Ninth Circuit Court of Appeals Partially Supports O'Bannon v NCAA Athlete Compensation Ruling

Earlier this week, the Ninth Circuit Court of Appeals issued a ruling that partially supports a lower federal court ruling which found the NCAA violated antitrust law by too aggressively restricting payments to college athletes.  The 9th Circuit’s ruling is not a complete victory for collegiate athletes because it still allows the NCAA to enforce compensation caps that make it difficult for players to earn payments for use of their names and likeness in marketing or video games.

Reviewing the Lower Court’s O’Bannon v NCAA Ruling

Last year the most significant legal challenge of the NCAA’s amateurism rules came from a lawsuit filed by former collegiate basketball player Ed O’Bannon who claimed that the NCAA’s policies of player compensation violated the Sherman Act.  O’Bannon argued that using player names and likenesses without permitting athletes to receive compensation – either from universities or other sources – was an unlawful trade restriction that illegally defied the Sherman Act’s anti-trust protections.  O’Bannon, like many former and current college athletes, argued that the NCAA has an illegal monopoly on revenue collected from college sports driven by unlawful amateurism policies.

Judge Claudia Wilken of the Northern District of California agreed with O’Bannon and ruled that the NCAA’s amateurism rules violated the Sherman Act by enforcing an unlawful restraint on trade, and struck down a provision of NCAA policy that caps player compensation at the cost of “grant-in-aid” – a term that means only payments for classes, necessary books, and room / board are permitted while optional costs like supplies, transportation, non-school provided meals, etc are excluded.  Judge Wilken ruled that colleges can compensate students 1) the full cost of attendance beyond “grant-in-aid” and 2) up to $5,000 in NIL payments (payments for use of images and likenesses) to be deferred until after the athlete leaves school.

NCAA Argues for Judicial Restraint in Appeal of O’Bannon Ruling

In response to the lower court ruling, the NCAA appealed by arguing that the lower court did not have the authority to reset the payment caps that the NCAA could enforce.  The NCAA’s argument against Sherman Act violations has long been that restricting payments to players is necessary to promote a pro-competitive amateur league that allows all colleges to compete to recruit the best players regardless of the school’s size.  In her ruling, Judge Wilken agreed that issuing a payment cap is necessary to maintaining the NCAA’s amateurism model, but found violations of antitrust law because the league did not employ the least restrictive payment caps.

According to the NCAA, if the lower court determined that restricting payments to athletes is necessary to promoting a procompetitive amateur collegiate atmosphere it therefore could not find violations of the Sherman Act simply because the judge did not agree with how the NCAA restricted payments.  The NCAA argued that the lower court’s least restrictive alternative mandate opens the doors for judges to set antitrust rules and payment caps as they see fit – effectively taking the place of a legislative agency.  According to the appeal, a “least restrictive alternative” standard allows judges to enforce their own opinions on policy without limitation, and should not be the standard for evaluating antitrust law.

Ninth Circuit Appeals Court Partially Supports O’Bannon Ruling

Upon review of the O’Bannon appeal the 9th Circuit determined that Judge Wilkens did not err by finding violations of the Sherman Act using a least restrictive means standard.  The court found that the NCAA’s grant-in-aid cap was not sufficiently related to the league’s stated procompetitive goals encompassed by enforcing amateurism.  The 9th Circuit agreed with Judge Wilken that the grant-in-aid cap was too restrictive and therefore in violation of provisions of the Sherman Act that make anti-competitive behavior illegal.  The majority wrote, “By the NCAA’s own standards, student-athletes remain amateurs as long as any money paid to them goes to cover legitimate educational expenses,” and held that the grant-in-aid cap went too far by restricting athletes from receiving additional payments that would not rob them of their amateur status.  As such, the 9th Circuit supported the portion of Judge Wilken’s decision which allows colleges to pay players the full cost of attendance rather than simply a grant-in-aid award.

However, the 9th Circuit supported the NCAA’s argument that “courts should not use antitrust law to make marginal adjustments to broadly reasonable market restraints” and found that Judge Wilken “clearly erred” by authorizing students receive up to $5,000 per year in NIL payments.  The majority found that the plaintiffs did not sufficiently demonstrate that paying cash compensation for use of player names and likenesses would promote the procompetitive benefits of NCAA amateurism better than the current policy of not paying athletes.  By placing the burden on players to show that paying students NIL benefits promotes amateurism at least as effectively as not paying them the 9th Circuit made it very difficult for collegiate athletes filing future lawsuits in the Ninth District to argue they deserve compensation beyond the cost of an education.

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