Shawne Alston v. Ncaa ( 2020 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE NATIONAL COLLEGIATE No. 19-15566
ATHLETIC ASSOCIATION ATHLETIC
GRANT-IN-AID CAP ANTITRUST D.C. No.
LITIGATION, 4:14-md-02541-
CW
SHAWNE ALSTON; MARTIN JENKINS;
JOHNATHAN MOORE; KEVIN PERRY;
WILLIAM TYNDALL; ALEX
LAURICELLA; SHARRIF FLOYD; KYLE
THERET; DUANE BENNETT; CHRIS
STONE; JOHN BOHANNON; ASHLEY
HOLLIDAY; CHRIS DAVENPORT;
NICHOLAS KINDLER; KENDALL
GREGORY-MCGHEE; INDIA CHANEY;
MICHEL’LE THOMAS; DON BANKS,
“DJ”; KENDALL TIMMONS; DAX
DELLENBACH; NIGEL HAYES;
ANFORNEE STEWART; KENYATA
JOHNSON; BARRY BRUNETTI;
DALENTA JAMERAL STEPHENS,
“D.J.”; JUSTINE HARTMAN; AFURE
JEMERIGBE; ALEC JAMES,
Plaintiffs-Appellees,
v.
NATIONAL COLLEGIATE ATHLETIC
ASSOCIATION, THE NCAA; PACIFIC
2 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
12 CONFERENCE; CONFERENCE USA;
THE BIG TEN CONFERENCE, INC.;
MID-AMERICAN CONFERENCE;
SOUTHEASTERN CONFERENCE;
ATLANTIC COAST CONFERENCE;
MOUNTAIN WEST CONFERENCE; THE
BIG TWELVE CONFERENCE, INC.;
SUN BELT CONFERENCE; WESTERN
ATHLETIC CONFERENCE; AMERICAN
ATHLETIC CONFERENCE,
Defendants-Appellants,
AMERICAN BROADCASTING
COMPANIES, INC.; CBS
BROADCASTING, INC.; ESPN
ENTERPRISES, INC.; ESPN, INC.; FOX
BROADCASTING COMPANY, LLC.;
FOX SPORTS HOLDINGS, LLC.;
TURNER BROADCASTING SYSTEM,
INC.,
Intervenors.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 3
IN RE NATIONAL COLLEGIATE No. 19-15662
ATHLETIC ASSOCIATION ATHLETIC
GRANT-IN-AID CAP ANTITRUST D.C. No.
LITIGATION, 4:14-md-02541-
CW
JOHN BOHANNON; JUSTINE
HARTMAN, as representatives of the OPINION
classes,
Plaintiffs-Appellants,
v.
NATIONAL COLLEGIATE ATHLETIC
ASSOCIATION, THE NCAA; PACIFIC
12 CONFERENCE; CONFERENCE USA;
THE BIG TEN CONFERENCE, INC.;
MID-AMERICAN CONFERENCE;
SOUTHEASTERN CONFERENCE;
ATLANTIC COAST CONFERENCE;
MOUNTAIN WEST CONFERENCE; THE
BIG TWELVE CONFERENCE, INC.;
SUN BELT CONFERENCE; WESTERN
ATHLETIC CONFERENCE; AMERICAN
ATHLETIC CONFERENCE,
Defendants-Appellees,
AMERICAN BROADCASTING
COMPANIES, INC.; CBS
BROADCASTING, INC.; ESPN
ENTERPRISES, INC.; ESPN, INC.; FOX
BROADCASTING COMPANY, LLC.;
4 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
FOX SPORTS HOLDINGS, LLC.;
TURNER BROADCASTING SYSTEM,
INC.,
Intervenors.
Appeal from the United States District Court
for the Northern District of California
Claudia Wilken, District Judge, Presiding
Argued and Submitted March 9, 2020
San Francisco, California
Filed May 18, 2020
Before: Sidney R. Thomas, Chief Judge, and Ronald M.
Gould and Milan D. Smith, Jr., Circuit Judges.
Opinion by Chief Judge Thomas;
Concurrence by Judge Milan D. Smith, Jr.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 5
SUMMARY*
Antitrust
The panel affirmed the district court’s order in an antitrust
action, enjoining the National Collegiate Athletic Association
from enforcing rules that restrict the education-related
benefits that its member institutions may offer students who
play Football Bowl Subdivision football and Division I
basketball.
In O’Bannon v. NCAA (O’Bannon II), 802 F.3d 1049 (9th
Cir. 2015), the court affirmed in large part the district court’s
ruling that the NCAA illegally restrained trade, in violation
of section 1 of the Sherman Act, by preventing FBS football
and D1 men’s basketball players from receiving
compensation for the use of their names, images, and
likenesses, and the district court’s injunction insofar as it
required the NCAA to implement the less restrictive
alternative of permitting athletic scholarships for the full cost
of attendance.
Subsequent antitrust actions by student-athletes were
consolidated in the district court. After a bench trial, the
district court entered judgment for the student-athletes in part,
concluding that NCAA limits on education-related benefits
were unreasonable restraints of trade, and accordingly
enjoining those limits, but declining to hold that NCAA limits
on compensation unrelated to education likewise violated
section 1.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
6 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
The panel affirmed the district court’s conclusion that
O’Bannon II did not foreclose this litigation as a matter of
stare decisis or res judicata.
The panel held that the district court properly applied the
Rule of Reason in determining that the enjoined rules were
unlawful restraints of trade under section 1 of the Sherman
Act. The panel concluded that the student-athletes carried
their burden at the first step of the Rule of Reason analysis by
showing that the restraints produced significant
anticompetitive effects within the relevant market for student-
athletes’ labor on the gridiron and the court.
At the second step of the Rule of Reason analysis, the
NCAA was required to come forward with evidence of the
restraints’ procompetitive effects. The district court properly
concluded that only some of the challenged NCAA rules
served the procompetitive purpose of preserving amateurism
and thus improving consumer choice by maintaining a
distinction between college and professional sports. Those
rules were limits on above-cost-of-attendance payments
unrelated to education, the cost-of-attendance cap on athletic
scholarships, and certain restrictions on cash academic or
graduation awards and incentives. The panel affirmed the
district court’s conclusion that the remaining rules, restricting
non-cash education-related benefits, did nothing to foster or
preserve consumer demand. The panel held that the record
amply supported the findings of the district court, which
reasonably relied on demand analysis, survey evidence, and
NCAA testimony.
The panel affirmed the district court’s conclusion that, at
the third step of the Rule of Reason analysis, the student-
athletes showed that any legitimate objectives could be
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 7
achieved in a substantially less restrictive manner. The
district court identified a less restrictive alternative of
prohibiting the NCAA from capping certain education-related
benefits and limiting academic or graduation awards or
incentives below the maximum amount that an individual
athlete may receive in athletic participation awards, while
permitting individual conferences to set limits on education-
related benefits. The panel held that the district court did not
clearly err in determining that this alternative would be
virtually as effective in serving the procompetitive purposes
of the NCAA’s current rules, and could be implemented
without significantly increased cost.
Finally, the panel held that the district court’s injunction
was not impermissibly vague and did not usurp the NCAA’s
role as the superintendent of college sports. The panel also
declined to broaden the injunction to include all NCAA
compensation limits, including those on payments untethered
to education. The panel concluded that the district court
struck the right balance in crafting a remedy that both
prevented anticompetitive harm to student-athletes while
serving the procompetitive purpose of preserving the
popularity of college sports.
Concurring, Judge M. Smith wrote that because he was
bound by O’Bannon II, he joined the panel opinion in full.
He wrote separately to express concern that the current state
of antitrust law reflects an unwitting expansion of the Rule of
Reason inquiry in a way that deprived the student-athletes of
the fundamental protections that the antitrust laws were
meant to provide them.
8 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
COUNSEL
Seth P. Waxman (argued), Leon B. Greenfield, Daniel S.
Volchok, David M. Lehn, and Kevin M. Lamb, Wilmer
Cutler Pickering Hale and Dorr LLP, Washington, D.C.; Bart
H. Williams, Scott P. Cooper, Kyle A. Casazza, Jennifer L.
Jones, and Shawn S. Ledingham Jr., Proskauer Rose LLP,
Los Angeles, California; Leane K. Capps and Caitlin J.
Morgan, Polsinelli PC, Dallas, Texas; Amy D. Fitts,
Polsinelli PC, Kansas City, Missouri; Mark A. Cunningham,
Jones Walker LLP, New Orleans, Louisiana; Beth A.
Wilkinson and Brant W. Bishop, Wilkinson Walsh &
Eskovitz LLP, Washington, D.C.; Sean Eskovitz, Wilkinson
Walsh & Eskovitz LLP, Los Angeles, California; Jeffrey A.
Mishkin and Karen Hoffman Lent, Skadden Arps Slate
Meagher & Flom LLP, New York, New York; Robert W.
Fuller III, Pearlynn G. Houck, and Lawrence C. Moore III,
Robinson Bradshaw & Hinson P.A., Charlotte, North
Carolina; Mark J. Seifert, Seifert Law Firm, San Francisco,
California; Andrew J. Pincus, Charles A. Rothfeld, and
Richard J. Favretto, Mayer Brown LLP, Washington, D.C.;
Britt M. Miller and Andrew S. Rosenman, Mayer Brown
LLP, Chicago, Illinois; Meryl Macklin, Bryan Cave Leighton
Paisner LLP, San Francisco, California; Richard Young and
Brent E. Rychner, Bryan Cave Leighton Paisner LLP,
Colorado Springs, Colorado; Benjamin C. Block, Covington
& Burling LLP, Washington, D.C.; R. Todd Hunt and
Benjamin G. Chojnacki, Walter Haverfield LLP, Cleveland,
Ohio; D. Erik Albright and Gregory G. Holland, Fox
Rothschild LLP, Greensboro, North Carolina; Jonathan P.
Heyl, Fox Rothschild LLP, Charlotte, North Carolina;
Charles L. Coleman III, Holland & Knight LLP, San
Francisco, California; for Defendants-Appellants.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 9
Steve Berman (argued), Craigh R. Spiegel, and Emilee N.
Sisco, Hagens Berman Sobol Shapiro LLP, Seattle,
Washington; Jeffrey L. Kessler (argued), David G. Feher, and
David L. Greenspan, Winston & Strawn LLP, New York,
New York; Bruce L. Simon and Benjamin E. Shiftan, Pearson
Simon & Warshaw LLP, San Francisco, California; Elizabeth
C. Pritzker, Jonathan K. Levine, Bethany L. Caracuzzo, and
Shiho Yamamoto, Pritzker Levine LLP, Oakland, California;
Linda T. Coberly, Winston & Strawn LLP, Chicago, Illinois;
Sean D. Meenan and Jeanifer E. Parsigian, Winston & Strawn
LLP, San Francisco, California; for Plaintiffs-Appellees.
Maurice M. Suh, Gibson Dunn & Crutcher LLP, Los
Angeles, California; Andrew S. Tulumello and Nick Harper,
Gibson Dunn & Crutcher LLP, Washington, D.C.; for Amici
Curiae National Football League Players Association and
National Basketball Players Association.
Bradley S. Pauley, Horvitz & Levy LLP, Burbank, California,
for Amicus Curiae National Federation of State High School
Associations.
Emma Rebhorn, Change to Win, New York, New York;
Sandeep Vaheesan, Open Markets Institute, Washington,
D.C.; Najah A. Farley, National Employment Law Project,
New York, New York; for Amici Curiae Open Markets
Institute, Change to Win, National Employment Law Project,
and Economics and Law Professors.
10 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
OPINION
THOMAS, Chief Judge:
We consider an appeal and cross-appeal from an order
enjoining the National Collegiate Athletic Association (the
“NCAA”) from enforcing rules that restrict the education-
related benefits that its member institutions may offer
students who play Football Bowl Subdivision (“FBS”)
football and Division I (“D1”) basketball (collectively,
“Student-Athletes”). See In re NCAA Athletic Grant-In-Aid
Cap Antitrust Litig. (Alston), 375 F. Supp. 3d 1058 (N.D. Cal.
2019). We have jurisdiction under 28 U.S.C. § 1291, and we
affirm.
We conclude that the district court properly applied the
Rule of Reason in determining that the enjoined rules are
unlawful restraints of trade under section 1 of the Sherman
Act, 15 U.S.C. § 1. We further conclude that the record
supports the factual findings underlying the injunction and
that the district court’s antitrust analysis is faithful to our
decision in O’Bannon v. NCAA (O’Bannon II), 802 F.3d 1049
(9th Cir. 2015).
I
A. The NCAA and its Compensation Rules
Founded in 1905, the NCAA regulates intercollegiate
sports. Id. at 1053. Its mission statement is to “maintain
intercollegiate athletics as an integral part of the educational
program and the athlete as an integral part of the student body
and, by so doing, retain a clear line of demarcation between
intercollegiate athletics and professional sports.” NCAA
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 11
regulations govern, among other things, the payments that
student-athletes may receive in exchange for and incidental
to their athletic participation as well as in connection with
their academic pursuits.
The NCAA divides its member schools into three
competitive divisions. D1 schools—some 350 of the
NCAA’s approximately 1,100 member schools—sponsor the
largest athletic programs and offer the most financial aid. D1
football has two subdivisions, one of which is the FBS.
In August 2014, the NCAA amended its D1 bylaws (the
“Bylaws”) to grant the so-called “Power Five”
conferences—the FBS conferences that generate the most
revenue—autonomy to adopt collectively legislation in
certain areas, including limits on athletic scholarships known
as “grants-in-aid.”1 In January 2015, the Power Five voted to
increase the grant-in-aid limit to the cost of attendance
(“COA”) at each school. Since August 2015, the Bylaws
have provided that a “full grant-in-aid” encompasses “tuition
and fees, room and board, books and other expenses related
to attendance at the institution up to the [COA],” as
calculated by each institution’s financial aid office under
federal law. See 20 U.S.C. §§ 1087kk, ll. The Bylaws also
contain an “Amateurism Rule,” which strips student-athletes
of eligibility for intercollegiate competition if they “[u]se[]
[their] athletics skill (directly or indirectly) for pay in any
1
The Power Five conferences are the Atlantic Coast Conference (the
“ACC”), Big Ten Conference, Big 12 Conference, Pacific 12 Conference
(the “Pac-12”), and Southeastern Conference (the “SEC”). Student-
Athletes named the Power Five as defendants, along with Conference
USA, the Mid-American Conference (the “MAC”), Mountain West
Conference, Sun Belt Conference, Western Athletic Conference, and
American Athletic Conference (the “AAC”).
12 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
form in [their] sport.” “[P]ay” is defined as the “receipt of
funds, awards or benefits not permitted by governing
legislation.”
However, governing legislation permits a wide range of
above-COA payments—both related and unrelated to
education. Without losing their eligibility, student-athletes
may receive, for instance: (i) awards valued at several
hundred dollars for athletic performance (“athletic
participation awards”),2 which may take the form of Visa gift
cards; (ii) disbursements—sometimes thousands of
dollars—from the NCAA’s Student Assistance Fund (“SAF”)
and Academic Enhancement Fund (“AEF”) for a variety of
purposes, such as academic achievement or graduation
awards, school supplies, tutoring, study-abroad expenses,
post-eligibility financial aid, health and safety expenses,
clothing, travel, “personal or family expenses,” loss-of-value
insurance policies, car repair, personal legal services, parking
tickets, and magazine subscriptions;3 (iii) cash stipends of
several thousands of dollars calculated to cover costs of
2
Athletic participation awards include the “Senior Scholar-Athlete
Award,” which is a postgraduate scholarship of $10,000 or less that
institutions may award two student-athletes per year, and awards for
achievement in special events, such as all-star or post-season bowl games.
3
The record indicates that the NCAA does little to regulate or monitor
the use of these funds. While it controls the total pool of money that an
institution may distribute each year, it has not capped the amount that an
individual athlete may receive. The SAF is broadly available to “assist
student-athletes in meeting financial needs that arise in conjunction with
participation in intercollegiate athletics, enrollment in an academic
curriculum or to recognize academic achievement as determined by
conference offices.” And the NCAA “encourage[s]” schools to allocate
AEF funds to provide “direct benefits to student-athletes that enhance
[their] welfare.”
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 13
attendance beyond the fixed costs of tuition, room and board,
and books, but used wholly at the student-athlete’s
discretion;4 (iv) mandatory medical care (available for at least
two years after the athlete graduates) for an athletics-related
injury; (v) unlimited meals and snacks; (vi) reimbursements
for expenses incurred by student-athletes’ significant others
and children to attend certain athletic competitions; and
(vii) a $30 per diem for “unitemized incidental expenses
during travel and practice” for championship events.
The NCAA has carved out many of these exceptions in
the past five years. For example, before 2015, athletic
participation awards did not take the form of cash-like Visa
gift cards. And once the NCAA permitted grants-in-aid for
the full COA, effective August 2015, many more student-
athletes began to receive above-COA payments, such as cash
stipends, Pell Grants, and AEF as well as SAF distributions.
This expansion of above-COA compensation has
coincided with rising revenue from D1 basketball and FBS
football for the NCAA and its members. In the 2015–16
academic year, these programs generated $4.3 billion in
revenue (a $300 million increase from the previous year) for
the Power Five. And in 2016, the NCAA negotiated an eight-
year extension (until 2032) of its multimedia contract for the
broadcasting rights to March Madness, the annual D1 men’s
basketball tournament. Under that agreement, the NCAA will
receive $1.1 billion per year (an annual increase of over $325
million).
4
Under the Bylaws, student-athletes who have already received Pell
Grants (calculated to cover the COA) may also receive these stipends.
14 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
B. The O’Bannon Litigation
The NCAA is no stranger to antitrust litigation arising
from its compensation rules. In 2009, Ed O’Bannon, a
former UCLA basketball player, sued the NCAA after
learning that a college basketball video game featured an
avatar that resembled him and sported his jersey number.
O’Bannon II, 802 F.3d at 1055. “The gravamen of [his]
complaint” was that the NCAA illegally restrained trade, in
violation of section 1, by preventing FBS football and D1
men’s basketball players from receiving compensation for the
use of their names, images, and likenesses (“NILs”).5 Id.
After a bench trial, the district court agreed under the
Rule of Reason and entered relief for the plaintiffs. See
O’Bannon v. NCAA (O’Bannon I), 7 F. Supp. 3d 955, 962–63
(N.D. Cal. 2014), aff’d in part, rev’d in part, O’Bannon II,
802 F.3d at 1079. The district court acknowledged the
NCAA’s evidence that college athletics’ “amateur tradition”
helps maintain their popularity as a product distinct from
professional sports. Id. at 999. It nevertheless concluded that
this procompetitive benefit did not justify the NCAA’s
“sweeping prohibition” on NIL compensation. Id. Based on
evidence that “school loyalty and geography” primarily drive
consumer demand and a lack of proof that small payments to
student-athletes would diminish college sports’ popularity,
5
The O’Bannon class included “[a]ll current and former student-
athletes” who had played D1 men’s basketball or FBS football “and whose
[NILs] 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
video[]games licensed or sold by Defendants, their co-conspirators, or
their licensees.” Id. at 1055–56.
 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 15
the district court determined that the NCAA could justify, at
most, restrictions on large payments. Id. at 1000–01.
After identifying two less restrictive alternatives
(“LRAs”) to the challenged rules, id. at 1004–07, the district
court implemented those LRAs through an injunction that
required the NCAA to permit its schools to (i) “use the
licensing revenue generated from the use of their student-
athletes’ [NILs] to fund stipends covering the [COA]”; and
(ii) to make deferred, post-eligibility cash payments in NIL
revenue, not to exceed $5,000, to student-athletes. Id. at
1007–08; see also id. at 1008 (finding no evidence that “such
a modest payment” would “undermine[]” NCAA’s
“legitimate procompetitive goals”). The NCAA appealed.
A majority of a Ninth Circuit panel concluded that the
district court’s decision, the first of its kind, was “largely
correct.” O’Bannon II, 802 F.3d at 1053; id. at 1079
(Thomas, C.J., concurring in part and dissenting in part). The
panel unanimously affirmed the injunction insofar as it
required the NCAA to permit athletic scholarships for the full
COA, but a panel majority reversed and vacated the
injunction’s requirement that the NCAA allow deferred NIL
payments. Id. at 1053.
In pertinent part, the panel rejected the NCAA’s threshold
argument that its amateurism rules, including those governing
compensation, are “valid as a matter of law” under NCAA v.
Board of Regents of the University of Oklahoma, 468 U.S. 85
(1984). O’Bannon II, 802 F.3d at 1061. The panel
acknowledged the Supreme Court’s observation, in “dicta,”
that the NCAA has historically preserved its product by, inter
alia, prohibiting payments to student-athletes. Id. at 1063
(citing Bd. of Regents, 468 U.S. at 102). But it declined to
16 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
read that statement as perpetual blanket approval for the
NCAA’s compensation rules, which were not at issue in
Board of Regents. Id. Though conceding that the NCAA’s
“amateurism rules are likely to be procompetitive,”6 id. at
1053, the panel refused to exempt them from antitrust
scrutiny, see id. at 1064 (explaining that a procompetitive rule
“can still be invalid under the Rule of Reason”).
The panel then affirmed much of the district court’s
analysis. See id. at 1069–76. As is relevant here, it found,
based on the record, “a concrete procompetitive effect in the
NCAA’s commitment to amateurism: namely that the
amateur nature of collegiate sports increases their appeal to
consumers.” Id. at 1073. As to LRAs, it agreed that the ban
on funding COA scholarships with NIL revenue was
“patently and inexplicably stricter” than necessary to
differentiate college from professional sports. Id. at 1075
(“[B]y the NCAA’s own standards, student-athletes remain
amateurs as long as any money paid to them goes to cover
legitimate educational expenses.”). It clarified that courts
must invalidate such restraints but may not “micromanage
organizational rules” or “strike down largely beneficial
market restraints[.]” Id.
A panel majority, however, found error in the district
court’s adoption of deferred NIL compensation “untethered
to [student-athletes’] education expenses” as a viable LRA.
Id. at 1076. It explained that “not paying student-athletes is
precisely what makes them amateurs” and disagreed that
6
In O’Bannon II, “amateurism rules” refers to, inter alia, the
NCAA’s “financial aid rules” and other rules “that limit student-athletes’
compensation and their interactions with professional sports leagues.” Id.
at 1055.
 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 17
“being a poorly-paid professional” is “‘virtually as effective’
for that market as being a[n] amateur.” Id. To avert a
“transition[]” to “minor league status” and to heed the
“Supreme Court’s admonition that [courts] must afford the
NCAA ‘ample latitude’ to superintend college athletics,” the
majority vacated this portion of the injunction. Id. at 1079
(quoting Bd. of Regents, 468 U.S. at 120). In closing, it
“emphasize[d] the limited scope of [its] decision,” explaining
that “in th[at] case,” the Rule of Reason did “not require”
anything “more” of the NCAA than to permit student-athletes
to receive scholarships for the COA. Id.7
C. The Alston Litigation
In March 2014, while the NCAA was litigating O’Bannon
I, FBS football and D1 men’s and women’s basketball players
filed several antitrust actions against the NCAA and eleven
D1 conferences that were transferred to and, with one
exception, consolidated before the same district court
presiding over O’Bannon I. Rather than confining their
challenge to rules prohibiting NIL compensation, Student-
Athletes sought to dismantle the NCAA’s entire
compensation framework.
7
I dissented from this vacatur, mostly on the basis of the standard of
review, because I concluded that the record supported the entirety of the
judgment. Id. at 1080. Though agreeing that “court[s] should not
eliminate the distinction between professional and college sports,” I also
disagreed that the vacated remedy would have done so. Id. at 1082 n.4.
As a practical matter, the remedy that survived appeal required nothing of
the NCAA, which had already adopted a more generous adjustment to the
grant-in-aid limit by permitting schools to offer any D1 recruit an athletic
scholarship up to the COA, irrespective of whether his or her NIL was or
could be used or licensed.
18 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
In December 2015, the district court certified three
injunctive relief classes comprised of (i) FBS football players,
(ii) D1 men’s basketball players, and (iii) D1 women’s
basketball players. Each subclass consists of student-athletes
who have received or will receive a full grant-in-aid during
the pendency of this litigation.
Nearly a year after our decision in O’Bannon II, the
NCAA sought judgment on the pleadings, invoking res
judicata. It argued that O’Bannon II “requires nothing more
of the NCAA than that it permit its member schools to
provide student-athletes with their full education-related
[COA].” Because the NCAA had already amended its rules
to satisfy that requirement, it reasoned that any post-
O’Bannon antitrust challenges to its compensation rules must
fail. The district court denied the motion. It explained that
Student-Athletes, unlike the O’Bannon plaintiffs, had
challenged, among other things, limits on non-cash,
education-related benefits. It acknowledged the possibility
that O’Bannon forecloses a type of relief—lifting restrictions
on cash payments untethered to educational expenses—but
declined to read it more broadly than that.
Cross-motions for summary judgment followed. The
district court again rejected the NCAA’s preclusion
arguments. As to the merits, it adopted, at the parties’
request, the market definition from O’Bannon I: the market
for a college education or, alternatively, student-athletes’
labor. It then granted Student-Athletes summary judgment at
the Rule of Reason’s first step, as the NCAA did not
meaningfully dispute that the challenged rules have
anticompetitive effects in the relevant markets. At the Rule
of Reason’s second step, it determined that the NCAA had
raised triable issues as to whether its rules have the
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 19
procompetitive effect(s) of maintaining the popularity of its
elite college basketball and football products or integrating
student-athletes into the wider campus community. Last, the
district court found that Student-Athletes had proffered
sufficient evidence to support their two proposed LRAs:
(i) allowing individual conferences, but not the NCAA, to
regulate student-athlete compensation; or (ii) enjoining
NCAA rules that restrict both non-cash education-related
benefits and benefits that are incidental to athletic
participation.
D. The District Court’s Decision
After a ten-day bench trial, the district court entered
judgment for Student-Athletes, in part. The court concluded
that NCAA limits on education-related benefits are
unreasonable restraints of trade, and accordingly enjoined
those limits; however, the court declined to hold that NCAA
limits on compensation unrelated to education likewise
violate section 1. Alston, 375 F. Supp. 3d at 1109.
1. Determination that O’Bannon Is Not Preclusive
At the outset of its conclusions of law, the district court
again declined to dismiss the case on res judicata grounds.
Id. at 1092–96. It identified “material factual differences”
between O’Bannon and the Alston litigation, id. at 1095,
including in the identity of class members and the rules and
rights at issue, see id. at 1093–94 (explaining that “[t]he crux
of the O’Bannon case was the right to student-athletes’
NIL[s],” whereas “[t]he conduct at issue here is not connected
to NIL rights” but to limits on above-COA compensation and
benefits); id. at 1094 (noting that challenged rules either did
20 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
not exist or have “materially changed” since O’Bannon). The
district court then proceeded to its Rule of Reason analysis.
2. The Relevant Market
To begin, the district court accepted Student-Athletes’
trial theory narrowing the relevant market to one in which
Student-Athletes sell their “labor in the form of athletic
services” to schools in exchange for athletic scholarships and
other payments permitted by the NCAA. Id. at 1067, 1097.
3. Anticompetitive Effects
Next, the court reiterated its summary judgment finding
of “significant anticompetitive effects in the relevant market.”
Id. at 1067, 1097. It relied on Student-Athletes’ economic
analyses reflecting that schools, as buyers of athletic services,
exercise monopsony power to artificially cap compensation
at a level that is not commensurate with student-athletes’
value. Id. at 1068. Based on these analyses, it also found
that, but for the challenged restraints, schools would offer
recruits compensation that more closely correlates with their
talent. Id. at 1068–69, 1098.
The district court also highlighted additional trial
evidence demonstrating the challenged rules’ anticompetitive
effects. This included testimony that, in 2013, the Power
Five began to urge the NCAA to loosen its compensation
restrictions based on a concern that existing rules
incongruously allowed schools to spend on virtually anything,
including palatial athletic facilities and seven-figure coaches’
salaries, except direct financial support for student-athletes.
Id. at 1068–69. In the district court’s view, the Power Five’s
concerns constituted further proof that, absent the NCAA’s
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 21
rules, student-athletes would receive higher compensation.
Id. at 1069. Although the NCAA granted the Power Five
autonomy to create new forms of compensation and to
expand previously available compensation and benefits in
2015, the district court observed that these conferences
remain constrained by “overarching NCAA limits” that cap
compensation at an artificially low level. Id.
4. Procompetitive Effect
The district court then turned to the NCAA’s asserted
procompetitive justifications. In pertinent part, the NCAA
argued that the challenged rules implement “amateurism,”
which drives consumer interest in college sports because
“consumers ‘value amateurism.’”8 Id. at 1070 (internal
citation omitted). The district court accepted this justification
with respect to the NCAA’s limits on cash compensation
untethered to education, but not as to its limits on non-cash
education-related benefits. Id. at 1082–83, 1101–02.
As a preliminary matter, the district court found no proof
that the challenged rules directly foster consumer demand.
Id. at 1070. It acknowledged the NCAA’s theory that its
rules safeguard “amateurism” for consumers’ benefit, but the
8
This justification is the only one raised on appeal. The district court
rejected the NCAA’s other proffered justification (abandoned on appeal):
The challenged rules purportedly enhance student-athletes’ college
education by integrating them into the wider campus community. Id.
at 1083–86, 1102–03. The district court declined to find that the
challenged rules improve academic performance or prevent a social
“wedge” between athletes and non-athletes. Id. at 1083–85, 1102–03. To
the contrary, it found that the challenged rules foster resentment by
permitting expenditures on “frills, like extravagant athletes-only
facilities.” Id. at 1085–86, 1103.
22 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
meaning of that term eluded the court.9 See id. at 1070–71
(noting former SEC commissioner’s testimony that he “do[es
not] even know what [amateurism] means” (internal citation
omitted)). Though the NCAA defined amateurism during the
litigation as “‘not paying’ the participants,” id. at 1071
(internal citation omitted), the district court observed that this
purported pay-for-play prohibition is riddled with exceptions.
See id. at 1071–74.
After cataloguing the long list of above-COA payments
that the NCAA permits, the court then reached two
conclusions: (i) the challenged rules “do not follow any
coherent definition of amateurism . . . or even ‘pay,’” and
(ii) these payments (many of which post-date O’Bannon)
have not diminished demand for college sports, which
“remain[] exceedingly popular and revenue-producing.” Id.
at 1074.
On the question of consumer demand, the district court
found Student-Athletes’ evidence regarding the effect (or lack
thereof) of above-COA compensation on demand more
compelling than the NCAA’s. For instance, in the battle of
economic experts, the district court found the NCAA’s only
demand expert, Dr. Kenneth Elzinga, unreliable because he
failed to study “standard measures of consumer demand, such
as revenues, ticket sales, or ratings,” but instead relied on
interviews with NCAA affiliates introduced to him by
9
The NCAA’s “Principle of Amateurism” provides that student-
athletes’ “participation should be motivated primarily by education and by
the physical, mental and social benefits to be derived,” that their
“participation in intercollegiate athletics is an avocation,” and that they
“should be protected from exploitation by professional and commercial
enterprises.” Id. at 1070 (internal citation omitted).
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 23
defense counsel. Id. at 1075. The district court further found
his analysis irrelevant as he refused to study consumer
response to historical changes in compensation levels based
on the false premise that the NCAA’s amateurism rules have
not materially changed over time. Id.
By contrast, the district court credited Student-Athletes’
expert Dr. Daniel Rascher’s demand analysis, which was
based on two natural experiments and, in some respects,
corroborated by defense witnesses. Id. at 1076–78, 1100.
The first experiment—comparing consumer demand before
and after the August 2015 increase to the grant-in-aid limit,
which resulted in “thousands of class members receiving
significant” above-COA payments, including SAF and AEF
distributions—demonstrated “no negative impact on
consumer demand.” Id. at 1076. In fact, Dr. Rascher found
that revenues from D1 basketball and FBS football, “one of
the best economic measures of consumer demand,” have
increased since 2015. Id. at 1076–77; see also id. at 1078
(noting corroborating testimony by an NCAA Rule 30(b)(6)
witness and a Big 12 Rule 30(b)(6) witness). The second
experiment—comparing demand before and after the
University of Nebraska (of the Big Ten) began providing
athletes up to $7,500 in post-eligibility education-related
aid—likewise did not demonstrably reduce interest in
Nebraska sports or FBS football and D1 basketball more
broadly. Id. at 1077–78.
The district court also found Student-Athletes’ survey
expert, Dr. Hal Poret, considerably more persuasive than the
NCAA’s, Dr. Bruce Isaacson. Id. at 1078–80, 1100–01.
Dr. Isaacson asked respondents why they watch college
sports and listed “amateurs and/or not paid” as one possible
reason, but failed to indicate that “amateurs” means “not
24 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
paid” or to otherwise define “amateurs,” thus “render[ing] the
responses hopelessly ambiguous.” Id. at 1078. Moreover, he
measured only consumer preference and conceded that he did
not attempt to study behavior. Id. at 1079. By contrast,
Dr. Poret tested behavior and found that consumers would
continue to view or attend college athletics (at the same rate)
even if eight types of compensation that the NCAA currently
prohibits or limits were individually implemented. Id.
at 1079–80. The district court credited this conclusion. Id.
at 1079–80 & n.24.
Testimony by NCAA lay witnesses that “student” status
drives demand also failed to persuade the district court of a
connection between the challenged compensation regime and
demand. Id. at 1082, 1101. It reasoned that “student-athletes
would continue to be students in the absence of the
challenged rules,” id. at 1082, relying on O’Bannon II’s
observation that higher education “would still be available to
student-athletes if they were paid some compensation in
addition to their athletic scholarships,” id. at 1101 (quoting
O’Bannon II, 802 F.3d at 1073). It also underscored the
absence of evidence that the NCAA had promulgated its rules
based on demand analyses. Id. at 1080, 1100–01.
Despite finding the NCAA’s procompetitive theory
largely unpersuasive, the district court “credit[ed] the
importance to consumer demand of maintaining a distinction
between college sports and professional sports.” Id. at 1082.
The court then found that some NCAA rules—the COA limit
on the grant-in-aid, limits on compensation unrelated to
education, and limits on cash awards for graduating or other
academic achievements—serve that purpose by precluding
“unlimited payments unrelated to education, akin to salaries
seen in professional sports leagues.” Id. at 1082–83; see also
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 25
id. at 1101–02. But the court concluded that limits on “non-
cash education-related benefits,” such as post-eligibility
graduate scholarships or tutoring, do not have that effect; it
reasoned that such benefits “could not be confused with a
professional athlete’s salary” and would only “emphasize that
the recipients are students.” Id. at 1083.
5. Less Restrictive Alternative
At the Rule of Reason’s third step, the district court
considered whether three potential alternatives to the
challenged restraints were less restrictive but virtually as
effective in preventing “demand-reducing unlimited
compensation indistinguishable from that observed in
professional sports.” Id. at 1086. The district court rejected
two proposed LRAs, both of which would have permitted
individual conferences to limit above-COA compensation,
but would have otherwise invalidated either (i) all NCAA
compensation limits or (ii) NCAA limits on education-related
compensation and existing caps on benefits incidental to
athletics participation, such as healthcare, pre-season
expenses, and athletic participation awards. Id. at 1086–87.
The district court found that both these alternatives would
enable professional-style cash payments, thus threatening the
distinction between college and professional sports. Id.
at 1087. The court acknowledged the possibility that
conferences could “discover” demand-preserving
compensation levels. Id. But it rejected these LRAs to avoid
demand-reducing “miscalculations” during “the inevitable
trial-and-error phase.” Id.
26 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
The district court then identified a viable LRA:
(1) allow the NCAA to continue to limit
grants-in-aid at not less than the [COA];
(2) allow the [NCAA] to continue to limit
compensation and benefits unrelated to
education; (3) enjoin NCAA limits on most
compensation and benefits that are related to
education, but allow it to limit education-
related academic or graduation awards and
incentives, as long as the limits are not lower
than its limits on athletic performance awards
now or in the future.10
Id. The court enumerated specific education-related benefits
that the NCAA would be unable to prohibit or limit under the
LRA: “computers, science equipment, musical instruments
and other items not currently included in the [COA] but
nonetheless related to the pursuit of various academic
studies”; post-eligibility scholarships for undergraduate,
graduate, and vocational programs at any school; tutoring;
study-abroad expenses; and paid post-eligibility internships.
Id. at 1088.
The district court explained that this LRA would permit
some NCAA regulation of cash graduation or academic
awards because these payments could otherwise morph into
professional-like salaries. Id. It instructed that the cap on
such awards should not fall below the existing limit on
aggregate athletic participation awards (currently, $5,600), as
receipt of the latter “has been shown not to decrease
10
The district court found that the current aggregate limit on such
awards is $5,600. Id. at 1072, 1099.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 27
consumer demand and not to be inconsistent with the
NCAA’s understanding of amateurism.” Id. Under this
LRA, individual conferences may continue to limit all
payment types because “no individual conference dominates
nearly the entire market, like the NCAA does.” Id. The
district court further reasoned that this LRA would not
“greatly impact[]” the NCAA’s “latitude to superintend
college sports,” as it “would affect only a small fraction of
[its] rulemaking jurisdiction.” Id.
The district court concluded that this LRA would be
virtually as effective as the challenged rules at preserving
student-athletes’ status as students (and thus demand),
analogizing it to the LRA affirmed in O’Bannon II: Both
require the NCAA to permit members “to cover legitimate
education-related costs.” Id. at 1105 (citing O’Bannon II,
802 F.3d at 1075). Finally, it determined that, far from
resulting in significantly increased costs, the LRA’s
elimination of a category of rules would decrease the
NCAA’s enforcement costs. Id. at 1090–91, 1105.
6. Remedy
The district court implemented this LRA via a permanent
injunction. See In re NCAA Athletic Grant-In-Aid Cap
Antitrust Litig., 2019 WL 1593939 (N.D. Cal. Mar. 8, 2019).
The injunction provides that the parties may move to modify
its list of education-related benefits and that the NCAA may
move to incorporate a definition of compensation and benefits
that are “related to education” if it chooses to adopt one. Id.
at *1. It also allows the NCAA to regulate how its members
provide education-related benefits. Id.; see also Alston,
375 F. Supp. 3d at 1107 (“[T]he NCAA could require schools
to pay for these items directly or to reimburse student-athletes
28 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
for [equipment] expenses if adequate proof of purchase is
shown.”). The court reiterated that NCAA members remain
free to independently restrict pay. Alston, 375 F. Supp. 3d
at 1109. And it stayed the injunction pending resolution of a
timely appeal. Id. at 1110.
E. Post-Appeal Developments
After the NCAA timely appealed, California enacted the
Fair Pay to Play Act (the “FPP Act”). See Cal. S.B. 206
(Sept. 30, 2019), Cal. Educ. Code § 67456. The FPP Act
requires the NCAA and its member institutions to permit
student-athletes enrolled in California colleges and
universities to earn compensation from the use of their NILs.
Id. § 67456(a), (g). It takes effect on January 1, 2023. Id.
§ 67456(h).
In response to the FPP Act, the NCAA created a working
group that has recommended permitting NIL benefits so long
as they are tethered to education and otherwise preserve the
distinction between college and professional sports
recognized in O’Bannon II. See Fed. and State Leg. Working
Grp. Report 4 (Oct. 23, 2019), available at
https://tinyurl.com/working-grp-report. In recent testimony
before the Senate Commerce Subcommittee on
Manufacturing, Trade and Consumer Protection, NCAA
President Dr. Mark Emmert denied that the NCAA would be
“taking any action that is contrary to the position advocated
by the NCAA or accepted by the Ninth Circuit with respect
to the type of NIL payments that were at issue in the
O’Bannon case[.]” See Test. of Dr. Mark Emmert 6 (Feb. 11,
2020), available at https://tinyurl.com/Emmert-Test-y.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 29
II
The application of stare decisis and res judicata are
questions of law that we review de novo. See In re Watts,
298 F.3d 1077, 1079 (9th Cir. 2002); Media Rights Techs.,
Inc. v. Microsoft Corp., 922 F.3d 1014, 1020 (9th Cir. 2019).
We review factual findings for clear error and legal
conclusions de novo. See O’Bannon II, 802 F.3d at 1061.
Under clear error review, we must “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. (quoting
FTC v. BurnLounge, Inc., 753 F.3d 878, 883 (9th Cir. 2014));
see also United States v. Alexander, 106 F.3d 874, 877 (9th
Cir. 1997) (“We must not reverse as long as the findings are
plausible in light of the record viewed in its entirety[.]”). In
other words, a decision is not clearly erroneous unless it
“strike[s] us as wrong with the force of a five-week-old,
unrefrigerated dead fish.” Prete v. Bradbury, 438 F.3d 949,
968 n.23 (9th Cir. 2006) (internal citation omitted).
Last, “[w]e review a district court’s decision to grant a
permanent injunction for an abuse of discretion”; the “factual
findings underpinning the award” for clear error; and the
“rulings of law relied upon by the district court in awarding
injunctive relief” de novo. Ollier v. Sweetwater Union High
Sch. Dist., 768 F.3d 843, 867 (9th Cir. 2014) (internal
citations and quotation marks omitted).
30 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
III
The district court correctly concluded O’Bannon II did
not foreclose this litigation as a matter of stare decisis and res
judicata.
A
Stare decisis binds “today’s Court” to “yesterday’s
decisions.” Danielson v. Inslee, 945 F.3d 1096, 1097 (9th
Cir. 2019) (quoting Kimble v. Marvel Entm’t, LLC, 135 S. Ct.
2401, 2409 (2015)). “In determining whether [we are] bound
by an earlier decision,” we consider “not only the rule
announced, but also the facts giving rise to the dispute, other
rules considered and rejected and the views expressed in
response to any dissent or concurrence.” Hart v. Massanari,
266 F.3d 1155, 1170 (9th Cir. 2001). “Insofar as there may
be factual differences between the current case” and
O’Bannon II, we “must determine whether those differences
are material to the application of the rule or allow the
precedent to be distinguished on a principled basis.” Id.
at 1172; see also In re Osborne, 76 F.3d 306, 309 (9th Cir.
1996) (explaining that decisions “furnish[] the rule for the
determination of a subsequent case involving identical or
similar material facts” (internal citation omitted)).
Antitrust decisions are particularly fact-bound. The
Supreme Court has long emphasized that the Rule of Reason
“contemplate[s]” “case-by-case adjudication.” See Leegin
Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877,
899 (2007); see also Maple Flooring Mfrs.’ Ass’n v. United
States, 268 U.S. 563, 579 (1925) (“[E]ach case arising under
the Sherman Act must be determined upon the particular facts
disclosed by the record, and . . . opinions in those cases must
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 31
be read in the light of their facts”); Phillip Areeda & Herbert
Hovenkamp, Antitrust Law: An Analysis of Antitrust
Principles and Their Application, ¶ 1205c3 (4th ed. 2018)
(“Continuing contracts in restraint of trade,” are “typically
subject to continuing reexamination,” and “even a judicial
holding that a particular agreement is lawful does not
immunize it from later suit or preclude its reexamination as
circumstances change.”).
O’Bannon II was a decision of “limited scope,” which the
panel majority summarized as follows:
[W]e reaffirm that NCAA regulations are
subject to antitrust scrutiny and must be tested
in the crucible of the Rule of Reason. . . .
[T]he 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 [COA] to their
student athletes. It does not require more.
802 F.3d at 1079 (emphasis added).
In arguing that the last two sentences of this passage
foreclose the current litigation, the NCAA ignores the
inherently fact-dependent nature of a Rule of Reason
analysis, which evaluates dynamic market conditions and
consumer preferences; the panel majority’s manifest effort to
limit its decision to the record before it; and the majority’s
32 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
mandate that courts must continue to subject NCAA rules,
including those governing compensation, to antitrust scrutiny.
See id. at 1064 (“The amateurism rules’ validity must be
proved, not presumed.”).
Far from straying outside O’Bannon II’s bounds, the
district court here sought to toe the line that the panel
majority drew. The court uncapped education-related
benefits, but left in place NCAA limits on compensation
unrelated to education, consistent with the majority’s
observation that “student-athletes remain amateurs as long as
any money paid to them goes to cover legitimate educational
expenses.” Id. at 1075 (emphasis added); see also id. at 1076
(vacating injunction only insofar as it forced NCAA to permit
“cash payments untethered to . . . education expenses”).
The district court meaningfully and properly distinguished
O’Bannon II from the current litigation as a narrow challenge
to restrictions on NIL compensation. See id. at 1052
(introducing challenged rules as those that “prohibit student-
athletes from being paid for the use of their [NILs]”); id.
at 1055 (stating that 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”); id.
at 1073 n.17 (“The correct inquiry under the Rule of Reason
is: What procompetitive benefits are served by the NCAA’s
existing rule banning NIL payments?”). Additionally, the
proposed LRAs in O’Bannon were expressly limited to
“licensing revenue generated from the use” of student-
athletes’ NILs. See O’Bannon I, 7 F. Supp. 3d at 1007. By
contrast, this action more broadly targets the “interconnected
set of NCAA rules that limit the compensation [student-
athletes] may receive in exchange for their athletic services.”
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 33
Alston, 375 F. Supp. 3d at 1062. And Student-Athletes
sought LRAs that would uncap above-COA compensation,
regardless whether their NILs have, will, or could generate
any revenue that would fund such compensation. See id. at
1086.
The NCAA’s argument that it should not incur antitrust
liability for relaxing its compensation limits since O’Bannon
is not persuasive. The district court rightly concluded that
this argument misses the mark: “It is the fact that the prices
of student-athlete compensation are fixed, as opposed to the
amount at which these prices are fixed, that renders the
agreements at issue anticompetitive.” Id. at 1095 (citing
O’Bannon II, 802 F.3d at 1071 (“It is no excuse that the
prices fixed are themselves reasonable.”) (quoting Catalano,
Inc. v. Target Sales, Inc., 446 U.S. 643, 647 (1980))).
Additionally, the NCAA’s concession that it has relaxed
its compensation limits since O’Bannon only underscores that
the instant litigation is materially factually different from
O’Bannon. Indeed, as Student-Athletes argue, the changes to
compensation limits since O’Bannon “alter the factual
assumption that drove the result in O’Bannon: they show that
non-education-related cash payments in excess of the [COA]
are no longer a ‘quantum leap’ from current NCAA
practice[.]” See O’Bannon II, 802 F.3d at 1078 (“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.”)).
In O’Bannon II, the majority addressed only two types of
above-COA allowances: Pell Grants and prize money for
tennis recruits. See id. at 1058–59. It distinguished Pell
Grants, which are “intended for education-related expenses,”
34 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
from “pure cash compensation” for athletic performance. Id.
at 1078 n.24. And it declared that “award money from
outside athletic events implicates amateurism differently than
allowing schools to pay student-[athletes] directly.” Id.
at 1077 n.21. Neither of these above-COA allowances is
analogous to the post-O’Bannon II forms of
compensation—provided by schools and unrelated to
education—that the district court cited to support its
conclusion that the NCAA, contrary to its theory of
amateurism, does provide at least some “pay for play.” See
Alston, 375 F. Supp. 3d at 1071–74. For example, the court
found that, after the O’Bannon record closed, student-athletes
have received, inter alia, athletic participation awards in the
form of Visa gift cards,11 SAF disbursements in the thousands
of dollars to pay for loss-of-value insurance,12 and personal
expenses unrelated to education. Id. at 1095. Based on these
innovations, the court fairly concluded that the compensation
landscape has meaningfully changed since O’Bannon. See id.
at 1094.
In sum, because O’Bannon II “was decided on a narrow
set of facts that are distinguishable from the present case,” we
“decline to adopt” the NCAA’s “broad interpretation” of that
decision. United States v. Silver, 245 F.3d 1075, 1079 (9th
Cir. 2001).
11
Visa gift cards function like cash, even if the NCAA declines to
admit as much.
12
The NCAA characterizes this insurance as a “legitimate expense to
protect against the risk of loss that could be incurred during athletic
competition,” but the legitimacy of these payments is irrelevant here.
What matters, for stare decisis purposes, is that the O’Bannon II panel had
no occasion to consider whether such payments accord with the NCAA’s
conception of amateurism.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 35
B
Res judicata, also known as “claim preclusion,” “bars a
party in successive litigation from pursuing claims that ‘were
raised or could have been raised in [a] prior action.’” Media
Rights Techs., 922 F.3d at 1020 (internal citation omitted). It
applies when there is: (i) an identity of claims between the
prior and subsequent actions; (ii) a final judgment on the
merits; and (iii) identity or privity between the parties. Id.
at 1020–21. The NCAA bears the burden of proving all three
elements. Id. at 1021. The NCAA fails to carry its burden
with respect to the first element.
“Claim preclusion does not apply to claims that were not
in existence and could not have been sued upon . . . when the
allegedly preclusive action was initiated.” Id. (internal
citation omitted). That bright-line rule is dispositive here.
Because Student-Athletes’ antitrust claim “arose from events
that occurred after” the O’Bannon record closed in August
2014—that is, the above-described proliferation of
permissible above-COA payments alongside a growth in
revenues from FBS football and D1 basketball—it is “not
barred.” Howard v. City of Coos Bay, 871 F.3d 1032, 1040
(9th Cir. 2017); see also Harkins Amusement Enters., Inc. v.
Harry Nace Co., 890 F.2d 181, 183 (9th Cir. 1989) (“Failure
to gain relief for one period of time does not mean that the
plaintiffs will necessarily fail for a different period of time”);
California v. Chevron Corp., 872 F.2d 1410, 1415 (9th Cir.
1989) (providing that “conduct of the parties since the first
36 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
judgment[] must be considered” in connection with
successive antitrust suits).13
IV
The district court properly granted judgment on the
Student-Athletes’ Sherman Act § 1 claim. The Sherman Act
prohibits, inter alia, agreements “in restraint of” interstate
trade or commerce. 15 U.S.C. § 1. The Supreme Court has
interpreted section 1 “as ‘outlaw[ing] only unreasonable
restraints’ of trade.” See In re Nat’l Football League’s
Sunday Ticket Antitrust Litig., 933 F.3d 1136, 1149 (9th Cir.
2019) (alteration in original) (quoting State Oil Co. v. Khan,
522 U.S. 3, 10 (1997)). “[W]hen considering agreements
among entities involved in league sports, such as here, [we]
must determine whether the restriction is unreasonable under
the [R]ule of [R]eason.” Id. at 1150 n.5; see also O’Bannon
II, 802 F.3d at 1069 (“[T]he appropriate rule is the Rule of
Reason.”).
As applied here, under the Rule of Reason’s “three-step
framework:” (1) Student-Athletes “bear[] the initial burden of
showing that the restraint produces significant
13
In support of its res judicata argument, the NCAA cites the
O’Bannon II majority’s discussion of the “danger” of “future plaintiffs”
pursuing “essentially the same claim again and again.” If anything, the
cited discussion cuts against the NCAA. The majority predicted that
future challenges to the district court’s $5,000 cap on deferred NIL
payments would ultimately result in student-athletes, “captur[ing] the full
value of their NIL” and the NCAA’s transformation into a minor league.
O’Bannon II, 802 F.3d at 1079. Far from enshrining the majority’s
decision as the last word on the legality of NCAA compensation rules, this
hypothetical rests on the premise that res judicata would not have blocked
such challenges.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 37
anticompetitive effects within a relevant market”; (2) if they
carry that burden, the NCAA “must come forward with
evidence of the restraint’s procompetitive effects”; and
(3) Student-Athletes “must then show that any legitimate
objectives can be achieved in a substantially less restrictive
manner.” O’Bannon II, 802 F.3d at 1070 (quoting Tanaka v.
Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001)).
Throughout this analysis, we remain mindful that, although
“the NCAA is not above the antitrust laws,” id. at 1079,
courts are not “free to micromanage organizational rules or to
strike down largely beneficial market restraints,” id. at 1075.
Accordingly, a court must invalidate a restraint and replace it
with an LRA only if the restraint is “patently and inexplicably
stricter than is necessary to accomplish all of its
procompetitive objectives.” Id. at 1075.
A
The district court properly concluded that the Student-
Athletes carried their burden at the first step of the Rule of
Reason. The district court found that the NCAA’s rules have
“significant anticompetitive effects in the relevant market”
for Student-Athletes’ labor on the gridiron and the court. See
Alston, 375 F. Supp. 3d at 1070 (“[B]ecause elite student-
athletes lack any viable alternatives to [D1], they are forced
to accept, to the extent they want to attend college and play
sports at an elite level after high school, whatever
compensation is offered to them by [D1] schools, regardless
of whether any such compensation is an accurate reflection of
the competitive value of their athletic services.”). These
findings “have substantial support in the record,” O’Bannon
II, 802 F.3d at 1070; see Alston, 375 F. Supp. 3d at 1067–70,
and the NCAA does not dispute them, see O’Bannon II, 802
F.3d at 1072.
38 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
B
The NCAA does, however, quarrel with the district
court’s analysis at the Rule of Reason’s second step, where
the NCAA bears a “heavy burden” of “competitively
justify[ing]” its undisputed “deviation from the operations of
a free market.” Bd. of Regents, 468 U.S. at 113; see also
O’Bannon II, 802 F.3d at 1064 (explaining that the NCAA is
not entitled to a presumption that its restraints are
procompetitive). On appeal, the NCAA advances a single
procompetitive justification: The challenged rules preserve
“amateurism,” which, in turn, “widen[s] consumer choice” by
maintaining a distinction between college and professional
sports.
“Improving customer choice is procompetitive.” Paladin
Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1157 (9th
Cir. 2003); see also O’Bannon II, 802 F.3d at 1072 (“[A]
restraint that broadens choices can be procompetitive.”).
Thus, the district court properly “credit[ed] the importance to
consumer demand of maintaining a distinction between
college and professional sports.” Alston, 375 F. Supp. 3d
at 1082.14
14
Writing in support of Student-Athletes, amici assert that courts may
not consider a restraint’s procompetitive benefits in a market outside the
market deemed relevant for the purpose of evaluating a restraint’s
anticompetitive effects. That proposition is not settled. See Paladin,
328 F.3d at 1157 n.11 (acknowledging the “theory that procompetitive
effects in a separate market cannot justify anticompetitive effects in the
market . . . under analysis” (citing United States v. Topco Assocs., Inc.
405 U.S. 596, 610 (1972)). The O’Bannon II panel had no occasion to
address it, as the parties there limited their dispute to whether the
challenged rules, as a factual matter, preserved consumer demand. See
802 F.3d at 1072–74. So, too, here: The parties have agreed that the
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 39
The district court concluded, however, that only some of
the challenged rules serve that procompetitive purpose: limits
on above-COA payments unrelated to education, the COA
cap on athletic scholarships, and certain restrictions on cash
academic or graduation awards and incentives. Id.
at 1101–02 (recognizing that removal of these restrictions
could result in unlimited cash payments akin to professional
salaries). It explained that the remaining rules—those
restricting “non-cash education-related benefits”—do nothing
to foster or preserve demand because “[t]he value of such
benefits, like a scholarship for post-eligibility graduate school
tuition, is inherently limited to its actual value, and could not
be confused with a professional athlete’s salary.” Id. at 1083.
The record amply supports these findings. The district
court reasonably relied on demand analyses, survey evidence,
and NCAA testimony indicating that caps on non-cash,
education-related benefits have no demand-preserving effect
and, therefore, lack a procompetitive justification. See id.
at 1076–80.
First, Dr. Rascher’s and Dr. Noll’s demand analyses
demonstrate that the NCAA has loosened its restrictions on
above-COA, education-related benefits since O’Bannon
without adversely affecting consumer demand. These
benefits include SAF and AEF distributions to cover fifth-
and sixth-year aid, postgraduate scholarships, tutoring,
relevant market is the market for Student-Athletes’ labor, while the market
to be assessed for pro-competitive effects is the market for college sports.
Thus, the issue is not presented in this case. Because the issue raised by
amici is “not properly before us,” we express no view on its merits, and
leave it for another day. Pres. Coal., Inc. v. Pierce, 667 F.2d 851, 862
(9th Cir. 1982).
40 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
international student fees, educational supplies, academic
achievement or graduation awards, graduate school exam
fees, and fees for internship programs. Id. at 1072 n.15.
Second, Student-Athletes’ survey evidence reflects that
individually implementing seven types of education-related
benefits—limited or forbidden under the challenged rules—
would not diminish the survey respondents’ viewership or
attendance.15
Third, NCAA witnesses confirmed that the NCAA set
limits on education-related benefits without consulting any
demand studies. See id. at 1080 (“Indeed, [Kevin] Lennon,
who has worked for the NCAA for more than thirty years,
testified that he does not recall any instance in which any
study on consumer demand was considered by the NCAA
membership when making rules about compensation”); see
also id. at 1074 (“Defendants have not provided any cogent
explanation for why the NCAA generally prohibits financial
aid for graduate school at another institution, or for why the
Senior Scholar Awards are limited in quantity and amount.”).
Notwithstanding this evidence, the NCAA accuses the
district court of straying from a purported “judicial
consensus” that the NCAA expands consumer choice by
enforcing an amateurism principle under which student-
athletes “must not be paid” a penny over the COA. This
sweeping procompetitive justification—the “Not One Penny”
15
These benefits were: an academic incentive payment with a
maximum value of $10,000, a graduation incentive payment with a
maximum value of $10,000, a post-eligibility undergraduate scholarship,
a work-study payment, off-season expenses, a graduate school scholarship
for the COA, and a post-eligibility study-abroad scholarship.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 41
standard, in Dr. Noll’s parlance—lacks support in both
precedent and the record.
Although both Board of Regents and O’Bannon II define
amateurism to exclude payment for athletic performance,
neither purports to immortalize that definition as a matter of
law. In fact, O’Bannon II recognizes that Board of Regents’
discussion of amateurism is “dicta.” 802 F.3d at 1063. And
to the extent the O’Bannon II majority accepted the NCAA’s
conception of amateurism, it did so based on the record,
which demonstrated a “concrete procompetitive effect,” id.
at 1073, of limiting above-COA “NIL cash payments
untethered to [students’] education expenses,” id. at 1076.
The record in this case, by contrast, reflects no such
concrete procompetitive effect of limiting non-cash,
education-related benefits. Instead, the record supports a
much narrower conception of amateurism that still gives rise
to procompetitive effects: Not paying student-athletes
“unlimited payments unrelated to education, akin to salaries
seen in professional sports leagues” is what makes them
“amateurs.” Alston, 375 F. Supp. 3d at 1083. The district
court credited NCAA testimony that college sports resonates
with fans because they are not professionalized, and that “if
the college game looks to be professional sports, [fewer]
people will watch it.” Id. at 1082 (internal citations omitted).
But the court reasonably declined to adopt the Not One Penny
standard based on considerable evidence that college sports
have retained their distinctive popularity despite an increase
in permissible forms of above-COA compensation and
benefits.
In defense of its expansive conception of amateurism, the
NCAA relies on its survey of 1,100 college sports fans,
42 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
reflecting that 31.7 percent watch college sports because,
inter alia, they “like the fact that college players are amateurs
and/or are not paid.” The NCAA claims that the district court
rejected this survey on “baseless grounds.” But it disregards
the court’s primary and most compelling reason for
dismissing this evidence: The survey results reflect, at most,
a consumer preference for “amateurism,” but do not capture
the effects (if any) that the tested compensation scenarios
would have on consumer behavior. See id. at 1079
(“Dr. Isaacson acknowledged that measuring consumer
preferences is ‘not the same thing’ as measuring future
consumer behavior, and that he did not do any work to
measure any relationship between the two.” (internal citation
omitted)). The NCAA does not deny this flaw in its survey
evidence.
The district court offered another sound reason to reject
the NCAA’s survey evidence: The survey’s use of the phrase
“amateurs and/or not paid” made its responses “hopelessly
ambiguous.” Id. at 1078. In so finding, the district court did
not, as the NCAA complains, “inject ambiguity into a
commonplace term.” Amateurism does not have a fixed
definition, as NCAA officials themselves have conceded.
See, e.g., id. at 1070–71 (“Mike Slive, who served as
commissioner of the SEC, one of the Power Five, . . . testified
that amateurism is ‘just a concept that I don’t even know
what it means. I really don’t.’” (internal citation omitted));
see also O’Bannon II, 802 F.3d at 1083 (Thomas, C.J.,
dissenting) (referring to amateurism as a “nebulous concept
prone to ever-changing definition”). Survey respondents who
selected “amateurs and/or not paid” may have very well
equated amateurism with student status, irrespective of
whether those students receive compensation for athletics.
See Alston, 375 F. Supp. 3d at 1082 (acknowledging defense
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 43
witness testimony that “consumers’ perception that student-
athletes are, in fact, students” drives consumer demand for
D1 basketball and FBS football). Given this lack of clarity,
the district court reasonably concluded that the NCAA’s
survey results were of limited evidentiary value.
Finally, the district court properly considered whether the
challenged rules themselves, rather than hypothetical
alternatives, have procompetitive benefits. As both parties
recognize, the proper “inquiry under the Rule of Reason is:
What procompetitive benefits are served by the NCAA’s
[challenged] rule[s]?” See O’Bannon II, 802 F.3d at 1073
n.17. As we have recounted, the district court gave reasoned
consideration to the procompetitive effects achieved by each
type of challenged rule, ultimately concluding that the NCAA
“sufficiently show[ed] a procompetitive effect of some
aspects of the challenged compensation scheme,” but not all.
Alston, 375 F. Supp. 3d at 1103 (emphasis added). By
contrast, in O’Bannon, the district court erred at step two
because it considered the procompetitive benefits of
hypothetical limits on large amounts of compensation. See
O’Bannon II, 802 F.3d at 1073 n.17 (“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).”). Here, the NCAA has
conceded that its rules, in part, “prevent the receipt of
unlimited pay” unrelated to education. Dr. Isaacson also
acknowledged that the challenged rules prohibit unlimited
pay. Thus, the court did not err in assessing whether such
rules have procompetitive effects.
In short, the district court fairly found that NCAA
compensation limits preserve demand to the extent they
44 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
prevent unlimited cash payments akin to professional salaries,
but not insofar as they restrict certain education-related
benefits.16
C
At the Rule of Reason’s third step, it is Student-Athletes’
burden to “make a strong evidentiary showing” that their
proposed LRAs to the challenged scheme “are viable.” Id.
at 1074. “[T]o be viable,” an alternative “must be ‘virtually
as effective’ in serving the procompetitive purposes of the
NCAA’s current rules, and ‘without significantly increased
cost.’” Id. (quoting Cty. of Tuolumne v. Sonora Cmty. Hosp.,
236 F.3d 1148, 1159 (9th Cir. 2001)). Where “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
[an LRA].” Id. at 1075.
The LRA identified by the district court would prohibit
the NCAA from (i) capping certain education-related
16
The NCAA asserts that the district court proceeded from the
“simply fictional” premise that the dividing line between student-athletes
and professionals is that the latter may receive “unlimited pay.” In
context, the district court was using the term “unlimited pay” as shorthand
for payments that run the risk of eroding consumer perception of student-
athletes as students—that is, cash payments unrelated to education and
akin to professional salaries. The NCAA’s own expert used that
shorthand in surveying consumer attitudes toward an “unlimited payments
scenario,” where “a college could pay a student-athlete any amount it
wanted to, without any limit, for playing college sports.”
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 45
benefits17 and (ii) limiting academic or graduation awards or
incentives below the maximum amount that an individual
athlete may receive in athletic participation awards, while
(iii) permitting individual conferences to set limits on
education-related benefits. See Alston, 375 F. Supp. 3d
at 1087. The district court did not clearly err in determining
that this LRA would be “‘virtually as effective’ in serving the
procompetitive purposes of the NCAA’s current rules,” and
may be implemented without “significantly increased cost.”
See O’Bannon II, 802 F.3d at 1074 (internal citation omitted).
1
The district court reasonably concluded that uncapping
certain education-related benefits would preserve consumer
demand for college athletics just as well as the challenged
rules do. Such benefits are easily distinguishable from
professional salaries, as they are “connect[ed] to education”;
“their value is inherently limited to their actual costs”; and
“they can be provided in kind, not in cash.” Alston, 375 F.
Supp. 3d at 1102. And, as already detailed, the record
furnishes ample support for the district court’s finding that
the provision of education-related benefits has not and will
not repel college sports fans.
17
Those benefits are the following: “computers, science equipment,
musical instruments and other tangible items not included in the cost of
attendance calculation but nonetheless related to the pursuit of academic
studies; post-eligibility scholarships to complete undergraduate or
graduate degrees at any school; scholarships to attend vocational school;
tutoring; expenses related to studying abroad that are not included in the
cost of attendance calculation; and paid post-eligibility internships.” In re
NCAA Athletic Grant-In-Aid Cap Antitrust Litig., 2019 WL 1593939,
at *1.
46 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
The district court drew an apt analogy between the LRA
upheld in O’Bannon II and the LRA it identified here: Both
athletic scholarships for the COA and education-related
benefits “cover legitimate education-related costs.” Id.
at 1105. Indeed, in affirming the district court’s order insofar
as it raised the grant-in-aid cap to the COA, the O’Bannon II
panel noted Dr. Emmert’s testimony that this alternative
would not harm demand “because all the money given to
students would be going to cover their ‘legitimate costs’ to
attend school.” O’Bannon II, 802 F.3d at 1075. In reference
to this litigation, Dr. Emmert similarly announced the
NCAA’s approval of the court’s order to the extent that it
would foster competition among conferences and schools
“over who can provide the best educational experience”—“an
inherently good thing.” Associated Press, Emmert: Ruling
reinforced fundamentals of NCAA, ESPN, Apr. 4, 2019,
available at https://tinyurl.com/emmert-NCAA/.
Dr. Emmert’s comment is consistent with the record. As
in O’Bannon II, the NCAA presented no evidence that
demand will suffer if schools are free to reimburse education-
related expenses of inherently limited value. Indeed, its
evidence was to the contrary. For instance, in testifying about
a University of Nebraska program that permits student-
athletes to receive up to $7,500 in post-eligibility aid (for
study-abroad expenses, scholarships, and internships), the
University’s former chancellor conceded that such benefits
“relate to the educational enterprise” and, thus, do not erode
demand. When asked about the propriety of above-COA
compensation, the current MAC commissioner similarly
testified that the “key” is “linking” payments to the “pursuit
of the educational opportunities of the individual involved.”
The LRA fashioned by the district court achieves that link.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 47
In light of this evidence, the district court reasonably
concluded that market competition in connection with
education-related benefits will only reinforce consumers’
perception of student-athletes as students, thereby preserving
demand. See Alston, 375 F. Supp. 3d at 1089 (observing that
NCAA’s “own witnesses” testified that “consumer demand
for [D1] basketball and FBS football is driven largely by
consumers’ perception that student-athletes are, in fact,
students”).
Moreover, no evidence in the record substantiates the
NCAA’s concerns that certain benefits permissible under the
LRA, if uncapped, will become vehicles for payments that are
virtually indistinguishable from a professional’s salary.
These concerns are premised on an unreasonably expansive
reading of the injunction, including its requirement that the
NCAA permit reimbursement for “tangible items not
included in the [COA] calculation but nonetheless related to
the pursuit of academic studies.” In re NCAA Athletic Grant-
In-Aid Cap Antitrust Litig., 2019 WL 1593939, at *1. We
construe injunctions in “context” and “so as to avoid . . .
absurd result[s].” Gathright v. City of Portland, 439 F.3d
573, 581 (9th Cir. 2006). The context here makes plain that
it “cannot have been the district court’s intent,” id., for
uncapped benefits to be vehicles for unlimited cash payments.
Instead, it expressly envisioned “non-cash education-related
benefits” for “legitimate education-related costs,” not luxury
cars or expensive musical instruments for students who are
not studying music. Alston, 375 F. Supp. 3d at 1105
(emphasis added). Thus, properly construed, the injunction
does not permit the type of unlimited cash payments asserted
by the NCAA. Further, as the district court properly
concluded, it is doubtful that a consumer could mistake a
post-eligibility internship for a professional athlete’s salary,
48 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
where the former is necessarily divorced from participation
in college athletics.
The NCAA’s challenges to the evidence underlying this
LRA are likewise unavailing. To be sure, neither the survey
nor Dr. Rascher’s observations regarding the Nebraska
program purport to reflect the effect that nationwide
education-related benefits, implemented in the aggregate,
would have on consumer demand. But the district court did
not rely exclusively on this evidence. Under the deferential
standard of review required here, we must examine the record
“in its entirety.” Alexander, 106 F.3d at 877. The NCAA
fails to explain why the cumulative evidence, which included
demand analyses regarding the growth of NCAA revenue
alongside the expansion of SAF and AEF payments for
education-related expenses, was insufficient.
And though the record does not reflect whether an athlete
has ever received $5,600 in aggregate athletic participation
awards, the district court reasonably concluded that
permitting student-athletes to receive up to that amount in
academic or graduation awards and incentives will not erode
consumer demand. See Alston, 375 F. Supp. 3d at 1072
(citing Dr. Elzinga’s testimony that a player on a successful
team could obtain $5,600 in cumulative awards under
existing rules). The district court had before it (and fairly
credited) evidence that demand would withstand even higher
caps on such awards and incentives. See id. at 1080
(discussing Student-Athletes’ survey, which indicated that
consumers would continue to view and attend college sports
events even if student-athletes received academic or
graduation incentive payments of up to $10,000); see also id.
at 1074, 1102, n.42 (observing that NCAA’s 30(b)(6) witness
was unable to explain the NCAA’s reason for limiting Senior
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 49
Scholar-Athlete Awards to two students per year and a value
of $10,000). The NCAA’s objection to the $5,600 cap rings
especially hollow considering that it does not cap individual
academic or graduation awards drawn from the AEF or SAF.
See id. at 1072 n.15.18
Finally, the NCAA contends that the district court
engaged in improper judicial price setting by tying the cap on
academic and graduation awards and incentives to the cap on
aggregate athletic participation awards. The Supreme Court
has remarked that courts are “ill suited” to identify terms of
dealing between competitors, including a product’s “proper
price.” Verizon Commc’ns Inc. v. Law Offices of Curtis V.
Trinko, LLP, 540 U.S. 398, 408 (2004). But the district court
did not fix the value of these academic awards: The task of
setting their value to protect demand, by adjusting the
aggregate value of athletic participation awards, remains in
the NCAA’s court. See Alston, 375 F. Supp. 3d at 1107.
2
The district court did not clearly err in finding that this
LRA will not result in significantly increased costs. The
district court reasoned that enjoining NCAA caps on most
education-related benefits will actually save the NCAA
resources that it would have otherwise spent on enforcing
18
The $5,600 cap on academic achievement awards and the $5,000
cap on deferred NIL compensation that the panel majority struck down in
O’Bannon II may be “remarkably close” as a numerical matter, but they
are different where it counts: Unlike deferred NIL compensation,
academic achievement awards are plainly education-related and, thus,
reinforce the demand-preserving perception of student-athletes as students.
50 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
those caps. Id. at 1090. Commonsense supports that
determination, as does the record.
Moreover, though the injunction permits the NCAA to
regulate, to an extent, academic and graduation awards and
incentives, and conferences to regulate all education-related
benefits, there is no reason to believe that such regulation, if
pursued, will result in significantly increased costs. The
NCAA does not dispute that it and its conferences have
existing rulemaking and enforcement infrastructure to
achieve such regulation. See id. at 1090 n.32 (noting
NCAA’s recent creation of enforcement body to adjudicate
violations of “complex” NCAA rules, including the
“prioritiz[ation of] academics and the well-being of college
athletes” (internal citation omitted); see also id. (noting that
conferences are legislative bodies under the Bylaws).
The court’s findings at step three are supported by the
record, and certainly not clearly erroneous.
V
The final question remaining is whether the district
court’s injunction goes too far or not far enough in enjoining
the NCAA’s unlawful conduct. In the NCAA’s view, the
injunction is impermissibly vague, in violation of Federal
Rule of Civil Procedure 65(d) (“Rule 65(d)”), and usurps the
association’s role as the “superintend[ent]” of college sports,
O’Bannon II, 802 F.3d at 1074. On cross-appeal, Student-
Athletes urge that the district court should have enjoined all
NCAA compensation limits, including those on payments
untethered to education. In our view, the district court struck
the right balance in crafting a remedy that both prevents
anticompetitive harm to Student-Athletes while serving the
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 51
procompetitive purpose of preserving the popularity of
college sports. Thus, we neither vacate nor broaden the
injunction, but affirm.
A
Rule 65(d) reflects the “basic principle” that “those
against whom an injunction is issued should receive fair and
precisely drawn notice of what the injunction actually
prohibits.” Fortyune v. Am. Multi-Cinema, Inc., 364 F.3d
1075, 1086–87 (9th Cir. 2004) (internal citation omitted).
“[W]e will not set aside injunctions under Rule 65(d) ‘unless
they are so vague that they have no reasonably specific
meaning.’” Id. at 1087 (internal citation omitted). The
challenged injunction clears this hurdle.
The district court enjoined the NCAA from limiting
enumerated “compensation and benefits related to
education,” In re NCAA Athletic Grant-In-Aid Cap Antitrust
Litig., 2019 WL 1593939, at *1 (listing computers, science
equipment, musical instruments, etc.). The NCAA does not
claim confusion as to the meaning of any of these items.
Instead, it stakes its Rule 65(d) objection on the injunction’s
reference to “other tangible items not included in the [COA]
but nonetheless related to the pursuit of academic studies.”
Id. When read in context, following a list of specific types of
education-related equipment, this language is reasonably
specific. And unlike in Columbia Pictures Industries, Inc. v.
Fung, a copyright infringement case on which the NCAA
relies, the injunction here does not make cryptic reference to
“general[]” or “wide[spread]” understanding and knowledge
of technical terms. 710 F.3d 1020, 1048 (9th Cir. 2013).
52 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
Nor did the district court impermissibly wrest control of
college sports from the NCAA by empowering itself to
determine the types of benefits that qualify as “related to”
education, instead of “leaving th[at] task” to “the institutions
experienced in and responsible for providing education.” The
NCAA does not (nor can it reasonably) dispute that the
benefits enumerated in the injunction are plainly related to
academics. What is more, the injunction invites the NCAA
to promulgate a definition of “related to education,” based on
its institutional expertise, subject to the court’s approval. See
In re NCAA Athletic Grant-In-Aid Cap Antitrust Litig., 2019
WL 1593939, at *1. This allowance does not constitute
judicial usurpation by a long shot.
In sum, we uphold the injunction against the NCAA’s
challenges.
B
If the district court had concluded, as Student-Athletes
contend, that NCAA limits on compensation unrelated to
education unreasonably restrain trade, then it should have
enjoined those limits. See 15 U.S.C. §§ 4, 25 (conferring
jurisdiction on federal courts to “prevent and restrain
violations” of antitrust law ); see also Ford Motor Co. v.
United States, 405 U.S. 562, 577–78 (1972) (“Antitrust relief
should unfetter a market from anticompetitive conduct.”
(emphasis added)). The problem for Student-Athletes is that
the court did not conclude as much; instead, it determined
that NCAA limits on education-related compensation are the
only challenged rules that flunk the Rule of Reason.
Although the district court found that all the challenged
rules have an anticompetitive effect, Alston, 375 F. Supp. 3d
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 53
at 1067–70, a finding of anticompetitive harm at step one
does not end the inquiry. A defendant may escape antitrust
liability despite inflicting harm if a court determines that the
restraint has a procompetitive effect, and a proposed LRA
eliminating that restraint is not viable. See, e.g., O’Bannon
II, 802 F.3d at 1070, 1076–79 (finding that rules prohibiting
NIL compensation had significant anticompetitive effects, but
vacating portion of injunction requiring deferred
compensation for NILs after concluding that this alternative
was not a viable LRA).
As previously stated, the district court concluded, at step
two, that the NCAA satisfied its burden of showing that
“[r]ules that prevent unlimited payments”—“unrelated to
education” and “akin to salaries seen in professional sports
leagues”—serve the procompetitive end of distinguishing
college from professional sports. Alston, 375 F. Supp. 3d
at 1083. And at step three, it rejected Student-Athletes
proposed LRAs, which would have eliminated such limits,
reasoning:
[A]t least some conferences would allow their
schools to offer student-athletes unlimited
cash payments that are unrelated to education.
Such payments could be akin to those
observed in professional sports leagues.
Payments of that nature could diminish the
popularity of college sports as a product
distinct from professional sports.
Id. at 1087. Contrary to Student-Athletes’ understanding, this
analysis reflects the judgment that limits on cash
compensation unrelated to education do not, on this record,
54 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
constitute anticompetitive conduct and, thus, may not be enjoined.
This judgment was adequately reasoned and rests on
neither factual nor legal error. The district court
acknowledged the theoretical possibility that “conference
officials, as rational economic actors, would not act contrary
to their members’ aggregate economic interests” by paying
demand-reducing levels of compensation. Id. But it
reasonably perceived a risk of “miscalculations” by
conferences during an “inevitable trial-and-error phase.” Id.
The district court did not clearly err in declining to assume
that conferences, in reality, would act rationally.
The record indicates that the Power Five schools have
exercised their autonomy in recent years to expand benefits
unrelated to education and that conferences and schools have
provided largely discretionary SAF and AEF payments for a
wide range of expenses unrelated to education—both without
harming consumer demand. But the district court reasonably
concluded that this evidence may not reliably indicate that
individual conferences would regulate payments in a demand-
preserving manner absent any restrictions: The autonomy
structure permits the Power Five to collectively adopt
compensation-related legislation, in line with O’Bannon II’s
guidance that some degree of “mutual agreement” is
necessary to make the college sports product available. See
802 F.3d at 1069 (quoting Bd. of Regents, 468 U.S. at 102).
And the NCAA currently limits the use of SAF funds to
payments that are distinguishable from a professional’s salary
in that they “meet[] financial needs that arise in conjunction
with participation in intercollegiate athletics, enrollment in
academic curriculum or to recognize academic achievement.”
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 55
Student-Athletes’ claims of legal error are likewise
unpersuasive. They cite no support for their position that a
court “should not simply import the [LRA] as its injunction.”
Indeed, O’Bannon II holds otherwise: “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 [viable LRA].” Id. at 1075 (emphasis added).
Finally, Student-Athletes argue that the NCAA may no
longer rely on O’Bannon II’s conclusion that NCAA limits on
cash payments untethered to education are critical to
preserving the distinction between college and professional
sports now that it has “endorse[d]” the very “same NIL
benefits” at issue there. This argument is premature. As it
stands, the NCAA has not endorsed cash compensation
untethered to education; instead, it has undertaken to comply
with the FPP Act in a manner that is consistent with
O’Bannon II—that is, by loosening its restrictions to permit
NIL benefits that are “tethered to education.” Fed. and State
Leg. Working Grp. Report 4 (Oct. 23, 2019), available at
https://tinyurl.com/working-grp-report; see also Test. of
Dr. Mark Emmert 6 (Feb. 11, 2020), available at
https://tinyurl.com/Emmert-Test-y. Accordingly, we disagree
that the NCAA’s response to the FPP Act militates in favor
of enjoining all NCAA compensation limits.19
19
Student-Athletes further contend that the FPP Act and similar
proposed legislation in other states indicate a “consensus” that student-
athletes’ receipt of payments unrelated to education will not dampen
consumer interest in college sports. However, the Act’s legislative history
suggests that concerns about fundamental fairness, rather than
considerations regarding demand, drove its enactment. See, e.g., S.B. 206
Assembly Floor Analysis 2 (Sept. 4, 2019), available at
https://tinyurl.com/SB-206-AFA.
56 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
VI
To repeat my observation in O’Bannon II: “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.” O’Bannon II, 802 F.3d at
1083 (Thomas, C.J., concurring in part and dissenting in
part).
For the foregoing reasons, we hold that the district court
properly concluded that NCAA limits on education-related
benefits do not “play by the Sherman Act’s rules.” Id.
at 1079. Accordingly, we affirm its liability determination
and injunction in all respects.
AFFIRMED.
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 57
M. SMITH, Circuit Judge, concurring:
Because I am bound by our decision in O’Bannon v.
NCAA (O’Bannon II), 802 F.3d 1049 (9th Cir. 2015), I join
the panel opinion in full. I write separately to express
concern that the current state of our antitrust law reflects an
unwitting expansion of the Rule of Reason inquiry in a way
that deprives the young athletes in this case (Student-
Athletes) of the fundamental protections that our antitrust
laws were meant to provide them.
Student-Athletes are talented, hardworking individuals
who have dedicated their young lives to excelling in specific
sports. As amici describe, Student-Athletes work an average
of 35–40 hours per week on athletic duties during their
months-long athletic seasons, and most work similar hours
during the off-season to stay competitive. At the same time,
most of them do their best to succeed academically, managing
to devote on average another 40 hours per week to classes
and study. Nevertheless, their coaches and others in the
Division 1 ecosystem make sure that Student-Athletes put
athletics first, which makes it difficult for them to compete
for academic success with students more focused on
academics. They are often forced to miss class, to neglect
their studies, and to forego courses whose schedules conflict
with the sports in which they participate. In addition to
lessening their chances at academic success because of the
time they must devote to their sports obligations, Student-
Athletes are often prevented from obtaining internships or
part-time paying jobs, and, as a result, often lack both income
and marketable work experience. Meanwhile, the grueling
hours and physical demands of college sports carry
significant health risks, such as sleep deprivation, stress,
broken bones, and even potential brain damage. Despite their
58 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
best efforts, however, fewer than 5% of Student-Athletes will
ever play at a professional level, and most of those lucky few
will stay in the pros only a few short years. In short, the
college years are likely the only years when young Student-
Athletes have any realistic chance of earning a significant
amount of money or achieving fame as a result of their
athletic skills.
For all their dedication, labor, talent, and personal
sacrifice, Student-Athletes go largely uncompensated. They
may receive tuition for an academic experience that they
cannot take full advantage of, minimal living expenses, and
some lavish perks that do nothing for their present or future
financial security. However, that is not because their athletic
services have little value. On the contrary, the NCAA and
Division 1 universities make billions of dollars from ticket
sales, television contracts, merchandise, and other fruits that
directly flow from the labors of Student-Athletes. A number
of Division 1 head football coaches take home multimillion-
dollar salaries that exceed those of many NFL coaches.
Moreover, contrary to the NCAA’s representations about the
importance of “amateurism,” the evidence in this case shows
that college sports viewership has only increased since we
reduced some limitations on student-athlete compensation in
O’Bannon II. See Panel Op. at 11–13.
My reaction to our application of federal antitrust law to
the case of the Student-Athletes is similar Justice Alito’s
reaction to the majority’s view in Collins v. Virginia,
584 U.S. ___, 138 S. Ct. 1663 (2018). Said he: “An ordinary
person of common sense would react to the Court’s decision
the way Mr. Bumble famously responded when told about a
legal rule that did not comport with the reality of everyday
life. If that is the law, he exclaimed, ‘the law is a ass—a
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 59
idiot.’” Id. at 1681 (Alito, J., dissenting) (quoting C.
Dickens, Oliver Twist 277 (1867)).
The treatment of Student-Athletes is not the result of free
market competition. To the contrary, it is the result of a
cartel of buyers acting in concert to artificially depress the
price that sellers could otherwise receive for their services.
Our antitrust laws were originally meant to prohibit exactly
this sort of distortion.
The Sherman Act and related antitrust laws were designed
to preserve our economic freedom. United States v. Topco
Assocs., Inc., 405 U.S. 596, 610 (1972). Under those laws,
the freedom guaranteed each and every
business, no matter how small, is the freedom
to compete—to assert with vigor, imagination,
devotion, and ingenuity whatever economic
muscle it can muster. Implicit in such
freedom is the notion that it cannot be
foreclosed with respect to one sector for the
economy because certain private citizens or
groups believe that such foreclosure might
promote greater competition in a more
important sector of the economy.
Id. The Sherman Act thus “protect[s] the economic freedom
of participants in the relevant market.” Am. Ad Mgmt., Inc.
v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1057 (9th Cir. 1999)
(quoting Associated Gen. Contractors of Cal., Inc. v. Cal.
State Council of Carpenters, 459 U.S. 519, 538 (1983)).
Those protections extend to sellers of goods and services—
such as Student-Athletes—to the same extent they do buyers,
consumers, or competitors. Mandeville Island Farms, Inc. v.
60 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
Am. Crystal Sugar Co., 334 U.S. 219, 235 (1948). “The Act
is comprehensive in its terms and coverage, protecting all
who are made victims of the forbidden practices by
whomever they may be perpetrated.” Id. (emphasis added).
Section 1 of the Sherman Act, at issue here, prohibits
agreements that unreasonably restrain trade. 15 U.S.C. § 1;
Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 58
(1911). In evaluating alleged violations of Section 1 that fall
outside the bounds of several now-established per se rules,
courts apply the Rule of Reason to determine the effect of a
given restraint on competition. “[T]he inquiry mandated by
the Rule of Reason is whether the challenged agreement is
one that promotes competition or one that suppresses
competition.” Nat’l Soc’y of Prof’l Eng’rs v. United States,
435 U.S. 679, 691 (1978). Importantly, it is not the purpose
of the Rule of Reason analysis “to decide whether a policy
favoring competition is in the public interest, or in the interest
of the members of an industry. Subject to exceptions defined
by statute, that policy decision has been made by the
Congress.” Id. at 692.
The Rule of Reason entails a three-step analysis, of which
the starting point is to identify the market in which the
restraint occurs. See Big Bear Lodging Ass’n v. Snow
Summit, Inc., 182 F.3d 1096, 1104–05 (9th Cir. 1999). At
Step One, the “plaintiff bears the initial burden of showing
that the restraint produces significant anticompetitive effects
within” that market. O’Bannon II, 802 F.3d at 1070 (quoting
Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir.
2001)). If the plaintiff meets that burden, at Step Two, “the
defendant must come forward with evidence of the restraint’s
procompetitive effects.” Id. (quoting Tanaka, 252 F.3d at
1063). Finally, at Step Three, “the plaintiff must . . . show
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 61
that any legitimate objectives can be achieved in a
substantially less restrictive manner.” Id. (quoting Tanaka,
252 F.3d at 1063).
Despite confining the Step One analysis of
anticompetitive effects to the defined market, courts have not
consistently limited the scope of the Step Two analysis in the
same way. Some, including our court, have permitted
defendants to offer procompetitive effects in a collateral
market as justification for anticompetitive effects in the
defined market. In NCAA v. Board of Regents of Univ. of
Oklahoma (Board of Regents), 468 U.S. 85 (1984), for
example, the Supreme Court considered whether preserving
demand for tickets to live college football games could justify
anticompetitive restraints in the market for live college
football television. Id. at 95–96, 115–17. The district court
defined the relevant market at Step One as “live college
football television.” Id. at 95. The NCAA had restrained
competition in this market by fixing the price of telecasts,
negotiating exclusive contracts with two television networks,
and artificially limiting the number of televised games. Id.
at 96. Among other alleged procompetitive justifications, all
of which the Court ultimately rejected, the NCAA argued that
its television plan promoted consumer demand for live
attendance at college football games. Id. at 115. The Court
rejected this argument for three reasons: (1) individual
schools could protect live attendance at the specific game
being televised by negotiating a regional blackout, without
acting in concert with other schools; (2) no evidence
supported the NCAA’s theory that limiting televised games
actually promoted live attendance, especially since games
would still be broadcast at all hours of the day; and (3) the
NCAA’s live attendance theory was “not based on a desire to
maintain the integrity of college football as a distinct and
62 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
attractive product, but rather on a fear that . . . ticket sales for
most college games are unable to compete in a free
market”—“a justification that is inconsistent with the basic
policy of the Sherman Act.” Id. at 115–17. The Supreme
Court did not, however, say that the live attendance
justification failed because courts categorically cannot
consider procompetitive benefits outside the defined market.
Our relevant precedents follow a similar analysis. In
O’Bannon II, we held that preserving consumer demand for
college sports was a legitimate procompetitive justification
for anticompetitive restraints on compensation for student-
athletes’ names, images, and likenesses in the market among
colleges for student-athletes’ services. 802 F.3d at 1069–73.
The district court had defined the relevant market at Step One
as the “college education market,” “wherein colleges compete
for the services of athletic recruits by offering them
scholarships and various amenities, such as coaching and
facilities.” Id. at 1070. The NCAA had restrained
competition in this market by preventing member schools
from paying student athletes for the use of their names,
images, and likenesses. Id. Contrary to two of the NCAA’s
proffered justifications, we accepted the district court’s
factual determinations that the restraint did “not promote
competitive balance,” and did “not increase output in the
college education market.” Id. at 1072. We also rejected the
NCAA’s argument that, by preserving the character of
college sports, the restraint “‘widen[ed]’ the choices
‘available to athletes.’” Id. (quoting Board of Regents,
468 U.S. at 102). “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, and
that opportunity would still be available to student-athletes if
they were paid some compensation in addition to their
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 63
athletic scholarships.” Id. at 1073. Yet, without tying the
Step 2 analysis to the “college education market,” we held
that the NCAA had demonstrated that the restraint served the
procompetitive purpose of preserving “the amateur nature of
collegiate sports [that] increases their appeal to consumers.”
Id. Accordingly, we proceeded to Rule of Reason Step Three,
wherein we upheld the district court’s less restrictive
alternative of allowing grant-in-aid up to the full cost of
attendance, but we vacated the district court’s less restrictive
alternative of allowing “small” amounts of deferred cash
compensation as incompatible with amateurism. Id. at
1074–79.
Other courts, however, have rejected procompetitive
justifications outside of the defined market. For example, in
Smith v. Pro Football, Inc., 593 F.2d 1173 (D.C. Cir. 1978),
a former NFL player challenged rules governing the draft of
graduating college players under which “no team was
permitted to negotiate prior to the draft with any [eligible]
player . . . and no team could negotiate with (or sign) any
player selected by another team in the draft.” Id. at 1176.
The D.C. Circuit affirmed the finding that the draft had
anticompetitive effects. The draft eliminated competition by
“inescapably forc[ing] each seller of football services to deal
with one, and only one buyer, robbing the seller, as in any
monopsonistic market, of any real bargaining power.” Id.
at 1185.
At Step Two of the Rule of Reason analysis, the NFL
asserted that the draft rules were procompetitive because they
promoted “competitive balance” among the league’s teams,
in turn “producing better entertainment for the public, higher
salaries for the players, and increased financial security for
the clubs.” Id. at 1186. The court rejected those justifications
64 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
because they did not have procompetitive effects in the
market for players’ services. “The draft is ‘procompetitive,’
if at all, in a very different sense from that in which it is
anticompetitive.” Id. “[W]hile [the draft] may heighten
athletic competition and thus improve the entertainment
product offered to the public, [it] does not increase
competition in the economic sense of encouraging others to
enter the market and to offer the product at lower cost.” Id.
The court concluded that the draft’s anticompetitive and
procompetitive effects were “not comparable,” and thus it
was “impossible to ‘net them out’ in the usual rule-of-reason
balancing.” Id.
Despite its ruling in Board of Regents, the Supreme Court
has not squarely addressed the proper scope of the Step Two
analysis. And, although we conducted a similar analysis in
O’Bannon II, neither have we. In my view, the underlying
purpose of the Sherman Act—promoting competition—
counsels in favor of conducting a more limited Rule of
Reason analysis, as the court in Smith did. Realistically, the
Rule of Reason analysis is judicially administrable only if it
is confined to the single market identified from the outset. If
the purpose of the Rule of Reason is to determine whether a
restraint is net procompetitive or net anticompetitive,
accepting procompetitive effects in a collateral market
disrupts that balancing. It weakens antitrust protections by
permitting defendants to rely on a broader array of
justifications that promote competition, if at all, in collateral
markets where the restraint under analysis does not occur.
Jurists faced with weighing the anticompetitive effects in
one market with the procompetitive effects in another cannot
simply “net them out” mathematically. Smith, 593 F.2d at
1186. Rather, courts employing a cross-market analysis
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 65
must—implicitly or explicitly—make value judgments by
determining whether competition in the collateral market is
more important than competition in the defined market. As
the Supreme Court has warned, this is not what the antitrust
laws invite courts to do. “If a decision is to be made to
sacrifice competition in one portion of the economy for
greater competition in another portion this too is a decision
that must be made by Congress and not by private forces or
by the courts. Private forces are too keenly aware of their own
interests in making such decisions and courts are ill-equipped
and ill-situated for such decisionmaking.” Topco, 405 U.S.
at 611.
Consider this case. The district court accepted the
relevant market as that for Student-Athletes’ “labor in the
form of athletic services in men’s and women’s Division I
basketball and FBS football,” in which Student-Athletes “sell
their athletic services to the schools that participate in
Division I basketball and FBS football in exchange for
grants-in-aid and other benefits and compensation permitted
by NCAA rules.” In re NCAA Athletic Grant-In-Aid Cap
Antitrust Litig. (Alston), 375 F. Supp. 3d 1058, 1067 (N.D.
Cal. 2019). At Step One, the district court found that
Student-Athletes had established significant anticompetitive
effects in the market for their athletic services. The court
concluded that the NCAA rules “have the effect of artificially
compressing and capping student-athlete compensation and
reducing competition for student-athlete recruits by limiting
the compensation offered in exchange for their athletic
services.” Id. at 1068.
At Step Two, the court did not limit its consideration to
the procompetitive effects of the compensation limits in the
market for Student-Athletes’ athletic services. Rather, it
66 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.
found that certain of the compensation limits are
procompetitive because they drive consumer demand for
college sports by distinguishing collegiate from professional
athletics. Id. at 1083. In other words, the court found that
limiting Student-Athletes’ pay in the market for their services
was justified because that restraint drove demand for the
distinct product of college sports in the consumer market for
sports entertainment. The court did not require that the
NCAA prove that this impact on consumer demand had a
corollary procompetitive impact on the market for Student-
Athletes’ services, that it “increase[d] output” or “‘widen[ed]’
the choices ‘available to athletes.’” O’Bannon II, 802 F.3d
at 1072 (quoting Board of Regents, 468 U.S. at 102). The
court did not require that the NCAA prove its compensation
rules, within the defined market, “increase competition in the
economic sense of encouraging others to enter the market to
offer the product at lower cost.” Smith, 593 F.2d at 1186. It
was enough for the NCAA to meet its Step Two burden that
it could show (however feebly) a procompetitive effect in a
collateral market.
Although the district court correctly applied our
precedents, the result of this analysis seems to erode the very
protections a Sherman Act plaintiff has the right to enforce.
Here, Student-Athletes are quite clearly deprived of the fair
value of their services. Alston, 375 F. Supp. 3d at 1068. As
the district court found, while the NCAA and its conferences
generate billions in revenue from college sports, they “have
monopsony power to restrain student-athlete compensation in
any way and at any time they wish, without any meaningful
risk of diminishing their market dominance.” Id. at 1063,
1070. Under the Rule of Reason analysis we affirm today, so
long as the NCAA cites consumer demand for college sports,
we allow it to artificially suppress competition for collegiate
IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 67
athletes’ services by limiting their compensation. Instead of
requiring the NCAA to explain how those limits promote
schools’ competition for athletes, we leave Student-Athletes
with little recourse under the antitrust laws. Student-Athletes
are thus denied the freedom to compete and, in turn, “of
compensation they would receive in the absence of the
restraints.” Id. at 1068.
Our Rule of Reason framework has shifted toward this
cross-market analysis without direct consideration or a robust
justification. It may be that scholars or litigants can develop
a purely economic, mathematically-defensible method for
cross-market analysis that does not depend on policy
judgments that our antitrust laws never meant to delegate to
the courts. But we do not currently have such a method, and
it may equally be the case that no such method is possible or
desirable.
Lacking a robust justification, I fear that our cross-market
Rule of Reason analysis frustrates the very purpose of the
antitrust laws, in this case to the great detriment of Student-
Athletes. I hope our court will reconsider this issue in a case
that squarely raises it.