect its student-athletes from commercial
exploitation. Id.
O’BANNON V. NCAA 25
After entering judgment for the plaintiffs on their antitrust
claims, the district court permanently enjoined the NCAA
from prohibiting its member schools from (1) compensating
FBS football and Division I men’s basketball players for the
use of their NILs by awarding them grants-in-aid up to the
full cost of attendance at their respective schools, or
(2) paying up to $5,000 per year in deferred compensation to
FBS football and Division I men’s basketball players for the
use of their NILs, through trust funds distributable after they
leave school. The NCAA timely appealed, and we have
jurisdiction under 28 U.S.C. § 1291.
II
We review the district court’s findings of fact after the
bench trial for clear error and review the district court’s
conclusions of law de novo. FTC v. BurnLounge, Inc.,
753 F.3d 878, 883 (9th Cir. 2014). Our clear-error review of
the district court’s findings of fact is “deferential”; “we will
accept the district court’s findings of fact unless we are left
with the definite and firm conviction that a mistake has been
committed.” Id. (alteration and internal quotation marks
omitted).
III
On appeal, the NCAA contends that the plaintiffs’
Sherman Act claim fails on the merits, but it also argues that
we are precluded altogether from reaching the merits, for
three independent reasons: (1) The Supreme Court held in
NCAA v. Board of Regents of the University of Oklahoma,
468 U.S. 85 (1984), that the NCAA’s amateurism rules are
“valid as a matter of law”; (2) the compensation rules at issue
here are not covered by the Sherman Act at all because they
26 O’BANNON V. NCAA
do not regulate commercial activity; and (3) the plaintiffs
have no standing to sue under the Sherman Act because they
have not suffered “antitrust injury.” We find none of these
three arguments persuasive.
A. Board of Regents Did Not Declare the NCAA’s
Amateurism Rules “Valid as a Matter of Law”
We consider, first, the NCAA’s claim that, under Board
of Regents, all NCAA amateurism rules are “valid as a matter
of law.”
Board of Regents concerned the NCAA’s then-prevailing
rules for televising college football games. The rules allowed
television networks to negotiate directly with schools and
conferences for the right to televise games, but they imposed
caps on the total number of games that could be broadcast on
television each year and the number of games that any
particular school could televise. Id. at 91–94. The University
of Oklahoma and the University of Georgia challenged this
regime as an illegal restraint of trade under Section 1.
The Court observed that the television rules resembled
two kinds of agreements that are ordinarily considered per se
unlawful when made among horizontal competitors in the
same market: a price-fixing agreement (in that the rules set
a minimum aggregate price that the television networks were
required to pay the NCAA’s members) and an output-
restriction agreement (in that the rules artificially capped the
number of televised game licenses for sale). Id. at 99–100.
But it concluded that applying a per se rule of invalidity to the
NCAA’s television rules would be “inappropriate” because
college football is “an industry in which horizontal restraints
O’BANNON V. NCAA 27
on competition are essential if the product is to be available
at all.” Id. at 100–01. The Court elaborated:
What the NCAA and its member institutions
market in this case is competition itself—
contests between competing institutions. Of
course, this would be completely ineffective
if there were no rules on which the
competitors agreed to create and define the
competition to be marketed. A myriad of
rules affecting such matters as the size of the
field, the number of players on a team, and the
extent to which physical violence is to be
encouraged or proscribed, all must be agreed
upon, and all restrain the manner in which
institutions compete. Moreover, the NCAA
seeks to market a particular brand of
football—college football. . . . In order to
preserve the character and quality of th[is]
“product,” athletes must not be paid, must be
required to attend class, and the like. And the
integrity of the “product” cannot be preserved
except by mutual agreement; if an institution
adopted such restrictions unilaterally, its
effectiveness as a competitor on the playing
field might soon be destroyed. Thus, the
NCAA plays a vital role in enabling college
football to preserve its character, and as a
result enables a product to be marketed which
might otherwise be unavailable. In
performing this role, its actions widen
consumer choice—not only the choices
available to sports fans but also those
28 O’BANNON V. NCAA
available to athletes—and hence can be
viewed as procompetitive.
Id. at 101–02 (emphasis added). The Court held that the
NCAA’s rules should therefore be analyzed under the Rule of
Reason.
Applying the Rule of Reason, the Court struck down the
television rules on the ground that they did not serve any
legitimate procompetitive purpose. Id. at 113–20. It then
concluded its opinion by stating:
The NCAA plays a critical role in the
maintenance of a revered tradition of
amateurism in college sports. There can be no
question but that it needs ample latitude to
play that role, or that the preservation of the
student-athlete in higher education adds
richness and diversity to intercollegiate
athletics and is entirely consistent with the
goals of the Sherman Act. But consistent with
the Sherman Act, the role of the NCAA must
be to preserve a tradition that might otherwise
die; rules that restrict output are hardly
consistent with this role. Today we hold only
that the record supports the District Court’s
conclusion that by curtailing output and
blunting the ability of member institutions to
respond to consumer preference, the NCAA
has restricted rather than enhanced the place
of intercollegiate athletics in the Nation’s life.
Id. at 120 (emphasis added).
O’BANNON V. NCAA 29
Quoting heavily from the language in Board of Regents
that we have emphasized, the NCAA contends that any
Section 1 challenge to its amateurism rules must fail as a
matter of law because the Board of Regents Court held that
those rules are presumptively valid. We disagree.
The Board of Regents Court certainly discussed the
NCAA’s amateurism rules at great length, but it did not do so
in order to pass upon the rules’ merits, given that they were
not before the Court. Rather, the Court discussed the
amateurism rules for a different and particular purpose: to
explain why NCAA rules should be analyzed under the Rule
of Reason, rather than held to be illegal per se. The point was
a significant one. Naked horizontal agreements among
competitors to fix the price of a good or service, or to restrict
their output, are usually condemned as per se unlawful. See,
e.g., United States v. Trenton Potteries Co., 273 U.S. 392,
398 (1927); see also, e.g., Broad. Music, Inc. v. CBS, Inc.,
441 U.S. 1, 19–20 (1979) (arrangements that “almost always
tend to restrict competition and decrease output” are usually
per se illegal). The Board of Regents Court decided,
however, that because college sports could not exist without
certain horizontal agreements, NCAA rules should not be
held per se unlawful even when—like the television rules in
Board of Regents—they appear to be pure “restraints on the
ability of member institutions to compete in terms of price
and output.” Bd. of Regents, 468 U.S. at 103.
Board of Regents, in other words, did not approve the
NCAA’s amateurism rules as categorically consistent with
the Sherman Act. Rather, it held that, because many NCAA
30 O’BANNON V. NCAA
rules (among them, the amateurism rules)9 are part of the
“character and quality of the [NCAA’s] ‘product,’” id. at 102,
no NCAA rule should be invalidated without a Rule of
Reason analysis. The Court’s long encomium to amateurism,
though impressive-sounding, was therefore dicta. To be sure,
“[w]e do not treat considered dicta from the Supreme Court
lightly”; such dicta should be accorded “appropriate
deference.” United States v. Augustine, 712 F.3d 1290, 1295
(9th Cir. 2013). Where applicable, we will give the quoted
passages from Board of Regents that deference. But we are
not bound by Board of Regents to conclude that every NCAA
rule that somehow relates to amateurism is automatically
valid.
What is more, even if the language in Board of Regents
addressing amateurism were not dicta, it would not support
the tremendous weight that the NCAA seeks to place upon it.
The Court’s opinion supports the proposition that the
preservation of amateurism is a legitimate procompetitive
purpose for the NCAA to pursue, but the NCAA is not asking
us to find merely that its amateurism rules are
procompetitive; rather, it asks us to hold that those rules are
essentially exempt from antitrust scrutiny.10 Nothing in
9
Importantly, the Court was quite clear that the preservation of
amateurism, standing alone, was not the justification for its decision to
reject a per se analysis. Bd. of Regents, 468 U.S. at 100–01 (“This
decision [not to apply a per se rule] is not based on . . . our respect for the
NCAA’s historic role in the preservation and encouragement of
intercollegiate amateur athletics.”).
10
The NCAA appears at some places in its briefs to concede that the
amateurism rules are subject to Rule of Reason analysis and merely to
argue that Board of Regents “dictates the outcome” of that analysis. But
O’BANNON V. NCAA 31
Board of Regents supports such an exemption. To say that
the NCAA’s amateurism rules are procompetitive, as Board
of Regents did, is not to say that they are automatically
lawful; a restraint that serves a procompetitive purpose can
still be invalid under the Rule of Reason if a substantially less
restrictive rule would further the same objectives equally
well. See Bd. of Regents, 468 U.S. at 101 n.23 (“While as the
guardian of an important American tradition, the NCAA’s
motives must be accorded a respectful presumption of
validity, it is nevertheless well settled that good motives will
not validate an otherwise anticompetitive practice.”).
The NCAA cites decisions of three of our sister circuits,
claiming that each adopted its view of Board of Regents.
Two of these three cases, however, ultimately subjected the
NCAA’s rules to Rule of Reason scrutiny—the very approach
we adopt today. See Smith v. NCAA, 139 F.3d 180, 186 (3d
Cir. 1998), vacated on other grounds by NCAA v. Smith,
525 U.S. 459 (1999); McCormack v. NCAA, 845 F.2d 1338,
1344–45 (5th Cir. 1988). Only one—the Seventh Circuit’s
decision in Agnew v. NCAA, 683 F.3d 328 (7th Cir. 2012)—
comes close to agreeing with the NCAA’s interpretation of
Board of Regents, and we find it unpersuasive.
In Agnew, two former college football players who lost
their scholarships challenged certain NCAA rules that
prohibited schools from offering multi-year scholarships and
capped the number of football scholarships each school could
offer. Id. at 332–33. The Agnew court read Board of Regents
broadly and concluded that, “when an NCAA bylaw is clearly
meant to help maintain the ‘revered tradition of amateurism
we see no distinction between that position and an argument for blanket
antitrust immunity.
32 O’BANNON V. NCAA
in college sports’ or the ‘preservation of the student-athlete in
higher education,’ the bylaw [should] be presumed
procompetitive.” Id. at 342–43 (quoting Bd. of Regents,
468 U.S. at 120). The court concluded, however, that the
scholarship limitations that were before it did not “implicate
the preservation of amateurism,” since awarding more or
longer scholarships to college athletes would not change their
status as amateurs. Id. at 344. Thus, no “procompetitive
presumption” applied to the scholarship rules. Id. at 345.
Instead of dismissing the plaintiffs’ antitrust claims on the
merits, the court dismissed them on the unrelated ground that
the plaintiffs had failed to plead the existence of a cognizable
market. Id.
Like the amateurism language in Board of Regents,
Agnew’s “procompetitive presumption” was dicta that was
ultimately unnecessary to the court’s resolution of that case.
But we would not adopt the Agnew presumption even if it
were not dicta. Agnew’s analysis rested on the dubious
proposition that in Board of Regents, the Supreme Court
“blessed” NCAA rules that were not before it, and did so to
a sufficient degree to virtually exempt those rules from
antitrust scrutiny. Id. at 341. We doubt that was the Court’s
intent, and we will not give such an aggressive construction
to its words.
In sum, we accept Board of Regents’ guidance as
informative with respect to the procompetitive purposes
served by the NCAA’s amateurism rules, but we will go no
further than that. The amateurism rules’ validity must be
proved, not presumed.
O’BANNON V. NCAA 33
B. The Compensation Rules Regulate “Commercial
Activity”
The NCAA next argues that we cannot reach the merits of
the plaintiffs’ Sherman Act claim because the compensation
rules are not subject to the Sherman Act at all. The NCAA
points out that Section 1 of the Sherman Act applies only to
“restraint[s] of trade or commerce,” 15 U.S.C. § 1, and claims
that its compensation rules are mere “eligibility rules” that do
not regulate any “commercial activity.”
This argument is not credible. Although restraints that
have no effect on commerce are indeed exempt from Section
1, the modern legal understanding of “commerce” is broad,
“including almost every activity from which the actor
anticipates economic gain.” Phillip Areeda & Herbert
Hovenkamp, Antitrust Law: An Analysis of Antitrust
Principles and Their Application, ¶ 260b (4th ed. 2013). That
definition surely encompasses the transaction in which an
athletic recruit exchanges his labor and NIL rights for a
scholarship at a Division I school because it is undeniable that
both parties to that exchange anticipate economic gain from
it. See, e.g., Agnew, 683 F.3d at 340 (“No knowledgeable
observer could earnestly assert that big-time college football
programs competing for highly sought-after high school
football players do not anticipate economic gain from a
successful recruiting program.”). Moreover, Board of
Regents’ discussion of the procompetitive justifications for
NCAA amateurism rules shows that the Court “presume[d]
the applicability of the Sherman Act to NCAA bylaws, since
no procompetitive justifications would be necessary for
noncommercial activity to which the Sherman Act does not
apply.” Id. at 339.
34 O’BANNON V. NCAA
It is no answer to these observations to say, as the NCAA
does in its briefs, that the compensation rules are “eligibility
rules” rather than direct restraints on the terms of agreements
between schools and recruits. True enough, the compensation
rules are written in the form of eligibility rules; they provide
that an athlete who receives compensation other than the
scholarships specifically permitted by the NCAA loses his
eligibility for collegiate sports. The mere fact that a rule can
be characterized as an “eligibility rule,” however, does not
mean the rule is not a restraint of trade; were the law
otherwise, the NCAA could insulate its member schools’
relationships with student-athletes from antitrust scrutiny by
renaming every rule governing student-athletes an “eligibility
rule.” The antitrust laws are not to be avoided by such
“clever manipulation of words.” Simpson v. Union Oil Co. of
Cal., 377 U.S. 13, 21–22 (1964).
In other words, the substance of the compensation rules
matters far more than how they are styled. And in substance,
the rules clearly regulate the terms of commercial
transactions between athletic recruits and their chosen
schools: a school may not give a recruit compensation
beyond a grant-in-aid, and the recruit may not accept
compensation beyond that limit, lest the recruit be
disqualified and the transaction vitiated. The NCAA’s
argument that its compensation rules are “eligibility”
restrictions, rather than substantive restrictions on the price
terms of recruiting agreements, is but a sleight of hand.
There is real money at issue here.
As the NCAA points out, two circuits have held that
certain NCAA rules are noncommercial in nature. In Smith
v. NCAA, the Third Circuit dismissed a student-athlete’s
challenge to the NCAA’s “Postbaccalaureate Bylaw,” which
O’BANNON V. NCAA 35
prohibited athletes from participating in athletics at
postgraduate schools other than their undergraduate schools,
on the grounds that the Sherman Act did not apply to that
Bylaw. The Smith court held that eligibility rules such as the
Postbaccalaureate Bylaw “are not related to the NCAA’s
commercial or business activities. Rather than intending to
provide the NCAA with a commercial advantage, the
eligibility rules primarily seek to ensure fair competition in
intercollegiate athletics.” Smith, 139 F.3d at 185.
The Sixth Circuit, meanwhile, held in Bassett v. NCAA,
528 F.3d 426, 430, 433 (6th Cir. 2008), that the NCAA’s
rules against giving recruits “improper inducements” were
“explicitly noncommercial.” The court explained:
In fact, th[e]se rules are anti-commercial and
designed to promote and ensure
competitiveness amongst NCAA member
schools. Violation of the applicable NCAA
rules gives the violator a decided competitive
advantage in recruiting and retaining highly
prized student athletes. It also violates the
spirit of amateur athletics by providing
remuneration to athletes in exchange for their
commitments to play for the violator’s
football program. Finally, violators of these
rules harm the student-athlete academically
when coaches and assistants complete
coursework on behalf of the student-athlete.
Id. at 433.
Neither Smith nor Bassett convinces us that the NCAA’s
compensation rules are noncommercial. The
36 O’BANNON V. NCAA
Postbaccalaureate Bylaw challenged in Smith was a true
“eligibility” rule, akin to the rules limiting the number of
years that student-athletes may play collegiate sports or
requiring student-athletes to complete a certain number of
credit hours each semester. As the Smith court expressly
noted, the Postbaccalaureate Bylaw was “not related to the
NCAA’s commercial or business activities.” Smith, 139 F.3d
at 185. By contrast, the rules here—which regulate what
compensation NCAA schools may give student-athletes, and
how much—do relate to the NCAA’s business activities: the
labor of student-athletes is an integral and essential
component of the NCAA’s “product,” and a rule setting the
price of that labor goes to the heart of the NCAA’s business.
Thus, the rules at issue here are more like rules affecting the
NCAA’s dealings with its coaches or with corporate business
partners—which courts have held to be commercial—than
they are like the Bylaw challenged in Smith. See Bd. of
Regents, 468 U.S. at 104–13 (applying Sherman Act to rules
governing NCAA members’ contracts with television
networks); Law v. NCAA, 134 F.3d 1010, 1024 (10th Cir.
1998) (applying Sherman Act to NCAA rules limiting
compensation of basketball coaches).
Bassett cannot be distinguished here in the way that Smith
can since it involved an NCAA rule relating to payments to
athletic recruits, but we believe Bassett was simply wrong on
this point. Bassett’s reasoning, in fine, is that rules that seek
to combat commercialism in college sports by preventing
schools from competing to pay student-athletes cannot be
considered restraints on “commerce.” We simply cannot
understand this logic. Rules that are “anti-commercial and
designed to promote and ensure competitiveness,” Bassett,
528 F.3d at 433, surely affect commerce just as much as rules
promoting commercialism. The intent behind the NCAA’s
O’BANNON V. NCAA 37
compensation rules does not change the fact that the
exchange they regulate—labor for in-kind compensation—is
a quintessentially commercial transaction.
We therefore conclude that the NCAA’s compensation
rules are within the ambit of the Sherman Act.
C. The Plaintiffs Demonstrated that the Compensation Rules
Cause Them Injury in Fact
The NCAA’s last argument antecedent to the merits is
that the plaintiffs’ Section 1 claim fails at the threshold
because the plaintiffs have failed to show that they have
suffered “antitrust injury.” Antitrust injury is a heightened
standing requirement that applies to private parties suing to
enforce the antitrust laws. To satisfy the antitrust-injury
requirement, a plaintiff must show “injury of the type the
antitrust laws were intended to prevent and that flows from
that which makes defendants’ acts unlawful.” Glen Holly
Entm’t, Inc. v. Tektronix Inc., 343 F.3d 1000, 1007–08 (9th
Cir. 2003) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat,
Inc., 429 U.S. 477, 489 (1977)) (internal quotation marks
omitted).
Although the NCAA purports to be making an antitrust-
injury argument, it is mistaken. The NCAA has not
contended that the plaintiffs’ injuries are not “of the type the
antitrust laws were intended to prevent.” Rather, the NCAA
has made a garden-variety standing argument: it alleges that
the plaintiffs have not been injured in fact by the
compensation rules because those rules do not deprive them
of any NIL compensation they would otherwise receive.
Addressing each of the potential markets for NIL rights that
the district court identified, the NCAA argues that (1) there
38 O’BANNON V. NCAA
are no legally-recognized NIL rights for participants in live
game broadcasts; (2) the NCAA’s compensation rules do not
deprive the plaintiffs of compensation for use of their NILs in
video games because the NCAA no longer permits college
sports video games to be made and has a separate policy
forbidding the use of student-athletes’ NILs in video games;
and (3) the NCAA’s licensing agreement for archival footage
with T3Media does not deprive athletes of NIL compensation
for archival footage because it prevents T3Media from
licensing student-athletes’ NILs while they are in school and
requires the company to obtain consent once student-athletes
have left school.
We conclude that the plaintiffs have shown that they are
injured in fact as a result of the NCAA’s rules having
foreclosed the market for their NILs in video games. We
therefore do not reach the thornier questions of whether
participants in live TV broadcasts of college sporting events
have enforceable rights of publicity or whether the plaintiffs
are injured by the NCAA’s current licensing arrangement for
archival footage.
1. Absent the NCAA’s compensation rules, video game
makers would negotiate with student-athletes for the
right to use their NILs
As we have explained, the district court found that, if
permitted to do so, video game makers such as EA would
negotiate with college athletes for the right to use their NILs
in video games because these companies want to make games
that are as realistic as possible. O’Bannon, 7 F. Supp. 3d at
970. The district court noted that EA currently negotiates
with the NFL and NBA players’ unions for the right to use
their members’ NILs in pro sports video games. Id. The
O’BANNON V. NCAA 39
plaintiffs also put into evidence a copy of a 2005 presentation
by EA representatives to the NCAA, which stated that EA’s
inability to use college athletes’ NILs was the “number one
factor holding back NCAA video game growth.”
The NCAA argues, however, that we cannot find that the
plaintiffs have suffered an injury in fact based on lost
compensation from video game companies because the
NCAA has terminated its relationship with EA and is not
currently working with any other video game maker.11 We
disagree. The district court found that it is entirely possible
that the NCAA will resume its support for college sports
video games at some point in the future, given that the NCAA
found such games to be profitable in the past, id., and that
finding of fact was not clearly erroneous. Given the NCAA’s
previous, lengthy relationship with EA and the other evidence
presented, it was reasonable for the district court to conclude
that the NCAA may well begin working with EA or another
video game company in the future.12
11
The NCAA also asserts before us that it has no intent to license its
intellectual property for use in video games in the future, but we place no
weight on that assertion. Statements in appellate briefs are not evidence.
See, e.g., Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d
987, 1002 (9th Cir. 2003).
12
Even if the district court had not made this factual finding, we would
be reluctant to conclude that the NCAA’s current moratorium on college
sports video games precludes the plaintiffs’ suit. When a defendant has
voluntarily ceased “allegedly improper behavior in response to a suit, but
is free to return to it at any time,” a challenge to the defendant’s behavior
is generally not considered moot unless “there is no reasonable
expectation that the illegal action will recur.” Native Vill. of Noatak v.
Blatchford, 38 F.3d 1505, 1510 (9th Cir. 1994). Under this logic, the
NCAA’s decision to terminate its relationship with video game companies
40 O’BANNON V. NCAA
Our conclusion is unaffected by the NCAA’s claim that
other rules and policies, not directly at issue here, would
forbid video game makers from using student-athletes’ NILs
in their games if such games were to be made again. The
NCAA did, after all, permit EA to continue making NCAA
video games for some time after EA began incorporating
recognizable player avatars into the games. Moreover, Joel
Linzner, a EA executive, testified at trial that EA “made a
long-sustained effort to work with the NCAA” to change the
policy against using student-athletes’ NILs, and that NCAA
executives were “supportive” of the idea. It was not clearly
erroneous for the district court to conclude on the basis of this
evidence that the NCAA might well either change its policy
barring the use of athletes’ NILs in video games or decline to
enforce it.
2. Whether the Copyright Act preempts right-of-
publicity claims based on sports video games is
tangential to this case and irrelevant to the plaintiffs’
standing
In addition to arguing that its current policies against
college sports video games defeat the plaintiffs’ claims to
standing, the NCAA also contends that there are legal barriers
that would prevent the plaintiffs from being compensated by
a video game maker. Specifically, the NCAA argues that the
Copyright Act would preempt any right-of-publicity claim
should not moot the plaintiffs’ video game-related claims or show that the
NCAA’s conduct does not injure the plaintiffs.
O’BANNON V. NCAA 41
arising out of the use of those NILs in sports video games.13
Thus, the NCAA maintains, if it were to resume its support
for college sports video games and permit video game
companies to use student-athletes’ NILs, the video game
makers would not pay student-athletes for their NILs; rather,
they could use the NILs for free.
We decline to consider this argument, for two reasons.
First, it is convoluted and far afield from the main issues in
this case. The NCAA asks us to decide whether, assuming
that EA or some other video game company were to make a
college sports video game that incorporated student-athletes’
NILs and then refuse to pay student-athletes for those NILs,
the game maker would have a viable Copyright Act defense
to a right-of-publicity lawsuit brought by the athletes. That
question is a complex one, implicating both Section 301 of
the Copyright Act, 17 U.S.C. § 301, which expressly
preempts certain common-law claims, and a murky body of
case law holding that, in some circumstances, the Act
impliedly preempts claims that fall outside of Section 301’s
scope. See, e.g., Facenda v. NFL Films, Inc., 542 F.3d 1007,
1028–32 (3d Cir. 2008) (suggesting, on the basis of a conflict
preemption analysis, that federal copyright law can
“impliedly preempt[]” right-of-publicity claims). It is
scarcely fit for resolution within the confines of a standing
inquiry in an antitrust suit between the NCAA and its student-
athletes that involves neither EA nor any other video game
13
The NCAA also argues that the First Amendment would preclude any
right-of-publicity claim arising out of a sports video game. We rejected
that argument in Keller, 724 F.3d at 1284, and we will not consider it
further in this appeal. Accord Hart v. Electronic Arts, Inc., 717 F.3d 141,
170 (3d Cir. 2013) (holding that “the NCAA Football . . . games at issue
in this case do not sufficiently transform [student-athletes’] identit[ies] to
escape [a] right of publicity claim”).
42 O’BANNON V. NCAA
company as a party. Should a college sports video game be
made in the future and the right-of-publicity suit envisioned
by the NCAA come to pass, the court hearing that suit will be
in a far better position to resolve the question of Copyright
Act preemption than we are.
Second and more importantly, the NCAA’s argument
about the Copyright Act, even if correct, is irrelevant to
whether the plaintiffs lack standing. On the NCAA’s
interpretation of the Copyright Act, professional football and
basketball players have no enforceable right-of-publicity
claims against video game makers either—yet EA currently
pays NFL and NBA players for the right to use their NILs in
its video games. O’Bannon, 7 F. Supp. 3d at 970. Thus,
there is every reason to believe that, if permitted to do so, EA
or another video game company would pay NCAA athletes
for their NIL rights rather than test the enforceability of those
rights in court. That the NCAA’s rules deny the plaintiffs all
opportunity to receive this compensation is sufficient to
endow them with standing to bring this lawsuit. See 13A
Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 3531.4 (3d ed. 1998) (“[L]oss of an opportunity
may constitute injury, even though it is not certain that any
benefit would have been realized if the opportunity had been
accorded.” (collecting cases)); cf., e.g., United States v.
Students Challenging Regulatory Agency Procedures
(SCRAP), 412 U.S. 669, 689 n.14 (1973) (rejecting the
government’s argument that standing should be limited “to
those who have been ‘significantly’ affected by agency
action”); Preminger v. Peake, 552 F.3d 757, 763 (9th Cir.
2008) (“The injury may be minimal.”).
* * *
O’BANNON V. NCAA 43
Because the plaintiffs have shown that, absent the
NCAA’s compensation rules, video game makers would
likely pay them for the right to use their NILs in college
sports video games, the plaintiffs have satisfied the
requirement of injury in fact and, by extension, the
requirement of antitrust injury.
IV
Having rejected all of the NCAA’s preliminary legal
arguments, we proceed to review the plaintiffs’ Section 1
claim on the merits. Although in another context the
NCAA’s decision to value student-athletes’ NIL at zero might
be per se illegal price fixing, we are persuaded—as was the
Supreme Court in Board of Regents and the district court
here—that the appropriate rule is the Rule of Reason. As the
Supreme Court observed, the NCAA “market[s] a particular
brand . . . [that] makes it more popular than professional
sports to which it might otherwise be comparable.” Board of
Regents, 468 U.S. at 101–02. Because the “integrity of the
‘product’ cannot be preserved except by mutual agreement,”
“restraints on competition are essential if the product is to be
available at all.” Id. at 101, 102; see also id. at 117 (“Our
decision not to apply a per se rule to this case rests in large
part on our recognition that a certain degree of cooperation is
necessary if the type of competition that [the NCAA] and its
member institutions seek to market is to be preserved.”
(footnote omitted)).
Like the district court, we follow the three-step
framework of the Rule of Reason: “[1] The plaintiff bears the
initial burden of showing that the restraint produces
significant anticompetitive effects within a relevant market.
[2] If the plaintiff meets this burden, the defendant must come
44 O’BANNON V. NCAA
forward with evidence of the restraint’s procompetitive
effects. [3] The plaintiff must then show that any legitimate
objectives can be achieved in a substantially less restrictive
manner.” Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063
(9th Cir. 2001) (citations and internal quotation marks
omitted).
A. Significant Anticompetitive Effects Within a Relevant
Market
As we have recounted, the district court made the
following factual findings: (1) that a cognizable “college
education market” exists, wherein colleges compete for the
services of athletic recruits by offering them scholarships and
various amenities, such as coaching and facilities; (2) that if
the NCAA’s compensation rules did not exist, member
schools would compete to offer recruits compensation for
their NILs; and (3) that the compensation rules therefore have
a significant anticompetitive effect on the college education
market, in that they fix an aspect of the “price” that recruits
pay to attend college (or, alternatively, an aspect of the price
that schools pay to secure recruits’ services). These findings
have substantial support in the record.
By and large, the NCAA does not challenge the district
court’s findings. It does not take issue with the way that the
district court defined the college education market. Nor does
it appear to dispute the district court’s conclusion that the
compensation rules restrain the NCAA’s member schools
from competing with each other within that market, at least
to a certain degree. Instead, the NCAA makes three modest
arguments about why the compensation rules do not have a
significant anticompetitive effect. First, it argues that
because the plaintiffs never showed that the rules reduce
O’BANNON V. NCAA 45
output in the college education market, the plaintiffs did not
meet their burden of showing a significant anticompetitive
effect. Second, it argues that the rules have no
anticompetitive effect because schools would not pay student-
athletes anything for their NIL rights in any event, given that
those rights are worth nothing. And finally, the NCAA
argues that even if the district court was right that schools
would pay student-athletes for their NIL rights, any such
payments would be small, which means that the
compensation rules’ anticompetitive effects cannot be
considered significant.
We can dispose of the first two arguments quickly. First,
the NCAA’s contention that the plaintiffs’ claim fails because
they did not show a decrease in output in the college
education market is simply incorrect. Here, the NCAA
argues that output in the college education market “consists
of opportunities for student-athletes to participate in FBS
football or Division I men’s basketball,” and it quotes the
district court’s finding that these opportunities have
“increased steadily over time.” See O’Bannon, 7 F. Supp. 3d
at 981. But this argument misses the mark. Although output
reductions are one common kind of anticompetitive effect in
antitrust cases, a “reduction in output is not the only measure
of anticompetitive effect.” Areeda & Hovenkamp ¶ 1503b(1)
(emphasis added).
The “combination[s] condemned by the [Sherman] Act”
also include “price-fixing . . . by purchasers” even though
“the persons specially injured . . . are sellers, not customers
or consumers.” Mandeville Island Farms, Inc. v. Am. Crystal
Sugar Co., 334 U.S. 219, 235 (1948). At trial, the plaintiffs
demonstrated that the NCAA’s compensation rules have just
this kind of anticompetitive effect: they fix the price of one
46 O’BANNON V. NCAA
component of the exchange between school and recruit,
thereby precluding competition among schools with respect
to that component. The district court found that although
consumers of NCAA football and basketball may not be
harmed directly by this price-fixing, the “student-athletes
themselves are harmed by the price-fixing agreement among
FBS football and Division I basketball schools.” O’Bannon,
7 F. Supp. 3d at 972–73. The athletes accept grants-in-aid,
and no more, in exchange for their athletic performance,
because the NCAA schools have agreed to value the athletes’
NILs at zero, “an anticompetitive effect.”14 Id. at 973. This
anticompetitive effect satisfied the plaintiffs’ initial burden
under the Rule of Reason. Cf. Cal. Dental Ass’n v. FTC,
526 U.S. 756, 777 (1999) (“[R]aising price, reducing output,
and dividing markets have the same anticompetitive effects.”
(quoting Gen. Leaseways, Inc. v. Nat’l Truck Leasing Ass’n,
744 F.2d 588, 594–95 (7th Cir. 1984))).
Second, the NCAA’s argument that student-athletes’
NILs are, in fact, worth nothing is simply a repackaged
version of its arguments about injury in fact, which we have
rejected.
Finally, we reject the NCAA’s contention that any NIL
compensation that student-athletes might receive in the
absence of its compensation rules would be de minimis and
that the rules therefore do not significantly affect competition
14
As we have explained, the district court alternatively characterized
student-athletes as buyers of educational services from a cartel rather than
sellers of labor to a monopsony. This different way of describing the
college education market did not alter either the district court’s analysis
of how the market functioned or its assessment that student-athletes are
harmed by the NCAA’s compensation rules. O’Bannon, 7 F. Supp. 3d at
973, 991–93.
O’BANNON V. NCAA 47
in the college education market. This “too small to matter”
argument is incompatible with the Supreme Court’s holding
in Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980)
(per curiam). In Catalano, a group of beer retailers sued a
group of beer wholesalers, alleging that the wholesalers had
secretly agreed to end their customary practice of extending
the retailers interest-free credit for roughly a month after the
delivery of beer. Id. at 644. The Court unanimously held that
this agreement was unlawful per se. It reasoned that the
agreement was clearly a means of “extinguishing one form of
[price] competition among the sellers,” given that credit terms
were part of the price of the beer, and that the agreement was
therefore tantamount to price-fixing. Id. at 649. The Court
was not concerned with whether the agreement affected the
market adversely: “It is no excuse that the prices fixed are
themselves reasonable.” Id. at 647.
The NCAA’s compensation rules function in much the
same way as the agreement at issue in Catalano: they
“extinguish[] one form of competition” among schools
seeking to land recruits. We acknowledge that Catalano was
a per se case in which the Court did not analyze the
anticompetitive effect of the wholesalers’ agreement in
detail,15 but the decision nonetheless indicates that an antitrust
court should not dismiss an anticompetitive price-fixing
agreement as benign simply because the agreement relates
only to one component of an overall price. That proposition
finds further support in Board of Regents: in Board of
Regents, a Rule of Reason case, the Court held that the
NCAA’s television plan had “a significant potential for
15
Indeed, the Catalano defendants declined to “suggest a procompetitive
justification for [their] horizontal agreement to fix credit.” Catalano,
446 U.S. at 646 n.8.
48 O’BANNON V. NCAA
anticompetitive effects” without delving into the details of
exactly how much the plan restricted output of televised
games or how much it fixed the price of TV contracts.
468 U.S. at 104–05. While the precise value of NIL
compensation is uncertain, at this point in the analysis and in
light of Catalano and Board of Regents, we conclude that the
plaintiffs have met their burden at the first step of the Rule of
Reason by showing that the NCAA’s compensation rules fix
the price of one component (NIL rights) of the bundle that
schools provide to recruits.
Because we agree with the district court that the
compensation rules have a significant anticompetitive effect
on the college education market, we proceed to consider the
procompetitive justifications the NCAA proffers for those
rules.
B. Procompetitive Effects
As discussed above, the NCAA offered the district court
four procompetitive justifications for the compensation rules:
(1) promoting amateurism, (2) promoting competitive balance
among NCAA schools, (3) integrating student-athletes with
their schools’ academic community, and (4) increasing output
in the college education market. The district court accepted
the first and third and rejected the other two.
Although the NCAA’s briefs state in passing that the
district court erred in failing to “credit all four justifications
fully,” the NCAA focuses its arguments to this court entirely
on the first proffered justification—the promotion of
amateurism. We therefore accept the district court’s factual
findings that the compensation rules do not promote
competitive balance, that they do not increase output in the
O’BANNON V. NCAA 49
college education market, and that they play a limited role in
integrating student-athletes with their schools’ academic
communities, since we have been offered no meaningful
argument that those findings were clearly erroneous. See,
e.g., Md. Cas. Co. v. Knight, 96 F.3d 1284, 1291 (9th Cir.
1996).
The district court acknowledged that the NCAA’s current
rules promote amateurism, which in turn plays a role in
increasing consumer demand for college sports. O’Bannon,
7 F. Supp. 3d at 978. The NCAA does not challenge that
specific determination, but it argues to us that the district
court gave the amateurism justification short shrift, in two
respects. First, it claims that the district court erred by
focusing solely on the question of whether amateurism
increases consumers’ (i.e., fans’) demand for college sports
and ignoring the fact that amateurism also increases choice
for student-athletes by giving them “the only opportunity
[they will] have to obtain a college education while playing
competitive sports as students.” Second, it faults the district
court for being inappropriately skeptical of the NCAA’s
historical commitment to amateurism. Although we might
have credited the depth of the NCAA’s devotion to
amateurism differently, these arguments do not persuade us
that the district court clearly erred.
The NCAA is correct that a restraint that broadens
choices can be procompetitive. The Court in Board of
Regents observed that the difference between college and
professional sports “widen[s]” the choices “available to
athletes.” Bd. of Regents, 468 U.S. at 102. But we fail to see
how the restraint at issue in this particular case—i.e., the
NCAA’s limits on student-athlete compensation—makes
college sports more attractive to recruits, or widens recruits’
50 O’BANNON V. NCAA
spectrum of choices in the sense that Board of Regents
suggested. As the district court found, it is primarily “the
opportunity to earn a higher education” that attracts athletes
to college sports rather than professional sports, O’Bannon,
7 F. Supp. 3d at 986, and that opportunity would still be
available to student-athletes if they were paid some
compensation in addition to their athletic scholarships.
Nothing in the plaintiffs’ prayer for compensation would
make student-athletes something other than students and
thereby impair their ability to become student-athletes.
Indeed, if anything, loosening or abandoning the
compensation rules might be the best way to “widen”
recruits’ range of choices; athletes might well be more likely
to attend college, and stay there longer, if they knew that they
were earning some amount of NIL income while they were in
school. See Jeffrey L. Harrison & Casey C. Harrison, The
Law and Economics of the NCAA’s Claim to Monopsony
Rights, 54 Antitrust Bull. 923, 948 (2009). We therefore
reject the NCAA’s claim that, by denying student-athletes
compensation apart from scholarships, the NCAA increases
the “choices” available to them.16
The NCAA’s second point has more force—the district
court probably underestimated the NCAA’s commitment to
amateurism. See Bd. of Regents, 468 U.S. at 120 (referring to
16
It may be that what the NCAA means by this argument is that its
compensation rules make it possible for schools to fund more scholarships
than they otherwise could and thereby increase the number of
opportunities that recruits have to play college sports. To the extent the
NCAA is making that argument, it is the functional equivalent of the
NCAA’s argument that the rules increase output in the college education
market. The district court found that argument unproved, and we have
affirmed that finding.
O’BANNON V. NCAA 51
the NCAA’s “revered tradition of amateurism in college
sports”). But the point is ultimately irrelevant. Even if the
NCAA’s concept of amateurism had been perfectly coherent
and consistent, the NCAA would still need to show that
amateurism brings about some procompetitive effect in order
to justify it under the antitrust laws. See id. at 101–02 &
n.23. The NCAA cannot fully answer the district court’s
finding that the compensation rules have significant
anticompetitive effects simply by pointing out that it has
adhered to those rules for a long time. Nevertheless, the
district court found, and the record supports that there is a
concrete procompetitive effect in the NCAA’s commitment
to amateurism: namely, that the amateur nature of collegiate
sports increases their appeal to consumers. We therefore
conclude that the NCAA’s compensation rules serve the two
procompetitive purposes identified by the district court:
integrating academics with athletics, and “preserving the
popularity of the NCAA’s product by promoting its current
understanding of amateurism.” O’Bannon, 7 F. Supp. 3d at
1005.17
17
The dissent suggests that during the second step the district court
defined the procompetitive benefits as “limits on large amounts of
student-athlete compensation preserve the popularity of the NCAA’s
product.” Dissent at 69, 70. But this cannot be right. During the second
step, the district court could only consider the benefits of the NCAA’s
existing rule prohibiting NIL payments—it could not consider the
potential benefits of an alternative rule (such as capping large payments).
The correct inquiry under the Rule of Reason is: What procompetitive
benefits are served by the NCAA’s existing rule banning NIL payments?
The district court found that the NCAA’s existing ban provides the
procompetitive benefit of preserving amateurism, and thus consumer
demand. It is only in the third step, where the burden is on the plaintiffs,
when the court could consider whether alternative rules provide a
52 O’BANNON V. NCAA
We note that the district court’s findings are largely
consistent with the Supreme Court’s own description of the
college football market as “a particular brand of football” that
draws from “an academic tradition [that] differentiates [it]
from and makes it more popular than professional sports to
which it might otherwise be comparable, such as, for
example, minor league baseball.” Bd. of Regents, 468 U.S. at
101–02. “Thus, the NCAA plays a vital role in enabling
college football to preserve its character, and as a result
enables a product to be marketed which might otherwise be
unavailable.” Id. at 102. But, as Board of Regents
demonstrates, not every rule adopted by the NCAA that
restricts the market is necessary to preserving the “character”
of college sports. We thus turn to the final inquiry—whether
there are reasonable alternatives to the NCAA’s current
compensation restrictions.
C. Substantially Less Restrictive Alternatives
The third step in the Rule of Reason analysis is whether
there are substantially less restrictive alternatives to the
NCAA’s current rules. We bear in mind that—to be viable
under the Rule of Reason—an alternative must be “virtually
as effective” in serving the procompetitive purposes of the
NCAA’s current rules, and “without significantly increased
cost.” Cnty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d
1148, 1159 (9th Cir. 2001) (internal quotation marks
omitted). We think that plaintiffs must make a strong
evidentiary showing that its alternatives are viable here. Not
only do plaintiffs bear the burden at this step, but the
procompetitive benefit. And even then, the courts' analysis is cabined to
considering whether the alternative serves the same procompetitive
interests identified in second step.
O’BANNON V. NCAA 53
Supreme Court has admonished that we must generally afford
the NCAA “ample latitude” to superintend college athletics.
Bd. of Regents, 468 U.S. at 120; see also Law v. Nat'l
Collegiate Athletic Ass'n, 134 F.3d 1010, 1022 (10th Cir.
1998) (“[C]ourts should afford the NCAA plenty of room
under the antitrust laws to preserve the amateur character of
intercollegiate athletics.”); Race Tires Am., Inc. v. Hoosier
Racing Tire Corp., 614 F.3d 57, 83 (3d Cir. 2010) (noting
that, generally, “sports-related organizations should have the
right to determine for themselves the set of rules that they
believe best advance their respective sport”).
The district court identified two substantially less
restrictive alternatives: (1) allowing NCAA member schools
to give student-athletes grants-in-aid that cover the full cost
of attendance; and (2) allowing member schools to pay
student-athletes small amounts of deferred cash compensation
for use of their NILs.18 O’Bannon, 7 F. Supp. 3d at 1005–07.
We hold that the district court did not clearly err in finding
that raising the grant-in-aid cap would be a substantially less
restrictive alternative, but that it clearly erred when it found
that allowing students to be paid compensation for their NILs
is virtually as effective as the NCAA’s current amateur-status
rule.
18
Although the NCAA now permits schools and conferences to elect to
raise their scholarship caps to the full cost of attendance, it could reverse
its position on that issue at any time. The district court’s injunction
prohibiting the NCAA from setting a cap any lower than the cost of
attendance thus remains in effect, which means that the NCAA’s
challenge to that portion of the injunction is not moot.
54 O’BANNON V. NCAA
1. Capping the permissible amount of scholarships at the
cost of attendance
The district court did not clearly err in finding that
allowing NCAA member schools to award grants-in-aid up to
their full cost of attendance would be a substantially less
restrictive alternative to the current compensation rules. All
of the evidence before the district court indicated that raising
the grant-in-aid cap to the cost of attendance would have
virtually no impact on amateurism: Dr. Mark Emmert, the
president of the NCAA, testified at trial that giving student-
athletes scholarships up to their full costs of attendance would
not violate the NCAA’s principles of amateurism because all
the money given to students would be going to cover their
“legitimate costs” to attend school. Other NCAA witnesses
agreed with that assessment. Id. at 983. Nothing in the
record, moreover, suggested that consumers of college sports
would become less interested in those sports if athletes’
scholarships covered their full cost of attendance, or that an
increase in the grant-in-aid cap would impede the integration
of student-athletes into their academic communities. Id.
The NCAA, along with fifteen scholars of antitrust law
appearing as amici curiae, warns us that if we affirm even
this more modest of the two less restrictive alternative
restraints identified by the district court, we will open the
floodgates to new lawsuits demanding all manner of
incremental changes in the NCAA’s and other organizations’
rules. The NCAA and these amici admonish us that as long
as a restraint (such as a price cap) is “reasonably necessary to
a valid business purpose,” it should be upheld; it is not an
antitrust court’s function to tweak every market restraint that
the court believes could be improved.
O’BANNON V. NCAA 55
We agree with the NCAA and the amici that, as a general
matter, courts should not use antitrust law to make marginal
adjustments to broadly reasonable market restraints. See,
e.g., Bruce Drug, Inc. v. Hollister, Inc., 688 F.2d 853, 860
(1st Cir. 1982) (noting that defendants are “not required to
adopt the least restrictive” alternative); Am. Motor Inns, Inc.
v. Holiday Inns, Inc., 521 F.2d 1230, 1249 (3d Cir. 1975)
(denying that “the availability of an alternative means of
achieving the asserted business purpose renders the existing
arrangement unlawful if that alternative would be less
restrictive of competition no matter to how small a degree”).
The particular restraint at issue here, however—the grant-in-
aid cap that the NCAA set below the cost of attendance—is
not such a restraint. To the contrary, the evidence at trial
showed that the grant-in-aid cap has no relation whatsoever
to the procompetitive purposes of the NCAA: by the
NCAA’s own standards, student-athletes remain amateurs as
long as any money paid to them goes to cover legitimate
educational expenses.
Thus, in holding that setting the grant-in-aid cap at
student-athletes’ full cost of attendance is a substantially less
restrictive alternative under the Rule of Reason, we are not
declaring that courts are free to micromanage organizational
rules or to strike down largely beneficial market restraints
with impunity. Rather, our affirmance of this aspect of the
district court’s decision should be taken to establish only that
where, as here, a restraint is patently and inexplicably stricter
than is necessary to accomplish all of its procompetitive
objectives, an antitrust court can and should invalidate it and
order it replaced with a less restrictive alternative.
A compensation cap set at student-athletes’ full cost of
attendance is a substantially less restrictive alternative means
56 O’BANNON V. NCAA
of accomplishing the NCAA’s legitimate procompetitive
purposes. And there is no evidence that this cap will
significantly increase costs; indeed, the NCAA already
permits schools to fund student-athletes’ full cost of
attendance. The district court’s determination that the
existing compensation rules violate Section 1 of the Sherman
Act was correct and its injunction requiring the NCAA to
permit schools to provide compensation up to the full cost of
attendance was proper.
2. Allowing students to receive cash compensation for
their NILs
In our judgment, however, the district court clearly erred
in finding it a viable alterative to allow students to receive
NIL cash payments untethered to their education expenses.
Again, the district court identified two procompetitive
purposes served by the NCAA’s current rules: “preserving the
popularity of the NCAA’s product by promoting its current
understanding of amateurism” and “integrating academics
and athletics.” O’Bannon, 7 F. Supp. 3d at 1005; see also
Board of Regents, 468 U.S. 117 (“It is reasonable to assume
that most of the regulatory controls of the NCAA are
justifiable means of fostering competition among amateur
athletic teams and therefore procompetitive because they
enhance public interest in intercollegiate athletics.”). The
question is whether the alternative of allowing students to be
paid NIL compensation unrelated to their education expenses,
is “virtually as effective” in preserving amateurism as not
allowing compensation. Cnty. of Tuolumne, 236 F.3d at 1159
(internal quotation marks omitted).
We cannot agree that a rule permitting schools to pay
students pure cash compensation and a rule forbidding them
O’BANNON V. NCAA 57
from paying NIL compensation are both equally effective in
promoting amateurism and preserving consumer demand.19
Both we and the district court agree that the NCAA’s
amateurism rule has procompetitive benefits. But in finding
that paying students cash compensation would promote
amateurism as effectively as not paying them, the district
court ignored that not paying student-athletes is precisely
what makes them amateurs.20
19
Although our analysis focuses on whether the alternative serves
procompetitive purposes, our prior cases make clear that plaintiffs must
prove that any alternative will not significantly increase costs to
implement. Cnty. of Tuolumne, 236 F.3d at 1159. And the district court
here failed to make any findings about whether allowing schools to pay
students NIL cash compensation will significantly increase costs to the
NCAA and its member schools.
20
The dissent suggests that the district court found amateurism itself has
no procompetitive value, and that “[a]mateurism is relevant only insofar
as popular demand for college sports is increased by consumer perceptions
of and desire for amateurism.” Dissent at 70. But this ignores that the
district court found that the NCAA’s “current understanding of
amateurism” helps “preserv[e] the popularity of the NCAA’s product.”
Amateurism is not divorced from the procompetitive benefit identified by
the court; it is its core element.
Elsewhere the dissent argues that “we are not tasked with deciding
what makes an amateur an amateur,” Dissent at 72 n.5, and that “the
distinction between amateur and professional sports is not for the court to
delineate. It is a line for consumers to draw,” id. at 71 n.4. However, if
we do not have some shared conception of what makes an amateur an
amateur—or, more precisely, the difference between amateurs and
professionals—then the district court’s findings on the role of amateurism
in college sports make no sense. We may not agree on all the particulars,
but the basic difference was spelled out by Neal Pilson, a witness the
district court relied on when determining that small cash payments to
students was a viable alternative: “if you’re paid for performance, you’re
not an amateur.”
58 O’BANNON V. NCAA
Having found that amateurism is integral to the NCAA’s
market, the district court cannot plausibly conclude that being
a poorly-paid professional collegiate athlete is “virtually as
effective” for that market as being as amateur. Or, to borrow
the Supreme Court’s analogy, the market for college football
is distinct from other sports markets and must be
“differentiate[d]” from professional sports lest it become
“minor league [football].” Bd. of Regents, 468 U.S. at 102.
Aside from the self-evident fact that paying students for
their NIL rights will vitiate their amateur status as collegiate
athletes, the court relied on threadbare evidence in finding
that small payments of cash compensation will preserve
amateurism as well the NCAA’s rule forbidding such
payments. Most of the evidence elicited merely indicates that
paying students large compensation payments would harm
consumer demand more than smaller payments would—not
that small cash payments will preserve amateurism. Thus, the
evidence was addressed to the wrong question. Instead of
asking whether making small payments to student-athletes
served the same procompetitive purposes as making no
payments, the evidence before the district court went to a
different question: Would the collegiate sports market be
better off if the NCAA made small payments or big
payments? For example, the district court noted that a
witness called by the NCAA, Bernard Muir, the athletic
director at Stanford University, testified that paying student-
athletes modest sums raises less concern than paying them
large sums. The district court also relied on Dr. Dennis’s
opinion survey, which the court read to indicate that in the
absence of the NCAA’s compensation rules, “the popularity
of college sports would likely depend on the size of payments
awarded to student-athletes.” O’Bannon, 7 F. Supp. 3d at
983. Dr. Dennis had found that payments of $200,000 per
O’BANNON V. NCAA 59
year to each athlete would alienate the public more than
would payments of $20,000 per year. Id. at 975–76, 983. At
best, these pieces of evidence indicate that small payments to
players will impact consumer demand less than larger
payments. But there is a stark difference between finding that
small payments are less harmful to the market than large
payments—and finding that paying students small sums is
virtually as effective in promoting amateurism as not paying
them.
The other evidence cited by the district court is even less
probative of whether paying these student-athletes will
preserve amateurism and consumer demand. The district
court adverted to testimony from a sports management expert,
Daniel Rascher, who explained that although opinion surveys
had shown the public was opposed to rising baseball salaries
during the 1970s, and to the decision of the International
Olympic Committee to allow professional athletes to compete
in the Olympics, the public had continued to watch baseball
and the Olympics at the same rate after those changes. Id. at
976–77. But professional baseball and the Olympics are not
fit analogues to college sports.21 The Olympics have not been
nearly as transformed by the introduction of professionalism
as college sports would be.
Finally, the district court, and the dissent, place particular
weight on a brief interchange during plaintiffs’ cross-
21
The district court also considered evidence that Division I tennis
recruits are permitted to earn up to ten thousand dollars per year in prize
money from athletic events before they enroll in college. O’Bannon, 7 F.
Supp. 3d at 974, 1000. Allowing college-bound tennis players to accept
award money from outside athletic events implicates amateurism
differently than allowing schools to pay student-tennis players directly.
60 O’BANNON V. NCAA
examination of one of the NCAA’s witnesses, Neal Pilson, a
television sports consultant formerly employed at CBS.
Pilson testified that “if you’re paid for your performance,
you’re not an amateur,” and explained at length why paying
students would harm the student-athlete market. Plaintiffs
then asked Pilson whether his opinions about amateurism
“depend on the level of the money” paid to players, and he
acknowledged that his opinion was “impacted by the level.”
When asked whether there was a line that “should not be
crossed” in paying players, Pilson responded “that’s a
difficult question. I haven’t thought about the line. And I
haven’t been asked to render an opinion on that.” When
pressed to come up with a figure, Pilson repeated that he was
“not sure.” He eventually commented that “I tell you that a
million dollars would trouble me and $5,000 wouldn’t, but
that’s a pretty good range.” When asked whether deferred
compensation to students would concern him, Pilson said that
while he would not be as concerned by deferred payments, he
would still be “troubled by it.”22
So far as we can determine, Pilson’s offhand comment
under cross-examination is the sole support for the district
court’s $5,000 figure. But even taking Pilson’s comments at
face value, as the dissent urges, his testimony cannot support
the finding that paying student-athletes small sums will be
virtually as effective in preserving amateurism as not paying
them. Pilson made clear that he was not prepared to opine on
22
Later in his cross-examination, Pilson was asked if “the public
watches college sports because they perceive student athletes as playing
for the love of the game and for the value and opportunities available to
them from a college education?” Pilson responded that that was “one of
the reasons that . . . would be jeopardized.” He then commented that “the
public has . . . a sense of college sports that is different from professional
[sports] and it’s at the bedrock of the popularity of college sports.”
O’BANNON V. NCAA 61
whether pure cash compensation, of any amount, would affect
amateurism. Indeed, he was never asked about the impact of
giving student-athletes small cash payments; instead, like
other witnesses, he was asked only whether big payments
would be worse than small payments. Pilson’s casual
comment—“[I] haven’t been asked to render an opinion on
that. It’s not in my report”—that he would not be troubled by
$5,000 payments is simply not enough to support the district
court’s far-reaching conclusion that paying students $5,000
per year will be as effective in preserving amateurism as the
NCAA’s current policy.23
The difference between offering student-athletes
education-related compensation and offering them cash sums
untethered to educational expenses is not minor; it is a
quantum leap.24 Once that line is crossed, we see no basis for
23
The dissent contends that the record supports the finding that $5,000
payments to student-athletes will have little to no effect on consumer
demand for college football. Dissent at 68 n.3, 72 (suggesting the district
court found “the distinction between offering student-athletes no
compensation and offering them a small amount of compensation is so
minor that it most likely will not impact consumer demand in any
meaningful way”). But there is little evidence in the record about the
impact of these $5,000 NIL payments. There is evidence only that small
payments will be less harmful than larger payments, and that a single
witness would not be as troubled by $5,000 payments. This is not enough
for plaintiffs to meet their burden to show that payments to student-
athletes will be as effective in preserving consumer demand as the
NCAA’s current amateurism policy.
24
The district court suggested that compensating athletes beyond the full
cost of attendance would not be problematic because student-athletes are
already permitted to accept Pell grants that raise their total aid package
above the cost of attendance. O’Bannon, 7 F. Supp. 3d at 1000; Dissent
at 65. This reasoning was faulty because it improperly equates
compensation intended for education-related expenses (i.e., Pell grants)
62 O’BANNON V. NCAA
returning to a rule of amateurism and no defined stopping
point; we have little doubt that plaintiffs will continue to
challenge the arbitrary limit imposed by the district court
until they have captured the full value of their NIL. At that
point the NCAA will have surrendered its amateurism
principles entirely and transitioned from its “particular brand
of football” to minor league status. Bd. of Regents, 468 U.S.
at 101–02. In light of that, the meager evidence in the record,
and the Supreme Court’s admonition that we must afford the
NCAA “ample latitude” to superintend college athletics, Bd.
of Regents, 468 U.S. at 120, we think it is clear the district
court erred in concluding that small payments in deferred
compensation are a substantially less restrictive alternative
restraint.25 We thus vacate that portion of the district court’s
decision and the portion of its injunction requiring the NCAA
to allow its member schools to pay this deferred
compensation.
with pure cash compensation. The fact that Pell grants (which are
available to athletes and nonathletes alike) have not eroded the NCAA’s
culture of amateurism says little about whether cash payments into trust
funds to compensate student-athletes for their prowess on the gridiron or
the court would do so.
25
The dissent criticizes us for citing “no record evidence to support [our]
conclusion that paying student-athletes $5,000 in deferred compensation
will significantly reduce consumer demand.” Dissent at 68 n.3. But we
do not decide, and the NCAA need not prove, whether paying student
athletes $5,000 payments will necessarily reduce consumer demand. The
proper inquiry in the Rule of Reason’s third step is whether the plaintiffs
have shown these payments will not reduce consumer demand (relative to
the existing rules). And we conclude they have not.
O’BANNON V. NCAA 63
V
By way of summation, we wish to emphasize the limited
scope of the decision we have reached and the remedy we
have approved. Today, we reaffirm that NCAA regulations
are subject to antitrust scrutiny and must be tested in the
crucible of the Rule of Reason. When those regulations truly
serve procompetitive purposes, courts should not hesitate to
uphold them. But the NCAA is not above the antitrust laws,
and courts cannot and must not shy away from requiring the
NCAA to play by the Sherman Act’s rules. In this case, the
NCAA’s rules have been more restrictive than necessary to
maintain its tradition of amateurism in support of the college
sports market. The Rule of Reason requires that the NCAA
permit its schools to provide up to the cost of attendance to
their student athletes. It does not require more.
We vacate the district court’s judgment and permanent
injunction insofar as they require the NCAA to allow its
member schools to pay student-athletes up to $5,000 per year
in deferred compensation. We otherwise affirm. The parties
shall bear their own costs on appeal.
AFFIRMED IN PART and VACATED IN PART.
64 O’BANNON V. NCAA
THOMAS, Chief Judge, concurring in part and dissenting in
part:
I largely agree with all but one of the majority’s
conclusions.1 I respectfully disagree with the majority’s
conclusion that the district court clearly erred in ordering the
NCAA to permit up to $5,000 in deferred compensation
above student-athletes’ full cost of attendance.
I
We review the district court’s determinations of fact for
clear error. We are not permitted to “review the evidence de
novo and freely substitute our judgment for that of the trial
judge.” United States v. Ironworkers Local 86, 443 F.2d 544,
549 (9th Cir. 1971). Rather, the clear error standard “is
significantly deferential, and we will accept the lower court’s
findings of fact unless we are left with the definite and firm
conviction that a mistake has been committed.” Lentini v.
Cal. Ctr. for the Arts, Escondido, 370 F.3d 837, 848-49 (9th
Cir. 2004).
There was sufficient evidence in the record to support the
award. The district court’s conclusion that the proposed
alternative restraint satisfied the Rule of Reason was based on
testimony from at least four experts–including three experts
1
The majority concludes that the plaintiffs established antitrust injury
in fact because the NCAA has foreclosed them from the market for the
athletes’ names, images, and likenesses (“NILs”) in video games.
Because we are bound by In re NCAA Student-Athlete Name & Likeness
Licensing Litig. (“Keller”), 724 F.3d 1268 (9th Cir. 2013), a case in which
I dissented, I agree that the plaintiffs have sufficiently established antitrust
injury. However, absent Keller, there is a serious question as to whether
the plaintiffs have established the requisite antitrust injury in fact.
O’BANNON V. NCAA 65
presented by the NCAA–that providing student-athletes with
small amounts of compensation above their cost of attendance
most likely would not have a significant impact on consumer
interest in college sports. O’Bannon, 7 F. Supp. 3d at
976–77, 983–84, 1000–01. It was also based on the fact that
FBS football players are currently permitted to accept Pell
grants in excess of their cost of attendance, and the fact that
Division I tennis recruits are permitted to earn up to $10,000
per year in prize money from athletic events before they
enroll in college. Id. at 974, 1000. The majority
characterizes the weight of this evidence as “threadbare.”
Op. at 58. I respectfully disagree.
The NCAA’s own expert witness, Neal Pilson, testified
that the level of deferred compensation would have an effect
on consumer demand for college athletics, but that paying
student-athletes $5,000 per year in trust most likely would not
have a significant impact on such demand. He also testified
that any negative impact that paying student-athletes might
have on consumer demand could be partially mitigated by
placing the compensation in a trust fund to be paid out after
graduation.
The majority dismisses this testimony because it was
made in a very “offhand” manner, and because Pilson
proffered the $5,000 amount on cross-examination “[w]hen
pressed.” Op. at 60. However, the NCAA presented this
witness as an expert on the issue of whether paying college
athletes will negatively impact consumer demand for college
66 O’BANNON V. NCAA
sports.2 Pilson testified at length on the topic, and his
qualifications were not challenged. It is not appropriate for
us on appeal to assess demeanor we did not see. As a result,
2
Pilson’s testimony included the following exchanges:
Q: Okay. And let me just turn finally to your last
opinion just briefly, Mr. Pilson, regarding whether
paying basketball and football players in college
threatens the popularity of college sports with the
television audience. Just briefly sir, over the course of
your career in the sports broadcast industry, have you
come to have opinions about why viewers are interested
in college sports on television?
A: Yes, I have.
Q: And how did you come to have those opinions?
A: I [sic] been in the industry for 40 years. I’ve
acquired and telecast thousands of hours of college
sports. I watch college sports and evaluate them, so I
have a pretty good handle on the industry. Of course,
I have personal opinions as well, but I certainly—I’ve
worked in the industry a long time.
* * * *
Q: Okay. Now, your opinions about why this would be
damaging to the sport are based on your—what you
think viewers appreciate, what the public perceives. I
have that correct?
A: Yes. And I would suggest I’ve been in that
business measuring viewers—my whole job at CBS
over 20 years was to try to figure out what the viewers
wanted to watch and give it to them, so I’m not a
layman on that subject.
O’BANNON V. NCAA 67
I would take the testimony at face value, and the district court
did not clearly err in crediting it.
The majority also dismisses the testimony given by expert
witness Dr. Daniel Rascher demonstrating that consumer
interest in major league baseball and the Olympics increased
after baseball players’ salaries rose and professional athletes
were allowed to compete in the Olympics. The majority
reasons that major league baseball and the Olympics are “not
fit analogues to college sports,” speculating that college
sports would be more significantly transformed by
professionalism than have the Olympics. Op. at 59.
However, the majority does not offer any evidentiary support
for the distinction, nor explain how or why the district court
clearly erred in crediting this testimony.
Moreover, Rascher also testified that consumer demand
in sports such as tennis and rugby increased after the sports’
governing boards permitted athletes to receive payment.
O’Bannon, 7 F. Supp. 3d at 977. In my view, the majority
errs in dismissing this testimony. The import of Rascher’s
testimony was that consumer demand typically does not
decrease when athletes are permitted to receive payment, and
that this general principle holds true across a wide variety of
sports and competitive formats. The district court did not
clearly err in crediting it.
The district court accepted the testimony of multiple
experts that small amounts of compensation would not affect
consumer demand, and then used the lowest amount
68 O’BANNON V. NCAA
suggested by one of the NCAA’s experts. The district court
was within its right to do so.3
II
The disagreement between my view and the majority
view largely boils down to a difference in opinion as to the
procompetitive interests at stake. The majority characterizes
our task at step three of the Rule of Reason as determining
“whether the alternative of allowing students to be paid NIL
compensation unrelated to their education expenses is
‘virtually as effective’ in preserving amateurism as not
allowing compensation.” Op. at 56 (emphasis added). This
conclusion misstates our inquiry. Rather, we must determine
whether allowing student-athletes to be compensated for their
NILs is ‘virtually as effective’ in preserving popular demand
for college sports as not allowing compensation. In terms of
antitrust analysis, the concept of amateurism is relevant only
insofar as it relates to consumer interest.
3
The majority states that it “cannot agree that a rule permitting schools
to pay students pure cash compensation and a rule forbidding them from
paying NIL compensation are both equally effective in promoting
amateurism and preserving consumer demand.” Op. at 56–57. And yet
the majority cites no record evidence to support its conclusion that paying
student-athletes $5,000 in deferred compensation will significantly reduce
consumer demand. Rather, the majority declares that it is a “self-evident
fact” that “[t]he difference between offering student-athletes education-
related compensation and offering them cash sums untethered to
educational expenses is not minor; it is a quantum leap.” Op. at 58, 61.
To the contrary, the district court concluded after a full bench trial that the
distinction between offering student-athletes no compensation and
offering them a small amount of compensation is so minor that it most
likely will not impact consumer demand in any meaningful way. See
O’Bannon, 7 F. Supp. 3d at 976–77, 983–84, 1000–01.
O’BANNON V. NCAA 69
The district court found that there are two, limited
procompetitive benefits to the current rule. It found that
limits on large amounts of student-athlete compensation
preserve the popularity of the NCAA’s product, and that
limits on large amounts of student-athlete compensation
promote the integration of academics and athletics.
O’Bannon, 7 F. Supp. 3d at 1004–05. In reaching these
conclusions, the district court explained:
[S]ome restrictions on compensation may still
serve a limited procompetitive purpose if they
are necessary to maintain the popularity of
FBS football and Division I basketball. If the
challenged restraints actually play a
substantial role in maximizing consumer
demand for the NCAA’s product—
specifically, FBS football and Division I
basketball telecasts, re-broadcasts, ticket
sales, and merchandise—then the restrictions
would be procompetitive. Id. at 1000
(emphasis added).
The district court recounted the testimony of NCAA
expert witness Dr. J. Michael Dennis, who conducted a
survey of consumer attitudes concerning college sports in
2013. The court found that “[w]hat Dr. Dennis’s survey does
suggest is that the public’s attitudes toward student-athlete
compensation depend heavily on the level of compensation
that student-athletes would receive.” Id. at 1000–01. It noted
that this conclusion “is consistent with the testimony of the
NCAA’s own witnesses, including [Stanford athletic director
Bernard] Muir and Mr. Pilson, who both indicated that
smaller payments to student-athletes would bother them less
than larger payments.” Id. at 1001.
70 O’BANNON V. NCAA
The district court determined that “the evidence presented
at trial suggests that consumer demand for FBS football and
Division I basketball-related products is not driven by the
restrictions on student-athlete compensation but instead by
other factors, such as school loyalty and geography.” Id. The
court therefore concluded that:
the NCAA’s restrictions on student-athlete
compensation play a limited role in driving
consumer demand for FBS football and
Division I basketball-related products.
Although they might justify a restriction on
large payments to student-athletes while in
school, they do not justify the rigid
prohibition on compensating student-athletes,
in the present or in the future, with any share
of licensing revenue generated from the use of
their names, images, and likenesses.
Id.
The district court’s findings of fact provide that one
procompetitive benefit of the current rule is that restricting
large payments to student-athletes plays a limited role in
preserving the popularity of the NCAA’s products. In the
context of this antitrust suit, the concept of “amateurism” is
useful only to the extent that it furthers this goal. In terms of
antitrust analysis, amateurism is relevant only insofar as
popular demand for college sports is increased by consumer
perceptions of and desire for amateurism. Viewed through
O’BANNON V. NCAA 71
the antitrust lens, it is consumer desire that we must credit;
not the NCAA’s preferred articulation of the term.4
Plaintiffs are not required, as the majority suggests, to
show that the proposed alternatives are “virtually as
effective” at preserving the concept of amateurism as the
NCAA chooses to define it. Indeed, this would be a difficult
task, given that “amateurism” has proven a nebulous concept
prone to ever-changing definition. See O’Bannon, 7 F. Supp.
3d at 973–75 (describing the ways that the NCAA’s
definition of amateurism has changed over time). Even
today, the NCAA’s conception of amateurism does not fall
4
The majority argues that “[h]aving found amateurism is integral to the
NCAA’s market, the district court cannot plausibly conclude that being a
poorly-paid professional athlete is ‘virtually as effective’ for that market
as being an amateur. Or, to borrow the Supreme Court’s analogy, the
market for college football is distinct from other sports markets and must
be ‘differentiate[d]’ from professional sports lest it become ‘minor league
[football].’” Op. at 58. The district court found that amateurism played
a limited role in preserving the popularity of college sports, and that other
factors, such as school loyalty, served as the primary force driving interest
in college athletics. O’Bannon, 7 F. Supp. 3d at 1000. But I agree that an
antitrust court should not eliminate the distinction between professional
and college sports; to do so would undermine competition. However, in
terms of antitrust analysis, the distinction between amateur and
professional sports is not for the court to delineate. It is a line for
consumers to draw. If consumers believe that paying college football
players $5,000 to be held in trust for use of their NILs will convert college
football into professional football, and as a consequence they stop
watching college football, then the proposed alternative will not be
virtually as effective as the current rule. But, taken to its literal extreme
to prohibit even small, deferred payments, the idea that “if you’re paid for
performance, you’re not an amateur,” Op. at 57 n.20, does not reflect
consumer behavior. The district court made factual findings that modest
payments, including those held in trust, would not significantly affect
consumer demand. See O’Bannon, 7 F. Supp. 3d at 976–77, 983–84,
1000–01. Therefore, I cannot conclude that the district court clearly erred.
72 O’BANNON V. NCAA
easily into a bright line rule between paying student-athletes
and not paying them. Tennis players are permitted to receive
payment of up to $10,000 per year for playing their sport. A
tennis player who begins competing at a young age could
presumably earn upwards of $50,000 for playing his sport and
still be considered an amateur athlete by the NCAA.5
The NCAA insists that consumers will flee if student-
athletes are paid even a small sum of money for colleges’ use
of their NILs. This assertion is contradicted by the district
court record and by the NCAA’s own rules regarding
amateurism. The district court was well within its right to
reject it. Division I schools have spent $5 billion on athletic
facilities over the past 15 years. The NCAA sold the
television rights to broadcast the NCAA men’s basketball
championship tournament for 12 years to CBS for $10.8
billion dollars. The NCAA insists that this multi-billion
dollar industry would be lost if the teenagers and young
adults who play for these college teams earn one dollar above
their cost of school attendance. That is a difficult argument
to swallow. Given the trial evidence, the district court was
well within its rights to reject it.
5
The majority states that “in finding that paying students cash
compensation would promote amateurism as effectively as not paying
them, the district court ignored that not paying student-athletes is precisely
what makes them amateurs.” Op. at 57. This is not true even under the
NCAA’s current definition of the term. But more importantly, we are not
tasked with deciding what makes an amateur an amateur. We are tasked
with determining whether a proposed less-restrictive alternative restraint
will affect consumer demand.
O’BANNON V. NCAA 73
III
The national debate about amateurism in college sports is
important. But our task as appellate judges is not to resolve
it. Nor could we. Our task is simply to review the district
court judgment through the appropriate lens of antitrust law
and under the appropriate standard of review. In the end, my
disagreement with the majority is founded on the appropriate
standard of review. After an extensive bench trial, the district
court made a factual finding that payment of $5,000 in
deferred compensation would not significantly reduce
consumer demand for college sports. This finding was
supported by extensive testimony from at least four expert
witnesses. There was no evidence to the contrary. Therefore,
on this record, I cannot agree with the majority that the
district court clearly erred when it determined that paying
student-athletes up to $5,000 per year would be “virtually as
effective” at preserving the pro-competitive benefits of the
current rule. Therefore, I would affirm the district court in all
respects.
For these reasons, I concur in part and dissent in part.