Alston v. National Collegiate Athletic Association, No. 19-15566 (9th Cir. 2020)Annotate this Case
In this antitrust action, the Ninth Circuit affirmed the district court's order enjoining the NCAA from enforcing rules that restrict the education-related benefits that its member institutions may offer students who play Football Bowl Subdivision football and Division I basketball.
The panel held that the district court properly applied the Rule of Reason in determining that the enjoined rules are unlawful restraints of trade under section 1 of the Sherman Act. In this case, the district court found that the NCAA's rules have significant anticompetitive effects in the relevant market for student-athletes' labor on the gridiron and the court; the district court fairly found that NCAA compensation limits preserve demand to the extent they prevent unlimited cash payments akin to professional salaries, but not insofar as they restrict certain education-related benefits; and the district court did not clearly err in determining that the less restrictive alternative would be virtually as effective in serving the procompetitive purposes of the NCAA's current rules, and may be implemented without significantly increased cost.
The panel also held that the record supported the factual findings underlying the injunction and that the district court's antitrust analysis is faithful to the panel's decision in O'Bannon v. NCAA (O’Bannon II), 802 F.3d 1049 (9th Cir. 2015).
Court Description: Antitrust. The panel affirmed the district court’s order in an antitrust action, enjoining the National Collegiate Athletic Association from enforcing rules that restrict the education-related benefits that its member institutions may offer students who play Football Bowl Subdivision football and Division I basketball. In O’Bannon v. NCAA (O’Bannon II), 802 F.3d 1049 (9th Cir. 2015), the court affirmed in large part the district court’s ruling that the NCAA illegally restrained trade, in violation of section 1 of the Sherman Act, by preventing FBS football and D1 men’s basketball players from receiving compensation for the use of their names, images, and likenesses, and the district court’s injunction insofar as it required the NCAA to implement the less restrictive alternative of permitting athletic scholarships for the full cost of attendance. Subsequent antitrust actions by student-athletes were consolidated in the district court. After a bench trial, the district court entered judgment for the student-athletes in part, concluding that NCAA limits on education-related benefits were unreasonable restraints of trade, and accordingly enjoining those limits, but declining to hold that NCAA limits on compensation unrelated to education likewise violated section 1. 6 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. The panel affirmed the district court’s conclusion that O’Bannon II did not foreclose this litigation as a matter of stare decisis or res judicata. The panel held that the district court properly applied the Rule of Reason in determining that the enjoined rules were unlawful restraints of trade under section 1 of the Sherman Act. The panel concluded that the student-athletes carried their burden at the first step of the Rule of Reason analysis by showing that the restraints produced significant anticompetitive effects within the relevant market for student- athletes’ labor on the gridiron and the court. At the second step of the Rule of Reason analysis, the NCAA was required to come forward with evidence of the restraints’ procompetitive effects. The district court properly concluded that only some of the challenged NCAA rules served the procompetitive purpose of preserving amateurism and thus improving consumer choice by maintaining a distinction between college and professional sports. Those rules were limits on above-cost-of-attendance payments unrelated to education, the cost-of-attendance cap on athletic scholarships, and certain restrictions on cash academic or graduation awards and incentives. The panel affirmed the district court’s conclusion that the remaining rules, restricting non-cash education-related benefits, did nothing to foster or preserve consumer demand. The panel held that the record amply supported the findings of the district court, which reasonably relied on demand analysis, survey evidence, and NCAA testimony. The panel affirmed the district court’s conclusion that, at the third step of the Rule of Reason analysis, the student- athletes showed that any legitimate objectives could be IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG. 7 achieved in a substantially less restrictive manner. The district court identified a less restrictive alternative of prohibiting the NCAA from capping certain education-related benefits and limiting academic or graduation awards or incentives below the maximum amount that an individual athlete may receive in athletic participation awards, while permitting individual conferences to set limits on education- related benefits. The panel held that the district court did not clearly err in determining that this alternative would be virtually as effective in serving the procompetitive purposes of the NCAA’s current rules, and could be implemented without significantly increased cost. Finally, the panel held that the district court’s injunction was not impermissibly vague and did not usurp the NCAA’s role as the superintendent of college sports. The panel also declined to broaden the injunction to include all NCAA compensation limits, including those on payments untethered to education. The panel concluded that the district court struck the right balance in crafting a remedy that both prevented anticompetitive harm to student-athletes while serving the procompetitive purpose of preserving the popularity of college sports. Concurring, Judge M. Smith wrote that because he was bound by O’Bannon II, he joined the panel opinion in full. He wrote separately to express concern that the current state of antitrust law reflects an unwitting expansion of the Rule of Reason inquiry in a way that deprived the student-athletes of the fundamental protections that the antitrust laws were meant to provide them. 8 IN RE NCAA ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIG.