United States: No Game-Changer For The NCAA: The Ninth Circuit Finds Antitrust Violation But Rejects Lower Court Injunction

The headlines that immediately followed the release of the Ninth Circuit's hotly anticipated decision in O'Bannon v. NCAA, et al., Nos 14-16601 and 14-17068 announced a blow to amateurism, as the court upheld a finding that certain of the NCAA's rules violated the Sherman Antitrust Act. But these early interpretations belied the more significant implications of the decision: the Ninth Circuit largely affirmed the institution of amateurism and cleared the way for the NCAA to continue business as usual. 

The Judgment of the District Court

The suit, brought by a class of Division I/FBS college football and men's basketball players, alleges that the NCAA's rules prohibiting student-athletes from receiving compensation for use of their names, images, and likenesses (NILs) violate Section I of the Sherman Act. The district court agreed with the plaintiffs, finding that these rules were unlawful because they had an anticompetitive effect in the college education market, and the procompetitive purposes of the rules could be achieved by less restrictive alternative restraints. The court permanently enjoined the NCAA from prohibiting its member institutions from: "(1) compensating FBS football and Division I men's basketball players for the use of their NILs by awarding them grants-in-aid up to the full cost of attendance at their respective schools, or (2) paying up to $5,000 per year in deferred compensation to FBS football and Division I men's basketball players for the use of their NILs, through trust funds distributable after they leave school." 

The Ninth Circuit's Opinion

The Ninth Circuit agreed with the district court that the NCAA rules at issue have a "significant anticompetitive effect on the college education market" but also "serve the two procompetitive purposes identified by the district court: integrating academics with athletics, and 'preserving the popularity of the NCAA's product by promoting its current understanding of amateurism.'" It also agreed that raising the grant-in-aid cap to cover the full cost of attendance constituted a less restrictive alternative to the challenged rules; the NCAA has already permitted this change. However, the panel rejected the district court's finding that another less restrictive alternative was to "allow[] NCAA member institutions to pay student-athletes small amounts of deferred cash compensation for use of their NILs."

Notably, the majority opinion revealed a thorough understanding of—and even sympathy for—the institution of amateurism. Regarding the district court's injunction requiring deferred cash compensation to players, the majority stated: "But in finding that paying students cash compensation would promote amateurism as effectively as not paying them, the district court ignored that not paying student-athletes is precisely what makes them amateurs." Moreover, the majority drew a stark distinction between grant-in-aid scholarships to student-athletes and cash compensation for use of their NILs: "The difference between offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap." The majority then explained that to cross that line would be to set off down a slippery slope with "no defined stopping point." 

Return to an Uncertain Status Quo

In practical terms, the Ninth Circuit decision requires hardly any digression from the status quo; NCAA rules already permit schools and conferences to choose to raise their scholarship caps to the full cost of attendance. For the NCAA, however, the status quo is shifting. In 2014, under pressure from the five major conferences, the NCAA loosened rules allowing these conferences the autonomy to, among other things, offer grant-in-aid scholarships up to the full cost of tuition. Disciplinary action against member institutions for violations of NCAA rules, which once demonstrated the NCAA's potency, now seem only to highlight the arbitrary aspects of these rules and their uneven enforcement. And in August 2015, the NCAA survived another major threat to its amateurism model when the NLRB declined to assert jurisdiction over a challenge brought by scholarship football players at Northwestern University who claimed to be employees within the meaning of the National Labor Relations Act. 

In other words, the scaffolding supporting the supremacy of the NCAA in overseeing college athletics is breaking down. The vast factual records developed in O'Bannon and the Northwestern case show the incontrovertibly pro-like demands on Division I and FBS athletes. Nonetheless, as the Ninth Circuit recognized, the amateur status of these student-athletes warrants protection. Accordingly, it is time for additional reforms to the NCAA's rules to acknowledge the special demands on, and market for, these athletes. Moreover, responsibility lies with the NCAA to set a meaningful ceiling on athletic requirements and with its member institutions to set a meaningful floor on academic ones. 

Either or both parties are likely to appeal the Ninth Circuit's decision to the Supreme Court. In the meantime, the NCAA and its member schools have another opportunity to recondition their policies and to reassert the uniqueness and critical importance of amateurism.   

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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