F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

E D W A R D C. O’B A

N N O N , J R ., On B ehalf of Himself and All Others Similarly Situated, Plaintiff-Appellee

,

v

.

N A T I O N A L C O L L E G I A T E A T H L E T I C A S S O C I A T I O N , AKA The NCAA,

Defendant-Appellant

,

and

E L E C T R O N I C A R

T S , I N C .; C O L L E G I A T E L I C E

N S I N G C O M P A

N Y , AKA CL C, Defendants

. Nos. 14-16601 14-17068

D.C. No. 4:09-cv-03329- CW

OPI NI ON

A ppeal from the United States District Court for the Northern District of California Claudia W ilken, Senior District J udg e, Presiding

Arg ued and Submitted March 17, 2015—San F rancisco, California

F iled September 30, 2015O’B A N N O N V

. N CAA 2

B efore: Sidney R. Thomas, Chief J udg e, J a y S. B y bee, Circuit J udg e and Gordon J . Quist, * Senior District J udg e

.

Opinion by

J udg e B y b e e; Partial Concurrence and Partial Dissent by Chief J udg e T homas

SUMMARY * *

Antitrust

The panel affirmed in part and reversed in part the district court’s judg ment a f

ter a bench trial in an antitr u s t s u i t reg arding the National Colleg iate Athletic A s s o c i ation’s rules prohibiting student-athletes from being paid for the use o f their names, imag es, and likenesses.

The district court held that the N CAA’s amateurism rules

were an unlawful restraint of trade in violation of Sec t ion 1 of the Sherman Antitrust Act. The district court p ermanently

e n j oined the N CAA from prohibiting its member school s from g iving student-athletes schol a r s h i p s up to the full cost of attendance at their respective schools and up to $5,000 per y ear in deferred compensation, to b e held in trust for studentathletes after they

leave colleg e.

* T h e Ho n o rab le Go rd o n J

. Q u i st, S en io r D istrict J u d g e f or th e U .S. District C o u rt f

o r th e W estern D istrict o f Mich ig an , sittin g b y d esig n atio n

.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.O’B A N N O N V

. N CAA 3

The panel held that it was not precluded from reaching the merits o f plaintiffs’ Sherman Act c laim because: (1) the Supreme Court did not hold in NCAA v. Bd. of Regents of the Univ. of Okla.

, 468 U.S. 85 (1984), that the NCAA’s amateurism rules are valid as a matter o f law; (2) the rules a re subject to the Sherman Act because they reg u late commercial activity ; and ( 3) t he plaintiffs established that they suffered injury in fact, and therefore had standing, b y showing that, absent the NCAA’s rules, video g ame makers woul d likely
pay them f

or the rig h t to use their na m e s , i m ag es, a nd likenesses in colleg e sports video g ames.

T h e panel held that e v en thoug h many of the NCA A ’s rules w ere likely to be p rocompetitive, they were not e x empt from antitrust scrutiny and must be analy z ed under the Rule of Reason. Apply ing the Rule of Reason, the panel h e ld that the NCAA’s rules h ad sig nificant anticompetitive effects within the c olleg e education market, in t h at they fix ed an aspect of the “price” that recruits pay to attend colleg e. The record supported the district c o urt’s find ing that the rules served the procompetitive purposes of integ rating academics with athletics and preserving the po p u larity of the NCAA’s product by promoting it s c u rrent understanding o f

a m a teurism. The panel concluded that the district cou r t identified one proper less restrictive alternative to the current NCAA rules

 ̄ i.e.
, allowing NCAA member to g ive scholarships up to the full cost of attendance

 ̄ but the district court’s o ther remedy

, allowing s t u d e n t s to be paid cash compensation of up to $5,000 per y ear, was erroneous. The panel vacated the d istrict court’s judg ment and p e rmanent injunction insofar as they required the NCAA to allow its member schools to pay student-athletes up to $5,000 per y e ar in deferred compensation.O’B A N N O N V

. N CAA 4

Chief J udg e Thomas concurred in part and dissented in part. He disag reed with the major i t y ’s conclusion that the district c ourt clearly erred in o rdering the NCAA to permit up t o $5,000 in d eferred compensation above student-athle t e s ’ full cost of attendance.

COUNSEL

Seth P. Wax man (arg

ued), L e on B

. Greenfield, D a n i e l S. Volchok, David M. L e h n, W eili J

. Shaw, Matthew J

. Tokson, W ilme r C utler Pickering Hale and Dorr L L P, Washing ton, D.C.; Glenn D. Pomerantz
, Kelly M. Klaus, L uis L i, Rohit K

. Sing la, Caroly

n H. Luedtke, Thane Rehn, J ustin P. Raphael, J esly n A. Miller, Mung e r, T o lles, & O lson L L P, San F rancisco, California; Greg o ry L

. Cur t ner, Robert J

. W iereng a, Kimberly K. Kefalas, Suz anne L

. W ahl, Schiff Hardin L L P, Ann Arbor, Michig an, for Defendant-Appellant.

Michael D. Hausfeld (arg u e d ), Hilary K. Scherrer, Sathy a S. Gosselin, Swathi B ojedla, Hausfeld L L P, W ashing ton, D.C.; Michael P. L ehmann

, B ruce W ecker, Hausfeld L L P, San F rancisco, California; J onathan Massey
, Massey & Gail L L P, W a shing ton, D.C., for Plaintiffs-Appellees.

J onathan M. J acobs o n , D aniel P. W eick, W ilson Sonsini Goodrich & Rosati Professional Corporation, New York, New York, for Amici Curiae Antitrust Scholars.

Allen P. Grunes, Maurice E

. Stucke, The Konkurrenz Group, W a shing ton, D.C., for Amici Curiae L aw and Economics a nd Antitrust Scholars.O’B A N N O N V

. N CAA 5

Nathan Sieg el, Patric k K a bat, L evine Sullivan Koch & Schulz

, L L P, W ashing ton, D.C., f or A mici Curiae A& E Television Netwo rks, L L C, AB C, I nc., CB S Corporation, Discovery C ommunications, L L C, F ox B roadcasting Company
, National Public R a d i o , I n c

. , N B CUniversal Media, L L C, The Reporter’s Committee fo r F r eedom of the Press, and Turner B roadcasting Sy stem, I nc.

Martin Michaelson, William L

. Monts I I I
, J oel D. B uckman, Hog an L o vells U S L L P, W a shing ton, D.C.; Ada Meloy

, General Counsel, American Council on Education, W a s hing ton, D.C., for A mici Curiae American Council o n Education, Association of Governing B oards of Universities and Colleg es, a

nd National Association o f I ndependent Colleg es and Universities.

Duncan W

. Crabtree-I

reland, Danie l l e S

. Van L ier, Screen Actors Guild-American F ederation of T e l evision and Radio Artists, L os Ang eles, California; J onathan F aber, L uminary Group L L C, Shelby

ville, I ndiana, for Amici Curiae Screen Actors G u i l d-American F ederation o f Television & Radio Artists and L uminary

Group L L C.

J ames B

. Speta, Chicag o, I llinois; Ernest A

. Young
, Apex
, North Carolina, for Amici Curiae I n tellectual Property a nd F irst Amendment Scholars.

Steve W

. Be r m an, Hag ens B erman Sobol Shapiro L L P, Seattle, W ashing ton; J e f

f D. F riedman, J on T. King

, H ag ens B erman Sobol Shapiro L L P, B e r keley

, California, for Amicus Curiae Alston Kindler Group.O’B A N N O N V

. N CAA 6

J effrey L

. K essler, D avid G. F eher, David L

. Greenspan, Timothy M

. Nevius, J o seph A. L itman, W inston & Strawn L L P, N ew York, New York; Steffen N. J ohnson, W inston & Strawn L L P, Washing ton, D.C.; Derek J

. Sarafa, W inston & Strawn L L P, Chicag o, I llinois, f or Amici Curiae Martin J enkins, Nig el Hay es, and Alec J a mes.

Steven N

. W illiams, Adam J

. Z apala, Cotchett, Pitre & McCarthy

, L L P, B urling ame, California, for Amic i Curiae Economists and Professors of Sports Manag ement.

Richard G. J ohnson, Richard G. J oh n s on Co., L .P.A., Cleveland, Ohio, for Amicus Curiae Andrew A. Oliver.

Michael J

. B oni, J oshua D

. Sny der, J ohn E. Sindoni, B oni & Z a ck L L C, B ala Cy

nwy d, Penn s y l v ania, for Amici Curiae Sports Manag e ment Professors.

David Martinez

, Robins Kaplan L L P, L os Ang e l e s, California, for Amici Curiae Twenty

- S i x Scholars o f Antitrust and Sports L aw.O’B A N N O N V

. N CAA 7

OP INION

B YB EE, Circuit J udg e:

Section 1 of the Sherman Antitrust Act of 1890, 15 U .S.C. § 1, prohibits “[ e ] very contract, combination

. . . , o r conspiracy

, in restraint of trade or c ommerce.” F or more than

a century , the National Colleg iate Athleti c A s sociation (NCAA) has prescribed r u les g overning the elig ibility o f athletes a t its more than 1,000 member colleg es a nd universities. Those rules p rohibit student-athletes from being paid f o r t h e use of their n ames, imag es, and likenesses (NI L s). The question presented i n t h i s momentous c ase is whether the NCAA’s r

ules are subject to the a n t i trust laws and, if so, whether they

are an unlawful restraint of trade.

After a bench trial and in a thoroug h opinion, the district
court concluded that the NCAA’s compensation rules were an unlawful r estraint of trade. I t then enjoined the NCAA from prohibiting its member schools from g iv i n g student-athletes scholarships up to the f ull cost of attendance at th e ir respective schools a

nd up to $5,000 p er y ear in d e f e r r e d compensation, to be held in t r u st for student-athletes until after they leave colleg e. As far a s we are aware, the district court’s d e c i s i o n is the first b y any federal court to hold that
any aspect o f the NCAA’s amateurism rules violate the antitrust laws, le t a l o ne to mandate b y injunction that the NCAA chang e its practices.

W e conclude that the district court’s decision w as larg ely
correct. Althoug h we ag r ee with the Supreme Court and our sister circuits that many of the N CAA’s amateurism r ules a re likely to be proc o m p e titive, w e h old that those rules are not

ex e mpt from antitrust scrutiny ; rather, they must be analy z edO’B A N N O N V

. N CAA 8

under the Rule of Reason. Apply ing the Rule of Reason, we conclude that the district court c o rrectly identified one proper alternative to the current NCAA compensation ru l es— i.e.
, allowing NCAA members to g ive scholarships up to the full
cost of attendance—but that the d istrict court’s other remedy

, allowing students to be paid cas h c o m p e nsation o f u p to $5,000 per y ear, was erroneous. W e therefore a ffirm in part and reverse in part.

I

A. The NCAA

American c olleg e s and universities have been c ompeting in sports for nearly 150 y ears: the era of intercolleg iate athletics b eg an, by most ac c o u n t s, on November 6, 1869,

w hen Rutg ers and Princeton met in the first colleg e footb a l l
g ame in American h istory —a g ame more akin to soccer than
to modern American football, p lay e d w ith “25 men to a side.” J oseph N

. Crowley

, I n the A rena: T he NCAA’s F irst Century 2 (2006), a vailable at https://www.nc a apublications.com/p4 0 39-in-the-arena-the-ncaas-first-century .aspx

. C o l l e ge football quickly g rew in popularity over the nex t few decades.

Fin de siècle colleg e football was a roug h g ame. Serious injuries were common, and it w as not unheard of for play ers to be killed during g ames. Sch o o l s w ere also free to hire nonstudent ringe r s to compete on their teams or to purchase play ers away from other schoo l s. B y 1905, these and other problems h ad broug ht colleg e football to a moment of crisis, and President T heodore Roosevelt convened a c onference at the W h ite House to a d dress the issue of injuries in colleg e football. L ater t h at y ear, the presidents of 62 colleg es a nd universities founded the I ntercolleg iate Athletic AssociationO’B A N N O N V

. N CAA 9

to create uniform rules f

or colleg e football. I n 1910, the I A A chang ed its name to the N ational C o l l eg iate A thletic Association (NCAA), and it has kept that name to this day

.

The NCAA has g rown to include so m e 1,100 member schools, org aniz ed into three divisions: Division I
, D ivision I I
, and Division I I I

. Division I schools are t h ose w ith the larg e st athletic p r og rams—schools must spo n s o r at least fourteen vars ity sports teams to qualify for Division I —and they provide the most financial aid to student-athletes. Division I has about 350 members.

F or f ootball competition only

, Division I ’s membership is divid ed i n t o two subdivisions: the F ootball B owl Subdivision (F B S) and the F ootball Championship Subdivision (F CS). F B S schools a re p ermitted to offer more full scholarships to their football play ers and, as a result, the level of c ompetition is g enerally hig h er in F B S than in F CS. F B S consists of about 120 of the natio n ’ s premier colleg e football schools.

B

. The Amateurism Rules

One of the NCAA’s e arliest reforms of intercolleg iate sports was a requirement t h a t the participants be amateurs. President C

. A

. Richmond of Union Colleg e commented in 1921 that the competition a mong c olleg es to acquire the best play ers had come to resemble “ the contest in dreadnoug hts” that h ad led t o W o r l d W ar I
, 1 and the NCAA soug ht to curb

1 T h e Drea d

n o u g h t w as a B ritish b attlesh i p t h at f eatu red larg e, lo n g

ran g e g u n s. T h e term cam e to ref er t o a class o f su

p er b attlesh i p

. In d raw in g th is co m

p ariso n , Mr. Rich m o n d sh o w ed h im self t o b e a h isto rian ah ead o f h is tim e. S

ee g en era lly Ro b ert K. Massie, Dread n o u g h t: B ritain

,O’B A N N O N V

. N CAA 10

this problem by restricting elig ibility for colleg e sports t o athletes who r eceived no compensation whatsoever. 2 B u t the NCAA, still a voluntary org aniz ation, lacked the ability to enforce this requirement effectively

, and schools continued to pay their athletes under the table in a variety of creative way s;

a 1929 stu dy found that 81 out of 112 schools survey ed provided some sort of improper inducement to their athletes.

The NCAA beg an to streng t h e n its enforcement capabilities in 1948, when it adopted what became known a s the “Sanity Cod e ”

— a set of rules that prohibited schools from g iving athletes financial aid that wa s b a s e d o n a thletic ability and not available to ordinary students. See Daniel E. L az aroff, T

h e NCAA in I

ts Second Century: Defender of Amateurism or Antitrust R e cidivist?

, 86 Or. L

. Rev. 3 29, 333 (2007). The Sanity Code a l s o created a new “compliance mechanism” to enforce the NCAA’s rules—“a C ompliance C ommittee that could terminate an institution’s N CAA membership.” Id.

Germ an y , an d th e Co m in g of t h e Great W ar (1 9 9 1 ) (ex plain in g h ow th e

n av al arm s race betw een B ritain an d G erm an y co n trib u t ed to th e o u tb reak

o f W o rld W ar I).

2 T h e rise o f th e NCA A ro u g h ly p arallel e d t h a t o f t h e In tern atio n al Oly m p ic Co m m i ttee (IOC) an d th e A m ateu r A th letic U n io n (A A U), bo th in tim e an d in p h i lo so p h y

. L ik e th e NCA A
, b o th o rg an izatio n s h av e h ad
to ad ap t t o in creasin g p ro f essio n alizatio n an d co m

m ercializatio n in s p o rts. In t h e late t

w en tieth cen tu ry , th e IOC ab an d o n ed its am ateu rism

ex p erim en t. T h e A A U, m ean w h ile, co n tin

u es to o p erate as a sp o n so r of

am ateu r sp o rts p ro g ram s an d to u rn am en ts; it is cu rren tly b est k n o w n f or its m an y b o y s ’ b a s k etb all team s , w h ich h av e stru g g led to d eal w ith th e in f lu en ce o f pro f

essio n al ag en ts an d o u t si d e m o n ey

. S ee, e.g

. , J aso n Z en g erle, Brea ks o

f t h e Ga me , N.Y. T im es, Dec. 2 6
, 2 0 1 0
, at B R8 (callin g it “ a co m m o n p lace fo r sp o rtsw

riters to describ e A .A .U. b ask etb all as a cessp o ol o f

co rru p tio n ”).O’B A N N O N V

. N CAA 11

I n 1956, the NCAA departed f rom the Sanity Code’s approach to financial a id b y chang ing its rules to p e rmit its members, for the f

i r s t time, to g ive student-athletes scholarships based on athlet i c ability

. These scholarships

were capped at the amount of a full “g rant in aid,” defined a s the total cost of “tuition and f ees, r oom and board, a

nd required course-r e l a ted books.” Student-athletes were prohibit ed from receiving a ny “financial aid based on

a t h letics ability ” in ex cess of the value of a g rant-in-ai d

, o n pain o f losing their elig ibility for c o lleg iate athletics. Studentathletes could seek a d ditional financial aid not r elated to their
at h l e tic skills; if they chose to do this, the total amount o f athletic and nonathletic financial a id they received could not

ex c e ed the “cost of attendance” at their respective schools. 3

I n A ug u st 2014, the NCAA a nnounced it w ould allow athletic conferences to authoriz e th e i r m ember schools to increase scholarships up to the f ull cost of attendance. The 80 member schools of the five larg e st athletic conferences in the country voted in J anuary 2015 to take that s t ep, and the scholarship cap at those schools is now at the f ull cost o f attendance. Marc Tracy
, Top Conferences to Allow Aid for Athletes’ Full Bills , N.Y. Times, J a n . 18, 2015, at SP8.

I n addition to its financ i al a i d rules, the NCAA has adopted numerous other amateurism rules that limit studentathlete s ’ co m p e n s a t i o n a n d t h e i r i n t er a ct i ons with professional sports leag

ues. An athlete can lose his amateur

3 T h e “ co s t of atten d an ce” at a p articu lar sch o ol in clu d es th e i tem s th at

m ak e u p a g ran t in aid p l u s “ [n o n req u ired ] b o ok s an d su pp lies,
tran sp o rtatio n , an d o th er ex pen ses related to atten d an ce at t h e in stitu tio n .” T h e d if f eren ce b etw een a g ran t in aid an d th e co st o f

atten d an ce is a f

ew th o u san d d o llars at m o st sch oo ls.O’B A N N O N V

. N CAA 12

status, for ex ample, if he sig ns a contract with a professional team, enters a professional le a g u e ’ s play er draft, or hires an ag ent. And, most importantly

, an athlete is prohibited—with fe w e x ceptions—from receiving any “ pay ” based on his athletic ability

, w hether from boosters, companies se e king endorsements, or w ould-be licensors of the athlete’s n ame, imag e, and likeness (NI L ).

C. The O’B annon a nd K eller Litigation

I n 2008, Ed O’B annon, a former All-American basketball play er at UCL A, visite d a f riend’s house, where his friend’s

son told O’B annon that he was depicted in a col l e ge basketball video g ame produced by Electronic Arts ( EA), a software c ompany that p r o d u ced video g ames based on colleg e football and men’s basketba l l f r om the late 1990s until around 2013. The f riend’s son turned on the video
g ame, and O’B annon saw a n avatar of himself—a v irtual play er who visually resembled O’B annon, play ed for U CL A
, and wore O’B annon’s je rsey number, 31. O’B annon h ad

never c onsented to the use of his likeness in the video g ame, and he had not been compensated for it.

I n 2 009, O ’Bannon sued the NCAA and the Colleg iate L icensing Company ( CL C), the entity which licenses the trademarks of the NCAA and a number of its member schools for commercial use, in federal c ourt. The g ravamen o f O’B annon’s complaint was that the NCAA ’s amateurism rules, insofar as they prevented student-athletes from being compensated for t h e use o f their NI L s, were an illeg al restraint of trade unde r S e c t i on 1 of the Sherman Act, 15 U.S.C. § 1.O’B A N N O N V

. N CAA 13

A ro u n d the same time, Sam Keller, the former starti n g quarterback for the Ariz o na State U n i v e rsity and University of Nebraska football teams, sep a rately broug h t suit ag ainst the N CAA, CL C
, a n d EA. Keller alleg ed that EA h ad impermissibly used student-athletes’ NI L s in its v ideo g ames and that the NCAA a

nd CL C had wr o n gf

ully turned a blind
ey e to EA’s misappropriation of these NI L s. The complaint stated a c laim under I ndiana’s and California’s r ig ht o f publicity statute s, as well as a number of common-law claims.

The two cases w ere c onsolidated d uring p retrial
proce ed i n gs. The defendants moved to dismiss Keller’s rig ht-of-publicity

claims on F irst A mendment g rounds. The distric t c ourt denied the motion to dismiss, and we affirmed
t h a t d e c i s i o n , h o l d i n g t h a t “ [ u ] n d e r C a l i f o r n i a ’ s transformative use defense, EA’s u se o f the likenesses o f colleg e athletes like Samuel Keller in its video g ames is not,

as a matter o f law, protected by the F irst Amendment.” In re NCAA Stude n t -Athlete Name & Likeness Licensing Litig. ( “Keller”) , 724 F .3d 1268, 1284 (9th Cir. 2013).

I n November 2013, the district court g ranted the plaintiffs’ motion for class certification. The court held that

c e rtification of a damag es class under Rule 23(b)(3) was inappropriate, but it certified the following class under Rule 23(b)(2) for injunctive and declaratory relief:

All current a

nd former student-athletes residing in the United States who compete on,

or competed on, an NCAA Division I (f o rmerly k

nown as “University Division” before 1973) colleg e or university me n ’s basketball team or on an NCAA FootballO’B A N N O N V

. N CAA 14

B o wl Subdivi s i o n ( f ormerly known a s Division I -A u ntil 2006) men’s football team and whose imag es, likenes s e s and/or names may be, or have been, included o r could have been included ( by v irtue of their appearance in a team roster) in g ame footag e o r in videog ames licensed or sold by Defendants, their co-conspirators, or their licensees. 4

After class certification was g ranted, the plaintiffs voluntarily dismissed their damag es c laims with p r e judice. The plaintiffs also se t t l e d their claims ag ainst EA and CL C, and the district court p r eliminarily approved the settlement. O’Bannon and Keller were deconsolidated, and in J une 2014, the antitrust claims ag a inst the NCAA at is s ue in O’Bannon went to a bench trial before the district court.

4 A s th is class def

in i tio n in d i c a t e s , O’ B an n o n an d Keller lim ited th eir

su its on ly t o h i g h

- lev el (Div isio n I/FB S) co lleg e f o o tb all a nd m en ’ s b ask etb all p lay ers. T h ey

lik ely d id so in p art b ecau se alm o st all o f EA ’ s

co lleg e sp o rts v id eo g a m es h av e b een f o o t b all an d m en ’ s b ask etb all
g am es, an d in p art b e c a u se th o se tw o sp o rts g en erate f ar m o re rev en u e th an an y o th er co lleg e sp o rts. S ee, e.g

. , Rich ard San d o m ir & P ete T h am el, To u rn a men t S ta

ys a t CBS

, Ad d in g Ca b le a n d 3 Tea ms , N.Y. T im es, A p r. 2 3
, 2 0 1 0
, at B 9 (d escrib in g CB S’ s ag reem en t to p ay $ 1 0 .8 b illio n f o r th e T V rig h ts to th e NCA A Div i sio n I m en ’ s b ask etb all to u rn am en t f o r a p erio d o f 1 3 y ears); Marc T racy & T im Ro h an , W h a t Ma d e Co l leg e Fo o tb a ll Mo re Like th e Pro s? $ 7 .3 Billio n, f o r a S ta rt , N.Y. T im es, Dec. 3 1 , 2 0 1 4 , at A 1 (d escrib i n g ESP N’ s ag reem en t to p ay “ $ 7 .3 b illio n

o v er 1 2 y ears to telecast s e v e n [ co l leg e f o o tb all] g am es a y ear”); Nat’ l Co lleg iate A th

. A s s ’n
, 2 0 0 4 –2 01 3 NCA A Rev en u es an d Ex p en ses of Div isio n I I n terco lleg iate A th letics Pro g ram s Rep o rt, at 37 (2 0 1 4 ),

a v a i l a b l e a t h t t p s : / / w w w

. n c a a p u b l i c a t i o n s

. c o m / p -4 3 4 4 -d i v i s i o n

- i

rev en u es- an d

- ex p en ses- 2 0 0 4

- 2 0 1 3 .asp x

. T h u s, alth o u g h NCA A m em ber sch o o ls sp o n so r team s i n a v ariety o f o t h er sp o rts, b o th th e d istrict co u rt’ s

an aly sis an d o u r o w

n f o cu s o n f o o tb all an d m en ’ s b ask etb all.O’B A N N O N V

. N CAA 15

D. The District Court’s Decision

After a fourteen-day bench trial, the district court entered judg ment for the plaintiffs, concluding that the NCAA’s rules prohibiting student-athletes from receiving compensation for their NI L s violate Section 1 of the Sherman Act. O’Bannon v. NCAA , 7 F . Supp. 3d 955 (N.D. Cal. 2014).

1. The Markets

Th e c o urt beg an by identify ing the markets in which the NCAA a l l e g edly restrained trade. I t identified two markets that w ere potentially a ffected by the challeng ed NCAA r u les.

a. The colleg e education market

F irst, the court found that there is a “ c olleg e education market” in which F B S football a n d Division I basketball schools compete to r ecruit the best high s c h ool play ers b y offering them “unique bundles o f g oods and services” that include not only scholarships b ut also c o a c h i ng , a thletic facilities, and the opportunity t o f ac e hig h-quality a thletic competition. Id. at 965–66. T h e c o urt found that very few athletes talented enoug h to p l ay F B S football or Division I basketball opt not to attend an F B S/Division I school; hardly
any c hoose to attend an F CS, D ivision I I
, or Division I I I school or to compete in minor or foreig n professional sports leag ues, and athletes are n ot allowed to join either the NF L o r the NB A directly f

rom h ig h school. 5 Id. at 9 6 6

. Thus, the

5 T h e NFL h as n ev er allo w ed h ig h s ch o ol p lay ers to en ter its draf t. T h e NB A d id at o n e tim e, an d a n u m b er o f NB A stars (in clu d in g L eB ro n J am es an d Ko b e B ry an t) cam e to t h e leag u e d irectly f

ro m h ig h s ch o o l, b u t in 2 0 0 5
, th e NB A ad o p ted a ru le req u irin g d raf tees to b e at least n in eteenO’B A N N O N V

. N CAA 16

court concluded, the market specifically for F B S football a nd D i vision I basketball scholarships is cog niz a ble under t h e antitrust laws b ecause “there are no p rofessional [ or colleg e] football o r basketball le a g u e s capable of supply ing a

s u b stitute for the bundle of g oods and services that FBS football a nd D ivision I basketball schools provide.” I d. at 968.

b. The g roup licensing market

The second mark e t i d entified by the district court was a “g roup licensing market” in which, but for t h e N C A A ’s compensation rules, colleg e football and basketball athletes would be able to sell g roup licenses f or the use of their NI L s. Id. The court broke this “g roup licensing market” down into three submarkets in which play ers’ NI L s could be profitably licensed: ( 1) live g ame telecasts, (2) sports video g ames, a nd (3) g ame rebroadcasts, advertisements, and other archival footag e. 6 Id. W ith r e s pect to live g ame telecasts, the court

n o t e d that the TV networks that broadcast live colleg e football and b asketball g a mes “often seek to a cq u i r e the rig hts to use” the play ers’ NI L s, which the court concluded “demonstrate[ s] that there is a d emand for these rig hts” on the networks’ part. Id. at 968–69. W ith respect to video g ames, the court found that the us e o f N I L s increased the attractiveness of colleg e sports v i deo g ames to consumers,

y ears o ld an d o n e y ear o u t o f h ig h sch o o l, a ru le it h as retain ed to th e p resen t day

. S

e e H o w a r d B eck

, N

.B.A. D ra ft W ill Clo se Bo o k o n Hig h S ch o o l S t a rs , N.Y. T im es, J u n e 2 8, 2 0 0 5 , at D1

.

6 A lth o u g h t

h e p lain tif

f s p resen ted s o m e ev id en ce o f o th er l icen sin g

o p p o rtu n ities f

o r m erch an d ise su ch as j ersey s an d b o bb l eh ead s, th ey ab an d o n ed th ese claim s an d th e d i strict co u rt d id n o t co n sid er su ch

m ark ets f u rth er. O ’Ba nn o n , 7 F. Su p p . 3 d at 9 6 8 n .4

.O’B A N N O N V

. N CAA 17

creating a demand for play ers’ NI L s. 7 Id. at 970. And with

r e spect to archival footag e, the court noted that the NC AA had licensed footag e o f student-athletes—including c urr e nt athletes—to a third-party licensing c ompany , T3Media, proving that there is demand for such footag e

. Id. at 970–71.

2. The Rule of Reason

Having concluded that the NCAA’s compensation ru les potentially r estrained competiti o n i n these two markets, the
court proceeded to analy z e the leg ality of the challeng ed NCAA rules w ith respect to those markets, apply ing the Rule of Reason. Id. at 984–1009. The district court found that the NCAA’s rules have an anticompetitive effect i n the colleg e

e ducation market but not in the g roup licensing market

. I t then c oncluded that the rules serve procompetitive purposes. F inally

, it determined that the p rocompetitive purposes of the rules could be achieved by less restrictive a lternative

r e straints and that the current r ules were therefore unlawful.

a. Anticompetitive effects

A t t he first step of the Rule of Reason, the court fo u n d that the NCAA’s rules have an anticompetitive effect on the colleg e education market

. W ere it not for those rules, the
court ex plained, schools would compete with e a ch o t her b y offering recruits compensation e x ceeding the cost o f attendance, which would “effectively lower the price that the

7 T h e c o u r t a ck

n ow l ed g ed th at t

h e NCA A h ad recen tly term in ated its relatio n sh ip w i th EA b y d eclin in g t o r en ew its licen se f o r su ch v i deo
g a m e s, b u t th e co u rt f

o u n d th at th ere w as n o ev id en ce th at th e N CA A

w o u ld n o t ren ew th e relatio n sh ip in th e f u tu re. O’Ba n n o n , 7 F

. Su pp

. 3 d at 9 7 0

.O’B A N N O N V

. N CAA 18

recruits must pay for the combination of e d u cational a nd athletic opportunities that th e s ch o ols provide.” Id. at 972. T he rules prohibiting c o mpensation for the use of stude n t

athletes’ NI L s are thus a price-fix ing ag reement: recruits pay for the bundles of servic e s provided by colleg es with their labor and their NI L s, but the “sellers” of these bundles—the colleg es—collectively “ag ree to value [ NI L s] at z ero.” Id. at 973. Under this theory

, colleg es and univ e r s i t ies behave a s

a cartel—a g roup of sellers who have colluded to fix the price of their product.

The court found in the alternative t h a t the colleg e education ma r k et c a n be thoug ht of as a market in which student-athletes are sellers rather than buy ers a nd the schools

are purchasers of athletic services. I n the court’s alternative view, the colleg e education market i s a monopsony

— a market in w hich there is only one b uy er (the NCAA schools, acting collectively

) for a particular g ood or service (the labor and NI L rig hts o f student-athletes), and the co l l e ges’
ag reement not to pay any thing to purchase recruits’ NI L s causes harm to competition. Id. at 973, 991.

B y contrast, the court found that the NCAA’s rules d o not have an anticompetitive effect on a n y o f the submarkets o f th e gr oup licensing market. The court ex plained that althoug h these submarkets ex ist, there wou ld b e no competition in any o f them i f the challeng ed NCAA rules

were a bolished. The court reasoned that the value of an N I L license to a live g ame broadcaster or a video g ame company would depend on t h e l icensee’s a cquiring every other N I L license that was available. A live g ame b roadcaster, for

ex a mple, would need to acquire a license from every team o r play er whose g ames it mig ht telecast. Similarly

, a v ideo
g ame producer would want to acquire NI L rig hts for all of theO’B A N N O N V

. N CAA 19

teams it n eeded to in cl u d e i n the g ame. Given these requirements, the court deemed it hig hly unlikely that g roups of student-athletes w ould compete with each other to sell their NI L rig hts; on the contrary , they would have an incentive to cooperate to m a k e sure that the packag e o f N I L rig hts sold to buy ers was a s complete as p ossible. I d

. at 993–98. With respect to a r ch i val footag e, meanwhile, the
court found that the NCA A’ s l icensing arrang ement with T 3 M edia did not depriv e s t u d e n t

- a t h l e t e s o f a n y compensation they mig ht other w i se r eceive because T3Media is prohibited from licensing footag e of current athletes a nd
must ob t a i n t h e consent o f any f o rmer athlete whose N I L appears in its footag e. Id. at 998–99.

b. Procompetitive purposes

At the s ec o n d s tep o f the Rule of Reason, the NCAA proffered four procompetitive p u rposes for its r u les prohibiting student-athletes from receiving compensation for the u se of their NI L s: ( 1) preserving “amateurism” in colleg e sports; (2) p romoting competitive balanc e i n F B S football a nd Division I basketball; (3) integ r ating academics and athletics; and (4) increasing output in the colleg e education market. Id.
at 999. The court accepted the first and third justifications in part while rejecting

the others.

(1) Amateurism. The NCAA arg ued to the d istrict court that restrictions on student- a thlete compensation a re

“ n ecessary to preserve the amateur tradition and identity o f colleg e sports.” Id. I t contended that amateurism had been

one of the NCAA’s core principles since its founding a nd that amateurism is a key d

river of colleg e sports’ popularity with consumers and fans. Id. at 999–1000.O’B A N N O N V

. N CAA 20

The district court rejected the NCAA’s contention that it had a “long standing commitment to a mateurism,” concluding instead that the NCAA’s definition of a mate u r i s m was “malleable,” chang ing frequently over time in “sig nifi c ant and contradictory way s.” I d

. at 1000. T he court sug g ested
t h a t , even today

, the NCAA’s definition of amateurism is inc o n s istent: althoug h p lay e r s g enerally cannot receive
compen s a t ion other than scholarships, tennis play ers a re permitted to a ccept up to $10,000 in p riz e mone y before enrolling i n colleg e, and student-athletes are permitted to accept P e l l grants even when those g rants raise their total fi n ancial aid packag e above their cost of attendance. Id. I t thus concluded that a mateurism was n ot, in fact, a “core principle[ ] ” of the NCAA. Id.

The district court was not p ersuaded that amateurism is the primary driver o f consumer demand for colleg e sports—but it did find that amateurism serves some procompetitive p urposes. T he court fir s t c oncluded that

consumers are primarily attracted to colleg e sports for

reasons unrelated to amateurism, such as loy alty to their alma
mater or affinity for the school in their reg ion of the country

. Id. at 977–78. I t also found much of the N C A A ’s e vidence about amateurism unreliable. F or ex a m p le, the NCAA provided a survey c o n d ucted by Dr. J

. Michael Dennis, a “survey research ex pert,” which purported to show that Americans “g enerally oppose[ ] the idea of p ay ing colleg e football and basketball play ers.” Id. at 975. T h e court deemed the Dennis survey “unpersuasive” for a couple
reasons, one of which was that it believed the survey ’s initial question skewed the results by priming respondents to think about illicit pay

ments to s t u d e nt-athletes rather than the possibility

of allowing athletes to be paid. Id.O’B A N N O N V

. N CAA 21

B u t the d i s t rict court ultimately found that the NCAA’s “current understanding of amateurism” play s s o m e r o le in
p reserving “the popularity of the NCAA’s product.” Id. at 1005. I t found that the NC A A ’ s current rules serve a procompetitive b enefit b y promoting this understanding o f amateurism, which in turn helps preserve consumer demand for colleg e sports.

(2) Co m p e t i tive Balance. The NCAA arg ued before the district court that restricting compensation to student-athletes helps level the p l a y ing field between F B S and Division I schools in recruiting

, thereby maintaining competitive balance among those schools’ football and basketball teams. Id. at 1001–02.

The district court acknowledg ed that promoti ng competitive balance could be a valid procompetitive purpose under the antitrust laws, b ut it c o ncluded that the challeng ed NCAA rules d o not promote competitive balance. T h e court noted that numerous economists have studied the NCAA over the y ears and that “nearly all” of t h em h ave concluded that the N CAA’s c ompensation rules do not promote competitive balance. Id. at 978. The c o u rt a l so ex plained that althoug h the NCAA f

orbids its member schools to pay student-athletes
any thing bey o nd a f

ix ed scholarship, it allo w s schools to spend a s m u c h as they like on other aspects of their a thletic
prog r ams, such as c o a c h i ng , facilities, and the like, which “neg ate[ s] whatever equaliz ing effect the NCAA’s restraints

on student-athlete compensati o n mig ht have once had.” Id.
at 1002. The c ourt concluded that competitive balance was thus not a viable justification for restricting student-athlete compensation.O’B A N N O N V

. N CAA 22

(3) I ntegrating Academics and Athletics. The NCAA’s third procompetitive justification f or its restraints on studentathlete compensation was that these restraints integ rate academics a

nd athletics and t h ereby “ improve the quality o f

e ducational services p rovided to student-athletes.” I d

. A c c o rding to the NCAA, student-athletes derive long -term benefits from parti c i p a t ing fully in academic life at their schools, which the compensation rules encourag e them to do. Id. at 979–80.

The district c o u r t a llowed that this was a viable procompetitive justification for the NCAA’s re g ulating the colleg e education market, but it concluded that most of the benefits of academic and athletic “integ ration” a re not the result of the NCAA’s rules restricting compensation. Rather, these benefits are achieved b y other NCAA rules—such a s those r e quiring student-athletes to attend class, p rohibiting athletes-only dorms, and forbidding s t udent-athletes to practice more than a certain number of hours per week. Id. at 980. T he court ex plained that the only wa y i n which the

c o m pensation rules mig ht facilitate the integ ration of athlet i c s and academics is that, by prohibi t i n g student-athletes from b e i ng paid larg e sums o f money not available to ord i n a r y students, the rules pr e v ent the creation of a social “wedg e” between student-athletes and the rest of the student body

. Id.
at 980, 100 3

. I t held, however, that even thoug h the avoidance of such a “ wedg e” is a leg itimate procompetitive
g o a l

, it does not justify a total, “sweeping prohibition” on pay ing student-athletes for the use of their NI L s. Id. at 1003.

(4) I n c r easing Output

. The fourth and final procompetitive justification alleg ed by the NCAA wa s t h at the restraints on student

- a t hlete compensation “ increase output” in the colleg e education market by increasing theO’B A N N O N V

. N CAA 23

available opportu n ities f

or students to play F B S football o r Division I basketball. Id. at 1003–04. The NCAA contended that its r ules a ccomp l i s h this g oal by a ttracting schools with

a philosophical commitment to amateurism to compete in Division I and by enabling schools to compete in Division I that otherwise could not afford to do so. Id. at 1004.

The district court r ejected this justification. The court found the i d e a that schools join D ivision I b e cause o f a philosophical commitment t o amateurism “implausible,” noting that som e major-conference schools had lobbied to chang e the NCAA’s scholarship rules to raise compensation limits. Id. at 981. The court a lso ex plained that sch o o l s in F CS, Division I I
, and Division I I I are subject to the same amateurism rules a s Division I schools, mak i n g it unlikely that schools c hoose to join D ivision I because of the amateurism rules. Id.

The court likewise found no support in the record f or the notion tha t the N CAA’s compensation rules e nable more schools to compete in Division I

. T h e court fo u n d that, because Division I schools do no t s h are revenue, there is no

reason t o believe that the cost saving s from not pay ing student-athletes ar e b e i n g u s e d t o fund additional scholarships
at low-revenue schools o r to enable those sc h o o ls to join Divi s i on I

. Id. at 1004. The court also noted that the plaintiffs were not seeking to require that all schools pay their student-athletes; rather, they soug ht an i n j unction permitting schools to do so. Schools that could not afford to pay their student-athletes would not need to do s o if the plaintiffs prevailed and would therefore not be driven out of Division I by a ruling in the plaintiffs’ favor. Id.O’B A N N O N V

. N CAA 24

c. L ess restrictive alternatives

Having found that the NCAA had presente d two procompetitive justifications f or “ c ircumscribed” limits on student-athlete c ompensation— i.e.
, increasing consumer demand for colleg e sports and preventing the formation of a “wedg e” between student-athletes and other students—the
court proceeded to the third and final step of the Rule o f Reason, where it considered whether there were m eans o f achieving the NCAA’s p rocompetitive pu r p o s es that were “substantially less restric t i v e ” than a total b an on compensating student-a thletes for use of their NI L s. Id. at 1004–05.

The court held that the plaintiffs had identified two leg itimate, le s s re strictive alternatives to the current NCAA rules: (1) allowing schools to award sti p e n d s to studenta t h l etes up to the full cost of attendance, thereby making up f o r any “shortfall” in their g rants-in-aid, and (2) permitting schools to hold a portion of their licensing revenues in trust,
to be d istributed to student-athletes in equal shares a fter they leave colleg e. 8 Id. at 1005–06

. The court d etermined that neither of these alternatives to the t o t a l ban on N I L compensation would u ndermine the NCAA’s procompetitive
purposes. The court also held that it would b e p ermissible for the N CAA to prohibit schools from f unding these stipends o r trusts with any

thing other than revenue derived from the use of play ers’ NI L s. I

d. at 1005.

8 T h e d istrict co u rt rej ected a th ird p ro po sal: p erm ittin g stu d en t- ath letes
to receiv e co m

p en satio n f

ro m sch o o l

- a

p p r o v e d en d o rsem en ts. O ’Ba n n o n , 7 F. Su p p. 3 d at 9 8 4

. T h e co u rt f o u n d th at th is p ro p o sal w o u l d u n derm in e th e NCA A ’ s ef

f orts to p ro tect i ts stu d e n t- ath letes f ro m co m m ercial

ex p lo itatio n

. Id

.O’B A N N O N V

. N CAA 25

After entering judg ment for the plaintiffs on their antitrust claims, the d istrict court p ermanently enjoi n e d the NCAA from prohibiting its member schools from (1) compensating F B S football and Division I men’s basketball p lay ers for the

use of their N I L s b y awarding them g r ants-in-aid up t o t he full cost of attendance at their r e spective schools, o r (2) p a y ing up to $5,000 p er y ear in deferred compensation to F B S football and Division I men’s basketball p lay ers for the

use of their NI L s, throug h trust funds d istributable after they leave school. T h e N C AA timely appealed, a nd w e have jurisdiction under 28 U.S.C. § 1291.

I I

W e review the district court’s f in d i ng s of fact after the bench trial f

o r clear error a

nd r eview the district court’s conclusions of law d e novo. FTC v. B u r nLounge, Inc.
, 753 F .3d 878, 883 (9th Cir. 2014). Our c lear-error review o f the district court’s fi n d i n g s of fact is “deferential”; “we will accept the district court’s finding s of f act u nless we are left with the definite and firm conviction that a mistake has been committed.” Id. (alteration and internal q u o t ation marks omitted).

I I I

On appeal, the NCAA contends that the plai n t i ffs’ Sherman Act c laim f

ails on the merits, b ut it also arg ues that

we are precluded altog ether from reaching the me r i ts, for three independent reasons: (1) The Supreme Court h eld in NCAA v. Board of Regents of the University of O k l a h o m a , 468 U.S. 85 (1984), th a t the NCAA’s a mateurism r u les a re “valid a s a matter of law”; (2) the compensation rules at issue h e re are not covered by the Sherman Act at all because t h e yO’B A N N O N V

. N CAA 26

do n o t reg ulate commercial activity ; a nd (3) the plaintiffs have no standing to sue under the Sherman Act because they have n o t s u f

f e r ed “antitrust injury .” W e find none of these three arg uments persuasive.

A. B o ard of Reg ents Did Not Decl a r e the NCAA’s Amateurism Rules “Valid as a Matter of Law”

W e consider, first, the NCAA’s c l aim that, under Board of R egents , all NCAA amateurism rules are “valid a s a matter of law.”

Board of Regents concerned the NCAA’s then-prevailing rules for televising c olleg e football g a mes. The rules allowed television networks to neg otiate directly w i t h schools a nd conferences for the rig h t to televise g ames, but they imposed
caps on the total number of g a mes that could be broadcast on television each y ear and the number of g ames t h at any particular school could televise. Id. at 91–94. The University of Oklahoma a

nd the University of Georgi a c halleng ed this
reg ime as an illeg al restraint of trade under Section 1.

The Court observed th a t the television rules resembled
two kinds of ag reements that are ordinarily considered per se unlawful when made among horiz ontal c o m petitors in the

same m a rket: a price-fix ing ag reement (in that the r ules set

a minimum ag g reg ate price that the television networks were required to pay the NC A A ’ s members) and an outputrestriction ag reement (in that the rules artificially capped the number of televised g ame licenses f or sale). Id. at 99–100. B ut it concluded that apply ing a p er se rule of invalidity to the NCAA’s television rule s would be “inappropriate” because colleg e football is “an industry in which horiz ontal restraintsO’B A N N O N V

. N CAA 27

on competition are essential if the product is to be available at all.” Id. at 100–01. The Court elaborated:

W h at t h e NCAA and its member institutions

mar k et in this case is competition itself—
contests between competi n g institutions. Of
course, t h is would be completely ineffective if there wer e n o rules on which the competitors ag reed to create and define the competition to be marketed. A m y r i ad o f rules affecting such matters a s the siz e of the field, the number of play ers on a team, and the

e x t ent to which phy sical violence is to b e encourag ed or proscr i b e d, all must be ag reed
upon, and a ll restr a in the manner in which ins t i tutions compete. Moreover, the N CAA seeks to market a particula r brand o f footbal l

— c olleg e football.

. . . In order to
preserve the character a n d quality of th[is] “product,” athletes must not be paid, must be required to a ttend class, and the like. And the integ rity of the “product” cannot be preserved

e x cept by mutual a g reement; if an institut i o n adopted such restrictions unilater ally

, its effective n e s s as a competitor on the play ing field mig ht soon b e d estroy ed. Thus, the NCAA play s a vital role in enabling colleg e fo o t b all to preserve its character, and as a result enables a product to b e marketed which

m i gh t otherwise be una v a i l a b l e

. I n performing this role, its actions widen

consumer choice—not only the choices available to sports fans but also thoseO’B A N N O N V

. N CAA 28

a v a ilable to a thletes—and hence can b e viewed as procompetitive.

Id. at 101–02 (emphasis added). The Court held th a t the NCAA’s r

ules should therefore be analy zed under the Rule o f Reason.

Apply ing the Rule of Reason, the Court struck down the television rules o n the g round that they did not s e r v e any leg itimate p r ocompetitive purpose. I d. at 113–20. I t then concluded its opinion by stating :

The N CA A play s a c ritical role in the maintenance of a revered tradition o f amateurism in colleg e sports. T here can be no question but that it needs amp l e l atitude to play that role, or t h a t the p reservation of the student-athlete in h igher education adds richness and diversity to intercollegiate athletics an d i s entirely consistent with the goals of the Sherman Act. B ut c onsistent with the Sherman Act, the role of the NCAA must be to preserve a tradition that mig ht otherwise die; r u les that restrict o utput are hardly consistent with this role. Today we hold only that the record supports th e D istrict Court’s conclusion that by curtaili n g output a nd blunting the a

bility o f member institutions to respond to consum e r preference, the N CAA has restricted rather than enhanced t h e place of intercolleg iate athletics in the Nation’s life.

Id. at 120 (emphasis added).O’B A N N O N V

. N CAA 29

Q u oting heavily f

rom the lang uag e in Board of Regen t s that w e h a v e emphasiz ed, the NCAA contends that any Section 1 challeng e to its amateurism rules must fail a s a

m a t ter of law because the Board of Regents Court held t h at those rules are presumptively valid. W e disag ree.

The Boa rd of Regents Court certainly discussed the NCAA’s amateurism rules at g reat leng th, but it did not do so in o r d e r to pass upon the rules’ merits, g iven that they were not before the Court. Rather, the Cou r t discussed the amateurism rules for a diff erent and particular purpose: to

ex p lain why NCAA rules should be analy z ed under the Rule of Reason, rather than h eld to be illeg al per se. The point was

a sig nifi c a n t one. Naked horiz ontal ag reements a mong competitors to fix the price of a g ood o r service, o r to restrict their output, are usually c ondemned as per se unlawful. See,
e.g. , United States v. Trenton Potteries Co.
, 27 3 U

. S

. 392, 398 ( 1927); see also, e.g. , Broad. Music, Inc. v. CB S

, Inc.
, 441 U.S. 1
, 19–20 (1979) (arrang e ments that “ almost alway s tend to restrict competition and decrease output” are usually
per se illeg al). T h e B o a r d of R egents Court decided, however, that because colleg e sports could not ex ist without certain h o ri z o ntal ag reements, N CAA rules should n ot be held per se unlawful even when—like the television rules in Board of Regents —they appear to b e p u r e “restraints on the ability of member ins t i t u tions to compete in terms of price and output.” Bd. of Regents , 468 U.S. at 103.

Board of Regents
, in other words, did n o t a pprove the NCAA’s amateuris m r

ules as categ orically consistent with the Sherman Act. Rather, it held that, because many NCAAO’B A N N O N V

. N CAA 30

rules (among them, the amateurism rules) 9 are part of the “character and quality of the [ NCAA’s] ‘ p roduct,’” id. at 102,

no NCAA rule should be invalidated without a Rule o f Reason analy sis. The Court’s long encomium to amateurism, thoug h impressive-sounding

, was therefore dicta. To be sure,

“ [ w] e do not treat considered dicta from the Supreme C o u r t lig htly ”; such dicta should b e acco rded “appropriate deference.” United S

tates v. A u

gustine
, 712 F .3d 1 290, 1295 (9th Cir. 2 013). W here a p plicable, we will g ive the quoted
passag es from Board of R e gents that deference. But we a re not bound by Board of

Regents to c onclude that e very NCAA rule that somehow r e l a t es to amateurism is automatically valid.

W h at is more, even i f t he lang uag e in Board of Regents addressing amateurism were not dicta, it w o uld n o t support the tremendous weig h t that the NCAA seeks to place upon it. The Court’s opinion supports the proposition t h at the preservation of amateurism is a leg iti m a te procompetitive
purpose for the NCAA to pursue, but the NCAA is n ot asking

us to find merely that its amateurism r u l e s a re procompetitive; r ather, it asks us to hol d that those rules a re essentially ex e mpt f

rom a n titr u s t scrutiny

. 1 0 Nothing in

9 I m p o rtan tly

, th e Co u rt w as q u ite clear t h at th e p reserv atio n of

am ateu r i sm , stan din g alo n e, w as n ot th e j u stif icatio n f o r its d ecisio n to

r ej ect a per se an aly sis. Bd

. o f Reg en t s , 4 6 8 U.S. at 10 0

– 0 1 ( “T h i s d ecisio n [n o t to ap p ly a p er se ru le] is n o t b ased on

. . . o u r resp ect f o r th e NCA A ’ s h isto ric ro le in th e p reserv atio n an d en co u rag em en t of in terco lleg iate am ateu r ath l etics.”).

1 0 T h e NCA A ap p ears at so m e p l aces in its b rief s to co n ced e t h a t t h e

am ateu rism ru les ar e s u b j e ct to Ru le o f Reaso n an aly sis an d m erely to arg u e th at Bo ard

o f Reg en ts “ d i ctates th e o u t co me ” o f th at an aly sis. Bu tO’B A N N O N V

. N CAA 31

Board of Regents sup ports such an ex emption. To say that the NCAA’s amateurism rules a re procompetitive, as Board of Regents did, is not t o s a y that they are automatically lawful ; a restraint that serves a procompetitive purpose can still b e invalid under the Rule of Reason if a substantially less restrictive r

ule w ould further the same objectives e q ually well. See B d. o

f Regents
, 468 U.S. at 101 n.23 (“W hile as the
g uardian of an important A merican tradition, the NCAA’s motiv e s must be accorded a respectful presumption o f validity

, it is nevertheless well settled that g ood motives will not validate an otherwise anticompetitive practice.”).

The NCAA cites decisions of three of our sister circuits, claiming that each adopt e d its view of Board of Regents

. Two of these three cases, however, ultimately subjecte d the NCAA’s rules to Rule of Reason scrutiny —the very approach

we a dopt today

. See Smith v. NCAA
, 1 39 F .3d 180, 186 (3d Cir. 1998), vacated on other grounds by N C A A v

. Smith

, 525 U.S. 4 59 (1999); McCormack v. NCAA , 845 F .2d 1338, 1344–45 (5th Cir. 1988). Only one—the Sev e n th Circuit’s decision in Agnew v. NCAA
, 683 F .3d 328 (7th Cir. 2012)—

comes close to ag r eeing with the NCAA’s i n t e r pretation o f Board of Regents , and we find it unpersuasive.

I n Agnew
, two former colleg e footba l l play ers who lost their schol a r s hips challeng ed certain NCAA rules that prohibited schools f

rom offering multi-y ear scholarships a nd capped the number of football scholarships each school could offer. Id. at 332–33. The Agnew court read B oard of Regents broadly and concluded that, “when an NCAA by law is clearly
meant t o h e l p maintain the ‘revered tradition of amateurism

w e see n o d istin c t i o n b etw een th at p o sitio n an d an arg u m en t f or b lan k et

an titru s t im

m u n i ty

.O’B A N N O N V

. N CAA 32

in colleg e sports’ or the ‘preservation of the student-athlete in hig her ed u c a tion,’ the by law [ should] be presumed procompetitive.” Id. at 342–43 (quoting B d

. of Regents
, 468 U.S. at 120). The c o u rt concluded, however, that the scholarship limitations that were before it did not “implicate the preservation of amateurism,” s ince awarding more o r long er scholarships to colleg e athletes would not c hang e their
status as amateurs. Id. at 344. Thus, no “procom p e t i tive presumption” applied to the scholarship rules. Id. a t 345. I nstead o f dismissing the plaintiffs’ antitrust claims o n t he merits, the court dismissed them on the unrelated g round that the p laintiffs h ad failed to plead the e x istence of a cog niz able market. Id.

L ike the amateurism lang uag e in Bo a r d of Regents
, Agnew ’s “procompetitive pre s u m p tion” was dicta that was ultimately unnecessary to the court’s r esolution of that case. B ut we would not adopt the Agnew pres umption e ven if it

were not d icta. Agnew ’s a naly sis rested o n t h e dubious proposition that in Board o f Regents
, the Supre m e C o u rt “blessed” NCAA rules that were n ot b e f o r e i t , and did so to

a sufficient deg ree to virtually ex empt those r u l es fr om antitrust scrutiny

. Id. at 341. W e doubt that was the Court’s intent, and we will no t gi v e such an ag g ressive c onstruction to its words.

I n sum, w e accept Board of Regents ’ g uidance a s informative with respect to the p rocompetitive purposes served by the NCAA’s amateurism rules, but we w ill g o no further than that. The amateurism rules’ validity must be proved, not presumed.O’B A N N O N V

. N CAA 33

B

. The Compensat i o n Rules Regulate “Commercial Activity”

The NCAA nex t arg ues that we cannot reach the merits o f the plaintiffs’ Sherman Act c laim because the compensation rules a re not subject to the Sherman A ct at all. Th e NCAA points out that Section 1 of the Sherman Act ap p lies only to “restraint[ s] of trade or commerce,” 15 U.S.C. § 1, and c laims that its compensation rules are mere “elig ibility rules” that do not reg ulate any

“commercial activity

. ”

This arg ument is n o t c r edible. Althoug h restraints that have no e ffect on commerce are indeed ex empt from Section 1, the modern leg al understanding o f “commerce” is broad, “including almost e v e ry activity from which the actor anticipates economic g ain.” Phillip Areeda & Herbert Hovenka mp, Antitrust Law: An A nalysis of Antitrust Principles and Their Application

, ¶ 260b (4th ed. 2013). That definition surely encompasses the transaction in which an athletic recruit e x chang e s h is labor an d NI L rig h ts for a scholarship at a Division I school because it is undeniable that both parties to that ex chang e ant i c ipate economic g ain from it. See, e.g. , A gnew , 683 F .3d a t 340 ( “N o k n o wledg eable observer c ould earnestly assert that big -time colleg e football
prog r ams competing f

or hig h ly soug h t

- a fter hig h school football play ers do n o t a n t i cipate economic g ain from a successful recruitin g prog ram.”). Moreover, Board of Re g e n t s ’ discussion o f the procompetitive justifications for NCAA amat e u r ism rules shows that the Court “presume[ d] the applicability of the Sherman Act to NCAA by laws, since

no procompetitive justifications would be neces s a r y for noncommercial activity t o which the Sherman Act does not apply .” I d. at 339.O’B A N N O N V

. N CAA 34

I t is no answer to these observations to say , as the NCAA does in its briefs, that the compensation rules are “elig ibility rules” rather than direct r estraints o n the terms of ag reements be t w een schools a

nd recruits. True enoug h, the compensation rules are written in the form of elig ibility rules; they provide
t hat an athlete who receives compensation other than the scholarships specifically p ermitted by the N CAA loses his elig ibility for colleg iate sports. T he mere fact that a rule can be characteriz e d as a

n “elig ibility r ule,” however, does not

mean the r

ule is not a r estraint of trade; were the law otherwise, the NCAA could insulate its member schools’ relationships with student-athletes from antitrust scrutiny b y renaming every rule g overning student-athletes an “elig ibility rule.” The antitrust la w s ar e n o t to b e avoided by such “clever manipulation of w ords.” Simpson v. Union Oil Co. of Cal.

, 377 U.S. 13, 21–22 (1964).

I n other words, the substance of the c o m p en sation rules
matters far more than h o w they are sty led. And in substance, th e rules c learly reg ulate the terms of commercial
t ransactions between a thletic recruits and their cho s e n schools: a sc h o o l m a y not g ive a recruit compensation bey ond a g rant-in-aid, and the recrui t m a y not accept compensation bey ond that limit, lest the recruit be disqualified and the transaction vi t i a ted. The NCAA’s
arg ument that its compensation rules a re “ e l ig ibility ” restrictions, rather than substantive restriction s on the price
terms of recruiting a g reements, is but a sleig ht of h and. There is real money

at issue here.

As the NCAA points out, tw o c ircuits have held that certain N CAA rules are noncommercial in n ature. I n S m i t h

v. NCAA
, the Third Circuit dismissed a student-athlete’s challeng e to the NCAA’s “Postbaccalaureate B y law,” whichO’B A N N O N V

. N CAA 35

prohibited athletes f

r om part i ci p ating in athletics at postg r aduate schools other than their u nderg raduate schools,

on the g r o unds that th e S h e r m a n Act did not apply to that B y law. The Smith court held that elig ibility rules such as the Pos t baccalaureate B y law “are not related to the NCAA’s commercial or business activities. Rather than inte n d i ng to p r ovide the NCAA w ith a commercial advantag e, t h e elig ibility rules p rimarily seek to en s u re fair competition in intercolleg iate athletics.” Smith , 139 F .3d at 185.

The Six th Circuit, meanwhile, held in Bassett v

. NCAA
, 528 F .3 d 426, 430, 433 (6th Cir. 2008), that the NCAA’s rules ag ainst g iving recruits “i m p roper inducements” were “ex p licitly noncommercial.” The court ex plained:

I n fact, th[ e] se rules are a nti-commercial and d e s i g n e d t o p r o m o t e a n d e n s u r e competi tiveness among st N CAA member schools. Violati on of the applicable N CAA rules g ives the violator a decided competitive advantag e in recruiting a nd retai n ing hig hly priz ed student athlete s

. I t a lso violates the spirit o f amateur athletics by providing remuneration to athletes in ex chang e for their commitments to play f o r the violator’s football prog ram. F in a l l y , v iolators of these rules harm the student-athlete academically when coaches a nd assistants complete coursework on behalf of the student-athlete.

Id. at 433.

Neither Smith nor Bassett convinces us that the NCAA’s

c o m p e n s a t i o n r u l e s a r e n o n c o m m e r c i a l

. T h eO’B A N N O N V

. N CAA 36

Postbaccalaureate B y law chall e ng ed in Smith was a true “elig ibility ” rule, a kin to the rules limiting the number o f
y ears that student-ath l e t e s may play colleg iate sports o r requiring student-athletes to complete a certain numbe r o f credit hours each semest e r

. A s the Smith court ex pressly noted, the Postbaccalaureate B y law was “not related t o t h e NCAA’s c ommercial or business activities.” Smith

, 139 F .3d
at 185

. B y contrast, the rules here—which reg ulate what compensation NCAA schools may g ive student-athletes, a nd how much— do r elate to the NCAA’s business activities: the labor of student-athletes is an integ ral and essential component of the NCAA’s “produc t , ” and a rule setting the price o f that labor g oes to the heart of the NCAA’s business. Thus, the rules at issue here a r e more like rules affecting the NCAA’s dealing s with its c oaches or with corporate business partners—which courts have held to be commercial—than they are like the B y law challeng e d i n Smith

. See Bd. of Regents
, 468 U.S. at 104–13 (apply ing Sherman Act to rules
g ove r n ing NCAA members’ contracts w ith television

n e t w o r ks); Law v. NCAA
, 134 F .3d 1010, 1024 (10th Cir. 1998) ( apply ing S h e r man Act to NCAA rules limiting compensation of basketball coaches).

Bassett cannot be disting uished here in the way that Smith

can since it involved an N CAA rul e r e l a t i ng to pay ments to athletic recruits, but we believe B assett was simply wrong on this point. Bassett ’s reasoning

, in fine, is that rules that seek
to combat c ommercialism in colle g e sports by preventing schools f r om c o m p e ting to pay student-athletes cannot be considered restr ai n t s on “commerce.” W e simply cannot unders t a n d this log ic. Rules that are “ anti-commercial a nd desig ned to promote and ensure c ompetitiveness,” Bassett
, 528 F .3d at 433, surely affect commerce just as much as rules promoting commercialism. The intent b ehind the NCAA’sO’B A N N O N V

. N CAA 37

compensation rules d o es n ot chang e the fact that the

ex c h a ng e they reg ulate—labor for in-kind compensation—is a quintessentially

commercial transaction.

W e therefore conclude that the NCAA’s compensation rules are within the ambit of the Sherman Act.

C. The Plaintiffs Demonstrated that the Compe n sation Rules Cause Them Injury in Fact

The NCAA’s last arg ument a n t ecedent to the merits is that the p laintiffs’ Section 1 c laim fails at the threshold because the p laintiffs have fail e d to show that they have suffered “antitrust injury .” Antitrust injury is a heig htened standing r equirement that applies to private parties suing to

en fo r ce the antitrust laws. To satisfy the antitrust-injury requirement, a plaintiff must show “injur y of the ty pe the antitrust laws were intended to p revent and t h a t f lows from that which makes defendants’ acts unlaw f u l.” Glen Holly Entm’t, Inc. v. Tektronix Inc.
, 343 F .3 d 1 000, 1007–08 (9th Cir. 2003) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.
, 429 U.S. 477, 489 (1977)) (internal q u o t a tion marks omitted).

Al thoug h the NCAA purports to be making an antitrustinjury a rg ument, it is mistaken. The NCAA h a s not contended that the p laintiffs’ injuries are not “of the ty pe the antitrust laws were intended to prevent.” Rather, the NCAA has made a g arden-variety standing arg ument: it a lleg es that the plaintiff

s have not been injured in fact b y the compensation rules because those rules do not deprive them of any N I L c o m p ensation they would otherwise r eceive. Addressing each of the potential mark e t s for NI L rig hts that the distri c t c o urt identified, the NCAA arg u e s that (1) thereO’B A N N O N V

. N CAA 38

are no leg ally -recogn iz ed NI L rig h ts for participants in l i ve g ame broadcasts; (2) the NCAA’s compensation rules do not deprive the plaintiffs of compensation f or use of their NI L s in

v i d eo g ames because the N CAA no long er permits col l e ge sports video g ames to be ma d e a n d has a separate p olicy forbidding the use of student-athletes’ NI L s in video g a mes; and (3) the N CAA’s licensing a g reement for archival f ootag e with T3Media does not deprive athletes of NI L compensation for archival foot a ge because it p r events T3Media from licensing student-athletes’ NI L s w hile they are in school a nd requires the company to obtain consent o nce student-athletes have left school.

W e conclude that the plaintiffs have shown that they are injured in fact as a r e s ult of the NCAA’s rules h aving foreclosed the market for thei r N I L s in video g ames. W e therefore do not r each the thorni e r questions of whether participants in live TV broadcasts of colleg e sporting events have enforceable rig

hts of publicity

or whether the plaintiffs

are injured by the NCAA’s current licensing arrang ement for archival footag e.

1. Absent the NCAA’s compensation rules, video g ame makers would neg o tiate with student-athletes for the rig ht to use their NI L s

As we have ex plained, the d i s t rict court found that, if
pe r mitted to do so, video g ame makers such as EA would
neg otiate with colleg e athletes for the rig ht to use their NI L s in v ideo g ames because these companies want to make g ames that a re as reali s t i c a s possible. O’Bannon
, 7 F

. Supp. 3d at 970

. T h e d istrict court noted that EA currently neg o tiates

w i t h the NF L and N B A play ers’ unions for the rig ht t o u s e their members’ NI L s in pro s p o r t s video g ames. Id. TheO’B A N N O N V

. N CAA 39

plaintiffs also put into e vidence a copy of a 2 005 presentation by EA representatives to the NCAA, which stated that EA’s inability to use colleg e athlet es’ NI L s was the “number o ne factor holding back NCAA video g ame g rowth.”

The N CAA arg ues, however, that we cannot find that the pla intiffs have suffered an injury in fact based on lost compensation from v ide o g a me companies because the NCAA h as terminated its relationship with EA a n d i s n ot currently working with a

ny o ther video g ame make r

. 1 1 W e disag ree. The district court found that it is entirely possible that the NCAA will r e sume its support for colleg e sports video g ames at some point in the future, g iven that the NCAA found such ga m e s t o b e profitable in the past, id.

, and that finding of fact was n ot clearly erroneous. Given the NCAA’s previous, leng thy relationship with EA and the other evidence presented, it was reasonable for the district court to conclude that the NCAA may well beg in working with EA o r another video g ame company

in the future. 1 2

11 T h e NCA A also asserts b ef o re u s th a t i t h a s n o i n t en t t o l icen se its in tellectu al p ro p erty f

o r u se in v i d eo g am es in th e f u tu re, b u t w e p lace n o

w eig h t o n th at assertio n

. Statem en ts in ap p ellate b rief s are n o t ev id en ce. S ee, e.g

. , Kyo cera Co rp

. v. Pru d en tia l-Ba ch e Tra d

e S ervs., In c. , 3 4 1 F.3 d 9 8 7 , 1 0 0 2 (9 th

Cir. 2 0 0 3 ).

1 2 Ev en i f th e d istrict co u rt h ad n o t m ad e th i s f actu al f i n d in g , w e w ou ld b e relu ctan t to co n clu d e th at t h e NCA A ’ s cu rren t m o rato riu m o n co lleg e sp o rts v id eo g am es p reclu d es th e p lain t if f s ’ s u i t

. W h en a d ef

en d an t h as

v o lu n t arily ceased “ alleg ed l y im p ro p er b eh av io r in resp o n se to a su it, b u t is f ree t o retu rn t o it at an

y tim e,” a ch allen g e to th e d ef en d an t’ s b eh av io r is g en er a l l y n ot co n sid ered m o o t u n less “ th ere is n o reaso n ab le

ex p ectatio n th at t h e illeg al actio n w ill recu r.” N a tive Vill. o

f No a ta k v. Bla tch fo rd

, 3 8 F. 3 d 1 5 0 5
, 15 1 0 (9 th Cir. 19 9 4 ). Un d er th is lo g ic, th e NCA A ’ s d ecisio n to term i n ate its relatio n sh ip w i th v id eo g am e co m p an iesO’B A N N O N V

. N CAA 40

O u r conclusion is unaffected by the NCAA’s claim th at other rules and policies, not dire c t l y a t issue here, would forbid video g ame makers from using student-athletes’ NI L s in their g ames if such g a mes were to be made ag a in

. The NCA A d i d

, after a ll, permit EA to continue making NCAA video g ame s for some time after EA beg an incorporating
recog niz able play er avatars into the g ames. Moreover, J oel L inz n er, a EA ex e cu t i v e , testified at trial that EA “made a long -sustained effort to work w ith the NCAA” to chang e the policy ag a inst using student-athletes’ NI L s, and t hat NCAA

ex e c utives w ere “supportive” o f the idea. I t was n o t cl e arly

erroneous for the district court to conclude on the basis of this evidence that the NCAA mig ht well either chan ge its p olicy barring the use of athletes’ NI L s in video g ames or d ecline to enforce it.

2. W h ether the Copy

rig ht Act preempts rig ht-ofpublicity claims based on sports video g a m e s i s tang ential to this case a

nd irrelevant to the plaintiffs’ standing

I n addition to arg u ing that its current policies against colleg e sports video g a mes def ea t the plaintiffs’ claims to standing

, the N CAA also contends that there are leg al barriers that would prevent the plaintiffs from being compensated b y

a video g ame maker. Specifically

, the NCAA arg ues that the Copy righ t A ct would preempt any rig ht-of-publicity claim

sh o u ld n o t m o o t th e p lain tif f s’ v id eo g am e- related claim s o r sh o w th at th e NCA A ’ s co n d u ct d o es n o t in j u re th e p lain tif

f s

.O’B A N N O N V

. N CAA 41

arising o ut of the u s e of those NI L s in sports video g ames. 1 3 T h u s, the NCAA maintains, if it w ere to resume its suppo r t for colleg e sports v ideo g a mes and permit video g ame companies to use stude n t-athletes’ NI L s, the v ideo g ame makers would not pay student-athletes for their N I L s; r ather, they could use the NI L s for free.

W e decline to consider t h i s a rg ument, for two reasons. F irst, it is convoluted and f a r afield from the main issues in this case. T h e N C AA asks us to decide whether, assuming th at EA or some other video g ame c ompany were to make a colleg e sports video g ame that incorporated student-athletes’ NI L s and then ref

u s e t o pay student-athletes for those NI L s, the g ame maker would h a v e a viable Copy rig ht Act defense
to a rig ht-of-publicity lawsuit brough t b y the a thletes. That question is a complex o ne, implicating both Section 301 o f
t h e Copy rig ht Act, 17 U .S.C. § 301, which ex pres s l y preempts certain common-law claims, and a murky b ody o f

c a s e law holding that, in some circumstances, the A ct impliedly p reempts claims that fall o utsid e o f S ection 301’s
scope. See, e.g. , Facenda v. NFL Films, Inc.
, 542 F .3d 1007, 1028–32 (3d Cir. 2008) (sug g esting

, on the basis of a conflict preemption analy sis, tha t f ederal c opy

rig ht law can

“ i m pliedly preempt[ ] ” rig h t-of-publicity claims). I t i s scarcely fit f

or resolution within the c onfines of a standing inquiry in an antitrust suit between the NCAA a nd its studentathletes that involves neither E A nor any other video g ame

13 T h e NCA A also arg u es th at th e First A m en d m en t w o u ld p reclu d e an y rig h t-o f

- p u b licity claim arisin g o u

t o f a sp o rts v id eo g am e. W e rej ected th at arg u m e n t i n Keller

, 7 2 4 F.3 d at 1 2 84
, an d w e w ill n o t co n sid er i t f u rth er in th is ap p eal. Acco rd Ha rt v. Electro n ic Arts, In c. , 7 1 7 F.3 d 1 4 1
, 1 7 0 (3 d Cir. 2 01 3 ) (h o ld i n g th at “ th e N CAA Fo o tb a ll

. . . g am es at issu e in th is case d o n ot su f

f icien t ly tran sf

o rm [stu d en t- ath letes’ ] id en tit[ies] to escap e [a] rig h t o f

p u b licity claim ”).O’B A N N O N V

. N CAA 42

company as a party

. Should a colleg e sports video g ame b e made in the future a

n d the rig ht-of-publicity suit e n v isioned by the NCAA come to p ass, the court hearing that suit w ill be in a f ar better position to resolve t h e q u estion of Copy rig ht Act preemption than we are.

Second a nd more importantly

, the NC AA’s arg ument about the Copy

rig h t Act, even if correct, is irrel e v ant to wheth er the p laintiffs lack standing

. On the NCAA’s interpretation o f the Copy rig h t Act, professional football a nd basketball play ers have no enf o r ceable rig ht-of-publicity claims ag ainst video g ame makers either—y et EA currently
pay s NF L and NB A play ers for the rig ht to use their NI L s in its video g ames. O’Bann o n , 7 F. Supp. 3d at 970. Thus, there is every reason to believe that, if permitted to d o so, EA

or another video g ame compa n y w o u ld pay NCAA athletes for their N I L rig hts rather than test the e n forceability of those rig hts in court. That the N CAA’s rules deny the plaintiffs all opportunity to r eceive this compensati o n i s sufficient to endow them with standing to b r ing this law suit. S ee 1 3A Charles Alan W rig ht & Arthur R. Miller, F ederal Practice a nd Procedure § 3531.4 (3d ed. 1998) (“[ L ] oss of an opportunity
may constitute injury

, eve n thoug h it is not certain that any benefit would have been realiz ed if the opportunity had been accorded.” (collecting cases)); cf., e.g. , United States v

. Students Challenging Regu latory Agency Procedures ( SCRAP)

, 412 U.S. 66 9
, 6 8 9 n.14 (1973) (rejecting the
g overnment’s arg ument that standing should be l i m i ted “to those who h a v e been ‘sig nificantly ’ affected by ag ency action”); Preminger v. Peake

, 552 F .3d 757, 763 ( 9 t h Cir. 2008) (“The injury may

be minimal.”).

* * *O’B A N N O N V

. N CAA 43

B e cause the p lain tiffs have shown that, absent the NCAA’s compensation rules, v ideo g ame makers would l i k e l y p a y them for the rig h t to use their NI L s in coll e ge sports video g ames, the p l aintiffs have satisfied the requirement o f i n

j u ry in fact a

nd, by ex tension, the requirement of antitrust injury

.

I V

Having re

j e cted all of the NCAA’s preliminary leg al
arg uments, we p roceed to revie w the p laintiffs’ Section 1 claim on the merits. Althoug h in another co n t e x t the NCAA’s decision t o value student-athletes’ NI L at zero mig ht b e per se illeg al price fix ing

, we are persuaded—as was t h e Supreme Court in Board of R e g e nts and the district court here—that the appropriate rule is the Rule of Reason. As the Supreme Court observed, the NCAA “market[ s] a particular brand

. . . [ that] makes it more popular t h a n p r ofessional sports to which it mig ht otherwise be comparable.” Board of Regents
, 468 U.S. at 101–02. B ecause t h e “ i n teg rity of the ‘product’ c annot be p reserved ex cept b y mutual ag reement,” “restraints on competition are essential if the product is to be available at all.” Id. at 1 0 1
, 1 0 2 ; s e e a lso id. at 117 (“Our decision not to app l y a per se rule to this case rests in larg e part o n o ur recog nition that a certain deg ree of cooperation is
necessary if the ty p e o f c ompetition that [ the NCAA] and its member institutions seek to market is to be preserved.” (footnote omitted)).

L ike the district court, we follow the three -step framework of the Rule o f Reason: “[ 1] The plaintiff bears the initial burd e n o f showing that the restraint produces sig nificant antic ompetitive effects within a relevant market. [ 2] I f the plaintiff meets this burden, the defendant must comeO’B A N N O N V

. N CAA 44

forward with evidence of the r estraint’s procompetitive effects. [3] The plaintiff must then show that any leg itimate objectives can be ach i e ved in a substantially less restrictive manner.” Tanaka v. Univ. of S. Cal.

, 2 52 F .3d 1059, 1063 (9th Cir. 2001) ( citations a n d internal quotation marks omitted).

A. Signific a n t Anticompetitive Effects W ithin a Relevant Market

As w e h a ve reco u nted, the d istrict court made the foll owing factual finding s: (1) that a cog niz able “colleg e education market” ex ists, w herein colleg es co m p e te for the services o f athletic recruits by offering them scholarships a nd various a menities, such as coaching and facilities; (2) that if the NCAA’s compensation rules did n o t e x ist, member schools w ould compete to offer re c r u i ts compensation for their NI L s; a

nd (3) that the compensation rules therefore have

a sig nificant anticompetitive effect o n the colleg e ed u cation

m a r k e t , in that they f

ix an aspect of the “price” that recruits
pay to attend colleg e (or, alternatively , an aspect of the price that schools p a

y to secure recruits’ services). These finding s have substantial support in the record.

B y and larg e, the NCAA does not cha l l eng e the district court’s finding s. I t does not take issue with the way that the district c ourt d efined the colleg e education market. Nor does it a ppear to dispute the d istrict court’s conclusion t h a t the compensation rules restrain the N CAA’s member schools from c omp e t i n g with e ach other within that market, at least
to a certain deg ree. I nstead, the NCAA makes three modest
arg uments about why th e c o mpensation rules do not h ave a sig nificant a

nticompetiti v e e f

fect. F irst, it arg ues that because the p laintiffs never showed that the rules re duceO’B A N N O N V

. N CAA 45

output in the colleg e education market, the plaintiffs did not
meet their burden of showing a sig nificant anticompetitive effect. Second, it arg ues t h a t the rules have no anticompetitive effect because school s w o u l d n o t pay studentathletes any

thing for their NI L rig hts in a ny e vent, g iven that those r ig h t s are worth nothing

. A nd finally

, the NCAA
arg ues that even i f the district court was rig ht that schools would pay student-athletes for their NI L rig hts, any such
pay ments would be smal l

, which means that the compensation rules’ antico mpetitive effects c annot be considered sig nificant.

W e can dispose o f the first two arg uments quickly

. F irst, the NCAA’s contention that the plaintiffs’ claim fails because they did n ot show a d e c r e a se in output in the colleg e education market is simply i n c orrect. Here, the NCAA

a r gues that output in the colleg e education market “consi s t s of opportunities for student-athletes to part i c i p ate in F B S football or Division I men’s b asketball,” a n d it quotes the district court’s finding that these opportunities have “increased steadily over time.” S ee O’Bannon
, 7 F

. Supp. 3d
at 981. B ut this arg ument misses the mark. Althoug h output reductions are one common k ind of a nticompetitive effect in antitrust cases, a “reduction in output is not the only measure of anticompetitive effect.” Areeda & Hovenkamp ¶ 1503b(1) (emphasis added).

The “combination[ s] condemned by the [ Sherman] Act” also include “ p r i c e -fix ing

. . . by purchasers” even thoug h “the persons spe c i a l ly injured

. . . are sellers, not customers

or c onsumers.” Mandeville Island Farms, Inc. v. Am. Crystal Sugar Co.
, 334 U.S. 219, 235 (1948). At trial, the plaintiffs demonstrated that the NCAA’s c ompensation r ules have just this kind of anticompetitive effect : they fix the price of o neO’B A N N O N V

. N CAA 46

c omponent o f the ex chang e between school and recrui t , thereby precluding co mpetition among schools with respect to that component. The district court found that althoug h

co n s u mers of NCAA football and basketball may not be harmed directly by this p r i ce-fix ing

, the “student-athletes themselves are harmed by the price-fix ing ag reement a mong F B S football and Division I b asketball schools.” O’Bannon
, 7 F

. Supp. 3 d at 972–73. The athletes acc e p t g rants-in-aid, and no mo r e , i n ex c hang e for their athletic performance, because the N CAA schools have ag reed to value the athletes’ NI L s at z ero, “an anticompetitive effect.” 1 4 Id. at 973. This anticompetitive effect satisfied the plaintiffs’ initial burden under the Rule o f Rea s on. Cf. Cal. Dental Ass’n v. F TC
, 526 U.S. 7 56, 777 (1999) (“[ R] aising price, reducing output, and dividing markets have the same anticompetitive effects.” (quoting Gen. Leaseways, Inc. v. Nat’l Truck Leasing A ss’n
, 744 F .2d 588, 594–95 (7th Cir. 1984))).

Second, the NCAA’s arg ument that stud e n t-athletes’ NI L s are, in fact, worth nothing is simply a re p a c k a g ed version o f its arg uments about injury in fact, which we have rejected.

F inally

, we reject the NCAA’s contention that any N I L compensation that student-athletes mig ht receive in the absence of its compensation rules would be de m i nimis a nd that the rules therefore do not sig nificantly affect competition

14 A s w e h av e ex p lain ed

, th e d istrict co u rt altern ativ ely ch aracter i z e d
stu d en t

- ath l etes as b u y ers o f ed u catio n al s erv i ces f ro m a cartel rath er th an sellers o f l a b o r to a m o n o p so n y

. T h i s d i f f eren t w ay o f d escrib in g th e

co lleg e ed

u catio n m ark et d i d n ot alter eith er t h e d istrict co u rt’ s an al y s is

o f h o w th e m ark et f

u n ctio n ed o r its assessm en t th at stu d en t- ath letes a r e h arm ed b y t

h e NCA A ’ s co m

p en satio n ru les. O’Ba n no n , 7 F

. Su p p

. 3d at 9 7 3 , 9 9 1

– 9 3

.O’B A N N O N V

. N CAA 47

in the colleg e ed u c a t i o n market. This “too small to matter”
arg ument is incompatible with the Supreme Court’s holding in Cata l a n o , I

n c. v. Target Sales, Inc.
, 446 U.S. 643 (1980) (p e r cu riam). I n Catalano

, a g roup of beer retailers sued a g roup of b eer w holesalers, alleg ing that the w holesalers h a d secretly ag reed to end their customary practice of ex t e nding the retailers interest-free credit for roug hly a month after the delivery of beer. Id. at 6 44. T he Court unanimously held that this ag reement was unlawful per se. I t reasoned that the
ag reement was clearly a means of “ ex ting uishing one form o f [ price] competition among the seller s ,” g iven that credit terms

were part of the price of the beer, and that the ag reement was therefore tantamount to price-fix in g. I d

. at 649. The Court

was not c oncerned with whether th e agr e ement affected the market adversely : “I t i s n o ex cuse that the prices fix ed a re themselves reasonable.” Id. at 647.

The N CAA’s compensatio n r u les function in much the

s a m e w ay as the ag r eement at issue in Catalano : they “ex ting uish[ ] one form o f c ompetition” among schools seeking to land recruits. We acknowledg e that Catalano was

a per se case in which the Court did not ana l y z e t he anticom p e titive effect of the wholesalers’ ag r eement in detail, 1 5 but the decision nonetheless indicates tha t a n antitrust
court should not dismiss a n anticompetitive price-fix ing
ag re e m e n t as benig n simply b ecause the ag reement relates only to one component of an overall p r ice. That proposition finds further support in Board o f Regents : in Board of Regents
, a Rule o f Reason case, the C o u rt h e l d that the NCAA’s television plan had “a sig nificant potential for

15 In d eed

, t

h e Ca ta la n o d ef

en dan ts d eclin ed to “ su g g est a p ro co m p etitiv e j u stif i catio n f or [th ei r ] h o rizo n t al ag reem en t t o f ix cred it.” C

a ta la n o , 4 4 6 U.S. at 6 4 6 n .8

.O’B A N N O N V

. N CAA 48

anticompetitive e f

f e c ts” without delving into the details o f

ex a c tly how much the plan restricted output of televised
g ames or how muc h i t f ix ed the price of TV contracts. 468 U.S. at 104–05. W hile the p r ec i se value of N I L compensation is uncertain, at this point in the analy sis and in lig ht of Catalano and Board o f Regents
, we conclude that the plaintiffs have met their b urden at the first step of the Rule o f Reason by showing that the NCAA’s compensation rules fix the p rice of one component (NI L rig h ts) of the bu n d l e that schools provide to recruits.

B e cause we ag ree with the distri c t c o urt that the compensation rules have a sig nificant anticompetitive effect on the colleg e education market, w e proceed to consider the procompetitive justifications the N C AA proffers for those rules.

B

. Procompetitive Effects

As discussed above, the N CAA o ffered the district court four p rocompetitive justifications for the compensation rules: (1) promoting amateurism, (2) pro m o t i n g c o m p e t i t i v e b a l a

nce among NCAA schools, (3) integ rating studen t-athletes with their schools’ academic community

, and (4) increasing output in the colle g e education market. The district court accepted the first and third and rejected the other two.

Althou g h the N CAA’s briefs state in passing that the district court erred in failing to “credit all four justifications fully ,” the NCAA focuses its arg uments to this court entirely

on t h e f

irst proffered justification—the promotion o f amateurism. W e therefor e accept the district court’s f actual f inding s that the compensation rules do not promote competitive balance, that they d o not increase output in theO’B A N N O N V

. N CAA 49

colleg e education market, a n d that they p lay a limited role in integ rating student-a t hletes with their schools’ academic communities, sin c e w e have been offered no meaning f ul

a r g ument that those finding s were clearly erroneous. S e e, e.g. , Md. Cas. Co. v. Knight

, 9 6 F .3d 1284, 1291 (9th Cir. 1996).

The district court acknowledg ed that the NCAA’s current rules promote amateurism, which in turn play s a role in increasing consumer demand for colleg e sports. O’Bannon
, 7 F. Supp. 3d at 978. The NCAA does not challeng e that specific determination, but it arg ues to u s t h a t the district
court g ave the am a t e u r ism justification short shrift, in two respects. Fi r st, it claims that the district court erred b y focusing solely on t h e question of whether amateurism in c reases consumers’ ( i.e.
, fans’) demand for colleg e sports and ig n oring the fact that amateurism also incre a s e s choice for student-athletes by g iving them “the o n ly opportunity [ they will] have to obtain a c o lleg e education w hile play ing competitive sports as students .” Second, it faults the district
court for being inappropriately skeptical of the NCAA’s hi s t orical c ommitment to amateurism. Althoug h we mig ht have c redited the depth o f t h e NCAA’s devotion to amateurism differently

, these arg u m e n ts do not persuade us that the district court clearly erred.

The NCA A i s correct that a restraint that broadens choices can be procompetitive. The Court in Board of Regents obser v e d t h a t the d ifference b etween colleg e a nd professional spo rts “widen[ s] ” the choices “available to athletes.” Bd. of Regents
, 468 U.S. at 1 02. B ut we fail to see how the restraint at issue in this particu l ar case— i.e.
, the N C AA’s limits on student-athlete compensation—makes colleg e sports more attractive to recruits, or widens recruits’O’B A N N O N V

. N CAA 50

spectrum of choices in the se nse that Board of Regents
sug g ested. As the d istrict court found, it is p rim arily “the opportunity to earn a h i gh e r education” that attracts athletes
to c olleg e sports rather than professional sports, O’Bannon
, 7 F

. Supp. 3d at 9 86, an d t h at o p portunity would still be available to student-ath l e t es if they were paid some

com p e n s ation in a d dition to their athletic scholarships. Nothin g i n the plaintiffs’ pray er for c ompensation would make student-athletes something other than stud e n t s a nd thereby impair their ability

to become student-athletes.

I ndeed, if a

ny thing

, loosening or a b andoning the compensation rules mig ht be the best way to “ wi d e n ” recruits’ rang e of choices; athletes mig ht well be more likely
to a ttend colleg e, and stay there long er, if they knew that they

were earning some amount of N I L income while they were in school. See J e ffrey L

. Harrison & C a s e y C. H arrison, The Law and Economics of t h e NCAA’s Claim to Monopsony Rights

, 5 4 Antitrust B ull. 9 2 3, 948 (2 009). W e therefore reject the NCAA’s c laim that, by d eny in g s tudent-athletes compensation apart from scholarships, the NCA A increases the “choices” available to them. 1 6

The NCAA’s second p oint has more forc e

— t h e district
court probably underestimated the N C A A ’s commitment to amateurism. S

ee Bd. of Regents
, 468 U.S. at 120 (referring to

1 6 It m ay b e t

h at w h at th e N CA A m ean s by th is arg u m en t is th at i t s

co m pen satio n ru les m ak e it po ssib l e f or sch oo ls to f

u n d m o re sch o larsh i p s th an th ey o t

h erw i se co u ld an d th ereb y in crease th e n u m ber of

o p p o rtu n ities th at recru its h av e to p lay co lleg e s p o r ts. T o t h e ex t en t th e NCA A is m ak in g th at arg u m en t, it is t h e fu n ctio n al eq u iv alen t o f th e NCA A ’ s arg u m en t th at th e ru l es in crease o u tp u t in th e co lleg e ed u catio n

m ark et. T h e d istri c t c o u r t f o u n d th at arg u m en t u n

p ro v ed

, an d w e h av e af f irm ed th at f

in d in g

.O’B A N N O N V

. N CAA 51

the NCAA’s “revered tradition o f a mateurism in colleg e sports”). B ut the point is ultimately irrelevant. Even if the NCAA’s concept of amateurism had been perfectly coherent and c onsistent, the NCAA would still need to show t hat amateurism bring s about some procompetitive effect in order
to justify it u n der the antitrust laws. See id. at 1 0 1

– 0 2 & n.23. The NCAA cannot fully answer the district court’s finding that the compensation rules have sig ni f icant anticompetitive effects simply by p ointing out th a t it has adhered to those rules for a long time. Nevertheless, the district court f

ound, and the r ecord supports that there is a concret e procompetitive effect in the NCAA’s commitment
to amateurism: namely

, that the amateur nature of c olleg iate sports increases their appeal to c o n s umers. W e therefore conclude that the NCAA’s compensation rules serve the two procompetitive p u rposes identified b y the district c ourt: integ rating academics with athletics, and “preserving the popularity of the NCAA’s product by p r o m o ting its current understanding of amateurism.” O’Bannon
, 7 F

. Supp. 3d at 1005. 1 7

1 7 T h e d i ssen t su g g ests th at d u rin g th e seco n d step th e d istrict c o u r t d ef in ed th e p ro co m

p etitiv e b en ef

its as “ l im its o n larg e am o u n ts of
stu d en t

- ath l ete co m

p en satio n p reserv e t

h e p o p u larity o f th e NCA A ’ s p ro d u ct.” Dissen t at 6 9
, 70

. B u t th is can n o t b e rig h t. Du rin g th e seco n d step , t h e d istrict co u rt co u ld on ly co n s id er th e b en ef its o f t h e NCA A ’ s

ex istin g ru le p ro h ib itin g N IL p ay m en ts—it co u ld n o t co n s id er t h e p o ten tial b en ef

its o f an altern ativ e ru le (su ch as cap p in g larg e p ay m en ts). T h e co rrect in qu iry u n d er t h e Ru l e o f Reaso n i s: W h at p ro co m p etitiv e b en ef its are serv ed b y th e NCA A ’ s ex istin g ru le b an n in g NIL p ay m en ts? T h e d istrict co u

rt f o u n d t h at t h e NCA A ’ s ex i s t i n g b a n p ro v id es th e p ro co m p e t i t i v e b en ef

it o f p reserv in g am ateu rism

, an d th u s co n su m er d em an d

. It is o n ly in th e th i rd s tep , w h ere th e b u rd en is o n th e p lain tif f s,

w h en t h e co u r t co u l d co n s id er w h eth er altern ativ e ru les p ro v id e aO’B A N N O N V

. N CAA 52

W e note that the district cou r t ’ s f inding s are larg ely consistent with the Supreme Court’s own description o f the colleg e f ootball market as “a particular brand of football” that dr a ws from “an academic tradition [ that] differentiates [ it] from a nd makes it more popular than professional spor t s to which it mig ht otherwise b e comparable, such as, for

ex a mple, minor leag ue baseball.” B d

. o f Regents
, 468 U.S. at 101–02. “Thus, the NCAA p lay s a vital rol e i n enabling colleg e f ootb a l l to preserve its character, and as a result enables a product to be marke t e d wh ich mig ht otherwise be unavailable.” I

d. at 1 02. B ut, as Board of Regents demonstrates, not every r ule adopted by the NC AA that restricts the market is necessary to preserving the “character” of colleg e sports. W e thus turn to the f inal inquiry

— whether there are reasonable alternatives to the NCAA’s current compensation restrictions.

C. Substantially Less Restrictive Alternatives

The third step in the Rule of Reason analy s is is whether there a re substantially less restrict i v e alternatives to the NCAA’s current rules. W e bear in mind that—to b e v iable under the Rule of Reason—an alternative must be “virtually

as effective” in serving th e procompetitive purposes of the NCAA’s current rules, and “withou t s ig nificantly increased cost.” Cnty. of Tuolumne v. S o nora Cmty. Hos

p

. , 2 36 F .3d 1 148, 1 159 (9th Cir. 2001) (internal quotation m a r k s

om i t t ed )

. We think that plaintiffs must make a strong evidentiary showing that its alternatives are v iable here. Not only d o plaintif

fs bear the burden at this step, but the

p ro co m p etitiv e ben ef

it. A n d ev en th en , th e co u rts' an aly sis is cab in ed to

co n sid erin g w

h eth er th e altern ativ e se rv es th e sam e p ro co m p etitiv e in terests id en tif

ied in seco n d step

.O’B A N N O N V

. N CAA 53

Supreme Court has admonished that we must g enerally afford the NCAA “ ample latitude” to superintend colleg e athletics. Bd. of Regents
, 468 U.S. at 120; see also L a w v

. N at'l Collegiate Athletic Ass '

n , 134 F .3d 1 010, 1022 (10th Cir. 199 8 ) (“[ C] ourts should afford the N CAA plenty of room under the a

ntitrust law s to preserve the amateur character o f intercolleg iate a t h l e tics.”); Race Tires Am., Inc. v. H oosier Racing Tire Corp.
, 614 F .3d 5 7, 83 ( 3d Cir. 2010) (noting that, g e nerally

, “sports-related org a niz ations should h ave the rig ht to determine for themselve s t h e set of rules that they believe best advance their respective sport”).

The district court identified two substantially less restrictive alternatives: (1) allowing NCAA member schools
to g ive student-athletes g rants-in-aid that cover the f u l l cost of attendance; and (2) allowing member schools to pay

s t u d e n t

- a t h l e t e s small amounts of deferred cash compensat i o n for use o f their NI L s. 1 8 O’Bannon
, 7 F

. Supp. 3d at 1005–07. W e h o l d t hat the district court did not c learly err in finding that raising the g rant-in-aid cap would be a substantially less restrictive alternative, but that it clearly erred when it fo und that allowing students to be paid compensation for their NI L s is virtually as effective as the NCAA’s current amateur-status rule.

1 8 A lth o u g h th e NCA A n o w p erm its sch oo ls an d co n f eren ces to elect to raise t h eir sch o larsh ip cap s to th e f u ll co st o f atten d an ce, it co u ld rev erse its p ositio n on th at issu e at an y tim e. T h e d istrict co u rt’ s i n j u n ctio n p ro h ib it i n g t

h e NCA A f

ro m settin g a cap an y lo w er th an th e co s t of
atten d an ce th u s rem ain s in e ffe c t , w h ich m ean s th at th e NCA A ’ s ch allen g e to th at p o rtio n

o f th e in j u n ctio n is n o t m o o t.O’B A N N O N V

. N CAA 54

1. Capping the p e r

missible amount o f scholarships a t the cost of attendance

The district court did not clearly err in finding t h at allowing N CAA member schools to a w ard g rants-in-aid u

p to their f ull cost of att e n d a n c e would b e a substantially less restrictive alternative to the current compensation r ules. All of the evidence before the district c ourt indicated that r aising the g rant-in-aid cap to the c ost of attendance would have virtually n o i m pact on amateurism: Dr. Mark Emmert, the president o f t h e NCAA, testified at trial that g iving studentathletes scholarships up to their f ull costs of attendance would
not violate the NCAA’s principles of amateurism because all the money g iven to students would be g oing to cover their “leg itimate costs” to attend school. Other N C AA w itnesses
ag reed with that a ssessment. Id. a t 9 8 3

. Nothing in the record, moreover, sug g ested that consumers of colleg e sports would become less interested in those s p o r t s if athletes’

s c h o larships covered their full cost of attendance, or that an increase in the g rant-in-aid cap would impede the integ r ation of student-athletes into their academic communities. Id.

The NCAA, along with fi ft een scholars of antitrust law appearing as amici curiae
, w arns u s that if we affirm even t h i s more modest of the two less restrictive a lternative
restr a i nts identified b y the d istrict court, we will open the floodg a t e s to new lawsuits demanding all manner o f incremental chang e s in the NCAA’s and other o rg aniz ations’ rules. T he NCAA and these amici admonish us that as long

as a restraint ( such as a price cap) is “reasonably necessary to

a valid business purpose,” it should b e upheld; i t i s not an antitrust court’s function to tweak every market restraint that the court believes could be improved.O’B A N N O N V

. N CAA 55

W e ag ree w ith the NCAA and the amici that, as a g eneral matter, courts should not use antitrust law to make marg inal

a d justments to broadly reasonable market restraints. S e e,

e. g

. , Bruce Drug, Inc. v. H ollister, I nc. , 688 F .2d 853, 860 (1st Cir. 1 982) (noting that defendants are “not r equired t o adopt the least restrictive” alternative); Am. M otor Inns, Inc.

v. Holiday Inns, Inc.
, 521 F .2d 1230, 1249 (3d Cir. 1 975) (deny ing that “the availability of an alternative m e a n s o f achieving the asserted b usiness purpo se renders the ex isting
arrang ement u nlawful if that alternati v e would be less restrictive of competition no matter to how small a deg r ee”). The particular restraint at issue here, h o wever—the g rant-inaid cap that the N CAA set below the cost of attendance—is
not such a restraint. To th e contrary , the evidence at trial

s h owed that the g r ant-in-aid cap has n o relation whats o e v e r to the procompetitive purposes of t h e NCAA: by the NCAA’s own standards, student-athletes remain amateurs a s long a s any money paid to them g oes to cover leg itimate educational ex penses.

Thus, in holding that setting the g rant-in-aid cap at student-athletes’ full cost of attendance is a substantially less restrictive alternative und e r t he Rule of Reason, we are not declaring that courts are free to micromanag e o rg aniz ational rules or to strik e d own larg ely beneficial market restraints with impunit y

. Rather, our affirmance of this aspect of the district c ourt’s decision should be taken to establish o n ly that where, as here, a restraint is patently and inexplicably stricter than is necessary to accomplish all of its proco mpetitive objectives, an antitrust court can and should invalidate it a nd order it replaced with a less restrictive alternative.

A compensation cap set at s tudent-athletes’ full cost o f attendance is a substantially less restrictive alternative meansO’B A N N O N V

. N CAA 56

o f accomplishing the NCAA’s leg itimate p r ocompetiti v e purposes. And there is no evidence t h a t t h i s cap will sig nificantly increase costs; indeed, the N C AA already
p e rmits schools to fund student-athletes’ full cos t o f

a t t endance. T he district c ourt’s determination that t h e

ex isting compensation rules violate Section 1 of the Sherman Act wa s c o rrect and its injunction requiring the N CAA to permit schools to provide compensation up to the full cost o f attendance was proper.

2. Allowing students to receive cash compensation for their NI L s

I n our judg ment, however, the district court clearly erred in finding it a viable alterative to a l l o w students to receive NI L cash pay

ments untethered to the ir education ex penses. Ag ain, the district court identi fi ed two procompetitive
purposes served by the NCAA’s current rules: “preserving the popularity of the NCAA’s product by pr o m o t ing its current understanding of amateurism” and “integ ra t i n g academics and a thletics.” O’Bannon
, 7 F

. Supp. 3 d a t 1005; see also Board of R egents , 468 U.S. 117 (“I t is reasonable to assume that most of the reg ulatory controls of the NCAA a re j u stifiable means of fostering competition among amate u r

a t h l etic teams and therefore procompetitive because they enhan ce public interest in intercolleg iate athletics.”). The question is whether the alternative of allowing students to be paid NI L compensation unrelated to their education ex penses, is “virtuall y a s e ffective” in preserving amateurism as not allowing c ompensation. Cnty. of Tuolumne

, 236 F .3d at 1159 (internal quotation marks omitted).

W e cannot ag ree that a r u le p ermitting schools to pay students pure cash compensation and a rule forbidding themO’B A N N O N V

. N CAA 57

from pay ing NI L compensation are both equally effective in promoting amateurism and preserving c onsumer demand. 1 9 B oth we a

nd the district court ag r e e that t h e N CAA’s amateurism rule has procompetitive benefits. B ut in finding that pay ing s t u dents cash compensation would promote amateurism as effectively as n ot pay ing them, the di s t rict
court ig nored that n o t pay ing student-athletes is precisely what makes them amateurs

. 2 0

19 A l th ou g h o u r an aly sis f o cu ses on w

h eth er th e altern a tiv e serv es p ro co m p etitiv e p u rp o s es, o u

r p rio r cases m ak e clear t h at p lain tif f s m u st p ro v e th at an y altern ativ e w ill n o t s ig n if ican tly i n crease co sts to im p lem en t. Cn ty. o

f Tu o lu mn e , 2 3 6 F.3 d at 1 1 5 9

. A n d th e district co u rt h ere f ailed to m ak e an y f

i n d in g s ab o u t w

h eth er allo w in g sch o o ls to p ay stu d en t s N IL cash co m

p en s atio n w ill sig n ifi c a n t l y i n crease co sts to th e NCA A an d its m em

b er sch o o ls.

20 T h e d issen t su g g ests th at th e d istrict co u rt f o u n d am ateu rism itself h as

n o p ro co m

p etitiv e v alu e, an d th at “ [a]m ateu rism is relev an t o n ly

in so f ar

as p o p u lar d em an d f

o r co l leg e sp o rts is in creased b y co n su mer p ercep tio n s

o f an d d esire f

o r am ateu rism

. ” Dissen t at 7 0

. B u t th is ig n o res th at th e d istrict co u rt f

o u n d t h a t t h e NCA A ’ s “ cu rren t u n d erstan d i n g of

am ateu rism ” h elp s “ p reserv [e] th e p o pu larity o f t h e NCA A ’ s p ro d u ct.” A m ateu rism is n o t d iv o rced f ro m th e p ro co m

p etitiv e b en ef

it id en tif ied b y th e co u rt; it is its co re elem en t.

Elsew h e r e t h e d issen t arg u es th at “ w e are n o t task ed w ith d ecid in g

w h at m ak es an am ateu r an am ateu r,” Dissen t at 7 2 n .5
, an d th at “ th e d istin ctio n betw een am ateu r an d p ro f essio n al sp orts i s n ot f

o r th e co u rt to d elin eate. It is a lin e f

o r co n s u m ers to d raw ,” id

. at 7 1 n .4

. Ho w ev er, if

w e d o n o t h av e so m e sh ared co n cep tio n o f w h at m ak es an am at e u r a n

am ateu r—o r, m ore p recisely

, th e d if f e r e n ce b etw een am ateu rs an d
p ro f essio n als—th en th e d istrict co u rt’ s f in d in g s o n th e ro le o f am ateu rism in co lleg e sp orts m ak e n o sen s e. We m ay n o t ag ree o n all th e p articu lars, b u t th e b asic d if

f eren ce w as sp elled o u t b y Neal P ilso n , a w itn ess th e d istrict co u rt relied o n w h en d eterm in in g th at sm all cash p ay m en ts to stu d en t s w as a v iab le altern ativ e: “ if y ou ’ re p aid f o r p erf o rm an ce, y o u ’ re

n o t an am ateu

r.”O’B A N N O N V

. N CAA 58

Having found that amateurism is integ ral to the NCAA’s market, the district c ourt cannot plausibly conclude that being

a poorly -paid profess i o n a l colleg iate athlete is “ virtually a s effective” f

or that market as being as amateur. Or, to borrow the Supreme Court’s analog y , the market for colleg e football is distinct from other sport s markets a nd must be “differentiate[ d] ” from professional sports lest it b e c o me “minor leag ue [ football]

. ” B d. of Regents , 468 U.S. at 102.

Aside from the self-evident fa c t that pay ing students for their NI L rig hts will vitiate their amateur status as c olleg iate athletes, the court re l i e d on threadbare evidence in finding that s mall pay

ments o f cash compensation will preserve amateurism as well the NCAA’s r ule forbidding such
pay ments. Most of the e vidence elicited merely indicates that
pay ing students larg e compensation pay ments would harm

consumer demand more than smaller pay ment s w o uld—not that small cash pay

ments will preserve amateurism. Thus, the evidence was addressed to the wrong qu e s t i on. I nstead o f asking whether making small pay ments to st u dent-athletes served the same procompetitive purposes as making no pay ments, the evidence before the di s trict court went to a different question: W o uld the colleg iate s p o r ts market be better off if the NCAA made small pay men ts or big
pay ments? F or ex ample, the district court noted that a witness called by the NCAA, B ernard Muir, t h e athletic director at Stanford University

, testified that pay ing studentathletes modest sums raises less concern than p a y i n g them larg e sums. The d istrict court a lso relied on Dr. Dennis’s opinion survey , which the court read to indicate that in the absence of the NCAA’s compensation rules, “the popularity of colleg e sports would likely depend on the siz e o f pay ments awarded to student-athletes.” O’Bannon
, 7 F

. Supp. 3d at 983. Dr. D ennis had found that p ay ments of $200,000 perO’B A N N O N V

. N CAA 59

y ear to each athlete would alienate the p ublic more than would pay

ments of $20,000 per y ear. Id. at 975–76, 983. At best, these pieces of evidence indicate that small pay ments to pl a y ers will impact consumer demand less than larg er pay ments. B ut there is a stark difference between finding that small pay ments are less h armful to the market than larg e pay ments—and finding that pay ing students small sums is virtually as effective in promoting amateurism as n o t pay ing them.

The other e vidence cited by the district court is even less probati v e of whether p ay ing these student-athletes will
prese r v e amateurism a

nd consumer d emand. The district
court adverted to testimony from a sports manag ement ex pert, Daniel Rascher, w ho ex plained that a lthoug h opinion survey s had shown the public was o pposed to r ising baseball salaries during the 1970s, and to the decision of t h e I nternational Oly mpic Committee to a llow professional athle t e s t o compete in the Oly mpics, the public had c o ntinued t o watch baseball and the Oly

mpics at the same r ate after those c hang es. Id. at 976–77. B ut professional b aseball and the Oly mpics are not fit analog u es to colleg e sports. 2 1 T h e Oly mpics have not been nearly a s transformed by the introduction of professionalism as colleg e sports would be.

F inally

, the district court, and the dissent, place particular weig ht on a brief interchang e during plaintiffs’ cross21 T h e d i strict co u rt also co n sid ered ev i d en ce th at Div isio n I ten n i s

recru its are p erm i tted to earn u p to ten th o u s an d d o llars p er y ear in p rize

m o n ey f ro m ath letic ev en ts b ef

ore t h ey en ro ll in co lleg e. O’Ba nn o n , 7 F. Su p p . 3 d at 9 74 , 1 0 0 0 . A llo w in g co l leg e- b o u n d ten n is p lay ers to accep t

aw ard m o n ey f

ro m ou tsid e at h l e tic ev en ts im p licates am ateu

rism d if f eren tly th an allo w i n g sch o o ls to p ay

stu den t- ten n is p lay ers d irectly

.O’B A N N O N V

. N CAA 60

ex a mination of one of the NCAA’s witnesses, Neal Pilson, a television sports consultant formerl y employ ed at CB S. Pilson testified that “ if y ou’r e p ai d for y our performance,
y ou’re not an a mateur,” and ex p lained at leng th why pay ing students would h arm the student-athlete market. Plaintiffs then asked Pilson whether his o p i n i o n s about amateurism “depend on the level of the money ” paid to p lay ers, and he acknowledg ed that his opinion was “impacted by the level.” W h en asked whether there was a line that “shoul d not be

c r o ssed” in pay ing play ers, Pilson r esponded “that’ s a difficult question. I haven’t thoug ht about the l i n e. And I haven’t b e e n asked to render an opinion on that.” W h en pressed to come up with a fig ure, Pilson repeated that h e was “not sure.” H e e v entually commented that “I tell y ou that a million dollars would trouble me a n d $5,000 wouldn’t, but that’s a p retty g ood rang e.” When asked whether deferred compensation to students would concern him, Pilson said that while he would not be a s concerned b y deferred pay ments, he would still be “troubled by it.” 2 2

So far as we can determine, Pilso n ’s offhand comment under cross-ex amination is the s o le support for the district court’s $5,000 fig ure. B u t even taking Pilson’s comments at face value, a s the dissent urg es, h is testimony cannot support the finding that pay ing student-athletes small sums w ill be virtually as effective in p r eserving amateurism as n o t pay ing them. Pilson made clear that he w as not prepared to opine on

22 L ater in h is cro ss-ex am in atio n , P ilso n w as ask ed if “ t h e p u b l ic

w atch es co l leg e sp o rts b ecau se th ey p erceiv e stu d en t ath letes as p lay i ng f o r th e lo v e of th e g am e an d fo r th e v alu e an d op p o rtu n ities av ailab le to th em f ro m a co lleg e ed u catio n ? ” P ilso n resp o n ded th at th at w as “ o n e o f th e reaso n s th at

. . . w o u ld b e j eo p ard i zed .” He th en co m m en ted th at “ th e p u b lic h as

. . . a sen se o f co l leg e sp o rts th at is d if f eren t f ro m p ro f essio n al [sp o rts] an d it’ s at th e b ed ro ck o f th e p op u larity

o f co lleg e sp o rts.”O’B A N N O N V

. N CAA 61

whether pure cash compensation, o f any a mount, would affect amateurism. I ndeed, he was never asked about the impact o f
g iving student-athletes small cash pay ments; instead, l ike other witnesses, he w a s a sked o nly w hether big pay ments would be wors e t han small pay ments. Pilson’s casual comment—“[ I ] haven’t been a sked t o r en der an opinion on that. I t’s not in my report”—that he would not be troubled b y $5,000 p ay

ments is simply not enoug h to support the district court’s far-r e ac hing c onclusion that pay ing students $5,000
per y ear will be as effective in preserving amateurism as the NCAA’s current policy

. 2 3

The d ifference b etween offering student-athletes education-related c o mpensation and offering them cash sums untethered to educational ex penses is not minor; it is a quantum leap. 2 4 Once that line is crossed, we see no b asis for

2 3 T h e d issen t co n ten ds th at th e reco rd s u p p orts th e f

in d in g th at $ 5 ,0 0 0
p a y m e n ts to stu den t- ath letes w i ll h av e little to n o ef f ect o n co n su

m e r d em an d f o r co lleg e f

o o tb all. D issen t at 6 8 n .3
, 72 (su g g estin g th e d istrict

co u rt f o u n d “ th e d istin ctio n b etw een of f erin g s tu d e nt -a t h letes n o

co m pen satio n an d of

f erin g th em a s m all am o u n t o f co m p en satio n is so

m in o r th at it m o st lik ely w il l n o t im p act co n su

m er d em an d in an y

m ea n i n g f u l w ay ”). B u t th ere is l ittle ev id en ce in th e reco rd ab o u t th e im p act of th ese $ 5 ,0 0 0 NIL p ay m en ts. T h ere is ev id en ce o n ly t h at sm all
p ay m en ts w ill b e less h a rmfu l th an larg er p ay m en ts, an d t

h at a sin g le

w itn ess w o u ld n o t b e as tro u b led b y $ 5 ,0 0 0 p ay

m en ts. T h is is n o t en o u g h f o r p lain t i ffs to m eet th eir b u rd en to sh ow th at p ay m en ts to stu d en tath l etes w ill b e as ef

f e c t i v e in preserv in g co n su m er d em an d as th e NCA A ’ s cu rren t am ateu rism p o l icy

.

24 T h e district co u rt su g g ested th at co m p en satin g ath letes b ey on d th e f u l l

co st o f atten d an ce w o u ld n o t be p ro b lem atic b ecau se stu d en t- ath letes are alread y p erm itted to accep t P ell g ran ts th at raise th eir to t a l a i d p ack ag e ab o v e th e co st o f atten d an ce. O’Ba n n o n , 7 F. Su p p . 3 d at 1 0 0 0 ; Dissen t at 6 5. T his reaso n in g w as f au lty b ecau se it im

pro p erly eq u ates

co m pen satio n in ten d ed f

or ed u catio n

- related ex p en ses ( i.e.
, P ell g ran t s)O’B A N N O N V

. N CAA 62

returning to a rule o f a m a teurism and no defined stopping point; we ha ve little doubt that plaintiffs w ill continue to challeng e the arbitrary limit i m p o s e d b y the district court until they have captured the full value o f their NI L

. At that point the NCAA will have surrendered its amat eurism principles entirely and transitioned from its “particular brand of football” to minor leag ue status. Bd. of Regents
, 468 U.S.
at 1 0 1–02. I n lig ht of that, the meag er evidence in the record, and the Supreme Court’s admonition that we must a fford the NCAA “ample latitude” to superintend colleg e athletics, Bd. of Regents
, 4 6 8 U

. S. at 120, w e think it is clear the district
court erred in concluding that s mall pay ments in deferred compensation are a substantially le s s restrictive a lternative restraint. 2 5 W e thus v acate that p ortion o f the district court’s decision and the portion of its injunction requiring the NCAA
to allow its m e m ber schools to pay this deferred compensation.

w ith p u re c a s h c o m

pen satio n

. T h e f

act th at P ell g ran ts (w

h ich are

av ailab le to ath letes an d n o n ath letes alik e) h av e n o t ero d ed th e NCA A ’ s

c u ltu re o f am ateu

rism say s little ab o u t w

h eth er cash p ay

m en ts in to t r u s t f u n d s to co m

p en sate stu d en t

- ath letes f o r th eir p ro w ess o n th e g rid iro n or th e co u rt w ou ld d o so

.

25 T h e d issen t criticizes u s f o r citin g “ n o reco rd ev id en ce to su pp o rt [o u r]

co n clu sio n

th at p ay in g stu d en t- ath letes $ 5 ,0 0 0 in d ef erred co m p en satio n

w ill sig n if

ican tly red u ce co n su

m er d em an d .” Dissen t at 6 8 n

. 3

. Bu t w e d o n o t d ecid e, a n d t h e NCA A n eed n o t p ro v e, w h eth er p ay in g stu d en t ath l etes $ 5 ,0 0 0 pay

m en ts w ill n ecessarily red uce co n su m er dem an d

. T h e p ro p er in q u iry in th e Ru le o f Reaso n ’ s t h ird step is w

h eth er th e plain tif

f s h av e sh ow

n th ese p ay

m en ts w ill n o t red

u ce co n su m er d em an d (relativ e to th e ex istin g ru les). A n d w e co n clu d e th ey h av e n o t.O’B A N N O N V

. N CAA 63

V

B y way of summation, we wish to emphasiz e the limited
scope of the decision w e have reached and the remedy we h a ve a pproved. Today

, w e r eaffirm that NCAA reg ulati o n s

are subject to antitru s t s crutiny a nd must be tested in the crucible of the Rule of Reason. W hen those reg ulations truly

serve procompetitive purposes, courts shou ld not hesitate to uphold them. B u t the NCAA is not a b ove the antitrust laws, and courts cannot and must not shy away from requiring

the NCAA to p l ay by the Sherman Act’s rules. I n this case, the NCAA’s rules have been more res t ri ctive than necessary to maintain its tradition of amateurism in support of the colleg e sports market. The Rule o f Reaso n requires that the NCAA permit its schools to p r o vide u p to the cost of a ttendance to their student athletes. I t does not require more.

W e vacate the district court’s judg ment and p ermanent injunction insofar as they require the N C A A to a llow its member schools to p ay student-athletes up to $5,000 per y e ar in deferred compensation. W e otherwise affirm. The parties shall bear their own costs on appeal.

AF F IRMED IN P ART and VACATED IN P A RT.O’B A N N O N V

. N CAA 64

THOMAS, Chief J u dg e, concurring in part and dissenting in part:

I larg ely agr ee with all but one of the majority ’s

c o n clusions. 1 I respectfully disag ree with the majorit y ’s conclusion that the district court clearly e rred in o rdering the NCAA to permit up to $5,000 in defe rred compensation above student-athletes’ full cost of attendance.

I

W e review the district court’s d e t e rminations of fact for clear e rror. W e are not permitted to “review the evidence de

novo and freely substitute o u r judg ment for that of the trial judg e.” U

nited States v. Ironworkers Local 86
, 443 F .2d 544, 549 (9th Cir. 1971). Rather, the clear error standard “ is sig nificantly deferential, and we will accept the lower court’s finding s o f fact unless we are left with the definite and f irm conviction that a mistake has been comm i t t e d .” Lentini v

. Cal. Ctr. for the Arts
, Escondido

, 370 F .3d 837, 848-49 (9th Cir. 2004).

There was sufficient evidence in the record to support the award. The district court’s conclusion tha t t h e proposed alternative restraint satisfied the Rule of Reason was based on testimony from a t least four ex perts–including three ex perts

1 T h e m a j o r ity co n clu d es th at th e p lain t if f s estab lish ed an titru st in

j u ry in f act b ecau se th e N C AA h a s f o reclo sed th em f

ro m th e m ark et f

or th e ath l etes’ n am es, im ag es, an d lik en esses (“ NIL s”) in v id eo g am es. B ecau se w e are b o u n d by In re NCAA S tu d en t-Ath lete Na me & Liken ess Licen sin g Litig

. ( “Keller”)

, 72 4 F.3 d 1 2 6 8 (9 th Cir. 2 0 1 3 ), a case in w h ich I d issen ted

, I ag ree th at th e p lain tif f s h av e s u f f icien tly estab lish ed an titru st in j u ry

. Ho w ev er, ab sen t Keller , th ere is a serio u s q u estio n as to w h eth er th e p lain tif

f s h av e estab lish ed

th e req u i site an t itru st in

j u ry in f act.O’B A N N O N V

. N CAA 65

presented by the NCAA–that providing student-athletes with small amount s o f c ompensation above their cost of attendance
most likely would not h ave a sig nificant impact on consumer interest in colleg e sp o r ts. O’Bannon
, 7 F

. Supp. 3d at 976–77, 983–84, 1000–01. I t was also based on the f act that F B S football play ers a r e cu rrently permitted to a ccept Pell
g rants in e x cess o f t h eir cost of attendance, and the fact that Division I tennis recruits are permitted to earn up to $10,000
per y e ar i n p r iz e money from athletic events before they enroll i n co l leg e. Id. at 974, 1000. The majority characteriz es the weig ht of this e v idence as “t h r eadbare.” Op. at 58. I

respectfully

disag r ee.

The NCAA’ s o wn ex pert witness, Neal Pilson, testified that the level of deferred compensation would have an effect

on consumer demand for colleg e athl etics, but that pay ing student-athletes $5,000 per y ear in trust most likely would not have a sig nificant impact on such demand. He also testified that any neg ative impact that pay ing stude n t

- a thletes mig ht have on consumer demand could be partially mitig ated b y placing the compensation in a trust f und t o b e paid o ut a fter
g raduation.

The majority d i s m isses this testimony because it was made in a very “offhand” manner, a nd because Pilson prof f e r ed the $5,000 amount on cross-ex amination “[ w] h en pressed.” Op. at 60. Howe v e r , the NCAA presented this witness as a

n ex pert on the issue of whether pay ing colleg e athletes w ill neg a tively impact consumer demand for colleg eO’B A N N O N V

. N CAA 66

sports. 2 Pilso n t e stified at leng th on the topic, and his qualifications were not challe n ged. I t is not appropriate for

us on appeal to assess d emeanor we did not see. As a r esult,

2 P ilso n ’ s testim o n

y in clu d ed th e f

o l lo w in g ex ch an g es:

Q : O k ay

. A n d let m e j u st tu rn f in ally to y o u r l a s t

o p in i o n j u st b rief

l y , Mr. P ilso n , reg ard in g w h eth er p ay in g b ask etb al l a n d f o o tb all p lay ers in co lleg e th reat e n s t

h e po p u l arity o f co l leg e s p o rts w ith th e telev isio n au d ien ce. J u st b rief ly sir, ov er th e co u rse of
y o u r career in th e sp o rts b ro ad cast i n d u s t r y , h av e y ou

co m e to h av e o p in i o n s ab ou t w h y v iew ers are in terested in co lleg e sp o rts o n

telev isio n ?

A : Yes, I h av e.

Q: A n d h o w

d id y o u co m e to h av e th o se o p in i o n s?

A : I [sic] b een in th e in du stry f or 4 0 y e a r s. I’ v e acq u ired an d telecast th o u s an d s o f h o u r s of co lleg e sp o rt s

. I w atch co lleg e sp orts an d ev alu ate th em , so I h av e a p r e t t y g o o d h an d le o n th e in du stry

. Of co u rse, I h av e p erso n al o p in io n s as w ell, b u t I certain ly

— I ’ v e

w o rk ed in th e in du stry

a lo n g tim e.

* * * *

Q: O k ay

. No w , y o u r o p in io n s ab o u t w h y th i s w o u ld b e d am ag in g to t h e sp o rt are b ased o n y o u r—w h at y ou th in k v iew ers ap p reciate, w h at th e p u b l i c perceiv es. I h av e th at co rrect?

A: Y es. A n d I w o u ld su g g est I’ v e b een in th at b u sin ess m easu rin g v i ew ers—m y w h o le j o b at C B S

o v er 2 0 y ears w as to try

to f ig u re o u t w

h at th e v iew ers

w an ted to w atch an d g iv e it to th em , so I’ m n o t a lay m an o n th at su bj ect.O’B A N N O N V

. N CAA 67

I would take the testimony a t face v alue, and the district court did not clearly

err in crediting

it.

The majority also dismisses the testimony g iven by ex pert wit n e s s Dr. Daniel Rascher d emonstrating that consumer interest in major leag ue baseball and the Oly mpics increased after baseball play

e rs’ salaries rose a

nd professional athletes

were allowed to compete i n the Oly mpics. T he majority

reasons that major leag ue baseball and the Oly mpics are “ not fit analog ues to colleg e sports,” speculating th a t c o lleg e sports would be m ore sig nificantly transformed b y professionalism than have the Oly m p ics. Op. at 59. However, the majority d oes not offer any evidentiary support for the distinction, nor ex plain how or why the district court clearly erred in crediting

this testimony

.
Moreover, Rascher also testified that consumer demand in sports such as tennis and rugby increased after the sports’
g overning boards permitted a thletes to receive pay ment. O’Bannon
, 7 F

. Supp. 3d at 977. I n my v i e w , t he majority

errs in dismissing this testimony

. T h e i mport of Rascher’s testimony w as that consumer demand ty pically does not decrease when athletes are permitted to receive pay ment, a nd that this g eneral principle h olds true across a wide variety of sports and competitive f

o r m a t s. The district court did not clearly err in crediting

it.

The district court accepted t h e testimony of multiple

ex p erts that small amounts of compensation w ould not affect

consumer demand, and then used the lowes t a m o untO’B A N N O N V

. N CAA 68

sug g ested by

one of the NCAA’s ex perts. The district court was within its rig ht to do so. 3

I I

The disag reement between my v i ew and the majority view larg ely boils down to a difference in opin i o n as to the procompetitive interests at stake. The majority c haracteriz e s

our task at s t e p t h r ee o f the Rule of Reason a s d etermining “whether the alternative of allowing students to be paid NI L compensation unrelated to their edu cation e x penses is ‘virtually as effe ctive’ in preserving amateurism as not allowing compensation.” Op. at 56 (emphasis added). This conclusion misstates our inquiry

. Rather, we must determine whether allowing student-athletes to be compensated for their NI L s is ‘virtually as effective’ in preserving popular demand for c ollege sports as not allowing c o mpensation. I n terms o f antitrust analy sis, the concept o f amateurism is relevant only insofar as it relates to consumer interest.

3 T h e m aj o rity s tates th at it “ can n o t ag ree th at a ru le p erm ittin g sch o ols
to p ay stu d en t s pu re cash co m p en satio n an d a ru le f

o rb id d in g th em

f ro m p ay in g NIL co m

p en satio n are b o th eq u ally ef f ectiv e i n pro m o tin g

am ateu rism a n d p r e serv in g co n su m er d em an d .” Op

. at 5 6

– 5 7

. A n d y et th e m aj o rity cites n o reco rd ev id en ce to su p p o rt its co n clu sio n th at p ay in g stu d en t

- ath l etes $ 5 ,0 0 0 in d ef erred co m pen satio n w ill s ig n if

ican tly red u ce

co n su m er d em an d

. Rath er, th e m aj o rity declares th at it is a “ self

- ev id en t f act” th at “ [t]h e d if

f eren ce b etw e en of

f erin g stu d en t- ath letes ed u catio n

related co m

p en satio n an d of

f erin g th em cash su m s u n t eth ered to ed u cat i o n a l e x p e n s es is n o t m in o r; it is a qu an tu m leap .” Op

. at 5 8
, 6 1

. T o th e co n trary , th e d istrict co u rt co n clu d ed af

ter a f u ll b en ch trial th at th e d istin ctio n b etw een o f

f erin g s tu d en t

- ath letes n o co m p en satio n an d

o ffe rin g th em a sm all am o u n t o f co m p en satio n is so m in o r th at i t m o s t lik ely w ill n o t im

p act co n s u m er dem an d in an y m ean in g f u l w ay

. S

ee O’Ba n no n , 7 F. Su

p p . 3 d at 9 76

– 77 , 9 8 3

– 8 4 , 1 00 0

– 0 1

.O’B A N N O N V

. N CAA 69

The district court fo u nd that there are two, limited procompetitive b enefits to the cur r e n t rule. I t found that limits on larg e a m ounts of student-athlete compensation
preserve the p opularit y o f the NCAA’s product, and that limits on larg e amounts of s tudent-athlete compensation promote t he integ ration of academics and athletics. O’Bannon
, 7 F

. Su p p

. 3d at 1004–05. I n reaching these conclusions, the district court ex plained:

[ S] ome restrictions on compensation may still

serve a limited p rocompetitive purpose if they

are necessary to maintain the p opularity o f F B S football and Division I basketball. I f the

c h a l l e n g e d r e s t r a i n t s a c t u a l l y p l a y a substantial role in max imiz ing consumer d e m a n d f

o r t h e N C A A ’ s p r o d u c t

— specifically

, F B S football and Division I basketball telecasts, re-broadca s ts, ticket sales, and merchandise—then the restrictions

wo u ld be procompetitive. Id. a t 1000 (emphasis added).

The district court recounted the testimony of N C AA

ex p ert witness Dr. J

. Michael Dennis, who cond u cted a survey of consumer attitudes concerning coll eg e sports in 2013. T he court found that “[ w] hat D r. D ennis’s survey does

s u ggest is that the public’s a ttitudes toward student-athle t e compensati o n depend heavily on the level of compensation that student-athletes would receive.” Id. at 1000–01. I t noted that this conclusion “is consistent wi t h the testimony of the NCAA’s o wn w itnesses, including [ Stanford athletic director B ernard] Mui r an d Mr. Pilson, who both indicated that smaller pay

ments to student-athletes would bother them less than larg er pay

ments.” I d. at 1001.O’B A N N O N V

. N CAA 70

The district court determined that “the evidence presented
at trial sug g ests that consumer demand for F B S football a nd Division I basketball-related p r o d u c ts is not driven by the restrictions on student-athl ete compensation but instead b y other factors, such as school loy alty and g eog r aphy .” Id. The court therefore concluded that:

the NC A A ’s restrictions o n student-athlete compensation play a limited r o l e in driving

consumer demand for F B S football and D i v i s i o n I b a s k e t b a l l

- re l a t e d p r o d u c t s

. Althoug h t h e y mig ht justify a r estriction on larg e pay ments t o student-athletes while in school, they do n ot justify the rig id prohibition on c ompensating student-athletes, i n the present or in the future, with any shar e of licensing revenue g enerated f rom the use o f their names, imag es, and likenesses.

Id.

The district c o u r t ’ s finding s of fact provide that o ne procompetitive benefit of t h e cu r rent rule is that restricting larg e pay ments to student-athletes p l ay s a limited role in preserving the popularity of the NCAA’s prod u cts. I n the
contex t of this antitrust suit, the concept of “amateurism” is useful only to the ex tent that it furthers this g oal. I n terms o f antitrust analy sis, amateurism i s relevant only insofar a s popular demand for colleg e sp orts is increased by consumer perceptions of and desire for a mateurism. Viewed throug hO’B A N N O N V

. N CAA 71

the antitrust lens, it is consumer desi r e t h a t we must credit; not the NCAA’s preferred articulation of the term. 4

Plaintiffs are not r equired, a s the majority sug g ests, to show that the proposed alternative s are “virtually a s effective” at preserving t he concept of amateurism as the NCAA chooses to define it. I ndeed, this would be a d ifficult task, g iven that “amateurism” h as proven a nebulous concept prone to ever-chang ing definition. See O’Bannon
, 7 F

. Supp. 3d at 9 73–75 (describing the way s that the NCAA ’s definition of amateurism has c hang e d over tim e ). Even today

, the NCAA’s c onception o f amateurism does not fall

4 T h e m aj ority arg u es th at “ [h ]av in g f o u n d am ateu rism is i n teg ral to th e NCA A ’ s m ark et, th e d istrict co u rt can n o t p l au sib ly co n clu d e th at b ein g a p o o rly

- p aid p ro f

essio n al ath lete is ‘ v irtu ally as ef f ectiv e’ f o r th at m ark et

as b ein g an am ate u r

. Or, t o b o rro w th e Su p rem e Co u rt’ s an alo g y , th e

m ark et f o r co lleg e f

o o t b all i s d istin ct f

ro m oth er sp o rts m ark ets an d m u st b e ‘ d if f eren tiate[d ]’ f

ro m p ro f essio n al sp o rts l est it b eco m e ‘ m in o r leag u e [f o o t b all].’ ” Op . at 5 8

. T h e district co u rt f o u n d th at am ateu rism

p lay ed

a lim ited ro le in p reserv in g th e p o p u larity o f co lleg e sp o rts, an d t h at o th er f acto rs, su ch as sch o o l lo y alty

, serv ed as th e prim ary f o rce d riv in g in terest in co lleg e ath letics. O’Ba n no n , 7 F. Su p p

. 3 d at 1 0 0 0

. B u t I ag ree t h at an

an titru s t co u rt sh ou l d n o t elim in ate t h e d istin ctio n b etw een p ro f essio n al

an d co lleg e sp orts; to d o so w o u ld u n derm in e co m p etitio n . Ho w ev er, in
term s o f an t itru st an aly sis, th e d i s t i n ctio n b etw een am ateu r an d
p r o fe s s i o n al sp o rts is n ot f o r t h e co u rt to d elin eate. It is a lin e f o r

co n su m ers to d raw

. If co n su

m ers b eliev e th at p ay in g co ll eg e f o o t b all
p lay ers $ 5,0 0 0 to b e h eld in tru st f or u se o f t h eir N IL s w ill co n v ert co lleg e f o o tb all in t o pro f

essio n al f

o o tb all, an d as a co n seq u en ce th ey sto p

w atch in g co lleg e f

o o tb all, th en th e p ro p osed altern ativ e w ill n o t b e

v irtu ally as ef

f ectiv e as th e cu rren t ru le. B u t , tak en to its l iteral ex trem e to p ro h ib it ev en sm all, d ef erred p ay m en ts, th e id ea th at “ if y ou ’ re paid f or p erf o rm an c e, y o u ’ re n ot an am ateu r,” O p

. at 5 7 n .2 0
, d o es n o t ref l ect

co n su m er b eh av io r. T h e d istrict co u rt m ad e f actu al f i n d in g s t h at m o dest
p ay m en ts, in clu d in g th o se h eld in tru st, w o u ld n o t sig n if ican tly a f f ect

co n su m er d em an d. S

ee O’Ba n n o n , 7 F. S u

pp

. 3 d at 9 7 6

– 77
, 9 8 3

– 8 4
, 1 0 0 0

– 0 1

. T h eref

o re, I can n o t co n clu d e t

h at th e d i strict co u rt clearly erred

.O’B A N N O N V

. N CAA 72

easily into a brig ht line rule between pay ing student-athletes and not pay ing them. Tennis play ers are permitted to receive
pay ment of up to $10,000 per y ear for play ing their sport. A tennis play er who beg i n s c o m p eting at a y o ung ag e could presumably earn upwards of $ 50,000 for play ing h is sport a nd still be considered an amateur athlete by the NCAA. 5

The NCAA insists that consumers will flee if studentathletes a re paid even a small sum of money for colleg e s’ use of their NI L s. This a s s er t ion is contradicted by the district
court r e cord and b y t h e NCAA’s own rules reg arding amateurism. The distr i c t c o urt was well within its r ig ht to reject it. Division I schools have spent $ 5 billion on athletic facilitie s o v e r the p ast 15 y ears. The NCAA sold the television rig hts to broadc a s t the NCAA men’s basketball championship tournament for 12 y ears to CB S for $10.8 billion dollars. The NCAA insists that t h i s m ulti-billion dollar industry would be lost if the teenag ers and y oung adults who play for these colleg e teams e arn one dollar above
t heir cost of school attendance. That is a difficult ar gu m e n t to swallow. G iven the trial evidence, t h e d i s t rict court was well within its rig hts to reject it.

5 T h e m aj ority states th at “ in f in d in g t h at p ay in g stu d e n t s c a s h

co m pen satio n w o u ld pro m o t e am ateu rism as ef f ectiv ely as n o t p ay in g th em , th e d istrict co u rt ig n o red th at n o t p ay in g stu d en t- ath letes is p recisely wh a t ma kes t

h em a m a teu rs. ” Op

. at 5 7

. T h i s is n o t tru e ev en u n d er th e NCA A ’ s cu rren t d ef

in itio n o f th e term

. B u t m o re im p ortan tly

, w e are n o t task ed w i th

d ecid in g w

h at m ak es an

am ateu r an am ateu r. W e are task ed

w ith d eterm in in g w

h eth er a p ro p o sed less- restrictiv e altern ativ e restrain t

w ill af f ect co n su m er d em an d

.O’B A N N O N V

. N CAA 73

I I I

The national debate about amateurism in colleg e sports is important. B ut our task as appellate judg es is not to resolve it. Nor c ould we. Our task i s s i m p l y to review the district
court judg ment throug h the appropriate lens of antitrust law and under the appropriate standard of review. I n the end, my disag reement w ith the majority is founded on the appropriate standard of review. After an ex tensive bench trial, the district
court made a factual finding that pay m e n t o f $5,000 in deferred compensation would not sig nificantly reduce

consumer demand for colleg e sports. This f inding was supported by ex tensive testimony from at leas t four ex pert witnesses. There was no evidence to the contrary

. Therefore,

on this record, I cannot a g ree wit h t h e majority that the district court clearly e rred w hen it determined tha t pay ing student-athletes up to $ 5,000 per y ear would be “virtually a s effective” at preserving the pro-competitive benefit s o f the
current rule. Therefore, I would affirm the district c ourt in all respects.

F or these reasons, I

concur in part and dissent in part.