Opinion ID: 4535062
Heading Depth: 4
Heading Rank: 4

Heading: Procompetitive Effect

Text: The district court then turned to the NCAA’s asserted procompetitive justifications. In pertinent part, the NCAA argued that the challenged rules implement “amateurism,” which drives consumer interest in college sports because “consumers ‘value amateurism.’”8 Id. at 1070 (internal citation omitted). The district court accepted this justification with respect to the NCAA’s limits on cash compensation untethered to education, but not as to its limits on non-cash education-related benefits. Id. at 1082–83, 1101–02. As a preliminary matter, the district court found no proof that the challenged rules directly foster consumer demand. Id. at 1070. It acknowledged the NCAA’s theory that its rules safeguard “amateurism” for consumers’ benefit, but the 8 This justification is the only one raised on appeal. The district court rejected the NCAA’s other proffered justification (abandoned on appeal): The challenged rules purportedly enhance student-athletes’ college education by integrating them into the wider campus community. Id. at 1083–86, 1102–03. The district court declined to find that the challenged rules improve academic performance or prevent a social “wedge” between athletes and non-athletes. Id. at 1083–85, 1102–03. To the contrary, it found that the challenged rules foster resentment by permitting expenditures on “frills, like extravagant athletes-only facilities.” Id. at 1085–86, 1103. 22 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. meaning of that term eluded the court.9 See id. at 1070–71 (noting former SEC commissioner’s testimony that he “do[es not] even know what [amateurism] means” (internal citation omitted)). Though the NCAA defined amateurism during the litigation as “‘not paying’ the participants,” id. at 1071 (internal citation omitted), the district court observed that this purported pay-for-play prohibition is riddled with exceptions. See id. at 1071–74. After cataloguing the long list of above-COA payments that the NCAA permits, the court then reached two conclusions: (i) the challenged rules “do not follow any coherent definition of amateurism . . . or even ‘pay,’” and (ii) these payments (many of which post-date O’Bannon) have not diminished demand for college sports, which “remain[] exceedingly popular and revenue-producing.” Id. at 1074. On the question of consumer demand, the district court found Student-Athletes’ evidence regarding the effect (or lack thereof) of above-COA compensation on demand more compelling than the NCAA’s. For instance, in the battle of economic experts, the district court found the NCAA’s only demand expert, Dr. Kenneth Elzinga, unreliable because he failed to study “standard measures of consumer demand, such as revenues, ticket sales, or ratings,” but instead relied on interviews with NCAA affiliates introduced to him by 9 The NCAA’s “Principle of Amateurism” provides that studentathletes’ “participation should be motivated primarily by education and by the physical, mental and social benefits to be derived,” that their “participation in intercollegiate athletics is an avocation,” and that they “should be protected from exploitation by professional and commercial enterprises.” Id. at 1070 (internal citation omitted). IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 23 defense counsel. Id. at 1075. The district court further found his analysis irrelevant as he refused to study consumer response to historical changes in compensation levels based on the false premise that the NCAA’s amateurism rules have not materially changed over time. Id. By contrast, the district court credited Student-Athletes’ expert Dr. Daniel Rascher’s demand analysis, which was based on two natural experiments and, in some respects, corroborated by defense witnesses. Id. at 1076–78, 1100. The first experiment—comparing consumer demand before and after the August 2015 increase to the grant-in-aid limit, which resulted in “thousands of class members receiving significant” above-COA payments, including SAF and AEF distributions—demonstrated “no negative impact on consumer demand.” Id. at 1076. In fact, Dr. Rascher found that revenues from D1 basketball and FBS football, “one of the best economic measures of consumer demand,” have increased since 2015. Id. at 1076–77; see also id. at 1078 (noting corroborating testimony by an NCAA Rule 30(b)(6) witness and a Big 12 Rule 30(b)(6) witness). The second experiment—comparing demand before and after the University of Nebraska (of the Big Ten) began providing athletes up to $7,500 in post-eligibility education-related aid—likewise did not demonstrably reduce interest in Nebraska sports or FBS football and D1 basketball more broadly. Id. at 1077–78. The district court also found Student-Athletes’ survey expert, Dr. Hal Poret, considerably more persuasive than the NCAA’s, Dr. Bruce Isaacson. Id. at 1078–80, 1100–01. Dr. Isaacson asked respondents why they watch college sports and listed “amateurs and/or not paid” as one possible reason, but failed to indicate that “amateurs” means “not 24 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. paid” or to otherwise define “amateurs,” thus “render[ing] the responses hopelessly ambiguous.” Id. at 1078. Moreover, he measured only consumer preference and conceded that he did not attempt to study behavior. Id. at 1079. By contrast, Dr. Poret tested behavior and found that consumers would continue to view or attend college athletics (at the same rate) even if eight types of compensation that the NCAA currently prohibits or limits were individually implemented. Id. at 1079–80. The district court credited this conclusion. Id. at 1079–80 & n.24. Testimony by NCAA lay witnesses that “student” status drives demand also failed to persuade the district court of a connection between the challenged compensation regime and demand. Id. at 1082, 1101. It reasoned that “student-athletes would continue to be students in the absence of the challenged rules,” id. at 1082, relying on O’Bannon II’s observation that higher education “would still be available to student-athletes if they were paid some compensation in addition to their athletic scholarships,” id. at 1101 (quoting O’Bannon II, 802 F.3d at 1073). It also underscored the absence of evidence that the NCAA had promulgated its rules based on demand analyses. Id. at 1080, 1100–01. Despite finding the NCAA’s procompetitive theory largely unpersuasive, the district court “credit[ed] the importance to consumer demand of maintaining a distinction between college sports and professional sports.” Id. at 1082. The court then found that some NCAA rules—the COA limit on the grant-in-aid, limits on compensation unrelated to education, and limits on cash awards for graduating or other academic achievements—serve that purpose by precluding “unlimited payments unrelated to education, akin to salaries seen in professional sports leagues.” Id. at 1082–83; see also IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 25 id. at 1101–02. But the court concluded that limits on “noncash education-related benefits,” such as post-eligibility graduate scholarships or tutoring, do not have that effect; it reasoned that such benefits “could not be confused with a professional athlete’s salary” and would only “emphasize that the recipients are students.” Id. at 1083.