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Edward O'bannon, Jr. v. Ncaa
Citation: Not availableDocket: 14-16601
Court: Court of Appeals for the Ninth Circuit; September 30, 2015; Federal Appellate Court
Original Court Document: View Document
The Ninth Circuit Court of Appeals addressed an antitrust case involving the NCAA's rules on student-athlete compensation. The court affirmed in part and reversed in part the district court's ruling, which had declared the NCAA's amateurism rules an unlawful restraint of trade under the Sherman Antitrust Act. The district court had barred the NCAA from preventing member schools from offering student-athletes scholarships covering the full cost of attendance and permitting up to $5,000 per year in deferred compensation. The panel determined that the NCAA's rules were not immune from antitrust scrutiny, clarifying that the Supreme Court's prior decision in NCAA v. Bd. of Regents did not validate these rules as lawful. The court found sufficient evidence that the plaintiffs had standing by demonstrating potential financial loss due to the NCAA's restrictions, which likely deterred video game companies from compensating them for their names, images, and likenesses. While acknowledging some procompetitive aspects of the NCAA's rules, the panel concluded that they imposed significant anticompetitive effects in the collegiate market by controlling the cost structure for recruits. The court supported the district court’s allowance of full-cost attendance scholarships but vacated the decision permitting up to $5,000 in deferred compensation, deeming that remedy erroneous. Chief Judge Thomas partially concurred and dissented, arguing against the majority’s view on the deferred compensation issue. Counsel for the Defendant-Appellant and Plaintiffs-Appellees includes prominent law firms from Washington, D.C., San Francisco, and other locations, with various amici curiae being represented by distinguished legal representatives from multiple organizations and areas of expertise. The case revolves around the application of Section 1 of the Sherman Antitrust Act, which prohibits contracts or conspiracies that restrain trade. The NCAA has historically enforced rules that prevent student-athletes from being compensated for their names, images, and likenesses. The central issue is whether these NCAA rules are subject to antitrust laws and if they constitute an unlawful restraint of trade. Following a bench trial, the district court determined that the NCAA’s rules on compensation were indeed an unlawful restraint and issued an injunction allowing member schools to provide scholarships covering the full cost of attendance and $5,000 per year in deferred compensation for student-athletes. This ruling marks a significant legal precedent as it is the first federal court decision finding aspects of the NCAA’s amateurism rules in violation of antitrust laws, necessitating changes in NCAA practices. The opinion concludes that while many NCAA rules may promote competition, they are not exempt from antitrust analysis and should be evaluated under the Rule of Reason. The district court identified a valid alternative to the NCAA's compensation rules, allowing scholarships up to the full cost of attendance, but erred in permitting cash compensation of up to $5,000 per year for student-athletes. Thus, the decision is affirmed in part and reversed in part. The NCAA, founded in 1910 from the earlier Intercollegiate Athletic Association, has expanded to include around 1,100 member institutions across three divisions, with Division I encompassing the largest programs and offering the most financial aid. The NCAA has historically maintained amateurism rules to prevent compensation for athletes, aiming to curb competition for players among colleges. Despite these efforts, enforcement has been inconsistent, leading to widespread rule violations. The NCAA began strengthening enforcement in 1948 with the "Sanity Code," which prohibited financial aid based on athletic ability, later allowing such scholarships in 1956. Scholarships for student-athletes were limited to the value of a full 'grant in aid,' encompassing tuition, fees, room and board, and required books, with prohibitions on receiving excessive financial aid based on athletic ability. Additional non-athletic financial aid was permissible, provided the total did not exceed the 'cost of attendance.' In August 2014, the NCAA permitted athletic conferences to increase scholarships to cover the full cost of attendance, a change adopted by the largest five athletic conferences in January 2015. NCAA regulations also restrict student-athletes from receiving compensation related to their athletic abilities, including payments from boosters or endorsements, and stipulate that signing with an agent or entering a professional draft can jeopardize amateur status. The O’Bannon and Keller litigation began with Ed O’Bannon, a former UCLA basketball player, who discovered an avatar resembling him in a college basketball video game without his consent or compensation. O’Bannon filed a lawsuit against the NCAA and the Collegiate Licensing Company (CLC) in 2009, claiming the NCAA’s amateurism rules violated antitrust laws. Similarly, Sam Keller, a former quarterback, sued the NCAA, CLC, and Electronic Arts (EA) for the unauthorized use of athletes' likenesses in video games, asserting claims under right of publicity statutes and common law. The cases were consolidated, and a motion to dismiss Keller’s claims based on First Amendment rights was denied. The court ruled that EA's use of college athletes' likenesses did not qualify for First Amendment protection under California's transformative use defense. In November 2013, the district court certified a class under Rule 23(b)(2) for injunctive and declaratory relief, excluding a damages class under Rule 23(b)(3). The certified class included all current and former NCAA Division I men’s basketball and Football Bowl Subdivision players in the U.S. whose images, likenesses, or names could have been included in licensed game footage or video games. Following this certification, plaintiffs dismissed their damages claims with prejudice and settled claims against EA and CLC, leading to preliminary approval of the settlement. The cases of O’Bannon and Keller were deconsolidated, with antitrust claims against the NCAA from O’Bannon proceeding to a bench trial in June 2014. After a fourteen-day trial, the district court ruled in favor of the plaintiffs, stating that NCAA rules preventing student-athletes from receiving compensation for their names, images, and likenesses (NILs) violate Section 1 of the Sherman Act. The court identified two affected markets: 1. **College Education Market**: The court recognized a distinct market where FBS football and Division I basketball schools compete to recruit top high school talent by offering scholarships and associated benefits. The court found that few athletes forgo these schools, as no other leagues provide comparable alternatives, making this market cognizable under antitrust laws. 2. **Group Licensing Market**: The court identified a group licensing market where athletes could sell NIL rights but are restricted by NCAA rules. This market was further divided into three submarkets: live game telecasts, sports video games, and archival footage. The court noted demand for NIL rights in live broadcasts and video games and highlighted that the NCAA had licensed archival footage, demonstrating market demand for student-athlete NILs. The court applied the Rule of Reason to assess the legality of NCAA's compensation rules, identifying anticompetitive effects primarily in the college education market, while finding no such effects in the group licensing market. It concluded that the NCAA's rules serve procompetitive purposes but could be achieved through less restrictive means, rendering the rules unlawful. In the college education market, the court noted that NCAA rules restrict schools from competing by offering recruits compensation exceeding the cost of attendance, effectively fixing prices at zero for student-athletes’ Name, Image, and Likeness (NIL) rights. This behavior likened colleges to a cartel, collectively suppressing the price of their services. Alternatively, the court viewed the market as a monopsony, with NCAA schools acting as a sole buyer for student-athletes' labor and NIL rights, further harming competition. Conversely, the court found no anticompetitive effects in group licensing submarkets. It argued that the nature of NIL licensing would require comprehensive agreements among student-athletes, disincentivizing competition and encouraging cooperation to maximize the value of sold NIL rights. Additionally, the court clarified that the NCAA’s licensing deal with T3Media did not hinder student-athletes’ potential compensation, as T3Media must obtain consent from former athletes for footage licensing. Regarding procompetitive purposes, the NCAA cited four justifications for its rules: preserving amateurism in college sports, promoting competitive balance in FBS football and Division I basketball, integrating academics with athletics, and increasing output in the college education market. The court partially accepted the NCAA's first and third justifications while rejecting the others. 1) **Amateurism**: The NCAA claimed that restrictions on student-athlete compensation were essential to uphold the amateur tradition central to college sports. However, the court found that the NCAA's definition of amateurism was inconsistent and frequently altered over time, concluding it was not a core principle. The court noted discrepancies in the NCAA's treatment of amateurism, such as allowing certain athletes to receive prize money and accepting Pell grants that exceed costs. While the court acknowledged that amateurism serves some procompetitive purposes, it determined that consumer interest in college sports is driven more by factors such as school loyalty rather than amateurism. The court criticized the reliability of the NCAA's evidence, particularly a survey it presented, which it deemed biased. Ultimately, it recognized that the NCAA's current amateurism definition does contribute to the popularity of its product. 2) **Competitive Balance**: The NCAA argued that limiting compensation helps maintain competitive parity among FBS and Division I schools in recruitment. The court accepted that promoting competitive balance could serve a procompetitive purpose but ruled that the NCAA's compensation rules do not actually achieve this. It cited extensive economic studies indicating that these rules fail to create balance. The court pointed out that while the NCAA restricts athlete compensation, schools can freely invest in other program aspects, undermining any intended equalizing effect. 3) **Integrating Academics and Athletics**: The NCAA defended its compensation restrictions by claiming they promote the integration of academics and athletics, enhancing educational quality for student-athletes. However, the court's assessment of this justification was not included in the provided information. The district court recognized a potential procompetitive justification for the NCAA’s regulation of the college education market but concluded that the benefits of academic and athletic integration do not primarily stem from the NCAA's compensation restrictions. Instead, these benefits arise from other NCAA rules enforcing class attendance, banning athletes-only dorms, and limiting practice hours. While the court acknowledged that prohibiting large payments to student-athletes could prevent a social divide, it found that this goal does not warrant a complete ban on paying student-athletes for the use of their name, image, and likeness (NIL). The NCAA's claim that restrictions on compensation increase opportunities in college sports was rejected by the court. It deemed the idea of schools joining Division I due to a commitment to amateurism as implausible, citing instances where major schools sought to increase compensation limits. Additionally, the court noted that schools in lower divisions share the same amateurism rules, undermining the argument that amateurism incentivizes Division I participation. The court also found no evidence that not compensating student-athletes enables more schools to compete in Division I, as revenue-sharing does not occur among Division I schools. After determining that the NCAA had presented two procompetitive justifications for limited compensation rules, the court examined if there were less restrictive alternatives. It identified two viable alternatives: allowing schools to provide stipends to student-athletes covering the full cost of attendance and permitting schools to hold a portion of licensing revenues in trust for equitable distribution to student-athletes after they leave college. The court determined that alternatives to a total ban on Name, Image, and Likeness (NIL) compensation would not undermine the NCAA’s procompetitive objectives. It ruled that the NCAA could restrict schools from using funds for NIL stipends or trusts from sources other than revenue generated from players' NILs. However, the court rejected a proposal allowing student-athletes to earn from school-approved endorsements, citing concerns over the exploitation of student-athletes. The district court ruled in favor of the plaintiffs on antitrust claims, permanently enjoining the NCAA from prohibiting member schools from compensating FBS football and Division I men’s basketball players for their NILs through grants-in-aid covering full attendance costs or annual deferred compensation of up to $5,000 via trust funds to be distributed post-graduation. The NCAA appealed, arguing that the plaintiffs' Sherman Act claim lacked merit and raised three independent reasons for dismissal: the Supreme Court's prior ruling in NCAA v. Board of Regents validated amateurism rules, the compensation regulations are not covered by the Sherman Act, and the plaintiffs lack standing due to the absence of “antitrust injury.” The court found these arguments unpersuasive, particularly clarifying that Board of Regents did not declare all NCAA amateurism rules valid as a matter of law. The original case involved NCAA television rules deemed necessary for the industry, as competition itself is the product marketed by the NCAA and its member institutions. Competitors in college football must agree on various rules, such as field size, team composition, and the regulation of physical play, to effectively define and market the competition. The NCAA plays a crucial role in maintaining the integrity and character of college football by enforcing rules that prevent athlete compensation and mandate class attendance. This mutual agreement among institutions is essential; unilateral changes could undermine competitive viability. The NCAA's actions are viewed as procompetitive, as they enhance consumer choices for both fans and athletes. The court determined that NCAA rules should be evaluated under the Rule of Reason, concluding that the television restrictions imposed by the NCAA lacked a legitimate procompetitive purpose and were therefore struck down. The decision emphasized the NCAA's importance in preserving the tradition of amateurism in college sports, which aligns with the Sherman Act’s goals. However, the court also noted that rules limiting output do not support this preservation role and may restrict the presence of intercollegiate athletics in society. The NCAA argued that prior case law presumed its amateurism rules as valid. The court rejected this argument, clarifying that previous discussions about amateurism were not judgments on the rules' merits but rather explanations for why such rules should be analyzed under the Rule of Reason, contrasting them with per se unlawful agreements that fix prices or restrict output. Arrangements that restrict competition and reduce output are typically deemed per se illegal; however, the Supreme Court's decision in Board of Regents established that certain horizontal agreements, essential for college sports, should not automatically be deemed unlawful. The NCAA’s rules, including those regarding amateurism, require a Rule of Reason analysis rather than a blanket illegality assessment under antitrust laws. Although the Board of Regents highlighted amateurism as a legitimate procompetitive purpose for the NCAA, it did not endorse the notion that all NCAA rules concerning amateurism are exempt from antitrust scrutiny. The preservation of amateurism alone does not justify non-application of a per se rule, and while the NCAA's motives are viewed with a presumption of validity, this does not shield anticompetitive practices. The NCAA's reliance on decisions from other circuits that align with Board of Regents is countered by the fact that these cases also employed Rule of Reason scrutiny, which aligns with the current analysis. In McCormack v. NCAA, the court critiques the Seventh Circuit's decision in Agnew v. NCAA, which broadly interpreted the Supreme Court's ruling in Board of Regents to grant NCAA rules an unwarranted presumption of procompetitive benefits. The Agnew court dismissed the scholarship limitations as unrelated to amateurism, ruling that expanding scholarships does not alter athletes’ amateur status, hence no procompetitive presumption applied. The court in Agnew ultimately dismissed the antitrust claims due to the plaintiffs' failure to identify a cognizable market, rendering its analysis of the procompetitive presumption unnecessary. The current court rejects the Agnew presumption, arguing it misinterprets the Supreme Court’s intent regarding NCAA rules and their antitrust implications. The court emphasizes that the validity of amateurism rules must be demonstrated, not assumed. Furthermore, the NCAA contends that its compensation rules fall outside the Sherman Act's scope as they are mere eligibility rules. The court counters this by affirming that the definition of commerce encompasses activities anticipating economic gain, such as the exchange of labor and NIL rights for scholarships. The court underscores that significant economic motivations exist in college sports, thereby affirming the applicability of the Sherman Act to NCAA bylaws. The NCAA's argument that these rules are simply eligibility rules does not hold weight against the broader understanding of commercial activity. Compensation rules established by the NCAA function as eligibility rules, stipulating that athletes who accept compensation beyond allowed scholarships forfeit their eligibility for collegiate sports. However, labeling these rules as "eligibility rules" does not exempt them from antitrust scrutiny; the essence of these rules is what matters. They effectively regulate commercial transactions between athletic recruits and their schools by restricting the compensation that can be offered and accepted. The NCAA's characterization of these rules as merely eligibility restrictions is seen as a misrepresentation. While two circuits have concluded that certain NCAA rules may be noncommercial, as in Smith v. NCAA and Bassett v. NCAA, this document argues that those cases do not apply to the compensation rules. The Smith case involved a rule purely about eligibility, while the rules at issue here directly influence the NCAA's business operations by governing the compensation of student-athletes, which is critical to the NCAA's overall product. In essence, the compensation rules are intertwined with the NCAA's commercial interests, unlike the eligibility-focused rules discussed in the cited cases. The NCAA's compensation rules are central to its business model and are akin to commercial regulations affecting its relationships with coaches and corporate partners, rather than merely regulatory bylaws like those challenged in previous cases. The court references cases where the Sherman Act was applied to NCAA rules, asserting that the NCAA's rules on student-athlete compensation are commercial transactions, regardless of their anti-commercial intent. The NCAA's argument that the plaintiffs lack standing due to insufficient demonstration of "antitrust injury" is found to be misplaced. The plaintiffs must show that their injuries stem from actions that violate antitrust principles, which the NCAA does not contest. Instead, the NCAA claims that the plaintiffs have not suffered any actual injury from the compensation rules. The NCAA challenges the existence of legally-recognized NIL rights, contends that its rules do not prevent compensation for NIL usage in video games, and argues that its licensing agreements do not restrict NIL compensation post-graduation. Ultimately, the court concludes that the plaintiffs have indeed demonstrated injury in fact due to the NCAA's rules inhibiting their ability to monetize their NILs in video games. The document examines the enforceability of rights of publicity for participants in live college sports broadcasts and the potential injuries to plaintiffs from the NCAA's licensing arrangements. The district court found that, in the absence of NCAA compensation rules, video game developers like EA would likely negotiate with student-athletes for their Name, Image, and Likeness (NIL) rights due to the desire for realistic gaming experiences. Evidence presented included a 2005 EA presentation indicating that the inability to use college athletes' NILs hindered NCAA video game growth. The NCAA contends that plaintiffs have not suffered an actual injury since it has terminated its relationship with EA and is not collaborating with any other video game developers. However, the district court disagreed, noting the possibility of future NCAA support for college sports video games given their past profitability, which was supported by existing evidence. The NCAA's assertion of no intent to license intellectual property for future video games was deemed unsubstantiated, as appellate briefs do not constitute evidence. Furthermore, the document states that the NCAA's current cessation of partnerships does not render the plaintiffs' suit moot, as the NCAA could resume its previous practices. The NCAA's claim that other policies would prevent the use of student-athletes' NILs in future video games is countered by historical allowances for EA to utilize recognizable player avatars and testimonies from EA executives about efforts to work with the NCAA on policy changes. This context underlines the ongoing relevance of the plaintiffs' challenge to the NCAA's licensing practices. The district court's conclusion that the NCAA may change its policy on athletes' NILs in video games was not clearly erroneous. The NCAA argues that its policy against college sports video games undermines the plaintiffs' standing and that the Copyright Act would preempt any right-of-publicity claims related to these games. This argument asserts that if the NCAA allowed video game companies to use student-athletes' NILs, the companies would not need to compensate the athletes. However, this contention is deemed convoluted and unrelated to the central issues of the case. The court notes that the question of whether the Copyright Act can provide a defense against right-of-publicity lawsuits is complex and better suited for a separate case involving the video game companies. Additionally, the NCAA's claim regarding Copyright Act preemption does not impact the standing of the plaintiffs, as professional athletes also have rights to compensation from video game companies despite similar legal barriers. EA or another video game company would likely compensate NCAA athletes for their Name, Image, and Likeness (NIL) rights if permitted, rather than litigate the enforceability of those rights. The NCAA's rules that prevent athletes from receiving such compensation grant the plaintiffs standing to file this lawsuit, as the loss of opportunity can constitute injury. The plaintiffs argue that they have shown potential harm due to the NCAA's compensation rules, satisfying the requirement for injury in fact and antitrust injury. The court acknowledges that while the NCAA's pricing of athletes' NIL rights at zero could be viewed as illegal price fixing, it opts for the Rule of Reason standard instead of a per se rule, recognizing the necessity of certain restraints on competition to maintain the integrity of college sports. The Rule of Reason involves a three-step analysis where the plaintiff must first demonstrate significant anticompetitive effects; if successful, the defendant must then provide evidence of any procompetitive benefits, after which the plaintiff can argue for less restrictive alternatives. The district court found that a "college education market" exists, where colleges compete for athletic recruits through scholarships and amenities. It concluded that without the NCAA's compensation rules, member schools would compete to offer recruits compensation for their NILs, resulting in significant anticompetitive effects on this market by fixing a component of the price recruits pay to attend college or that schools pay for recruits' services. The NCAA largely does not dispute these findings or the definition of the college education market. The NCAA does not contest the district court's finding that its compensation rules limit competition among member schools in the market. Instead, it presents three arguments to assert that these rules do not significantly hinder competition. First, the NCAA claims that plaintiffs failed to demonstrate a reduction in output in the college education market, which it argues consists of opportunities for student-athletes in FBS football and Division I men’s basketball. However, the court rejects this argument, emphasizing that a reduction in output is not the sole measure of anticompetitive effect; price-fixing among buyers is also condemned under antitrust law. The NCAA's rules effectively fix the price of athletes’ name, image, and likeness (NIL) rights at zero, thus limiting competition among schools. The court finds that this price-fixing harms student-athletes, meeting the plaintiffs' burden under the Rule of Reason. Second, the NCAA contends that NIL rights have no value, which is dismissed as a restatement of previously rejected arguments regarding injury. Lastly, the NCAA argues that any compensation student-athletes might receive without the rules would be minimal, implying that the rules do not significantly impact competition, but this assertion is also rejected. The district court viewed student-athletes as buyers of educational services rather than sellers of labor, yet this perspective did not change its analysis of the college education market or its conclusion that the NCAA's compensation rules harm student-athletes. The court referenced the Supreme Court's ruling in Catalano, which deemed a beer wholesalers' agreement to end interest-free credit as unlawful per se for eliminating price competition. Similarly, the NCAA's compensation rules extinguish competition among schools for recruits. Although Catalano was a per se case without detailed analysis of anticompetitive effects, it demonstrates that courts should not overlook price-fixing agreements based solely on their limited scope. The court also noted that in Board of Regents, the NCAA's television plan was found to have significant potential for anticompetitive effects without needing extensive quantification of its impact. The plaintiffs successfully argued that the NCAA's rules effectively fix the price of NIL rights—a component of the educational services provided to recruits—establishing a significant anticompetitive effect. The NCAA presented four procompetitive justifications for its rules: promoting amateurism, ensuring competitive balance, integrating student-athletes into academic communities, and increasing market output. The district court accepted the first and third justifications but rejected the other two. Although the NCAA claimed the court erred in not fully crediting all justifications, it primarily focused its appeal on the promotion of amateurism. The district court's findings are accepted, confirming that the NCAA's compensation rules do not enhance competitive balance, do not increase output in the college education market, and only marginally integrate student-athletes into academic communities. The NCAA does not dispute the court's recognition that its rules promote amateurism, which boosts consumer demand for college sports, but it argues the court undervalued the role of amateurism in providing student-athletes with educational opportunities. Additionally, the NCAA contends that the court was overly skeptical of its commitment to amateurism. Despite acknowledging that broader choices can be procompetitive, the court finds that the NCAA's restrictions on student-athlete compensation do not enhance attractiveness to recruits or broaden their choices as suggested. The primary draw for athletes remains the opportunity for a higher education, which would still exist alongside compensation. The NCAA's claim that its rules augment choices by enabling more scholarships is deemed unproven by the district court. Ultimately, even if the NCAA's amateurism concept were coherent, it must demonstrate a procompetitive effect under antitrust laws, which it has not done. The NCAA's long-standing compensation rules do not exempt it from scrutiny regarding their anticompetitive effects, as determined by the district court. The court found that the NCAA’s commitment to amateurism has a tangible procompetitive effect by enhancing the consumer appeal of collegiate sports. The NCAA’s rules serve two primary procompetitive purposes: integrating academics with athletics and maintaining the popularity of its product through the current interpretation of amateurism. The dissent argues that the court improperly defined procompetitive benefits by suggesting that limits on student-athlete compensation preserve the NCAA's product popularity. However, the court clarified that it could only assess the benefits of the existing prohibition on NIL payments, concluding that this ban helps preserve amateurism and consumer demand. The district court's findings align with the Supreme Court's characterization of college football as a unique product shaped by an academic tradition, differentiating it from professional sports. While the NCAA plays a crucial role in maintaining the character of college football, not all its restrictive rules are necessary for this purpose. The analysis then shifts to whether there are substantially less restrictive alternatives to the NCAA's compensation rules. For alternatives to be viable, they must be nearly as effective in accomplishing the NCAA's procompetitive purposes and not result in significantly higher costs. Plaintiffs carry the burden of proof at this stage, needing to demonstrate that their alternatives are effective, and the court will only evaluate how these alternatives align with the procompetitive interests identified earlier. The Supreme Court has emphasized the necessity of granting the NCAA significant discretion in managing college athletics. Courts should allow the NCAA flexibility under antitrust laws to maintain the amateur nature of intercollegiate athletics, as established in Race Tires Am. Inc. v. Hoosier Racing Tire Corp. The district court identified two less restrictive alternatives to the NCAA's rules: 1) permitting NCAA member schools to provide grants-in-aid covering the full cost of attendance for student-athletes, and 2) allowing small amounts of deferred cash compensation for student-athletes' use of their names, images, and likenesses (NILs). The court correctly determined that raising the grant-in-aid cap to the full cost of attendance is a viable alternative; however, it erred in equating the effectiveness of allowing compensation for NILs with the current amateur-status rules. The NCAA has the option to raise scholarship caps to the full cost of attendance but could revert to lower caps, rendering the district court's injunction against such a cap relevant. Evidence presented indicated that increasing the grant-in-aid cap would not harm the concept of amateurism, with NCAA President Dr. Mark Emmert asserting that funds would only cover legitimate educational costs. Testimony supported that this change would not diminish public interest in college sports or affect student-athlete integration into academic environments. The NCAA and supporting scholars cautioned that affirming the district court's ruling might lead to a surge of lawsuits challenging NCAA rules. They argue that antitrust law should not be used for minor adjustments to reasonable market restraints. While agreeing with this principle, the court noted that the specific restraint of a grant-in-aid cap below the cost of attendance does not align with this view. Evidence presented at trial indicated that the NCAA's grant-in-aid cap does not align with its procompetitive goals, as student-athletes remain amateurs when payments cover legitimate educational expenses. The court determined that allowing a cap at the full cost of attendance is a less restrictive alternative that meets the NCAA's objectives without significantly increasing costs, as schools are already permitted to fund this amount. The district court's ruling that the NCAA's compensation rules violate Section 1 of the Sherman Act and its injunction to allow compensation up to the full cost of attendance were deemed correct. However, the court found that the district court erred in considering allowing students to receive cash payments for their name, image, and likeness (NIL) untethered to educational expenses as a viable alternative. While the NCAA's rules were recognized as serving procompetitive purposes by maintaining amateurism and integrating academics with athletics, the court concluded that permitting cash compensation would not effectively preserve amateurism compared to the current prohibition. The court emphasized that maintaining the amateur status of student-athletes is essential, and the district court's assumption that cash payments could promote amateurism equally was flawed. The analysis highlighted the necessity for plaintiffs to demonstrate that any alternatives proposed would not significantly increase implementation costs. The district court did not assess whether allowing schools to provide students with NIL cash compensation would significantly raise costs for the NCAA and its member schools. The dissent claimed that the court determined amateurism lacks procompetitive value and is only relevant due to consumer perceptions that enhance the popularity of college sports. However, the district court asserted that the NCAA's conception of amateurism is essential for maintaining the popularity of its product. The dissent further argued that defining amateurism is not the court's role, but without a clear understanding of the amateur-professional distinction, the court's findings about amateurism's role in college sports become meaningless. The court referenced testimony from Neal Pilson, stating that payment for performance negates amateur status. Recognizing amateurism as central to the NCAA's market, the court contended that characterizing poorly-paid collegiate athletes as "virtually as effective" as amateurs is untenable. It emphasized that the collegiate sports market must be differentiated from professional sports to avoid becoming a minor league. The court criticized the reliance on insufficient evidence supporting the notion that small cash payments would preserve amateurism alongside the NCAA’s existing rules against such payments, arguing that the evidence mistakenly addressed whether small or large payments would better serve the collegiate sports market instead of the core question of preserving amateurism. Testimonies from witnesses indicated that modest payments would raise fewer concerns than larger sums, and an opinion survey suggested that consumer demand would be less adversely affected by smaller payments compared to larger ones. Overall, the evidence presented did not adequately support the claim that small payments could uphold amateurism. A distinction is made between the relative harm of small versus large payments to student-athletes and the effectiveness of small payments in preserving amateurism compared to no payments. The district court referenced testimony from sports management expert Daniel Rascher, who noted that public opposition to rising salaries in professional baseball and the Olympics did not deter viewership. However, these examples are not directly applicable to college sports, which would experience significant changes with the introduction of professionalism. The district court also considered evidence regarding Division I tennis recruits being allowed to earn prize money, indicating that different rules for outside earnings impact amateurism differently than direct payments from schools. Further, the district court relied on the testimony of Neal Pilson, a television sports consultant, who stated that paying players undermines their amateur status. When questioned about the threshold for acceptable payment, Pilson expressed uncertainty but indicated that a significant amount, such as a million dollars, would be troubling, while a smaller sum like $5,000 would be less concerning. However, he also acknowledged that any form of compensation, including deferred payments, would still raise concerns. Pilson's comments were the primary basis for the district court's conclusion regarding the $5,000 figure, but his testimony does not substantiate the claim that small payments would effectively maintain amateurism in the same way as not paying athletes. He emphasized that the public's perception of college sports as distinct from professional sports is crucial to its popularity, and this perception could be jeopardized by any form of cash compensation. Witness testimony indicated that the impact of small cash payments to student-athletes was not adequately evaluated; they were only questioned about the relative severity of larger payments compared to smaller ones. A remark from Pilson suggested he would not mind $5,000 payments, but this was insufficient evidence to justify the district court’s conclusion that such payments could maintain amateurism as effectively as the NCAA's current policies. The distinction between educational compensation and unrestricted cash payments is significant, representing a substantial shift. The dissent argued that $5,000 payments would minimally affect consumer demand, but the evidence primarily showed that small payments are less detrimental than larger ones, lacking enough support for the plaintiffs' claims regarding the preservation of consumer demand. The district court erroneously equated educational grants like Pell grants with cash compensation, failing to recognize that such comparisons do not reflect whether cash payments would undermine amateurism. The ruling to allow deferred compensation payments was vacated, as the court concluded that the evidence did not support the idea that small cash payments would be a less restrictive alternative to the NCAA's existing amateurism framework. The court emphasized the importance of allowing the NCAA significant discretion in regulating college athletics. The dissent challenges the majority's assertion that there is insufficient evidence to support the conclusion that $5,000 in deferred compensation for student-athletes will not significantly decrease consumer demand. The majority clarifies that the NCAA is not required to prove a reduction in demand, but rather that the plaintiffs failed to demonstrate that such payments would not reduce demand relative to current rules. The decision emphasizes the NCAA's regulations are subject to antitrust scrutiny under the Rule of Reason, affirming that while NCAA rules can be upheld if they serve procompetitive purposes, they have been overly restrictive in maintaining amateurism. The court mandates that the NCAA allow schools to cover the full cost of attendance for student-athletes but vacates the district court's order permitting an additional $5,000 in deferred compensation. The dissenting opinion supports the district court's decision, arguing that sufficient evidence exists to justify the allowance of deferred compensation based on expert testimony. The majority's conclusion that plaintiffs have established antitrust injury is noted, although the dissent raises doubts about this assertion absent a specific precedent. The ruling is affirmed in part and vacated in part, with both parties bearing their own costs on appeal. FBS football players can accept Pell grants exceeding their cost of attendance, and Division I tennis recruits may earn up to $10,000 annually in prize money prior to college enrollment. The majority of the court refers to the evidence regarding the impact of student-athlete compensation on consumer demand as "threadbare," a characterization that is contested. NCAA expert Neal Pilson testified that while deferred compensation could influence consumer interest, a $5,000 annual payment in trust would likely have minimal negative effects on demand. He further suggested that any potential adverse impact could be alleviated by delaying payments until after graduation. The majority dismisses Pilson's testimony as "offhand" and due to the context of cross-examination, despite his extensive experience in sports broadcasting and lack of challenges to his qualifications. Additionally, expert Dr. Daniel Rascher's testimony indicated that consumer interest in major league baseball and the Olympics increased following salary rises and the allowance for professional athletes to compete, a point the majority discredits without supportive evidence. Rascher also noted similar increases in consumer demand for sports like tennis and rugby after payment was permitted. The majority's dismissal of this evidence is viewed as erroneous. Rascher’s testimony indicated that allowing athletes to receive payment does not typically diminish consumer demand across various sports. The district court appropriately credited this testimony and accepted expert opinions suggesting that small compensation amounts would not affect consumer demand. The court used the lowest compensation figure proposed by one of the NCAA’s experts, affirming its right to do so. A key point of contention between differing judicial views is the nature of the procompetitive interests involved. The majority opinion misinterprets the inquiry, focusing erroneously on whether allowing payment for Name, Image, and Likeness (NIL) compensation is as effective in preserving amateurism as prohibiting it, rather than whether it maintains consumer interest in college sports. The majority claimed a significant difference exists between education-related compensation and cash payments, yet did not provide evidence to support that paying student-athletes $5,000 would notably reduce consumer demand. Conversely, the district court concluded that the difference between no compensation and a small amount is minimal and unlikely to impact demand significantly. The court identified limited procompetitive benefits of the current compensation rules, asserting that restrictions on large student-athlete payments help maintain the popularity of NCAA products and support the integration of academics and athletics. The findings were based on expert testimony, including a survey by Dr. J. Michael Dennis, indicating that public attitudes towards compensation are contingent on the compensation levels proposed. The district court concluded that evidence from the NCAA's own witnesses, including Stanford athletic director Bernard Muir and Mr. Pilson, indicated that smaller payments to student-athletes would be less objectionable than larger ones. The court found that consumer demand for FBS football and Division I basketball products is influenced more by factors like school loyalty and geography rather than restrictions on student-athlete compensation. Consequently, the NCAA’s restrictions on compensation were deemed to have a limited impact on consumer demand. While the NCAA might justify prohibiting large payments to student-athletes, it could not justify an absolute prohibition on compensating them with a share of licensing revenue from their names, images, and likenesses. The court recognized that the concept of "amateurism" is relevant only to the extent that it supports the popularity of NCAA products, emphasizing that consumer demand should guide antitrust analysis rather than the NCAA's definition of amateurism. The plaintiffs are not required to demonstrate that alternative compensation models are equally effective in maintaining amateurism, which has historically been a vague and evolving concept. The court acknowledged that while amateurism contributes to the distinctiveness of college sports, the distinction between amateur and professional sports should ultimately be defined by consumer preferences rather than the court. Consumers' perceptions that paying college football players $5,000 held in trust for their name, image, and likeness (NIL) would transform college football into a professional sport could lead to decreased viewership, rendering the proposed payment structure less effective than current rules. However, prohibiting even minimal deferred payments does not align with consumer behavior. The district court found that modest payments would not significantly impact consumer demand, as established in the O’Bannon case. The argument that paying student-athletes would undermine their amateur status is challenged by evidence, including NCAA rules allowing tennis players to earn up to $10,000 annually without losing their amateur status. The NCAA's claim that a multi-billion dollar industry would collapse if student-athletes received any payment is unsubstantiated and contradicted by the district court's findings. The district court's conclusion that $5,000 in deferred payments would not diminish consumer interest was based on extensive expert testimony, supporting its decision to reject the NCAA's arguments. The appellate judges' role is to evaluate the district court's judgment under antitrust law principles, not to redefine amateurism. Therefore, the dissenting opinion agrees with the district court's findings and would affirm its judgment in full.