O'Bannon, Jr. v. National Collegiate Athletic Association et al

Filing 291

FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by Judge Claudia Wilken on 8/8/2014. (ndr, COURT STAFF) (Filed on 8/8/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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EDWARD O’BANNON, et al.
Plaintiffs,

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United States District Court
For the Northern District of California

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FINDINGS OF FACT
AND CONCLUSIONS OF
LAW

v.
NATIONAL COLLEGIATE ATHLETIC
ASSOCIATION; ELECTRONIC ARTS
INC.; and COLLEGIATE LICENSING
COMPANY,
Defendants.
________________________________/

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No. C 09-3329 CW

INTRODUCTION
Competition takes many forms.

Although this case raises

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questions about athletic competition on the football field and the

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basketball court, it is principally about the rules governing

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competition in a different arena -- namely, the marketplace.

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Plaintiffs are a group of current and former college student-

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athletes.

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National Collegiate Athletic Association (NCAA) in 2009 to

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challenge the association’s rules restricting compensation for

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elite men’s football and basketball players.

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Plaintiffs seek to challenge the set of rules that bar student-

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athletes from receiving a share of the revenue that the NCAA and

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its member schools earn from the sale of licenses to use the

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student-athletes’ names, images, and likenesses in videogames,

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live game telecasts, and other footage.

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these rules violate the Sherman Antitrust Act.

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this charge and asserts that its restrictions on student-athlete

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They brought this antitrust class action against the

In particular,

Plaintiffs contend that
The NCAA denies

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compensation are necessary to uphold its educational mission and

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to protect the popularity of collegiate sports.

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A non-jury trial on Plaintiffs’ claims was held between June

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9, 2014 and June 27, 2014.

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testimony, documentary evidence, and arguments of counsel

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presented during and after trial, the Court finds that the

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challenged NCAA rules unreasonably restrain trade in the market

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for certain educational and athletic opportunities offered by NCAA

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Division I schools.

After considering all of the

The procompetitive justifications that the

United States District Court
For the Northern District of California

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NCAA offers do not justify this restraint and could be achieved

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through less restrictive means.

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findings of fact and conclusions of law, and will enter as a

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remedy a permanent injunction prohibiting certain overly

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restrictive restraints.

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The Court makes the following

FINDINGS OF FACT
I.

Background

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A.

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The NCAA was founded in 1905 by the presidents of sixty-two

The NCAA

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colleges and universities in order to create a uniform set of

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rules to regulate intercollegiate football.

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Undisputed Facts, at ¶ 6.

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eleven hundred member schools and regulates intercollegiate

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athletic competitions in roughly two dozen sports.

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its current constitution, the association seeks to “initiate,

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stimulate and improve intercollegiate athletics programs for

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student-athletes and to promote and develop educational

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leadership, physical fitness, athletics excellence and athletics

Docket No. 189, Stip.

Today, the association has roughly

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According to

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participation as a recreational pursuit.”

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Division I Manual, at 15.

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Ex. 2340, 2013-14 NCAA

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To achieve these goals, the NCAA issues and enforces rules

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governing athletic competitions among its member schools.

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4.

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bylaws and cover a broad range of subjects.

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the rules establish academic eligibility requirements for student-

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athletes, set forth guidelines and restrictions for recruiting

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high school athletes, and impose limits on the number and size of

United States District Court
For the Northern District of California

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Id. at

These rules are outlined in the association’s constitution and
Among other things,

athletic scholarships that each school may provide.

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Id. at 3-5.

Since 1973, the NCAA’s member schools have been organized

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into three divisions -- Divisions I, II, and III -- based on the

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number and quality of opportunities that they provide to

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participate in intercollegiate athletics.

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¶ 27.

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quality of opportunities to participate in intercollegiate

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athletics because they sponsor more sports teams and provide more

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financial aid to student-athletes than schools in Divisions II and

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III.2

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sponsor a minimum of fourteen varsity sports teams, including

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football, and distribute a baseline amount of financial aid to its

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student-athletes.

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365, 367.

Stip. Undisputed Facts

Division I schools provide the greatest number and highest

To qualify for membership in Division I, a school must

Trial Tr. 2043:13-:25 (Delany); Ex. 2340 at

Roughly three-hundred and fifty of the NCAA’s eleven

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26
27
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1

All exhibit citations in this order are to the page numbers
provided by the parties at trial, which do not necessarily correspond to
the page numbers created by the original author of the exhibit.
2 The NCAA’s bylaws define financial aid to mean “funds provided to
student-athletes from various sources to pay or assist in paying their
cost of education at the institution.” Ex. 2340 at 206. The Court
adopts this definition for the purposes of this order.

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1

hundred schools currently compete in Division I.

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1743:23 (Emmert).

Trial Tr.

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Division I itself further is divided, for the purposes of

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football competition, into two subdivisions: the Football Bowl

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Subdivision (FBS) and the Football Championship Subdivision

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(FCS).

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schools are allowed to offer up to eighty-five full scholarships

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to members of their football teams.

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permitted to offer only a smaller number of full scholarships to

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Trial Tr. 2144:9-:11 (Petr); Ex. 2340 at 364-67.

FBS

In contrast, FCS schools are

United States District Court
For the Northern District of California

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members of their teams.

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schools are able to offer more football scholarships than FCS

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schools, the level of football competition within FBS is generally

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higher than within FCS.

Currently, about one hundred and twenty

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schools compete in FBS.

Id. ¶ 45.

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Stip. Undisputed Facts ¶ 28.

Because FBS

In addition to the two football subdivisions, Division I

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schools are also organized into a number of conferences, which

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essentially function as smaller leagues within the NCAA.

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conferences -- most of which contain between eight and fifteen

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schools -- typically have their own membership requirements.

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conferences also organize conference-specific games and events

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featuring their member schools, including regular season football

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games, regular season basketball games, and post-season basketball

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tournaments.

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the NCAA and must comply with its constitution and bylaws, they

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operate independently for the most part and have the authority to

The

Most

Although the conferences are considered members of

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3

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Prior to 2006, FBS was known as Division I-A and FCS was known as
Division I-AA. For the purposes of simplicity, this order uses “FBS”
and “FCS” to refer to these subdivisions even when discussing studentathletes who played Division I football before 2006.

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generate their own revenue and set their own rules, provided those

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rules are consistent with NCAA policy.

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Ex. 2340 at 22.

The rules governing participation and competition in Division

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I are enacted by an eighteen-member body known as the Division I

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Board of Directors, which typically receives proposals from the

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division’s member schools and conferences.

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1745:2 (Emmert); Ex. 2340 at 35.

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university presidents and chancellors from eighteen different

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colleges or universities.

United States District Court
For the Northern District of California

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Trial Tr. 1744:16-

The Board is made up of

Ex. 2340 at 35.

A school or conference that seeks to propose a new rule or

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rule change typically does so by submitting the proposal to a

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designated committee or task force appointed by the Board.

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Tr. 1745:20-1746:15.

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the proposal and, if it approves, may forward the proposal to a

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body known as the Division I Legislative Council, which is made up

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of athletics administrators from schools in each of the thirty-two

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Division I conferences.

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Council may then forward the proposal to the Board of Directors,

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which has the ultimate authority to approve the proposal by a

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majority vote.

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may only be repealed through an override process that involves a

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vote of sixty-two percent of the NCAA’s member institutions.

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1747:6-:20.

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not have any voting power in this process.

Trial

That committee or task force then considers

Id.; Ex. 2340 at 37.

Trial Tr. 1745:20-1746:15.

The Legislative

Actions by the Board

Id.

The NCAA’s current president, Dr. Mark Emmert, does
Id. 1746:19-:24.

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B.

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Electronic Arts Inc. (EA) is a corporation which develops and

Electronic Arts Inc. & Collegiate Licensing Company

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manufactures videogames.

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and sold an annual NCAA-branded college football videogame every

Stip. Undisputed Facts ¶ 35.

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It created

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year between 1997 and 2013.

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an annual NCAA-branded college basketball game every year between

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1998 and 2010.

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entered into licensing agreements with the NCAA and its member

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schools and paid them for permission to use their intellectual

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property, including their marks, in the videogames.

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Exs. 1125, 1126.

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corporation that licenses trademarks of the NCAA and several of

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its member schools and conferences.

Id. ¶ 40.

Id. ¶ 39.

It also created and sold

In order to create these games, it

Id. ¶¶ 37-38;

Collegiate Licensing Company (CLC) is a Georgia

Stip. Undisputed Facts ¶¶ 32-

United States District Court
For the Northern District of California

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34.

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and CLC in this action, they subsequently agreed to settle those

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claims.

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C.

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Plaintiffs are twenty current and former student-athletes,

Although Plaintiffs originally brought claims against both EA

Plaintiffs

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all of whom play or played for an FBS football or Division I men’s

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basketball team between 1956 and the present.

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Plaintiffs went on to play professional sports after they left

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college.

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certified under Federal Rule of Civil Procedure 23(b)(2) in

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November 2013:

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Some, but not all,

They represent the following class, which this Court

All current and former student-athletes
residing in the United States who compete on,
or competed on, an NCAA Division I (formerly
known as “University Division” before 1973)
college or university men’s basketball team or
on an NCAA Football Bowl Subdivision (formerly
known as Division I-A until 2006) men’s
football team and whose images, likenesses
and/or names may be, or have been, included or
could have been included (by virtue of their
appearance in a team roster) in game footage
or in videogames licensed or sold by
Defendants, their co-conspirators, or their
licensees.
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1

Case No. 09-1967, Docket No. 1025, April 11, 2014 Order, at 47-48

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(amending definition of previously certified class).

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II.

The Relevant Markets

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As explained in previous orders, Plaintiffs allege that the

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NCAA has restrained trade in two related national markets, which

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they refer to as the “college education market” and the “group

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licensing market.”

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the same participants, each market ultimately involves a different

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set of buyers, sellers, and products.

United States District Court
For the Northern District of California

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Although these alleged markets involve many of

Accordingly, this order

addresses each market separately.

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A.

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The evidence presented at trial, including testimony from

College Education Market

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both experts and lay witnesses, establishes that FBS football and

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Division I basketball schools compete to recruit the best high

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school football and basketball players.

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(O’Bannon); 114:21-117:17 (Noll); 831:8-:11 (Rascher); 1759:21-:22

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(Emmert); Ex. 2530.

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unique bundles of goods and services to elite football and

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basketball recruits.

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the cost of tuition, fees, room and board, books, certain school

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supplies, tutoring, and academic support services.

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40:2-:20 (O’Bannon); 582:6-:18 (Prothro); 1741:10-:20 (Emmert);

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Ex. 2340 at 207.

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coaching, medical treatment, state-of-the-art athletic facilities,

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and opportunities to compete at the highest level of college

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sports, often in front of large crowds and television audiences.

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Trial Tr. 13:4-:12 (O’Bannon); 556:8-558:2 (Prothro); 1157:20-

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1158:7 (Staurowsky); 1721:3-1722:19 (Emmert).

Trial Tr. 9:1-:7

Specifically, these schools compete to sell

The bundles include scholarships to cover

Trial Tr.

They also include access to high-quality

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In exchange for

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these unique bundles of goods and services, football and

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basketball recruits must provide their schools with their athletic

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services and acquiesce in the use of their names, images, and

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likenesses for commercial and promotional purposes.

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110:12 (Noll).

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attending college and participating in intercollegiate athletics

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that are not covered by their scholarships.

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9

Id. 109:5-

They also implicitly agree to pay any costs of

See Ex. 2340 at 207.

The evidence presented at trial demonstrates that FBS
football and Division I basketball schools are the only suppliers

United States District Court
For the Northern District of California

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of the unique bundles of goods and services described above.

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Recruits who are skilled enough to play FBS football or Division I

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basketball do not typically pursue other options for continuing

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their education and athletic careers beyond high school.

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Plaintiffs’ economic expert, Dr. Roger Noll, examined the rates at

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which elite football and basketball recruits accept athletic

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scholarships to play FBS football or Division I basketball.

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observed that, between 2007 and 2011, more than ninety-eight

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percent of football recruits classified as four- or five-star

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recruits (the two highest ratings available) by Rivals.com

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accepted offers to play FBS football.

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2529.

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recruits chose to play football at an FCS school and none chose to

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play at a Division II or III school during that period.

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Among three-star recruits, ninety-two percent of those offered a

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scholarship from an FBS school accepted one.

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percent of all three-star recruits accepted an offer to play

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football at a non-FBS school.

He

Trial Tr. 113:2-114:13; Ex.

None of the five-star recruits and only 0.2% of four-star

Id.

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8

Id.

Ex. 2529.

Less than four

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This pattern is even more stark for basketball recruits.

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Between 2007 and 2011, no four- or five-star basketball recruits

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and less than one percent of all two- and three-star recruits

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accepted offers to play for a non-Division I school.

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among zero-star recruits, only one percent accepted offers to play

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basketball outside of Division I.

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ninety-five percent of all recruits offered Division I basketball

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scholarships in the Rivals.com sample accepted one.

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data supports Dr. Noll’s conclusion that “if the top athletes are

Id.

United States District Court
For the Northern District of California

Even

In contrast, roughly

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offered a D-I scholarship, they take it.

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else.”

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Id.

Id.

This

They do not go anywhere

Trial Tr. 114:6-:7.

On cross-examination, Dr. Noll conceded that the Rivals.com

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data he used in his analysis came from recruits’ self-reported

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information about the scholarship offers they received and

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accepted.

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Noll’s opinion unreliable.

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report accurate information to Rivals.com because the information

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is relatively easy to verify; after all, a recruit’s lie about

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accepting a scholarship from a particular school will be

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discovered as soon as his name does not appear on that school’s

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roster or list of committed recruits.

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not presented any data of its own to contradict the Rivals.com

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data nor any other evidence, expert or otherwise, to cast doubt on

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Dr. Noll’s conclusion that there are no substitutes for the

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opportunities offered by FBS football and Division I basketball

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schools.

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Id. 486:7-:9.

However, this fact does not render Dr.
Recruits have a strong incentive to

In any event, the NCAA has

The only potential substitutes that the NCAA has identified
are the opportunities offered by schools in other divisions,
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1

collegiate athletics associations, or minor and foreign

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professional sports leagues.

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associations, or professional leagues, however, provides the same

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combination of goods and services offered by FBS football and

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Division I basketball schools.

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and III all provide a lower number of scholarships than FBS

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football and Division I basketball schools, which results in a

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lower level of athletic competition.

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Athletic Association (NAIA), National Junior College Athletic

None of these other divisions,

Schools in FCS and Divisions II

The National Intercollegiate

United States District Court
For the Northern District of California

10

Association (NJCAA), National Christian Collegiate Athletic

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Association (NCCAA), and United States Collegiate Athletic

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Association (USCAA) likewise provide fewer scholarships and offer

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a lower level of competition.

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other divisions and associations are often smaller than FBS

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football and Division I basketball schools, spend much less on

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athletics, and may not even provide opportunities to attend a

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four-year college.

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2830:12 (Stiroh).

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schools do not compete with FBS football and Division I basketball

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schools for recruits.

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What’s more, the schools in these

Id. 2824:14-:24, 2826:16-2827:7, 2829:17This is why, as Dr. Noll concluded, these other

Dr. Noll also analyzed the Rivals.com data to show that FBS

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schools almost always defeated non-FBS schools in head-to-head

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recruiting contests for the same football recruit between 2007 and

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2011.

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head-to-head recruiting contests for basketball players revealed

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the same discrepancy between Division I and non-Division I

27

schools.

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this discrepancy when comparing head-to-head recruiting contests

Id. 116:6-118:11, 474:23-475:14; Ex. 2530.

Trial Tr. 116:6-118:11.

10

His analysis of

Notably, he did not observe

1

among FBS football schools or Division I basketball schools.

2

Ex. 2530 at 3.

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within the five major Division I conferences -- namely, the

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Pacific 12 Conference (Pac 12), Big 12 Conference, Atlantic Coast

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Conference, Southeastern Conference (SEC), and Big 10

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Conference -- to that of schools in less prominent Division I

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conferences, he found that they were still in competition with

8

each other.

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other divisions and junior colleges and NAIA and all the rest that

Id.;

Even when he compared the success of the schools

Trial Tr. 116:9-:13 (“And unlike the finding for

United States District Court
For the Northern District of California

10

was in the first picture, what we find here is that although the

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major conferences win more than they lose, in competing against

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the lesser conferences, there is considerable competitive

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overlap.”).

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schools in FCS, Divisions II and III, and other non-NCAA

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collegiate athletics associations are not substitutes for the

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bundles of goods and services offered by FBS football and Division

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I basketball schools.

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Thus, the bundles of goods and services offered by

Nor are the opportunities offered by the professional leagues

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that the NCAA has identified here.

20

football and basketball recruits rarely forego opportunities to

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play FBS football or Division I basketball in order to play

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professionally.

23

the National Basketball Association (NBA) permits players to enter

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the league immediately after high school.

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(O’Bannon).

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NBA Development League (D-League), the Arena Football League

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(AFL), and certain foreign football and basketball leagues --

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permit players to join immediately after high school, recruits do

Dr. Noll noted that elite

Neither the National Football League (NFL) nor

Id. 68:17-69:6

Although other professional leagues -- such as the

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1

not typically pursue opportunities in those leagues.

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482:11-:13 (Noll).

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an analysis of recruits who chose to play professionally in these

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leagues, he replied that too few had ever done so to conduct such

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an analysis.

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analysis of zero.”).

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even be given an opportunity to play in these leagues.

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482:14-:17 (“The opportunity is not given to very many high school

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athletes to play in Europe.”).

Id.

When Dr. Noll was asked why he did not conduct

Id. 484:19-485:13 (“It would be hard to do an
He also noted that many recruits may not
Id.

What’s more, none of these leagues

United States District Court
For the Northern District of California

10

offers the same opportunity to earn a higher education that FBS

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football and Division I basketball schools provide.

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these reasons, the Court finds that there are no professional

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football or basketball leagues capable of supplying a substitute

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for the bundle of goods and services that FBS football and

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Division I basketball schools provide.

16

relevant college education market, as described above.

For all of

These schools comprise a

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B.

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Professional athletes often sell group licenses to use their

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names, images, and likenesses in live game telecasts, videogames,

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game re-broadcasts, advertisements, and other archival footage.4

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Plaintiffs allege that, in the absence of the NCAA’s challenged

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rules, FBS football and Division I basketball players would also

23

be able to sell group licenses for the use of their names, images,

Group Licensing Market

24
4

25
26
27
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Plaintiffs presented some evidence at trial of a market for
licenses to use student-athletes’ names, images, and likenesses in other
merchandise, such as jerseys and bobbleheads. The Court does not
address this market because Plaintiffs previously abandoned all of their
claims related to such markets. Docket No. 827, June 20, 2013 Hrg. Tr.
54:13-:16. In addition, the evidence they presented at trial regarding
merchandise-related licenses did not constitute proof of a market for
group licenses but, rather, only individual licenses.

12

1

and likenesses.

2

certain FBS football and Division I basketball teams would be able

3

to join together to offer group licenses, which they would then be

4

able to sell to their respective schools, third-party licensing

5

companies, or media companies seeking to use student-athletes’

6

names, images, and likenesses.

7

submarkets within this broader group licensing market: (1) a

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submarket for group licenses to use student-athletes’ names,

9

images, and likenesses in live football and basketball game

Specifically, they contend that members of

Plaintiffs have identified three

United States District Court
For the Northern District of California

10

telecasts; (2) a submarket for group licenses to use student-

11

athletes’ names, images, and likenesses in videogames; and (3) a

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submarket for group licenses to use student-athletes’ names,

13

images, and likenesses in game re-broadcasts, advertisements, and

14

other archival footage.

15

1.

16
17

Submarket for Group Licenses to Use StudentAthletes’ Names, Images, and Likenesses in Live
Game Telecasts

The Court finds that a submarket exists in which television

18

networks seek to acquire group licenses to use FBS football and

19

Division I basketball players’ names, images, and likenesses in

20

live game telecasts.

21

licensing agreements to use the intellectual property of schools,

22

conferences, and event organizers -- such as the NCAA or a bowl

23

committee -- in live telecasts of football and basketball games.

24

In these agreements, the networks often seek to acquire the rights

25

to use the names, images, and likenesses of the participating

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student-athletes during the telecast.

27

1994 licensing agreement granting CBS the rights to telecast the

Television networks frequently enter into

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13

For instance, the NCAA’s

1

Division I men’s basketball tournament every year from 1995 to

2

2002 includes a “Name & Likeness” provision that states:

3

The Network, its sponsors, their advertising
representatives and the stations carrying the
telecasts of the games will have the right to
make appropriate references (including without
limitation, use of pictures) to NCAA and the
universities and colleges of the teams, the
sites, the games and the participants in and
others identified with the games and in the
telecasting thereof, provided that the same do
not constitute endorsements of a commercial
product.

4
5
6
7
8
9

Ex. 2104 at 16 (emphasis added).

A 1999 agreement between the

United States District Court
For the Northern District of California

10

NCAA and CBS for the rights to telecast certain Division I

11

basketball games contains a “Name & Likeness” provision with

12

nearly identical language.

13

make appropriate references (including without limitation, use of

14

pictures) to . . . the participants in and others identified with

15

the games” (emphasis added)).

16

conferences, the University of Notre Dame, and Fox Broadcasting

17

Company for the rights to telecast certain 2007, 2008, and 2009

18

bowl games similarly provides that the event organizer will be

19

solely responsible for ensuring that Fox has “the rights to use

20

the name and likeness, photographs and biographies of all

21

participants, game officials, cheerleaders” and other individuals

22

connected to the game.

23

other contracts containing similar language.

24

at 10 (granting the broadcaster “all name and likeness rights of

25

all participants, officials, competing teams and any other persons

26

connected with the Events that are reasonable or necessary for the

27

Telecast of the Events”); Ex. 3078 at 2-3 (providing that the Big

28

10 would use “reasonable commercial efforts” to obtain from any

Ex. 2116 at 17 (granting the “right to

An agreement between the FBS

Ex. 2162 at 9.

14

Plaintiffs also provided
See, e.g., Ex. 2230

1

non-conference opponent the “right . . . to use its respective

2

players’ names, likenesses, and that school’s trademarks, logos

3

and other items in promoting, advertising and Telecasting any such

4

game”).

5

these rights among television networks.

These contracts demonstrate that there is a demand for

6

Plaintiffs’ broadcasting industry expert, Edwin Desser,

7

confirmed that provisions like these are common and that they have

8

economic value to television networks.

9

699:18-700:3, 681:18-:23 (“If you’re running a business like a

Trial Tr. 651:9-:11,

United States District Court
For the Northern District of California

10

television network, a broadcast station, you would prefer to have

11

consents, and you would like to have somebody stand behind those

12

consents so that you don’t have to worry about somebody coming

13

after you later with a claim.”).

14

exists.

15

group licenses -- not individual licenses.

16

that a “television sports agreement is a bundle of rights and

17

responsibilities that are all interrelated and that, you know,

18

create value, provide comfort, and are [] integrated into the

19

agreement.”

20

student-athlete’s name, image, and likeness during a game telecast

21

would not have any value to a television network unless it was

22

bundled with licenses to use every other participating student-

23

athlete’s name, image, and likeness.

24

Thus, a market for these rights

Plaintiffs also demonstrated that this is a market for

Id. 658:14-:19.

Mr. Desser testified

A license to use an individual

The NCAA’s broadcasting industry expert, Neal Pilson,

25

testified that sports broadcasters need not acquire the rights to

26

use student-athletes’ names, images, and likenesses and that the

27

primary reason they enter into licensing agreements with event

28

organizers is to gain exclusive access to the facility where the
15

1

event will occur.

2

convincing.

3

certain rights even from visiting teams who do not control access

4

to the event facility.

5

that broadcasting agreements -- like those quoted above --

6

sometimes refer expressly to name, image, and likeness “rights.”

7

Id. 805:2-:16.

8

challenged NCAA rules, teams of FBS football and Division I

9

basketball players would be able to create and sell group licenses

Trial Tr. 720:5-:17.

This testimony is not

Mr. Pilson admitted that broadcasters must acquire

Id. 803:5-804:8.

He also acknowledged

Accordingly, the Court finds that, absent the

United States District Court
For the Northern District of California

10

for the use of their names, images, and likenesses in live game

11

telecasts.

12

2.

Submarket for Group Licenses to Use StudentAthletes’ Names, Images, and Likenesses in
Videogames

13
14

Like television networks, videogame developers would seek to

15

acquire group licenses to use the names, images, and likenesses of

16

FBS football and Division I basketball players if the NCAA did not

17

prohibit student-athletes from selling such licenses.

18

make all of its sports-themed videogames “as authentic as

19

possible.”

20

presidents, Joel Linzner, explained, “We have found that it is

21

pleasing to our customers to be able to use the real athletes

22

depicted as realistically as possible and acting as realistically

23

as possible.”

24

(describing demand for use of student-athletes’ names, images, and

25

likenesses in videogames).

26

negotiates licenses with professional sports leagues and teams to

27

use their trademarks, logos, and other intellectual property in

28

videogames.

Trial Tr. 1656:7 (Linzner).

EA seeks to

One of the company’s vice

Id. 1658:3-:6; see also Ex. 2007 at 50-54

To do this, the company typically

Trial Tr. 1656:10-1657:25.
16

It also negotiates with

1

groups of professional athletes for licenses to use their names,

2

images, and likenesses.

3

the same rights from student-athletes in order to produce college

4

sports-themed videogames, if it were permitted to do so.

5

1669:24-1670:24.

6

challenged NCAA rules, there would be a demand among videogame

7

developers for group licenses to use student-athletes’ names,

8

images, and likenesses.

9

Id.

EA would be interested in acquiring

Id.

Accordingly, the Court finds that, absent the

The NCAA asserts that such demand would not exist because it

United States District Court
For the Northern District of California

10

has ceased licensing its intellectual property for use in

11

videogames, making it unlikely that any developer would seek to

12

develop a videogame using the names, images, and likenesses of

13

student-athletes.

14

record.

15

with EA, it has not presented any evidence suggesting that it will

16

never enter into such an agreement again in the future.

17

its current bylaws preclude it from entering into such an

18

agreement.

19

demonstrates that, prior to this litigation, the NCAA found it

20

profitable to license its intellectual property for use in

21

videogames.

22

agreement with EA, even as the company evaded the NCAA’s rules

23

prohibiting it from using student-athletes’ images and likenesses

24

in videogames.

25

videogames featured playable avatars that could easily be

26

identified as real student-athletes despite the NCAA’s express

27

prohibition on featuring student-athletes in videogames.

28

avatars played the same positions as their real-life counterparts,

This assertion is not supported by the trial

Although the NCAA recently declined to renew its license

None of

Furthermore, the evidence presented at trial

Indeed, it continued to renew its annual licensing

Throughout the late 2000s, EA’s NCAA-branded

17

The EA

1

wore the same jersey numbers and uniform accessories, haled from

2

the same home state, and shared the same height, weight,

3

handedness, and skin color.

4

568:6-569:24 (Prothro); 930:5-931:7 (Rascher).

5

reasons, the Court finds that a submarket would exist for group

6

licenses to use student-athletes’ names, images, and likenesses in

7

videogames if student-athletes were permitted to receive

8

compensation for such licenses.

9

3.

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Trial Tr. 27:14-28:11 (O’Bannon);
For all of these

Submarket for Group Licenses to Use StudentAthletes’ Names, Images, and Likenesses in Game ReBroadcasts, Advertisements, and Other Archival
Footage

Plaintiffs have shown that television networks, advertisers,
and third-party licensing companies seek to use archival footage
of student-athletes in game re-broadcasts, commercials, and other
products.

Several of the live telecasting agreements discussed

above included provisions granting the television network the
rights to use archival footage, as well.

See, e.g. Ex. 3078 at 2-

3 (granting the Big 10 Network the rights to use certain studentathletes’ names and likenesses in “promoting, advertising and
Telecasting” a game); Ex. 2230 at 2 (granting Fox Sports Net the
“right to re-Telecast the Selected Events,” the “right to
distribute highlights of the Selected Events,” and the specific
right to use the “names and likenesses of the players” to promote
certain games as well as the network itself).

Tyrone Prothro, a

former wide receiver for the University of Alabama, saw footage in
a commercial of a famous catch that he made during a game.
Tr. 565:24-566:8.

Trial

Finally, one of the NCAA’s vice presidents,

Mark Lewis, established that the NCAA has licensed all of its
18

1

archival footage from past NCAA championships to a third-party

2

licensing company, T3Media, which acts as the association’s agent

3

in licensing that footage for use in game re-broadcasts,

4

advertisements, and any other products.

5

Although T3Media is not permitted to license footage of current

6

student-athletes, it still acquires the rights to this footage

7

while the student-athletes are in school for later use (after

8

acquiring the student-athletes’ consent).

9

that demand for this footage exists.

Id. 3206:13-:25.

This is enough to show

Based on this evidence, the

United States District Court
For the Northern District of California

10

Court finds that, absent the NCAA’s challenged rules, there would

11

be a demand among television networks, third-party licensing

12

companies, and advertisers for group licenses to use student-

13

athletes in game re-broadcasts, advertisements, and other archival

14

footage.

15

III. The Challenged Restraint

16

NCAA rules prohibit current student-athletes from receiving

17

any compensation from their schools or outside sources for the use

18

of their names, images, and likenesses in live game telecasts,

19

videogames, game re-broadcasts, advertisements, and other footage.

20

Plaintiffs contend that these rules restrain trade in the two

21

markets identified above.

22

The NCAA imposes strict limits on the amount of compensation

23

that student-athletes may receive from their schools.

24

importantly, it prohibits any student-athlete from receiving

25

“financial aid based on athletics ability” that exceeds the value

26

of a full “grant-in-aid.”

27

full “grant-in-aid” as “financial aid that consists of tuition and

28

fees, room and board, and required course-related books.”

Ex. 2340 at 208.

19

Most

The bylaws define a

Id. at

1

207.

2

year.

3

this amount forfeits his athletic eligibility.

4

This amount varies from school to school and from year to
Any student-athlete who receives financial aid in excess of
Id. at 208.

In addition to this cap on athletics-based financial aid, the

5

NCAA also imposes a separate cap on the total amount of financial

6

aid that a student-athlete may receive.

7

prohibits any student-athlete from receiving financial aid in

8

excess of his “cost of attendance.”

9

term “grant-in-aid,” the term “cost of attendance” is a school-

Specifically, it

Ex. 2340 at 208.

Like the

United States District Court
For the Northern District of California

10

specific figure defined in the bylaws.

11

calculated by [a school]’s financial aid office, using federal

12

regulations, that includes the total cost of tuition and fees,

13

room and board, books and supplies, transportation, and other

14

expenses related to attendance” at that school.

15

Because it covers the cost of “supplies, transportation, and other

16

expenses,” the cost of attendance is generally higher than the

17

value of a full grant-in-aid.

18

aid and the cost of attendance varies from school to school but is

19

typically a few thousand dollars.

20

It refers to “an amount

Id. at 206.

The gap between the full grant-in-

5

The NCAA also prohibits any student-athlete from receiving

21

compensation from outside sources based on his athletic skills or

22

ability.

6

Thus, while a student-athlete may generally earn money

23
5

24
25
26
27
28

Under certain circumstances, a student-athlete who has an
unexpected “special financial need” may be permitted to receive
additional aid beyond the cost of attendance. Trial Tr. 2144:252145:14 (Petr). This additional aid comes from his school’s “student
assistance fund” and could include money for “needed clothing, needed
supplies, a computer,” or other academic needs. Ex. 2340 at 238.
6 The NCAA’s bylaws contain a minor exception permitting studentathletes to receive limited compensation for educational expenses
“awarded by the U.S. Olympic Committee or a U.S. national governing
body.” Ex. 2340 at 211.

20

1

from any “on- or off-campus employment” unrelated to his athletic

2

ability, he may not receive “any remuneration for value or utility

3

that the student-athlete may have for the employer because of the

4

publicity, reputation, fame or personal following that he or she

5

has obtained because of athletics ability.”

6

athletes are also barred from endorsing any commercial product or

7

service while they are in school, regardless of whether or not

8

they receive any compensation to do so.

9

Id. at 211.

Student-

Id. at 86.

Dr. Noll testified that these rules restrain competition

United States District Court
For the Northern District of California

10

among schools for recruits.

11

higher, schools would compete for the best recruits by offering

12

them larger grants-in-aid.

13

not capped at the cost of attendance, schools would compete for

14

the best recruits by offering them compensation exceeding the cost

15

of attendance.

16

that the recruits must pay for the combination of educational and

17

athletic opportunities that the schools provide.

18

explained, “if the scholarship value is suppressed, that means the

19

net price paid by a student-athlete to attend college is higher.”

20

Trial Tr. 105:24-107:1.

21

the power to and does suppress the value of athletic scholarships

22

through its grant-in-aid rules, it has increased the prices

23

schools charge recruits.

24

If the grant-in-aid limit were

Similarly, if total financial aid was

This competition would effectively lower the price

As Dr. Noll

Thus, he explained, because the NCAA has

Id. 127:20-129:13.

Dr. Noll’s opinions are consistent with the opinions of the

25

NCAA’s own economic expert, Dr. Daniel Rubinfeld, who testified

26

that the NCAA operates as a “joint venture which imposes

27

restraints” on trade.

28

specifically acknowledged that “the NCAA does impose a restraint,

Id. 2922:20-:21.

21

Dr. Rubinfeld

the restraint we have been discussing in this case.”

2

2921:8-:9.

3

because it serves procompetitive purposes, he never denied that

4

the NCAA restricts competition among its members for recruits.

5

fact, his own economics textbook specifically refers to the NCAA

6

as a “cartel,” which he defined during his testimony as “a group

7

of firms that impose a restraint.”

8

NCAA’s other economic expert, Dr. Lauren Stiroh, testified that

9

the NCAA does not restrain competition in any market, her opinions

10
United States District Court
For the Northern District of California

1

were based on the theory that anticompetitive effects cannot arise

11

unless consumers in a “downstream market” are harmed.

12

2766:16-:22.

13

watch or attend college football and basketball games or purchase

14

goods using the names, images, and likenesses of student-athletes.

15

The Court rejects Dr. Stiroh’s theory that Plaintiffs cannot show

16

any anticompetitive effects caused by the alleged restraint

17

without demonstrating some harm to these consumers.

18

cited above demonstrates that student-athletes themselves are

19

harmed by the price-fixing agreement among FBS football and

20

Division I basketball schools.

21

represented by a recruit’s decision to attend and play for a

22

particular school, the school provides tuition, room and board,

23

fees, and book expenses, often at little or no cost to the school.

24

The recruit provides his athletic performance and the use of his

25

name, image, and likeness.

26

the latter at zero by agreeing not to compete with each other to

27

credit any other value to the recruit in the exchange.

28

anticompetitive effect.

Id.

Although he opined that this restraint was lawful

Id. 2975:3-:4.

In

Although the

Id.

In this case, those consumers would be people who

The evidence

In the complex exchange

However, the schools agree to value

This is an

Thus, the Court finds that the NCAA has
22

1

the power -- and exercises that power -- to fix prices and

2

restrain competition in the college education market that

3

Plaintiffs have identified.

4

Dr. Noll testified that elite football and basketball

5

recruits -- the buyers in Plaintiffs’ college education market --

6

could also be characterized as sellers in an almost identical

7

market for their athletic services and licensing rights.

8

143:21-144:8.

9

basketball schools are buyers seeking to acquire recruits’

Id.

In that market, FBS football and Division I

United States District Court
For the Northern District of California

10

athletic services and licensing rights, paying for them with full

11

grants-in-aid but no more.

12

restrictions on student-athlete compensation still represent a

13

form of price fixing but create a buyers’ cartel, rather than a

14

sellers’ cartel.

15

schools would engage in price competition in the market for

16

recruits’ athletic services and licensing rights if there were no

17

restrictions on student-athlete compensation; the only difference

18

would be that they would be viewed as buyers in the transactions

19

rather than sellers.

20

market is essentially a mirror image of the market for recruits’

21

athletic services and licensing rights, the Court finds that the

22

NCAA exercises market power, fixes prices, and restrains

23

competition in both markets.

24

IV.

25

From that perspective, the NCAA’s

Just as in Plaintiffs’ college education market,

Thus, because Plaintiffs’ college education

Asserted Purposes of the Restraint
The NCAA asserts that the challenged restrictions on student-

26

athlete compensation are reasonable because they are necessary to

27

preserve its tradition of amateurism, maintain competitive balance

28

among FBS football and Division I basketball teams, promote the
23

1

integration of academics and athletics, and increase the total

2

output of its product.

3

A.

4

The NCAA asserts that its challenged rules promote consumer

5

demand for its product by preserving its tradition of amateurism

6

in college sports.

7

survey data, and lay witness testimony to support this assertion.

8

The Court does not find this evidence sufficient to justify the

9

challenged restraint.

Preservation of Amateurism

It relies on historical evidence, consumer

United States District Court
For the Northern District of California

10

Dr. Emmert testified that “the rules over the hundred-year

11

history of the NCAA around amateurism have focused on, first of

12

all, making sure that any resources that are provided to a

13

student-athlete are only those that are focused on his or her

14

getting an education.”

15

evidence presented at trial, however, demonstrates that the

16

association’s amateurism rules have not been nearly as consistent

17

as Dr. Emmert represents.

18

numerous times since the NCAA -- then known as the Intercollegiate

19

Athletic Association (IAA) -- enacted its first set of bylaws in

20

1906.

21
22
23
24
25
26
27

Trial Tr. 1737:8-:12.

The historical

In fact, these rules have changed

The IAA’s first bylaws governing amateurism provided,
No student shall represent a College or
University in an intercollegiate game or
contest who is paid or receives, directly or
indirectly, any money or financial concession
or emolument as past or present compensation
for, or as prior consideration or inducement
to play in, or enter any athletic contest,
whether the said remuneration be received
from, or paid by, or at the instance of any
organization, committee or faculty of such
College or University, or any individual
whatever.

28
24

1

Stip. Undisputed Facts ¶¶ 6-7.

This rule would have barred even

2

today’s athletic scholarships.

Despite the breadth of this

3

written prohibition, the IAA’s member schools recruited students

4

using “player subsidies” and other illicit forms of payment.

5

¶ 10.

6

Id.

In 1916, after changing its name to the NCAA, the association

7

adopted a new rule stating that an amateur was “one who

8

participates in competitive physical sports only for pleasure, and

9

the physical, mental, moral, and social benefits directly derived

United States District Court
For the Northern District of California

10

therefrom.”

11

define an amateur as “one who engages in sport solely for the

12

physical, mental or social benefits he derives therefrom, and to

13

whom the sport is nothing more than an avocation.”

14

Id.

The NCAA amended that definition in 1922 to

Id. ¶ 14.

Most schools continued to ignore these rules for the first

15

few decades of the NCAA’s existence.

16

1948, the NCAA enacted a strict set of rules known as the “Sanity

17

Code” designed to curb violations of its bylaws.

18

Sanity Code “required that financial aid be awarded without

19

consideration of athletics ability,” which, again, would have

20

prohibited today’s athletic scholarships.

21

the Sanity Code the following year and, in 1952, created its first

22

enforcement committee to address and prevent rules infractions.

23

Id. ¶ 24.

24

Id. ¶¶ 17-20.

Id.

Then, in

Id. ¶ 20.

The

The NCAA repealed

In 1956, the NCAA enacted a new set of amateurism rules

25

permitting schools to award athletic scholarships to student-

26

athletes.

27

governing athletics-based financial aid and imposed a limit on the

28

size of athletic scholarships that schools were permitted to

Id. ¶ 25.

These rules established a national standard

25

1

offer.

2

precluded student-athletes from receiving any financial aid beyond

3

that needed for “commonly accepted educational expenses,”

4

including tuition, fees, room and board, books, and cash for

5

incidental expenses such as laundry.

6

Id.

That limit -- now known as a full “grant-in-aid” --

Id.

The NCAA continued to revise its scholarship limits after

7

implementing the grant-in-aid limit in 1956. In 1975, for

8

instance, it removed the cash for incidental expenses from the

9

full grant-in-aid.

Walter Byers Depo. 21:21-22:14, 24:6-:17.

It

United States District Court
For the Northern District of California

10

amended the grant-in-aid rules again in 2004 by allowing student-

11

athletes who receive federal Pell grants to receive total

12

assistance in excess of a full grant-in-aid and even in excess of

13

the cost of attendance.

14

at 208.

15

grant are now eligible to receive a full grant-in-aid plus the

16

value of their Pell grant -- currently, just over $5,500 -- even

17

if that total exceeds the cost of attendance.

18

1573:8-:16 (Pastides); Ex. 2340 at 208.

19

rules again in 2013 to permit different levels of compensation for

20

recruits in different sports.

21

tennis recruits to earn up to ten thousand dollars per year in

22

prize money from athletic events before they enroll in college.

23

Ex. 2340 at 75.

24

barred from receiving any prize money in excess of their actual

25

and necessary costs of competing in an event.

26

Trial Tr. 161:10-162:4 (Noll); Ex. 2340

As a result, student-athletes who qualify for a Pell

Trial Tr.

The NCAA amended its

The new rules permit Division I

Other Division I recruits, in contrast, remain

Id.

The amateurism provision in the NCAA’s current constitution

27

states that student-athletes “shall be amateurs in an

28

intercollegiate sport, and their participation should be motivated
26

1

primarily by education and by the physical, mental and social

2

benefits to be derived.

3

athletics is an avocation, and student-athletes should be

4

protected from exploitation by professional and commercial

5

enterprises.”

6

stands in stark contrast to the definitions set forth in the

7

NCAA’s early bylaws.

8

considers the primary motivation for participating in

9

intercollegiate athletics -- was not even a recognized motivation

Student participation in intercollegiate

Ex. 2340 at 18.

This conception of amateurism

Indeed, education -- which the NCAA now

United States District Court
For the Northern District of California

10

for amateur athletes during the years when the NCAA prohibited

11

athletic scholarships.

12

restrictions on student-athlete compensation, which cap athletics-

13

based financial aid below the cost of attendance, are not

14

justified by the definition of amateurism set forth in its current

15

bylaws.

16

The Court finds that the NCAA’s current

Although the NCAA sought to establish the importance of these

17

restrictions by asserting that they increase consumer interest in

18

FBS football and Division I basketball, its evidence supporting

19

this assertion is unpersuasive.

20

survey research expert, Dr. J. Michael Dennis, who conducted a

21

survey of consumer attitudes concerning college sports in 2013.

22

Dr. Dennis surveyed 2,455 respondents across the United States and

23

observed that they generally opposed the idea of paying college

24

football and basketball players.

25

survey contained an initial question that apparently affected many

26

respondents’ answers to the survey’s substantive questions.

27

initial open-ended question asked respondents what they had heard

28

about student-athletes being paid.

It presented testimony from a

Trial Tr. 2613:24-2614:6.

27

His

The

Id. 2716:15-2717:7; Exs. 2629,

1

2630.

2

“single most common response” to this question was that

3

respondents had heard about student-athletes receiving some form

4

of illegal or illicit payments.

5

Many other respondents mentioned paying student-athletes a salary.

6

Trial Tr. 2714:21-2715:2 (Poret); Ex. 2630.

7

testified that his results remained the same even after he removed

8

these specific 274 respondents from his sample, the fact that

9

these respondents expressly mentioned illicit payments or salaries

Plaintiffs’ survey expert, Hal Poret, noted that the

Trial Tr. 2714:2-:20; Ex. 2629.

Although Dr. Dennis

United States District Court
For the Northern District of California

10

at the start of the survey strongly suggests that the question

11

primed respondents to think about such illicit payments when

12

answering the other survey questions.

13

The NCAA relies heavily on the fact that sixty-nine percent

14

of respondents to Dr. Dennis’s survey expressed opposition to

15

paying student-athletes while only twenty-eight percent favored

16

paying them.

17

responses, however, are not relevant to the specific issues raised

18

here and say little about how consumers would actually behave if

19

the NCAA’s restrictions on student-athlete compensation were

20

lifted.

21

consistent with those observed in other polls and surveys

22

concerning college sports, he acknowledged that those other

23

studies may “vary in their quality or their methodology and their

24

implementation.”

25

Accordingly, the Court does not find these findings to be credible

26

evidence that consumer demand for the NCAA’s product would

27

decrease if student-athletes were permitted to receive

28

compensation.

Trial Tr. 2604:21-2605:2; Ex. 4045 at 19.

These

Although Dr. Dennis testified that these responses were

Trial Tr. 2641:24-2642:11; Ex. 4045 at 20.

28

1

The most relevant questions in Dr. Dennis’s survey asked

2

respondents specifically whether they would be more or less likely

3

to watch, listen to, or attend college football and basketball

4

games if student-athletes were paid.

5

respondents stated they would be less likely to watch, listen to,

6

or attend games if student-athletes were paid $20,000 per year.

7

Ex. 4045 at 23.

8

less likely to watch, listen to, or attend games if student-

9

athletes were paid $50,000 per year.

Thirty-eight percent of all

Forty-seven percent stated that they would be

Id.

In contrast, only about

United States District Court
For the Northern District of California

10

four or five percent of respondents said that they would be more

11

likely to watch, listen to, or attend games if student-athletes

12

were paid $20,000 or $50,000 per year.

13

(Dennis).

14

more or less likely to watch, listen to, or attend games if

15

student-athletes were paid these amounts.

16

Trial Tr. 2651:14-2652:8

The remaining respondents stated that they would be no

Id.

While these questions are more germane to consumer behavior

17

than the survey’s findings about respondents’ general opinions

18

about compensating student-athletes, they still do not credibly

19

establish that the specific rules challenged here contribute to

20

consumer demand.

21

opinions about providing student-athletes with a share of

22

licensing revenue generated from the use of their own names,

23

images, and likenesses.

24

(Poret).

25

athletes the full cost of attendance, or any amount less than

26

$20,000 per year.

27

their behavior would be affected if small or large amounts of

28

compensation for the use of student-athletes’ names, images, and

Dr. Dennis did not ask respondents for their

Id. 2669:15-:18 (Dennis); 2709:6-:18

Nor did he ask their opinions about paying student-

Dr. Dennis also failed to ask respondents how

29

1

likenesses were held in trust for them until they left school --

2

one of Plaintiffs’ proposed alternatives here.

3

(Dennis); 2711:21-2712:9, 2718:19-2714:12 (Poret).

4

Id. 2686:18-2687:3

In addition, numerous respondents provided internally

5

inconsistent responses to different survey questions.

6

three of the respondents who said that they favored paying

7

student-athletes also stated that they would be less likely to

8

watch, listen to, or attend games if student-athletes were paid.

9

Id. 2729:25-2730:9.

Eighty-

Another thirty-three respondents stated that

United States District Court
For the Northern District of California

10

they opposed paying student-athletes but said that they would be

11

more likely to watch, listen to, or attend games if student-

12

athletes were paid.

13

respondents did not understand or did not take seriously some of

14

the survey questions and illustrate the limits of Dr. Dennis’s

15

conclusions.

16

Id.

These responses suggest that some

Based on these flaws in Dr. Dennis’s survey, the Court finds

17

that it does not provide credible evidence that demand for the

18

NCAA’s product would decrease if student-athletes were permitted,

19

under certain circumstances, to receive a limited share of the

20

revenue generated from the use of their own names, images, and

21

likenesses.

22

survey to counter Dr. Dennis’s survey, the Court notes that the

23

NCAA produced Dr. Dennis’s survey as a rebuttal report, which may

24

have limited Plaintiffs’ opportunity to commission such a survey.

25

What’s more, Dr. Dennis himself acknowledged that it would be

26

extremely difficult to ask the specific kinds of detailed survey

27

questions most relevant to this case -- specifically, those

Although Plaintiffs did not provide their own opinion

28
30

1

relating to varying amounts and methods of payment for the use of

2

student-athletes’ names, images, and likenesses.

3

Plaintiffs presented other evidence illustrating the limits

4

of opinion surveys as predictors of consumer demand for sports-

5

entertainment products.

6

Daniel Rascher, described how opinion surveys conducted between

7

1970 and the present consistently showed that the public

8

overwhelmingly opposed rising baseball player salaries but

9

continued to watch, listen to, and attend Major League Baseball

Their expert on sports management, Dr.

United States District Court
For the Northern District of California

10

games at a high rate even as player salaries rose during this

11

period.

12

many people felt that the removal of the reserve clause in the

13

1970s -- which ultimately enabled players to become free agents,

14

thus leading to higher salaries -- would undermine the popularity

15

of professional baseball.

16

fans’ stated opposition to rising salaries, Major League Baseball

17

revenues continued to rise after the removal of the reserve

18

clause.

19

‘Hey, we don’t want the players to make so much money,’ ultimately

20

they continue to watch on television, you know, buy tickets,

21

concessions, the whole thing.” (internal quotation marks added)).

22

Dr. Rascher highlighted another survey showing public opposition

23

to the decision of the International Olympic Committee (IOC) to

24

permit professional athletes to compete in the Olympics, even as

25

consumer interest in the Olympics remained high and revenues

26

generated by the event continued to rise during the same period.

27

Id. 904:22-905:18; see also id. 226:15-227:17 (testimony of Dr.

28

Noll that the Olympics are “much more popular now than they were

Id. 901:12-903:24; Ex. 2549.

He specifically noted that

However, despite these predictions and

Id. 903:13-:16 (“So even though the fans in polls say,

31

1

[when] amateur”).

2

pointed to various other formerly amateur sports associations --

3

such as those governing rugby and tennis -- whose events grew in

4

popularity after they began to allow their athletes to accept

5

payments.

6

In addition to the Olympics, Dr. Rascher also

Id. 903:25-904:21.

Although the NCAA presented evidence showing that the Nielsen

7

ratings for professional baseball and the Olympics have declined

8

since the 1970s and 1980s, this does not cast doubt on Dr.

9

Rascher’s findings.

As Dr. Rascher explained, Nielsen ratings

United States District Court
For the Northern District of California

10

measure the share of the population watching a particular event,

11

not the raw number of viewers.

12

a result, Nielsen ratings have declined for virtually every

13

television program or sporting event over the past few decades as

14

the viewing population and number of television channels has

15

grown.

16

which has seen a dramatic increase in the raw number of viewers

17

over the years, has experienced flat Nielsen ratings for several

18

decades.

19

Id.

Id. 986:7-:10, 1019:20-1020:9.

As

Even a single event as popular as the Super Bowl,

Id. 1024:18-1026:7, 1025:6-:15.

Other historical evidence suggests that the NCAA’s

20

restrictions on student-athlete compensation have not contributed

21

significantly to the popularity of FBS football and Division I

22

basketball.

23

testified during his 2007 deposition, for instance, that the

24

NCAA’s decision to remove incidental expenses from the grant-in-

25

aid coverage in 1975 was not motivated by a desire to increase

26

consumer demand for its product.

27

24:6-:17.

28

experienced a tremendous growth in popularity during the period

The NCAA’s former president, the late Walter Byers,

Byers Depo. 21:21-22:14,

In fact, he specifically noted that NCAA sports

32

1

between 1956 and 1975 when grants-in-aid still covered the full

2

cost of attendance.

3

trial record suggests that the removal of incidental expenses or

4

any other changes to the grant-in-aid limit had an impact on the

5

popularity of college sports during this time.

6

Id. 25:15-26:8.

7

None of the evidence in the

Thus, the Court finds that the NCAA’s restrictions on

7

student-athlete compensation are not the driving force behind

8

consumer demand for FBS football and Division I basketball-related

9

products.

Rather, the evidence presented at trial suggests that

United States District Court
For the Northern District of California

10

consumers are interested in college sports for other reasons.

11

Pilson testified, for instance, that the popularity of college

12

sports is driven by feelings of “loyalty to the school,” which are

13

shared by both alumni and people “who live in the region or the

14

conference.”

15

Plonsky, an associate athletics director at the University of

16

Texas (UT), testified that UT sports would remain popular as long

17

as they had “anything in our world to do with the University of

18

Texas.”

19

pretty loyal.”).

20

popularity of the NCAA’s annual men’s basketball tournament stems

21

from the fact that schools from all over the country participate

22

“so the fan base has an opportunity to cheer for someone from

23

their region of the country.”

24

become extremely popular at least in part because there’s someone

Trial Tr. 757:20-758:13.

Mr.

Similarly, Christine

Id. 1414:23-:24; see also id. 1376:13 (“Longhorns are
Dr. Emmert himself noted that much of the

Id. 1757:1-:9; see also id. (“It’s

25
26
27
28

7

The NCAA’s objections to this testimony under Federal Rules of
Evidence 602 and 701 are overruled. Walter Byers was the executive
director of the NCAA between 1956 and 1975, Stip. Undisputed Facts ¶ 23,
and therefore had personal knowledge of the popularity of NCAA sports
during this period.

33

1

from your neighborhood likely to be in the tournament.”).

2

testified that college bowl games have the same appeal.

3

1757:16-:19.

4

restrictions on student-athlete pay is not the driving force

5

behind consumer interest in FBS football and Division I

6

basketball.

7

certain limited restraints on student-athlete compensation, they

8

do not justify the rigid restrictions challenged in this case.

9

United States District Court
For the Northern District of California

10

B.

He

Id.

This evidence demonstrates that the NCAA’s

Thus, while consumer preferences might justify

Competitive Balance

The NCAA asserts that its challenged restraints are

11

reasonable and procompetitive because they are needed to maintain

12

the current level of competitive balance among FBS football and

13

Division I basketball teams.

14

maintain this particular level of competitive balance in order to

15

sustain consumer demand for its product.

16

It further asserts that it must

The Court finds that the NCAA’s current restrictions on

17

student-athlete compensation do not promote competitive balance.

18

As Dr. Noll testified, since the 1970s, numerous sports economists

19

have studied the NCAA’s amateurism rules and nearly all have

20

concluded that the rules have no discernible effect on the level

21

of competitive balance.

22

of the more recent articles addressing the subject, a 2007 study

23

by economist Jim Peach published in the Social Science Journal,

24

found that there is “‘little evidence that the NCAA rules and

25

regulations have promoted competitive balance in college athletics

26

and no a priori reason to think that eliminating the rules would

27

change the competitive balance situation.’”

28

(quoting Peach article).

Trial Tr. 229:8-234:2.

He noted that one

Id. 232:22-233:1

Dr. Rascher reached the same conclusion
34

1

based on his review of the economics literature.

2

922:16.

3

field of sports economics, by Rod Fort, which found that the

4

NCAA’s restrictions on student-athlete pay do not appear to have

5

any impact on competitive balance.

6

Id. 920:9-

He specifically cited one of the leading textbooks in the

Id. 921:10-:18.

The academic consensus on this issue is not surprising given
that many of the NCAA’s other rules and practices suggest that the

8

association is unconcerned with achieving competitive balance.

9

Several witnesses testified that the restrictions on student-

10
United States District Court
For the Northern District of California

7

athlete compensation lead many schools simply to spend larger

11

portions of their athletic budgets on coaching, recruiting, and

12

training facilities.

13

910:2-911:7 (Rascher).

14

the average salary for a head football coach exceeds $1.5 million.

15

Id. 1151:20-1152:14 (Staurowsky).

16

schools are able to spend freely in these other areas cancels out

17

whatever leveling effect the restrictions on student-athlete pay

18

might otherwise have.

19

spending by the high-revenue schools or minimize existing

20

disparities in revenue and recruiting.

21

specifically conceded that it is “not the mission of the

22

association to . . . try and take away the advantages of a

23

university that’s made a significant commitment to facilities and

24

tradition and all of the things that go along with building a

25

program.”

26

Id. 296:14-297:18 (Noll); 865:11-866:2,
In the major conferences, for instance,

The fact that high-revenue

The NCAA does not do anything to rein in

In fact, Dr. Emmert

Trial Tr. 1774:23-1775:6.

This same sentiment underlies the NCAA’s unequal revenue

27

distribution formula, which rewards the schools and conferences

28

that already have the largest athletic budgets.
35

Revenues

1

generated from the NCAA’s annual Division I men’s basketball

2

tournament are distributed to the conferences based on how their

3

member schools performed in the tournament in recent years.

4

Docket No. 207, Stip. Re: Broadcast Money, at ¶ 10.

5

the major conferences -- and the highest revenue schools --

6

typically receive the greatest payouts, which hinders, rather than

7

promotes, competitive balance.

As a result,

8

The only quantitative evidence that the NCAA presented

9

related to competitive balance is a cursory statistical analysis

United States District Court
For the Northern District of California

10

conducted by Dr. Rubinfeld comparing the levels of competitive

11

balance in FBS football and Division I basketball to the levels in

12

the NFL and NBA.

13

that the NFL and NBA -- each of which has fewer teams than

14

Division I -- provide an appropriate baseline for comparing

15

competitive balance.

16

suggest that the NCAA’s challenged rules actually produce the

17

levels of competitive balance he observed.

18

Nothing in Dr. Rubinfeld’s analysis suggests

More importantly, his analysis does not

Even if the NCAA had presented some evidence of a causal

19

connection between its challenged rules and its current level of

20

competitive balance, it has not shown that the current level of

21

competitive balance is necessary to maintain its current level of

22

consumer demand.

23

that the ideal level of competitive balance for a sports league is

24

somewhere between perfect competitive balance (where every team

25

has an equal chance of winning every game) and perfect imbalance

26

(where every game has a predictable outcome).

27

(Noll); 3127:2-:21 (Rubinfeld).

28

to identify the specific level of competitive balance between

Trial Tr. 228:20-229:2 (Noll).

It is undisputed

Id. 453:8-:22

The NCAA has not even attempted

36

1

those extremes that is ideal or necessary to sustain its current

2

popularity.

3

Court finds that the NCAA’s challenged rules are not needed to

4

achieve a level of competitive balance necessary, or even likely,

5

to maintain current levels of consumer demand for FBS football and

6

Division I basketball.

Given the lack of such evidence in the record, the

7

C.

8

The NCAA contends that its restrictions on student-athlete

9

Integration of Academics and Athletics

compensation are reasonable and procompetitive because they

United States District Court
For the Northern District of California

10

promote the integration of academics and athletics.

11

particular, it asserts that its challenged rules ensure that

12

student-athletes are able to obtain all of the educational

13

benefits that their schools provide and participate in their

14

schools’ academic communities.

15

integration of academics and athletics increases the quality of

16

the educational services its member schools provide to student-

17

athletes in the college education market that Plaintiffs have

18

identified.

In

According to the NCAA, the

19

For support, the NCAA relies on evidence showing that

20

student-athletes receive both short-term and long-term benefits

21

from being student-athletes.

22

Heckman, testified that participation in intercollegiate athletics

23

leads to better academic and labor market outcomes for many

24

student-athletes as compared to other members of their

25

socioeconomic groups.

26

found that these benefits are particularly pronounced for student-

27

athletes from disadvantaged backgrounds.

28

additional evidence, including its own data on student-athlete

One of its experts, Dr. James

Trial Tr. 1493:13-1494:25.

37

Id.

Dr. Heckman

The NCAA presented

1

graduation rates, to show that student-athletes enjoy substantial

2

benefits from participating in intercollegiate athletics.

3

However, none of this data nor any of Dr. Heckman’s observations

4

suggests that student-athletes benefit specifically from the

5

restrictions on student-athlete compensation that are challenged

6

in this case.

7

that the long-term educational and academic benefits that student-

8

athletes enjoy stem from their increased access to financial aid,

9

tutoring, academic support, mentorship, structured schedules, and

To the contrary, Dr. Heckman specifically testified

United States District Court
For the Northern District of California

10

other educational services that are unrelated to the challenged

11

rules in this case.

12

Division I basketball schools offer most of these services to

13

their student-athletes independently and are not compelled to do

14

so by the NCAA, particularly not by the challenged rules.

15

Id. 1512:23-1516:17.

FBS football and

The same is true of the various other benefits of integration

16

that the NCAA has identified.

17

student-athletes derive from interacting with faculty and non-

18

student-athletes on campus are achieved mostly through the NCAA’s

19

rules requiring student-athletes to attend class and meet certain

20

academic requirements.

21

association’s rules prohibiting schools from creating dorms solely

22

for student-athletes or from requiring student-athletes to

23

practice more than a certain number of hours each week.

24

these rules is challenged here.

25

For instance, the benefits that

They are also achieved through the

None of

The only evidence that the NCAA has presented that suggests

26

that its challenged rules might be necessary to promote the

27

integration of academics and athletics is the testimony of

28

university administrators, who asserted that paying student38

1

athletes large sums of money would potentially “create a wedge”

2

between student-athletes and others on campus.

3

(Pastides).

4

much compensation was ultimately awarded, some student-athletes

5

might receive more money from the school than their professors.

6

Student-athletes might also be inclined to separate themselves

7

from the broader campus community by living and socializing off

8

campus.

9

Id. 1591:2-:20

These administrators noted that, depending on how

It is not clear that any of the potential problems identified

United States District Court
For the Northern District of California

10

by the NCAA’s witnesses would be unique to student-athletes.

11

fact, when the Court asked Dr. Emmert whether other wealthy

12

students -- such as those who come from rich families or start

13

successful businesses during school -- raise all of the same

14

problems for campus relations, he replied that they did.

15

1790:18-:22.

16

would be any more problematic for campus relations than paying

17

other students who provide services to the university, such as

18

members of the student government or school newspaper.

19

Nonetheless, the Court finds that certain limited restrictions on

20

student-athlete compensation may help to integrate student-

21

athletes into the academic communities of their schools, which may

22

in turn improve the schools’ college education product.

23

In

Id.

It is also not clear why paying student-athletes

Plaintiffs have produced anecdotal and statistical evidence

24

suggesting that the NCAA’s current rules do not serve to integrate

25

FBS football players or Division I basketball players into the

26

academic communities at their schools.

27

the former UCLA basketball star, testified that he felt like “an

28

athlete masquerading as a student” during his college years.
39

For example, Ed O’Bannon,

Id.

1

33:11-:14.

2

Staurowsky, a sports management professor, who studied the

3

experiences of FBS football and Division I basketball players and

4

concluded that the time demands of their athletic obligations

5

prevent many of them from achieving significant academic success.

6

Id. 1175:12-1176:21.

7

NCAA’s data on student-athlete graduation rates and Dr. Heckman’s

8

observations surrounding academic outcomes for student-athletes.

9

However, the Court need not resolve these factual disputes

Plaintiffs also presented testimony from Dr. Ellen

Some of this evidence conflicts with the

United States District Court
For the Northern District of California

10

because, regardless of how they are resolved, the restraints on

11

student-athlete compensation challenged in this case generally do

12

not serve to enhance academic outcomes for student-athletes.

13

D.

14

The NCAA asserts that its challenged rules are reasonable and

Increased Output

15

procompetitive because they enable it to increase the number of

16

opportunities available to schools and student-athletes to

17

participate in FBS football and Division I basketball, which

18

ultimately increases the number of games that can be played.

19

refers to this increased number of FBS football and Division I

20

schools, student-athletes, and games as increased output.

21

It

The Court finds that the NCAA’s restrictions on student-

22

athlete compensation do nothing to increase this output.

23

number of schools participating in FBS football and Division I

24

basketball has increased steadily over time and continues to

25

increase today.

26

participation in FBS football and Division I basketball typically

27

raises a school’s profile and leads to increased athletics-based

28

revenue.

Stip. Undisputed Facts ¶¶ 42-49.

Trial Tr. 872:1-874:20 (Rascher).
40

The

This is because

Although Dr. Emmert

1

and other NCAA and conference officials say that this trend is not

2

the result of increased Division I revenues but, rather, because

3

of schools’ philosophical commitment to amateurism, this theory is

4

implausible.

5

(Sankey); 3188:25-3189:17 (Lewis).

6

conferences have specifically undertaken efforts to change the

7

NCAA’s existing scholarship rules, which suggests that the rules

8

are not the reason that they choose to participate in Division I.

9

Ex. 2095 at 4 (2013 presentation by representatives of the five

Id. 1783:2-:14; 2080:11-:23 (Delany); 2418:5-:25
Schools in some of the major

United States District Court
For the Northern District of California

10

major conferences requesting autonomy to raise existing

11

scholarship limits); Ex. 2527 at 2 (2014 letter from Pac 12 urging

12

other major conferences to support rule changes, including raising

13

the grant-in-aid limit).

14

suggest that any schools joined Division I originally because of

15

its amateurism rules.

16

participate in collegiate sports associations that restrict

17

compensation for student-athletes, including the NCAA’s lower

18

divisions and the NAIA.

19

Division III are bound by the same amateurism provisions of the

20

NCAA’s constitution as the schools in Division I.

21

difference between schools in Division I and schools in other

22

divisions and athletics associations, as explained above, is the

23

amount of resources that Division I schools commit to athletics.

24

Thus, while there may be tangible differences between Division I

25

schools and other schools that participate in intercollegiate

26

sports, these differences are financial, not philosophical.

27
28

What’s more, there is no evidence to

These schools had numerous other options to

Indeed, schools in FCS, Division II, and

The real

For this reason, the NCAA’s assertion that schools would
leave FBS and Division I for financial reasons if the challenged
41

1

restraints were removed is not credible.

2

Emmert and various other athletics administrators that most

3

Division I athletic programs operate at a loss and would not

4

remain in Division I if the challenged rules were removed

5

conflicts with the clear weight of the evidence.

6

1784:6-:18 (Emmert); 3188:25-3189:3 (Lewis).

Indeed, some of the

7

NCAA’s own witnesses undermined this claim.

Dr. Harris Pastides,

8

the president of the University of South Carolina, for instance,

9

specifically testified that his school “would probably continue to

The testimony of Dr.

Trial Tr.

United States District Court
For the Northern District of California

10

compete in football and men’s basketball” if the challenged

11

restrictions on student-athlete compensation were lifted.

12

1598:23-:25.

13

Banowsky, similarly expressed skepticism that universities would

14

leave Division I if the restrictions were removed.

15

2372:20.

16

that most Division I sports programs operate at a loss by noting

17

that UT’s athletics department is not only self-sustaining but, in

18

fact, generates surplus revenue that funds other university

19

programs and expenses.

20

indicated that UT was not abnormal in this regard and that the

21

“vast proportion” of athletics programs across the country are

22

operated by “self-sourced, self-generated” revenues.

23

1468:11.

24

most of which are distributed back to its member schools and

25

conferences, have increased in recent years.

26

Id.

The commissioner of Conference USA, Britton

Id. 2371:25-

Ms. Plonsky also cast doubt on Dr. Emmert’s assertion

Id. 1385:12-:18, 1465:20-1466:10.

She

Id. 1467:22-

Mr. Lewis himself acknowledged that the NCAA’s revenues,

Id. 3195:19-3196:3.

Dr. Rascher offered similar testimony and documented that

27

participation in FBS football and Division I basketball generates

28

significant revenue and is highly profitable for most schools.
42

1

Id. 830:4-831:15.

2

much on coaches and training facilities.

3

that most FBS football schools used to spend even more on their

4

student-athletes before the NCAA lowered its team scholarship cap

5

from 105 to eighty-five.

6

Noll testified that some of the schools that currently compete in

7

FBS and Division I do so without providing the maximum amount of

8

financial aid permitted under NCAA rules.

9

These revenues are what enable them to spend so
Dr. Rascher also noted

Id. 873:20-874:20.

Furthermore, Dr.

Based on this evidence, the Court finds that schools would

United States District Court
For the Northern District of California

10

not exit FBS football and Division I basketball if they were

11

permitted to pay their student-athletes a limited amount of

12

compensation beyond the value of their scholarships.

13

challenged restrictions on compensation do not increase the number

14

of opportunities for schools or student-athletes to participate in

15

Division I.

16

V.

17

The NCAA’s

Alternatives to the Restraint
Plaintiffs have proposed three modifications to the NCAA’s

18

challenged rules which, they contend, would allow the NCAA to

19

achieve the purposes of its challenged rules in a less restrictive

20

manner: (1) raise the grant-in-aid limit to allow schools to award

21

stipends, derived from specified sources of licensing revenue, to

22

student-athletes; (2) allow schools to deposit a share of

23

licensing revenue into a trust fund for student-athletes which

24

could be paid after the student-athletes graduate or leave school

25

for other reasons; or (3) permit student-athletes to receive

26

limited compensation for third-party endorsements approved by

27

their schools.

28
43

1

The Court finds that Plaintiffs’ first proposed

2

alternative -- allowing schools to award stipends -- would limit

3

the anticompetitive effects of the NCAA’s current restraint

4

without impeding the NCAA’s efforts to achieve its stated

5

purposes, provided that the stipends do not exceed the cost of

6

attendance as that term is defined in the NCAA’s bylaws.

7

stipend capped at the cost of attendance would not violate the

8

NCAA’s own definition of amateurism because it would only cover

9

educational expenses.

A

Indeed, as noted above, the NCAA’s member

United States District Court
For the Northern District of California

10

schools used to provide student-athletes with similar stipends

11

before the NCAA lowered its cap on grants-in-aid.

12

21:21-22:14, 24:6-:17.

13

grant-in-aid limit to cover the full cost of attendance would not

14

violate the NCAA’s amateurism rules.

15

Sankey, the executive associate commissioner and chief operating

16

officer of the SEC, expressed the same view during his testimony,

17

as did Dr. Rubinfeld.

18

(Rubinfeld).

Byers Depo.

Dr. Emmert testified that raising the

Trial Tr. 1742:15-:18.

Greg

Id. 2430:23-:24 (Sankey); 3117:2-:4

19

None of the evidence presented at trial suggests that

20

consumer demand for the NCAA’s product would decrease if schools

21

were permitted to provide such stipends to student-athletes once

22

again.

23

stipends would hinder any school’s efforts to educate its student-

24

athletes or integrate them into the academic community on campus.

25

If anything, providing student-athletes with such stipends would

26

facilitate their integration into academic life by removing some

27

of the educational expenses that they would otherwise have to

28

bear, such as school supplies, which are not covered by a full

Nor does any of the evidence suggest that providing such

44

1

grant-in-aid.

2

allow for such stipends also would not have any effect on the

3

NCAA’s efforts to achieve competitive balance or increase its

4

output because, as explained above, its existing restrictions on

5

student-athlete compensation do not advance these goals.

6

Ex. 2340 at 207.

Raising the grant-in-aid cap to

Plaintiffs’ second proposed less restrictive alternative --

7

allowing schools to hold payments in trust for student-athletes --

8

would likewise enable the NCAA to achieve its goals in a less

9

restrictive manner, provided the compensation was limited and

United States District Court
For the Northern District of California

10

distributed equally among team members.

11

Mr. Pilson, testified that he would not be troubled if schools

12

were allowed to make five thousand dollar payments to their

13

student-athletes and that his general concerns about paying

14

student-athletes would be partially assuaged if the payments were

15

held in trust.

16

director, Bernard Muir, similarly acknowledged that his concerns

17

about paying student-athletes varied depending on the size of the

18

payments that they would receive.

19

dollar limit, you know, that varies, but it does concern me when

20

we’re talking about six figures, seven figures in some cases.”).

21

This testimony is consistent with Dr. Dennis’s general observation

22

that, if the NCAA’s restrictions on student-athlete pay were

23

removed, the popularity of college sports would likely depend on

24

the size of payments awarded to student-athletes.

25

therefore finds that permitting schools to make limited payments

26

to student-athletes above the cost of attendance would not harm

27

consumer demand for the NCAA’s product -- particularly if the

28

student-athletes were not paid more or less based on their

Trial Tr. 770:25-771:18.

45

The NCAA’s own witness,

Stanford’s athletic

Id. 254:3-:18 (“Where I set the

The Court

1

athletic ability or the quality of their performances and the

2

payments were derived only from revenue generated from the use of

3

their own names, images, and likenesses.

4

Holding these limited and equal shares of licensing revenue

5

in trust until after student-athletes leave school would further

6

minimize any potential impact on consumer demand.

7

student-athletes are already permitted to receive compensation for

8

the use of their names, images, and likenesses in game re-

9

broadcasts and other archival footage of their college

Indeed, former

United States District Court
For the Northern District of California

10

performances as long as they enter into such agreements after they

11

leave school.

12

if current and future student-athletes were given the opportunity

13

to receive compensation from their schools after they leave

14

college.

15

athletes while they are enrolled would not erect any new barriers

16

to schools’ efforts to educate student-athletes or integrate them

17

into their schools’ academic communities.

18

finds that consumer demand for the NCAA’s products would not

19

change if schools were allowed to offer and student-athletes on

20

FBS football and Division I basketball teams were allowed, after

21

leaving college, to receive limited and equal shares of licensing

22

revenue generated from the use of their names, images, and

23

likenesses during college.

The popularity of college sports would not suffer

Likewise, holding compensation in trust for student-

The Court therefore

24

Although Drs. Emmert and Rubinfeld suggested that student-

25

athletes could potentially monetize these future earnings while

26

they are still in school by taking out loans against the trust,

27

the NCAA could easily prohibit such borrowing, just as it

28

currently prohibits student-athletes from borrowing against their
46

1

future earnings as professional athletes.

2

(prohibiting student-athletes from accepting any loan issued based

3

on the “student-athlete’s athletics reputation, skill or pay-back

4

potential as a future professional athlete”).

5

witnesses testified that its current rules would not suffice to

6

prevent student-athletes from borrowing against their future

7

compensation.

8

schools could place the money in a special account, such as a

9

spendthrift trust, to prevent such borrowing.

See Ex. 2340 at 236

None of the NCAA’s

Nor did they rule out that the NCAA and its member

Accordingly, the

United States District Court
For the Northern District of California

10

Court finds that allowing FBS football and Division I basketball

11

schools to hold in trust a limited and equal share of licensing

12

revenue for their recruits would provide a less restrictive means

13

of achieving the NCAA’s stated purposes.

14

Plaintiffs’ third proposed alternative, however -- allowing

15

student-athletes to receive money for endorsements -- does not

16

offer a less restrictive way for the NCAA to achieve its purposes.

17

Allowing student-athletes to endorse commercial products would

18

undermine the efforts of both the NCAA and its member schools to

19

protect against the “commercial exploitation” of student-athletes.

20

Although the trial record contains evidence -- and Dr. Emmert

21

himself acknowledged -- that the NCAA has not always succeeded in

22

protecting student-athletes from commercial exploitation, this

23

failure does not justify expanding opportunities for commercial

24

exploitation of student-athletes in the future.

25

themselves previously indicated that they were not seeking to

26

enjoin the NCAA from enforcing its current rules prohibiting such

27

endorsements.

Plaintiffs

In light of this record, the Court finds that

28
47

1

Plaintiffs’ third proposed less restrictive alternative does not

2

offer the NCAA a viable means of achieving its stated goals.

3
4
5

CONCLUSIONS OF LAW
I.

Legal Standard under the Section 1 of the Sherman Act
Section 1 of the Sherman Act makes it illegal to form any

“contract, combination in the form of trust or otherwise, or

7

conspiracy, in restraint of trade or commerce among the several

8

States.”

9

section, a plaintiff must show “‘(1) that there was a contract,

10
United States District Court
For the Northern District of California

6

combination, or conspiracy; (2) that the agreement unreasonably

11

restrained trade under either a per se rule of illegality or a

12

rule of reason analysis; and (3) that the restraint affected

13

interstate commerce.’”

14

1062 (9th Cir. 2001) (citing Hairston v. Pacific 10 Conference,

15

101 F.3d 1315, 1318 (9th Cir. 1996)).

16

15 U.S.C. § 1.

To prevail on a claim under this

Tanaka v. Univ. of S. Cal., 252 F.3d 1059,

In this case, Plaintiffs allege that the NCAA’s rules and

17

bylaws operate as an unreasonable restraint of trade.

18

particular, they seek to challenge the set of rules that preclude

19

FBS football players and Division I men’s basketball players from

20

receiving any compensation, beyond the value of their athletic

21

scholarships, for the use of their names, images, and likenesses

22

in videogames, live game telecasts, re-broadcasts, and archival

23

game footage.

24

enacted and are enforced pursuant to an agreement among its

25

Division I member schools and conferences.

26

that these rules affect interstate commerce.

27

only remaining question here is whether the challenged rules

28

restrain trade unreasonably.

In

The NCAA does not dispute that these rules were

48

Nor does it dispute
Accordingly, the

1

“The rule of reason is the presumptive or default standard”

2

for making this determination.

3

Safeway, Inc., 651 F.3d 1118, 1133 (9th Cir. 2011) (citing Texaco

4

Inc. v. Dagher, 547 U.S. 1, 5 (2006)).

5

restraints may be examined under a truncated “quick look” or per

6

se analysis, the Supreme Court has “expressed reluctance to adopt

7

per se rules with regard to ‘restraints imposed in the context of

8

business relationships where the economic impact of certain

9

practices is not immediately obvious.’”

California ex rel. Harris v.

Although certain

State Oil Co. v. Khan,

United States District Court
For the Northern District of California

10

522 U.S. 3, 10 (1997) (citing FTC v. Indiana Federation of

11

Dentists, 476 U.S. 447, 458-459 (1986)).

12

specifically held that concerted actions undertaken by joint

13

ventures should be analyzed under the rule of reason.

14

Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 203 (2010)

15

(“When ‘restraints on competition are essential if the product is

16

to be available at all,’ per se rules of illegality are

17

inapplicable, and instead the restraint must be judged according

18

to the flexible Rule of Reason.” (citing NCAA v. Board of Regents

19

of Univ. of Oklahoma, 468 U.S. 85, 101 (1984))).

20

explained in prior orders, the Court analyzes the challenged

21

restraint in this case under the rule of reason rather than a

22

“quick look” or per se rule.

23

1025, April 11, 2014 Order, at 8-9; Case No. 09-1967, Docket No.

24

151, Feb. 8, 2010 Order, at 9–10.

25

The Supreme Court has

American

Thus, as

See Case No. 09-1967, Docket No.

“A restraint violates the rule of reason if the restraint’s

26

harm to competition outweighs its procompetitive effects.”

27

Tanaka, 252 F.3d at 1063.

28

shifting framework to conduct this balancing.

Courts typically rely on a burden-

49

Under that

1

framework, the “plaintiff bears the initial burden of showing that

2

the restraint produces ‘significant anticompetitive effects’

3

within a ‘relevant market.’”

4

1319).

5

defendant must come forward with evidence of the restraint’s

6

procompetitive effects.”

7

this burden, the plaintiff must “show that ‘any legitimate

8

objectives can be achieved in a substantially less restrictive

9

manner.’”

United States District Court
For the Northern District of California

10
11

II.

Id. (citing Hairston, 101 F.3d at

If the plaintiff satisfies this initial burden, “the

Id.

Finally, if the defendant meets

Id. (citing Hairston, 101 F.3d at 1319).

Anticompetitive Effects in the Relevant Markets
“Proof that defendant’s activities had an impact upon

12

competition in the relevant market is ‘an absolutely essential

13

element of the rule of reason case.’”

14

v. San Fernando Valley Bd. of Realtors, 786 F.2d 1400, 1405 (9th

15

Cir. 1986) (citations omitted).

16

this context,

17

Supermarket of Homes, Inc.

The term “relevant market,” in

21

“encompasses notions of geography as well as
product use, quality, and description. The
geographic market extends to the area of
effective competition . . . where buyers can
turn for alternative sources of supply. The
product market includes the pool of goods or
services that enjoy reasonable
interchangeability of use and cross-elasticity
of demand.”

22

Tanaka, 252 F.3d at 1063 (quoting Oltz v. St. Peter’s Cmty. Hosp.,

23

861 F.2d 1440, 1446 (9th Cir. 1988) (internal citations omitted)).

18
19
20

24

Here, Plaintiffs allege that the challenged restraint causes

25

anticompetitive effects in two related national markets: (1) the

26

“college education market,” in which colleges and universities

27

compete to recruit student-athletes to play FBS football or

28

Division I basketball; and (2) the “group licensing market,” in
50

1

which videogame developers, television networks, and others

2

compete for group licenses to use the names, images, and

3

likenesses of FBS football and Division I men’s basketball players

4

in videogames, telecasts, and clips.

5

these markets in turn.

6

A.

7
8
9

The Court addresses each of

College Education Market
1.

Market Definition

As outlined in the findings of fact, Plaintiffs produced
sufficient evidence at trial to establish the existence of a

United States District Court
For the Northern District of California

10

national market in which NCAA Division I schools compete to sell

11

unique bundles of goods and services to elite football and

12

basketball recruits.

13

recruits the opportunity to earn a higher education while playing

14

for an FBS football or Division I men’s basketball team.

15

exchange, the recruits who accept these offers provide their

16

schools with their athletic services and acquiesce in their

17

schools’ use of their names, images, and likenesses while they are

18

enrolled.

19

attendance not covered by their grants-in-aid.

20

Specifically, these schools compete to offer

8

In

The recruits must also pay for any other costs of

The NCAA contends that it does not restrain competition in

21

this market.

22

Division I basketball schools lack the power to fix prices in this

23

market because they must compete with other colleges and

24

universities -- such as those in other divisions and college

In particular, it argues that FBS football and

25
8

26
27
28

This market could be divided into two submarkets -- one in which
Division I basketball schools compete for elite basketball recruits and
one in which FBS football schools compete for elite football recruits.
However, because the parties’ evidence and arguments in this case apply
generally to both of these submarkets, there is no need to subdivide the
broader market for the purposes of this analysis.

51

1

athletic associations -- in supplying educational and athletic

2

opportunities to elite recruits.

3

professional sports leagues and domestic minor leagues which might

4

likewise provide alternatives to playing FBS football or Division

5

I basketball.

6

leagues, the NCAA argues, Plaintiffs have defined the field of

7

competition in the college education market too narrowly.

8

The NCAA also points to foreign

By failing to account for these other schools and

The “field of competition” within a given product market
consists of “the group or groups of sellers or producers who have

10
United States District Court
For the Northern District of California

9

actual or potential ability to deprive each other of significant

11

levels of business.”

12

Inc., 875 F.2d 1369, 1374 (9th Cir. 1989).

13

limited to producers of the particular “product at issue” but also

14

includes the producers of “all economic substitutes for the

15

product.”

16

1038, 1045 (9th Cir. 2008).

17

economic substitutes, courts typically consider two factors:

18

“first, [the product’s] reasonable interchangeability for the same

19

or similar uses; and second, cross-elasticity of demand, an

20

economic term describing the responsiveness of sales of one

21

product to price changes in another.”

22

Coliseum Comm’n v. Nat’l Football League, 726 F.2d 1381, 1393 (9th

23

Cir. 1984); see also Brown Shoe Co. v. United States, 370 U.S.

24

294, 325 (1962) (“The outer boundaries of a product market are

25

determined by the reasonable interchangeability of use or the

26

cross-elasticity of demand between the product itself and

27

substitutes for it.”).

28

the price, use, and qualities of all potential substitutes for the

Thurman Indus., Inc. v. Pay ‘N Pak Stores,
This group is not

Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d
To determine whether a product has

Los Angeles Memorial

This analysis requires an examination of

52

1

product at issue.

2

Co., 328 F.3d 1145, 1163 (9th Cir. 2003) (“For antitrust purposes,

3

a ‘market is composed of products that have reasonable

4

interchangeability for the purposes for which they are produced --

5

price, use and qualities considered.’” (citations omitted)).

6

analysis of these factors in the present case demonstrates that

7

Plaintiffs have properly defined the scope of a relevant college

8

education market.

9

See Paladin Associates, Inc. v. Montana Power

An

As set forth in the findings of fact, the product that FBS

United States District Court
For the Northern District of California

10

and Division I schools offer is unique.

11

educational and athletic opportunities offered by schools outside

12

of FBS football and Division I -- including schools in FCS,

13

Divisions II and III, and associations like the NAIA, USCAA,

14

NJCAA, or NCCAA -- differ significantly in both price and quality

15

from those offered by FBS and Division I schools.

16

schools typically offer a lower level of athletic competition,

17

inferior training facilities, lower-paid coaches, and fewer

18

opportunities to play in front of large crowds and on television.

19

Furthermore, because many of these schools do not offer athletic

20

scholarships, the cost of attending these institutions is much

21

higher for many student-athletes than the cost of attending an FBS

22

football or Division I basketball school.

23

who receive scholarship offers to play FBS football or Division I

24

basketball rarely turn them down and, when they do, almost never

25

do so to play football or basketball at a school outside of FBS or

26

Division I.

27

compete with FBS and Division I schools in the recruiting market,

28

just as they do not on the football field or the basketball court.

The combination of

Non-Division I

This is why recruits

In short, non-FBS and non-Division I schools do not

53

1

The same holds true for professional sports leagues such as

2

the AFL, NBA D-League, and foreign football and basketball

3

leagues.

4

earn a higher education or regularly showcase their athletic

5

talents on national television.

6

demonstrates that FBS football and Division I basketball command a

7

significantly larger domestic television audience than virtually

8

every other football or basketball league, with the exceptions of

9

the NFL and NBA (neither of which permits an athlete to enter its

These leagues do not offer recruits opportunities to

The NCAA’s own evidence

United States District Court
For the Northern District of California

10

league directly from high school).

11

football and basketball recruits rarely pursue careers in these

12

second-tier leagues immediately after high school and

13

overwhelmingly prefer to play for FBS football teams and Division

14

I basketball teams.

15

The evidence shows that elite

In sum, the qualitative differences between the opportunities

16

offered by FBS football and Division I basketball schools and

17

those offered by other schools and sports leagues illustrate that

18

FBS football schools and Division I basketball schools operate in

19

a distinct market.

20

(S.D. Ind.) (finding plaintiff’s allegations regarding “the

21

superior competition, institutional support, overall preference,

22

higher revenue, and more scholarship opportunities provided in

23

Division I football, as opposed to Division II or NAIA football”

24

sufficient to support his assertion that “Division II and NAIA

25

football are not adequate substitutes for Division I football and,

26

thus, not part of the same relevant market”); White v. NCAA, Case

27

No. 06-999, Docket No. 72, at 3 (C.D. Cal. Sept. 20, 2006)

28

(finding plaintiff’s allegations that student-athletes had no

See Rock v. NCAA, 2013 WL 4479815, at *13

54

1

reasonably interchangeable alternatives for the “unique

2

combination of coaching-services and academics” offered by FBS

3

football and Division I basketball schools sufficient to plead a

4

relevant market).

5

fluctuations in the price of attending FBS and Division I schools

6

resulting from changes in the grant-in-aid limit have not caused

7

large numbers of FBS football and Division I basketball recruits

8

to migrate toward other schools or professional leagues.

9

Trial Tr. 127:4-:17 (Noll); Lucas Auto. Engineering, Inc. v.

So, too, does the fact that historic

See

United States District Court
For the Northern District of California

10

Bridgestone/Firestone, Inc., 275 F.3d 762, 767 (9th Cir. 2001)

11

(“The determination of what constitutes the relevant product

12

market hinges, therefore, on a determination of those products to

13

which consumers will turn, given reasonable variations in

14

price.”).

15

schools and professional leagues that the NCAA has identified lack

16

the power to deprive FBS football and Division I basketball

17

schools of a significant number of recruits.

18

other schools and leagues are not suppliers in the market that

19

Plaintiffs have identified.

20

Taken together, this evidence shows that the various

2.

Accordingly, these

The Challenged Restraint

21

Because FBS football and Division I basketball schools are

22

the only suppliers in the relevant market, they have the power,

23

when acting in concert through the NCAA and its conferences, to

24

fix the price of their product.

25

power by forming an agreement to charge every recruit the same

26

price for the bundle of educational and athletic opportunities

27

that they offer: to wit, the recruit’s athletic services along

28

with the use of his name, image, and likeness while he is in

They have chosen to exercise this

55

1

school.

2

offering any recruit a cash rebate, deferred payment, or other

3

form of direct compensation -- that school may be subject to

4

sanctions by the NCAA.

5

If any school seeks to lower this fixed price -- by

This price-fixing agreement constitutes a restraint of trade.

6

The evidence presented at trial makes clear that, in the absence

7

of this agreement, certain schools would compete for recruits by

8

offering them a lower price for the opportunity to play FBS

9

football or Division I basketball while they attend college.

United States District Court
For the Northern District of California

10

Indeed, the NCAA’s own expert, Dr. Rubinfeld, acknowledged that

11

the NCAA operates as a cartel that imposes a restraint on trade in

12

this market.

13

Despite this undisputed evidence, the NCAA contends that its

14

conduct does not amount to price-fixing because the price that

15

most student-athletes actually pay is “at or close to zero” due to

16

their athletic scholarships.

17

commercial nature of the transactions between FBS football and

18

Division I basketball schools and their recruits.

19

true that many FBS football and Division I basketball players do

20

not pay for tuition, room, or board in a traditional sense, they

21

nevertheless provide their schools with something of significant

22

value: their athletic services and the rights to use their names,

23

images, and likenesses while they are enrolled.

24

pay the incidental expenses of their college attendance.

25

Seventh Circuit recently observed that these “transactions between

26

NCAA schools and student-athletes are, to some degree, commercial

27

in nature, and therefore take place in a relevant market with

28

respect to the Sherman Act.”

This argument mischaracterizes the

While it is

They must also
The

Agnew v. NCAA, 683 F.3d 328, 341
56

1

(7th Cir. 2012).

2

schools make with premier athletes -- full scholarships in

3

exchange for athletic services -- are not noncommercial, since

4

schools can make millions of dollars as a result of these

5

transactions.”

6

The court reasoned that “the transactions those

Id. at 340.

A court in the Central District of California similarly

7

concluded that these transactions take place within a cognizable

8

antitrust market.

9

student-athletes had stated a valid Sherman Act claim against the

In White, the court found that a group of

United States District Court
For the Northern District of California

10

NCAA by alleging that its cap on the value of grants-in-aid

11

operated as a price-fixing agreement among FBS football and

12

Division I basketball schools.

13

4.

14

plaintiffs had failed to allege a sufficient harm to competition.

15

It explained,

16
17
18
19
20
21
22
23
24
25
26
27
28

Case No. 06-999, Docket No. 72, at

The court specifically rejected the NCAA’s argument that the

Plaintiffs’ [complaint] alleges that studentathletes are consumers of the higher education
and coaching services that the NCAA schools
provide. Plaintiffs allege that the GIA
[grant-in-aid] cap operates to restrict the
price at which student-athletes purchase those
services by forcing student-athletes to bear a
greater portion of the cost of attendance than
they would have borne if the GIA cap had not
been in place. Taken in a light most
favorable to the Plaintiffs, these allegations
suggest that the GIA cap harms would-be
buyers, forcing them to pay higher prices than
would result from unfettered competition.
Id. (citations omitted).

The same reasoning governs here, where

Plaintiffs have shown that FBS football and Division I basketball
schools have fixed the price of their product by agreeing not to
offer any recruit a share of the licensing revenues derived from
the use of his name, image, and likeness.
57

1

The fact that this price-fixing agreement operates by

2

undervaluing the name, image, and likeness rights that the

3

recruits provide to the schools -- rather than by explicitly

4

requiring schools to charge a specific monetary price -- does not

5

preclude antitrust liability here.

6

prohibits various kinds of price-fixing agreements, even indirect

7

restraints on price.

8

310 U.S. 150, 223 (1940) (“[T]he machinery employed by a

9

combination for price-fixing is immaterial.

Federal antitrust law

See United States v. Socony-Vacuum Oil Co.,

Under the Sherman Act

United States District Court
For the Northern District of California

10

a combination formed for the purpose and with the effect of

11

raising, depressing, fixing, pegging, or stabilizing the price of

12

a commodity in interstate or foreign commerce is illegal per

13

se.”).

14

Supreme Court held that an agreement among beer wholesalers to

15

cease providing interest-free credits to retailers was “merely one

16

form of price fixing” and could therefore be “presumed illegal”

17

under § 1 of the Sherman Act.

18

Court reasoned that the “agreement to terminate the practice of

19

giving credit is [] tantamount to an agreement to eliminate

20

discounts, and thus falls squarely within the traditional per se

21

rule against price fixing.”

22

terms must be characterized as an inseparable part of the

23

price.”).

24

“wholesalers had competed with each other with respect to trade

25

credit, and the credit terms for individual retailers had varied

26

substantially.”

27

practice thus “extinguish[ed] one form of competition among the

28

sellers” and could be presumed unlawful, even though it did not

In Catalano, Inc. v. Target Sales, Inc., for instance, the

446 U.S. 643, 650 (1980).

The

Id. at 648; see also id. (“[C]redit

It noted that, prior to their agreement, the

Id. at 644-45.

The agreement to eliminate this

58

1

ultimately require the sellers to set their prices at some

2

specific, pre-determined level.

3

Id.

Like the wholesalers’ agreement in Catalano, the agreement

4

among FBS football and Division I basketball schools not to offer

5

recruits a share of their licensing revenue eliminates one form of

6

price competition.

7

prices indirectly, rather than directly, it is nevertheless

8

sufficient to satisfy Plaintiffs’ initial burden under the rule of

9

reason.

Although this agreement may operate to fix

Plaintiffs need not identify an agreement as obviously

United States District Court
For the Northern District of California

10

unlawful as the wholesalers’ agreement in Catalano to establish a

11

per se violation, let alone to meet the lower burden imposed by

12

the first step of a rule of reason analysis.

13

45 (“[W]e have held agreements to be unlawful per se that had

14

substantially less direct impact on price than the agreement

15

alleged in this case.”).

16

See 446 U.S. at 644-

Indeed, in another case involving concerted action by members

17

of a sports league, then-Judge Sotomayor observed that an

18

antitrust plaintiff may sometimes meet its burden by identifying

19

an agreement to fix prices indirectly.

20

Properties, Inc. v. Salvino, Inc., 542 F.3d 290, 337 (2d Cir.

21

2008) (Sotomayor, J., concurring).

22

sought to challenge an agreement among Major League Baseball teams

23

to license their trademarks and other intellectual property

24

exclusively through a designated third party called Major League

25

Baseball Properties (MLBP).

26

agreement violated the Sherman Act because it eliminated price

27

competition among the teams as suppliers of intellectual property.

28

A three-judge panel of the Second Circuit rejected this claim,

See Major League Baseball

In that case, the plaintiff

The plaintiff alleged that the

59

finding that the agreement did not constitute price-fixing.

2

separate concurrence, then-Judge Sotomayor noted that, although

3

she agreed that the licensing arrangement was lawful, she believed

4

that the majority had endorsed “an overly formalistic view of

5

price fixing.”

6

agreement does not specify a price to be charged, the effect of

7

the agreement clearly eliminates price competition between the

8

[teams] for trademark licenses.

9

competition from the market is the essence of price fixing.”

10
United States District Court
For the Northern District of California

1

at 335; see also id. at 336-37 (“In other words, an agreement

11

between competitors to ‘share profits’ or to make a third party

12

the exclusive seller of their competing products that has the

13

purpose and effect of fixing, stabilizing, or raising prices may

14

be a per se violation of the Sherman Act, even if no explicit

15

price is referenced in the agreement.”).

16

also noted that such an agreement could be unlawful, even if it

17

was only meant to bind members of a joint venture.

18

Id. at 334.

In a

She reasoned, “While the MLBP

An agreement to eliminate price
Id.

Then-Judge Sotomayor

She explained,

[T]he antitrust laws prohibit two companies A
and B, producers of X, from agreeing to set
the price of X. Likewise, A and B cannot
simply get around this rule by agreeing to set
the price of X through a third-party
intermediary or “joint venture” if the purpose
and effect of that agreement is to raise,
depress, fix, peg, or stabilize the price of
X.

19
20
21
22

9

23

Id. at 336.

24

agreement served a procompetitive purpose, because it increased

Although she ultimately concluded that the MLBP

25
26
27
28

9

The Supreme Court recently relied on this language from thenJudge Sotomayor’s concurrence in another Sherman Act case involving a
challenge to concerted action by members of a sports league. American
Needle, 560 U.S. at 202 (“[C]ompetitors ‘cannot simply get around’
antitrust liability by acting ‘through a third-party intermediary or

60

1

the total number of licenses sold, her opinion nevertheless

2

illustrates that price-fixing agreements take many forms and may

3

be unlawful even if they are implemented by members of a joint

4

venture.

5

Although Plaintiffs have characterized FBS football and

6

Division I basketball schools as sellers in the market for

7

educational and athletic opportunities, in their post-trial brief

8

they argued that the schools could alternatively be characterized

9

as buyers in a market for recruits’ athletic services and

United States District Court
For the Northern District of California

10

licensing rights.

11

recruitment of the highest ranked male high school football and

12

basketball players each year.

13

Plaintiffs’ antitrust claim arises under a theory of monopsony,

14

rather than monopoly, alleging an agreement to fix prices among

15

buyers rather than sellers.

16

violate § 1 of the Sherman Act just as a price-fixing agreement

17

among sellers would.

18

Grp., Inc., 629 F.3d 697, 705 (7th Cir. 2011) (“Ordinarily, price-

19

fixing agreements exist between sellers who collude to set their

20

prices above or below prevailing market prices.

21

also violate § 1 by forming what is sometimes known as a ‘buyers’

22

cartel.’”); Vogel v. Am. Soc. of Appraisers, 744 F.2d 598, 601

23

(7th Cir. 1984) (“Just as a sellers’ cartel enables the charging

24

of monopoly prices, a buyers’ cartel enables the charging of

25

monopsony prices; and monopoly and monopsony are symmetrical

26

distortions of competition from an economic standpoint.”

The relevant market would be that for the

Viewed from this perspective,

Such an agreement, if proven, would

See generally Omnicare, Inc. v. UnitedHealth

But buyers may

27
28

‘joint venture.’’” (quoting Salvino, 542 F.3d at 336 (Sotomayor, J.,
concurring)).

61

1

(citations omitted)).

2

“kinship between monopoly and monopsony suggests that similar

3

legal standards should apply to claims of monopolization and to

4

claims of monopsonization.”

5

Hardwood Lumber Co., Inc., 549 U.S. 312, 322 (2007) (citing Roger

6

G. Noll, “‘Buyer Power’ and Economic Policy,” 72 Antitrust L.J.

7

589, 591 (2005)).

8
9

The Supreme Court has noted that the

Weyerhaeuser Co. v. Ross-Simmons

In recent years, several courts have specifically recognized
that monopsonistic practices in a market for athletic services may

United States District Court
For the Northern District of California

10

provide a cognizable basis for relief under the Sherman Act.

11

e.g., Rock, 2013 WL 4479815, at *11 (finding that plaintiff had

12

identified a cognizable market in which “buyers of labor (the

13

schools) are all members of NCAA Division I football and are

14

competing for the labor of the sellers (the prospective student-

15

athletes who seek to play Division I football)”); In re NCAA I-A

16

Walk-On Football Players Litig., 398 F. Supp. 2d 1144, 1150 (W.D.

17

Wash. 2005) (“Plaintiffs have alleged a sufficient ‘input’ market

18

in which NCAA member schools compete for skilled amateur football

19

players.”).

20

that the “proper identification of a labor market for student-

21

athletes . . . would meet plaintiffs’ burden of describing a

22

cognizable market under the Sherman Act.”

23

that Plaintiffs’ alternative monopsony theory mirrors their

24

monopoly price-fixing theory, the evidence presented and facts

25

found above are sufficient to establish a restraint of trade in a

26

market for recruits’ athletic services just as they are to

27

establish a restraint of trade in the college education market.

28

As explained above, viewed from this perspective, the sellers in

See,

Indeed, the Seventh Circuit recently noted in Agnew

62

683 F.3d at 346.

Given

1

this market are the recruits; the buyers are FBS football and

2

Division I basketball schools; the product is the combination of

3

the recruits’ athletic services and licensing rights; and the

4

restraint is the agreement among schools not to offer any recruit

5

more than the value of a full grant-in-aid.

6

this restraint, schools would compete against one another by

7

offering to pay more for the best recruits’ athletic services and

8

licensing rights -- that is, they would engage in price

9

competition.

United States District Court
For the Northern District of California

10

In the absence of

The NCAA argues that Plaintiffs cannot prevail under a

11

monopsony theory because they have not presented evidence of an

12

impact on price or output in a “downstream market.”

13

2766:16-:22 (Stiroh).

14

only way that a restraint on an input market -- such as a market

15

for recruits’ athletic services and licensing rights -- can give

16

rise to an anticompetitive harm is if that restraint ultimately

17

harms consumers by reducing output or raising prices in a

18

downstream market.

19

among economists, they are not supported by the relevant case law.

20

The Supreme Court has indicated that monopsonistic practices that

21

harm suppliers may violate antitrust law even if they do not

22

ultimately harm consumers.

23

Crystal Sugar Co., 334 U.S. 219 (1948), the Supreme Court

24

considered whether an agreement among sugar refiners to fix the

25

prices they paid for sugar beets constituted a violation of the

26

Sherman Act.

27

combination condemned by the Act, even though the price-fixing was

28

by purchasers, and the persons specially injured . . . are

Trial Tr.

They cite Dr. Stiroh’s testimony that the

Whatever merit Dr. Stiroh’s views might have

In Mandeville Island Farms v. Am.

It concluded that “the agreement is the sort of

63

sellers, not customers or consumers.”

2

Court reached this conclusion despite a vehement dissent from

3

Justice Jackson noting that the price of sugar had not been

4

affected by the refiners’ agreement.

5

decision, thus, “strongly suggests that suppliers . . . are

6

protected by antitrust laws even when the anti-competitive

7

activity does not harm end-users.”

8

v. Sw. Bell Tel. Co., 305 F.3d 1124, 1134 (10th Cir. 2002); see

9

also Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 988

10
United States District Court
For the Northern District of California

1

(9th Cir. 2000) (“The Supreme Court’s references to the goals of

11

achieving ‘the lowest prices, the highest quality and the greatest

12

material progress’ and of ‘assur[ing] customers the benefits of

13

price competition’ do not mean that conspiracies among buyers to

14

depress acquisition prices are tolerated.

15

field makes clear that the interaction of competitive forces, not

16

price-rigging, is what will benefit consumers.” (emphasis added)).

17

Id. at 235.

Id. at 247.

Notably, the

The majority’s

Telecor Communications, Inc.

Every precedent in the

This is consistent with a long line of cases, including some

18

decided by the Ninth Circuit, recognizing that restraints on

19

competition within a labor market may give rise to an antitrust

20

violation under § 1 of the Sherman Act.

21

Shipowners’ Ass’n, 272 U.S. 359, 365 (1926) (holding that a multi-

22

employer agreement among ship owners restrained trade in a labor

23

market for sailors); Todd v. Exxon Corp., 275 F.3d 191, 201 (2d

24

Cir. 2001) (Sotomayor, J.) (holding that a conspiracy among oil

25

industry employers to set salaries at “artificially low levels”

26

restrained trade in a labor market and noting that “a horizontal

27

conspiracy among buyers [of labor] to stifle competition is as

28

unlawful as one among sellers”); Ostrofe v. H.S. Crocker Co.,
64

See, e.g., Anderson v.

1

Inc., 740 F.2d 739, 740 (9th Cir. 1984) (holding that a multi-

2

employer agreement in the paper lithograph label industry may

3

restrain trade in a “market for personal services”).

4

consistent with the many recent cases, some of which are cited

5

above, recognizing the validity of antitrust claims against the

6

NCAA based on anticompetitive harms in a labor market.

7

Agnew, 683 F.3d at 346 (recognizing that the NCAA’s scholarship

8

rules may restrain trade in a “labor market for student-athletes”

9

and noting that “labor markets are cognizable under the Sherman

It is also

See, e.g.,

United States District Court
For the Northern District of California

10

Act”); Law v. NCAA, 134 F.3d 1010, 1015 (10th Cir. 1998) (finding

11

that an NCAA rule capping compensation for entry-level coaches

12

restrained trade in a “labor market for coaching services” and

13

noting that “[l]ower prices cannot justify a cartel’s control of

14

prices charged by suppliers, because the cartel ultimately robs

15

the suppliers of the normal fruits of their enterprises”); In re

16

NCAA I-A Walk-On Football Players Litig., 398 F. Supp. 2d at 1150

17

(recognizing that the NCAA’s scholarship rules may restrain trade

18

in an “‘input’ market in which NCAA member schools compete for

19

skilled amateur football players”).

20

Southern District of Indiana recently rejected the NCAA’s argument

21

that a student-athlete would need to plead a “‘market-wide impact

22

on the price or output of any commercial product’” in order to

23

state a valid Sherman Act claim challenging its former prohibition

24

on multi-year football scholarships.

25

*14 (S.D. Ind.) (quoting NCAA’s brief).

26

found that the student-athlete’s complaint “adequately plead[]

27

anticompetitive effects of the challenged bylaws” in the

28

“‘nationwide market for the labor of Division I football student
65

In fact, a court in the

Rock, 2013 WL 4479815, at
The court in that case

1

athletes’” based on his allegations that, in the absence of the

2

challenged scholarship rules, the schools competing for his

3

services would have offered him a multi-year scholarship.

4

*3, *15 (quoting complaint).

5

the plaintiff had identified a cognizable harm to competition by

6

alleging that removing the challenged restraint would “would force

7

the schools to ‘compete’ for recruits.”

8

here have presented sufficient evidence to show an analogous

9

anticompetitive effect in a similar labor market.

Id. at

The court specifically noted that

Id. at *15.

Plaintiffs

Accordingly,

United States District Court
For the Northern District of California

10

they have shown a cognizable harm to competition under the rule of

11

reason.

12

The Court notes that Plaintiffs had not articulated a

13

monopsony theory prior to trial.

14

trial in response to the Court’s questions.

15

Court has addressed Plaintiffs’ monopoly theory in greater detail.

16

However, Plaintiffs presented significant evidence to support a

17

monopsony theory during trial.

18

length in their post-trial briefs.

19

trial and the facts found here, as well as the law, support both

20

theories.

21

monopsony theory.

Their expert addressed it at
For this reason, the

Both sides discussed the theory at
The evidence presented at

The NCAA is not prejudiced by alternative reliance on a

22

B.

23

Plaintiffs also allege that the NCAA has restrained

24

competition in three specific national submarkets of a broader

25

national group licensing market: namely, the submarkets for group

26

licenses to use student-athletes’ names, images, and likenesses in

27

(1) live game telecasts, (2) videogames, and (3) game re-

Group Licensing Market

28
66

1

broadcasts, highlight clips, and other archival footage.

2

Court addresses each of these submarkets separately.

3

1.

4
5

The

Submarket for Group Licenses to Use StudentAthletes’ Names, Images, and Likenesses in Live
Game Telecasts

As noted above, television networks compete for the rights to

6

telecast live FBS football and Division I basketball games.

7

order to secure these rights, networks typically purchase licenses

8

to use the intellectual property of the participating schools and

9

conferences during the game telecast as well as the names, images,

In

United States District Court
For the Northern District of California

10

and likenesses of the participating student-athletes.10

11

student-athletes are not permitted by NCAA rules to license the

12

rights to use their names, images, and likenesses, the networks

13

deal exclusively with schools and conferences when acquiring the

14

student-athletes’ rights.

Because

15

As the Court found above, in the absence of the NCAA’s

16

restrictions on student-athlete compensation, student-athletes on

17

certain FBS football and Division I basketball teams would be able

18

to sell group licenses for the use of their names, images, and

19

likenesses to television networks.

20

licenses to the television networks directly or do so through some

21

intermediate buyer -- such as their school or a third-party

22

licensing company -- which would bundle the group license with

23

other intellectual property and performance rights and sell the

They would either sell those

24
25
26
27
28

10

As discussed in the findings of fact, when a third party -- such
as a bowl committee or the NCAA itself -- has organized a particular
athletic event, the networks may also purchase a separate license from
that party to use its intellectual property during the telecast.
Because these transactions do not involve the transfer of rights to use
student-athletes’ names, images, and likenesses, they are not relevant
to this discussion.

67

1

full bundle of rights to the network.

2

student-athletes would sell their group licenses to the networks

3

directly or through some intermediate buyer, however, a submarket

4

for such group licenses would exist.

Regardless of whether the

5

The NCAA denies that such a market exists as a matter of law.

6

It argues that the First Amendment and certain state laws preclude

7

student-athletes from asserting any rights of publicity in the use

8

of their names, images, and likenesses during live game telecasts.

9

The Court has previously rejected this argument.

See April 11,

United States District Court
For the Northern District of California

10

2014 Order at 21.

11

believed that student-athletes lacked publicity rights in the use

12

of their names, images, and likenesses, they may have still sought

13

to acquire these rights as a precautionary measure.

14

often negotiate licenses to acquire uncertain rights.

15

Distribution & Mktg., Inc. v. Major League Baseball Advanced

16

Media, L.P., 505 F.3d 818, 826 (8th Cir. 2007) (Colloton, J.,

17

dissenting) (“CBC surely can ‘agree,’ as a matter of good business

18

judgment, to bargain away any uncertain First Amendment rights

19

that it may have in exchange for the certainty of what it

20

considers to be an advantageous contractual arrangement.”); Hynix

21

Semiconductors, Inc. v. Rambus, Inc., 2006 WL 1991760, at *4 (N.D.

22

Cal.) (crediting expert testimony that “a negotiating patentee and

23

licensee generally agree to a lower royalty rate if there is

24

uncertainty as to whether the patents are actually valid and

25

infringed”).

26

evidence of the existence of a national submarket for group

27

licenses.

Furthermore, even if some television networks

Businesses
See C.B.C.

The NCAA’s argument does not undermine Plaintiffs’

28
68

1

That said, Plaintiffs have not identified any harm to

2

competition in this submarket.

3

element of a Section 1 violation under the rule of reason is

4

injury to competition in the relevant market.”

5

Inc. v. S. Pac. Transp. Co., 858 F.2d 567, 570 (9th Cir. 1988).

6

That injury must go “beyond the impact on the claimant” and reach

7

“a field of commerce in which the claimant is engaged.”

8

McNamara, 979 F.2d 728, 738 (9th Cir. 1992) (citations and

9

quotation marks omitted); see also Sicor Ltd. v. Cetus Corp., 51

As previously noted, an “essential

Alliance Shippers,

Austin v.

United States District Court
For the Northern District of California

10

F.3d 848, 854 (9th Cir. 1995) (“Under the rule of reason approach,

11

the plaintiff must show an injury to competition, rather than just

12

an injury to plaintiff’s business.” (emphasis in original;

13

citations and quotation marks omitted)).

14

shown that the NCAA’s challenged rules harm student-athletes by

15

depriving them of compensation that they would otherwise receive,

16

they have not shown that this harm results from a restraint on

17

competition in the group licensing market.

18

have failed to show that the challenged rules hinder competition

19

among any potential buyers or sellers of group licenses.

20

While Plaintiffs have

In particular, they

The sellers in this market would be the student-athletes.

21

Plaintiffs have not presented any evidence to show that, in the

22

absence of the challenged restraint, teams of student-athletes

23

would actually compete against one another to sell their group

24

licenses.

25

that such competition would not occur.

26

network that seeks to telecast a particular athletic event would

27

have to obtain a group license from every team that could

28

potentially participate in that event.

In fact, the evidence in the record strongly suggests

69

This is because any

For instance, a network

seeking to telecast a conference basketball tournament would have

2

to obtain group licenses from all of the teams in that conference.

3

Under those circumstances, none of the teams in the conference

4

would compete against each other as sellers of group licenses

5

because the group licenses would constitute perfect complements:

6

that is, every group license would have to be sold in order for

7

any single group license to have value.

8

Hovenkamp, “Implementing Antitrust’s Welfare Goals,” 81 Fordham L.

9

Rev. 2471, 2487 (2013) (“Perfect complements are goods that are

10
United States District Court
For the Northern District of California

1

invariably used together -- or, more technically, situations in

11

which one good has no value unless it can be consumed together

12

with the other good.”).

13

conference would never have to compete with teams outside of the

14

conference because those teams -- as non-participants in the

15

conference tournament -- would not be able to sell their group

16

licenses with respect to that event in the first place.

17

this scenario, teams of student-athletes would never actually

18

compete against each other as sellers of group licenses, even if

19

the challenged NCAA rules no longer existed.

20

See generally Herbert

At the same time, the teams in that

Thus, in

The same outcome would result whenever any network sought to

21

telecast any other FBS football and Division I basketball event.

22

Although the specific set of group licenses required for each

23

event would vary, the lack of competition among student-athlete

24

teams would remain constant: in every case, the network would need

25

to acquire group licenses from a specific set of teams, none of

26

which would have any incentive to compete either against each

27

other or against any teams whose group licenses were not required

28

for the telecast.

These conditions would hold regardless of
70

1

whether the student-athlete teams sold their group licenses to the

2

television networks directly or through some intermediary, such as

3

their schools, because the demand for group licenses would be

4

dictated primarily by the identity of the teams eligible to

5

participate in each event.

6

might compete against each other in order to secure a specific

7

telecasting contract with a particular network, the challenged

8

NCAA rules do not inhibit this type of competition.

9

are already free to compete against each other in this way.

To the extent that entire conferences

Conferences
So,

United States District Court
For the Northern District of California

10

too, are any individual pairs of schools whose teams are scheduled

11

to play against each other in specific regular season games.

12

the conferences, these pairs may freely compete against other

13

pairs of schools whose games are scheduled for the same time in

14

order to secure a contract with whatever networks can show games

15

during that time slot.

16

presented sufficient evidence to show that student-athlete teams

17

would actually compete against each other in any of these ways if

18

they were permitted to sell group licenses to use their names,

19

images, and likenesses.

20

11

Like

In any event, Plaintiffs have not

Plaintiffs have also failed to identify any situation in

21

which buyers of group licenses might compete against each other.

22

As noted above, there are two sets of potential buyers in this

23

market: the television networks, which would buy group licenses

24

directly from the student-athlete teams, and intermediate buyers,

25
11

26
27
28

The evidence presented at trial suggests that most telecasting
contracts, even for regular season games, are negotiated at the
conference-wide level -- not the individual team level. Nevertheless,
the Court notes that the challenged rules would not suppress competition
in this market even if contracts to telecast regular season games were
negotiated at the individual team level.

71

1

which would bundle those licenses with other rights and sell those

2

bundles of rights to the networks.

3

buyers -- the television networks -- already compete freely

4

against one another for the rights to use student-athletes’ names,

5

images, and likenesses in live game telecasts.

6

not be able to purchase these rights directly from the student-

7

athletes, they nevertheless compete to acquire these rights from

8

other sources, such as schools and conferences.

9

networks do not compete to purchase these rights directly from the

The first set of potential

Although they may

The fact that the

United States District Court
For the Northern District of California

10

student-athletes is due to the assurances by the schools,

11

conferences, and NCAA that they have the authority to grant these

12

rights.

13

schools of the student-athletes’ rights, or otherwise be unlawful,

14

but they are not anticompetitive because they do not inhibit any

15

form of competition that would otherwise exist.

16

student-athletes to seek compensation for group licenses would not

17

increase the number of television networks in the market or

18

otherwise enhance competition among them.

19

Such assurances might constitute conversion by the

12

Allowing

Nor would it increase competition among any potential

20

intermediate buyers in this market, such as third-party licensing

21

companies and schools.

22

television networks, already free to compete against one another

23

to acquire the rights to use student-athletes’ names, images, and

24

likenesses in live game telecasts.

Third-party licensing companies are, like

They may be barred from

25
26
27
28

12

Plaintiffs voluntarily dismissed all of their claims against the
NCAA for “individual damages, disgorgement of profits, and an
accounting.” Docket No. 198, Stip. Dismissal, at 2. They also
dismissed their claims for unjust enrichment. Accordingly, the Court
does not consider these claims here.

72

1

purchasing these rights directly from the student-athletes but

2

they are not barred from competing to acquire these rights through

3

other channels.

4

Unlike television networks and third-party licensing

5

companies, schools do not currently compete for group licenses to

6

use student-athletes’ names, images, and likenesses in live game

7

telecasts.

8

solely from the challenged restraint.

9

lifted, each school would still only be able to purchase group

This lack of competition, however, does not stem
Even if the restraint were

United States District Court
For the Northern District of California

10

licenses from its own student-athletes because those are the only

11

licenses that the school could bundle with its own intellectual

12

property rights for sale to a network.

13

purchase a marketable group license from student-athletes at

14

another school.

15

another for the rights to use individual student-athletes’ names,

16

images, and likenesses, they do so only as sellers in the college

17

education market or consumers in the market for recruits’ athletic

18

services and licensing rights.

19

the market for group licenses.

No school would be able to

To the extent that schools do compete against one

They do not compete as buyers in

20

Accordingly, Plaintiffs have failed to show that the

21

challenged NCAA rules harm competition in this submarket.

22

Although they have presented sufficient evidence to establish that

23

they were injured by the NCAA’s conduct, as noted above, “[i]njury

24

to an antitrust plaintiff is not enough to prove injury to

25

competition.”

26

1464, 1469 (9th Cir. 1986).

27

competition only in the college education market or the market for

28

recruits’ athletic services and licensing rights.

O.S.C. Corp. v. Apple Computer, Inc., 792 F.2d
Plaintiffs have shown an injury to

73

1

2.

2
3

Submarket for Group Licenses to Use StudentAthletes’ Names, Images, and Likenesses in
Videogames

Plaintiffs have presented sufficient evidence to establish

4

that, absent the challenged NCAA rules, a national submarket would

5

exist in which videogame developers would compete for group

6

licenses to use student-athletes’ names, images, and likenesses.

7

This submarket is analogous to the live telecasting submarket

8

discussed above.

9

licenses in the videogame submarket would be student-athletes on

As in that submarket, the sellers of group

United States District Court
For the Northern District of California

10

certain FBS football and Division I basketball teams.

11

would either be videogame developers or intermediate buyers who

12

would bundle the student-athletes’ rights with other parties’

13

rights and sell those bundles to videogame developers.

14

The buyers

The NCAA contends that, even if student-athletes were

15

permitted to receive compensation for the use of their names,

16

images, and likenesses, this submarket would not exist.

17

that it and some of its member conferences recently decided to

18

stop licensing their intellectual property for use in videogames.

19

Without access to this intellectual property, the NCAA argues,

20

videogame developers cannot develop marketable videogames and,

21

thus, would not seek to purchase group licenses from student-

22

athletes.

23

It notes

This argument overstates the significance of the decisions of

24

the NCAA and some of its member conferences not to license their

25

intellectual property to videogame developers.

26

videogame developers do not need the intellectual property rights

27

of both the NCAA and all of its conferences in order to produce a

28

college sports videogame.

To begin with,

If a sufficient number of schools and
74

1

conferences were willing to license their intellectual property

2

for use in videogames, a submarket for student-athletes’ group

3

licenses would likely exist.

4

testified at trial that EA remains interested in acquiring the

5

rights to use student-athletes’ names, images, and likenesses and

6

would seek to acquire them if not for the NCAA’s challenged rules

7

and the present litigation.

8

recent decisions of the NCAA and some of its conferences not to

9

license their intellectual property has not permanently eliminated

Indeed, Mr. Linzner specifically

This testimony suggests that the

United States District Court
For the Northern District of California

10

the demand for group licenses to use student-athletes’ names,

11

images, and likenesses.

12

could have been adopted due to this litigation and could be

13

reversed at any time -- do not establish the lack of a videogame

14

submarket.

15

13

Accordingly, these decisions -- which

Nevertheless, Plaintiffs have not identified any injury to

16

competition within this submarket.

17

telecasting submarket, the ultimate buyers in this submarket --

18

videogame developers -- would need to acquire group licenses from

19

a specific set of teams in order to create their product.

20

set might include all of the teams within Division I, all of the

21

teams within the major conferences, or some other set of teams

22
23
24
25
26
27
28

13

Just as in the live

This

The NCAA’s other argument -- that videogame developers would not
need to acquire group licenses because their use of student-athletes’
names, images, and likenesses is protected under the First Amendment -was rejected by the Ninth Circuit earlier in this litigation. In re
NCAA Student-Athlete Name & Likeness Licensing Litig., 724 F.3d 1268,
1284 (9th Cir. 2013) (concluding that “EA’s use of the likenesses of
college athletes like Samuel Keller in its video games is not, as a
matter of law, protected by the First Amendment”); see also Hart v.
Electronic Arts, Inc., 717 F.3d 141, 170 (3d Cir. 2013) (holding that
“the NCAA Football 2004, 2005 and 2006 games at issue in this case do
not sufficiently transform Appellant’s identity to escape the right of
publicity claim”).

75

1

that the videogame developer believed would be necessary to

2

produce a marketable product.

3

included within that set, those teams would not compete against

4

each other as sellers of group licenses, even in the absence of

5

the challenged rules, because they would all share an interest in

6

ensuring that the videogame developer acquired each of the group

7

licenses required to create its product.

8

not compete against any teams outside of the set because the

9

videogame developer determined that those other teams’ group

Regardless of which teams were

These teams would also

United States District Court
For the Northern District of California

10

licenses were not required to produce the videogame.

11

competition between teams (or conferences) is even less likely in

12

the videogame submarket than the live telecasting submarket

13

because videogame developers -- unlike television networks -- are

14

not constrained by the number of group licenses that they could

15

use to produce their product.

16

demonstrates that videogame companies could, and often did,

17

feature nearly every FBS football and Division I basketball team

18

in their videogames.

19

individual teams and conferences to sell group licenses is

20

extremely unlikely.

21

happen), it is not restrained by the challenged NCAA restrictions

22

on student-athlete compensation.

23

telecasting submarket, the challenged rules do not suppress

24

competition in this submarket.

Indeed,

The evidence presented at trial

Under these circumstances, competition among

And, to the extent that it happens (or would

Thus, just as with the live

25
26
27
28
76

1

3.

2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

Submarket for Group Licenses to Use StudentAthletes’ Names, Images, and Likenesses in Game ReBroadcasts, Highlight Clips, and Other Archival
Footage

Plaintiffs allege that the NCAA’s challenged rules impose
restraints on a national submarket for group licenses to use
student-athletes’ names, images, and likenesses in game rebroadcasts, highlight clips, and other archival game footage, both
for entertainment and to advertise products.

However, they have

not presented sufficient evidence to show that the NCAA has
imposed any restraints in this submarket.

As found above, the

undisputed evidence shows that the NCAA has designated a thirdparty agent to negotiate and manage all licensing related to its
archival footage.

That third-party agent, T3Media, is expressly

prohibited from licensing any footage that features current
student-athletes.

It is also contractually required to obtain the

rights to use the names, images, and likenesses of any former
student-athletes who appear in footage that it has licensed.
Thus, under this arrangement, no current or former studentathletes are actually deprived of any compensation for game rebroadcasts or other archival footage that they would otherwise
receive in the absence of the challenged NCAA rules.

What’s more,

even if Plaintiffs had made such a showing, they have not
presented sufficient evidence to show an injury to competition in
this submarket.

In order to license all of the footage in the

NCAA’s archives, T3Media would have to obtain a group license from
every team that has ever competed in FBS or Division I.

These

teams, once again, would have no incentive to compete against each

28
77

1

other in selling their group licenses.

2

enforcing its challenged rules would not change that.

3

III. Procompetitive Justifications

4

Enjoining the NCAA from

Because Plaintiffs have presented sufficient evidence to show

5

that the NCAA’s rules impose a restraint on competition in the

6

college education market, the Court must determine whether that

7

restraint is justified.

8

consider whether the “anticompetitive aspects of the challenged

9

practice outweigh its procompetitive effects.”

United States District Court
For the Northern District of California

10

In making this determination, it must

Paladin

Associates, 328 F.3d at 1156.

11

The NCAA has asserted four procompetitive justifications for

12

its rules barring student-athletes from receiving compensation for

13

the use of their names, images, and likenesses: (1) the

14

preservation of amateurism in college sports; (2) promoting

15

competitive balance among FBS football and Division I basketball

16

teams; (3) the integration of academics and athletics; and (4) the

17

ability to generate greater output in the relevant markets.

18

Court considers each of these procompetitive justifications in

19

turn.

The

20

A.

21

As noted in the findings of fact, the NCAA asserts that its

Amateurism

22

restrictions on student-athlete compensation are necessary to

23

preserve the amateur tradition and identity of college sports.

24

contends that this tradition and identity contribute to the

25

popularity of college sports and help distinguish them from

26

professional sports and other forms of entertainment in the

27

marketplace.

28

commitment to amateurism, recent consumer opinion surveys, and

It

For support, it points to historical evidence of its

78

1

testimony from various witnesses regarding popular perceptions of

2

college sports.

3

restrictions on student-athlete compensation, it does not justify

4

the specific restrictions challenged in this case.

5

it does not justify the NCAA’s sweeping prohibition on FBS

6

football and Division I basketball players receiving any

7

compensation for the use of their names, images, and likenesses.

8

Although the NCAA has cited the Supreme Court’s decision in

9

Although this evidence could justify some limited

In particular,

Board of Regents as support for its amateurism justification, its

United States District Court
For the Northern District of California

10

reliance on the case remains unavailing.

11

orders, Board of Regents addressed limits on television

12

broadcasting, not payments to student-athletes, and “does not

13

stand for the sweeping proposition that student-athletes must be

14

barred, both during their college years and forever thereafter,

15

from receiving any monetary compensation for the commercial use of

16

their names, images, and likenesses.”

17

The Supreme Court’s suggestion in Board of Regents that, in order

18

to preserve the quality of the NCAA’s product, student-athletes

19

“must not be paid,” 468 U.S. at 102, was not based on any factual

20

findings in the trial record and did not serve to resolve any

21

disputed issues of law.

22

assertions of the NCAA’s own counsel in the case, who stated

23

during oral argument that the NCAA was not relying on amateurism

24

as a procompetitive justification and “might be able to get more

25

viewers and so on if it had semi-professional clubs rather than

26

amateur clubs.”

27

85.

28

programs of amateur football, it is probably reducing its net

As explained in previous

Oct. 25, 2013 Order at 15.

In fact, the statement ran counter to the

Oral Arg. Tr. at 25, Board of Regents, 468 U.S.

He further argued, “When the NCAA says, we are running

79

1

profits.”

2

able to increase its intake if it abolished or reduced the

3

academic standards that its players must meet.”).

4

also presented ample evidence here to show that the college sports

5

industry has changed substantially in the thirty years since Board

6

of Regents was decided.

7

1081, 1099 (7th Cir. 1992) (Flaum, J., concurring in part and

8

dissenting in part) (“The NCAA continues to purvey, even in this

9

case, an outmoded image of intercollegiate sports that no longer

Id. (emphasis added); see also id. (“The NCAA might be

Plaintiffs have

See generally Banks v. NCAA, 977 F.2d

United States District Court
For the Northern District of California

10

jibes with reality.

11

Supreme Court’s incidental phrase in Board of Regents does not

12

establish that the NCAA’s current restraints on compensation are

13

procompetitive and without less restrictive alternatives.

14

The times have changed.”).

Accordingly, the

The historical record that the NCAA cites as evidence of its

15

longstanding commitment to amateurism is unpersuasive.

16

record reveals that the NCAA has revised its rules governing

17

student-athlete compensation numerous times over the years,

18

sometimes in significant and contradictory ways.

19

evincing the association’s adherence to a set of core principles,

20

this history documents how malleable the NCAA’s definition of

21

amateurism has been since its founding.

22

This

Rather than

The association’s current rules demonstrate that, even today,

23

the NCAA does not consistently adhere to a single definition of

24

amateurism.

25

status even if he accepts ten thousand dollars in prize money the

26

year before he enrolls in college.

27

recruit, however, would forfeit his athletic eligibility if he did

28

the same.

A Division I tennis recruit can preserve his amateur

A Division I track and field

Similarly, an FBS football player may maintain his
80

1

amateur status if he accepts a Pell grant that brings his total

2

financial aid package above the cost of attendance.

3

football player would no longer be an amateur if he were to

4

decline the Pell grant and, instead, receive an equivalent sum of

5

money from his school for the use of his name, image, and likeness

6

during live game telecasts.

7

indicative of “core principles.”

8
9

But the same

Such inconsistencies are not

Nonetheless, some restrictions on compensation may still
serve a limited procompetitive purpose if they are necessary to

United States District Court
For the Northern District of California

10

maintain the popularity of FBS football and Division I basketball.

11

If the challenged restraints actually play a substantial role in

12

maximizing consumer demand for the NCAA’s products --

13

specifically, FBS football and Division I basketball telecasts,

14

re-broadcasts, ticket sales, and merchandise -- then the

15

restrictions would be procompetitive.

16

U.S. at 120 (recognizing that “maximiz[ing] consumer demand for

17

the product” is a legitimate procompetitive justification).

18

Attempting to make this showing, the NCAA relies on consumer

19

opinion surveys, including the survey it commissioned from Dr.

20

Dennis specifically for this case.

21

survey -- which contained several methodological flaws and did not

22

ask respondents about the specific restraints challenged in this

23

case -- does not provide reliable evidence that consumer interest

24

in FBS football and Division I basketball depends on the NCAA’s

25

current restrictions on student-athlete compensation.

26

Plaintiffs offered evidence demonstrating that such surveys are

27

inevitably a poor tool for accurately predicting consumer

28

behavior.

See Board of Regents, 468

As noted above, however, this

Further,

Dr. Rascher highlighted various polls and surveys which
81

1

documented widespread public opposition to rule changes that

2

ultimately led to increased compensation for professional baseball

3

players and Olympic athletes even as Major League Baseball and the

4

IOC were experiencing periods of massive revenue growth.

5

evidence counsels strongly against giving any significant weight

6

to Dr. Dennis’s survey results.

7

suggest is that the public’s attitudes toward student-athlete

8

compensation depend heavily on the level of compensation that

9

student-athletes would receive.

This

What Dr. Dennis’s survey does

This is consistent with the

United States District Court
For the Northern District of California

10

testimony of the NCAA’s own witnesses, including Mr. Muir and Mr.

11

Pilson, who both indicated that smaller payments to student-

12

athletes would bother them less than larger payments.

13

Ultimately, the evidence presented at trial suggests that

14

consumer demand for FBS football and Division I basketball-related

15

products is not driven by the restrictions on student-athlete

16

compensation but instead by other factors, such as school loyalty

17

and geography.

18

be more popular in places where college teams are located.

19

Similarly, Ms. Plonsky noted that popular interest in college

20

sports was driven principally by the loyalty of local fans and

21

alumni.

22

offered a tiddlywinks team, that would somehow be popular with

23

some segment of whoever loves our university.”

24

1415:2.

25

Mr. Pilson explained that college sports tend to

She testified, “I would venture to say that if we [UT]

Trial Tr. 1414:25-

The Court therefore concludes that the NCAA’s restrictions on

26

student-athlete compensation play a limited role in driving

27

consumer demand for FBS football and Division I basketball-related

28

products.

Although they might justify a restriction on large
82

1

payments to student-athletes while in school, they do not justify

2

the rigid prohibition on compensating student-athletes, in the

3

present or in the future, with any share of licensing revenue

4

generated from the use of their names, images, and likenesses.

5

B.

6

The NCAA asserts that its challenged rules are justified by

Competitive Balance

7

the need to maintain the current level of competitive balance

8

among its FBS football and Division I basketball teams in order to

9

maintain their popularity.

This Court has previously recognized

United States District Court
For the Northern District of California

10

that a sports league’s efforts to achieve the optimal competitive

11

balance among its teams may serve a procompetitive purpose if

12

promoting such competitive balance increases demand for the

13

league’s product.

14

Needle, 560 U.S. at 204 (“We have recognized, for example, ‘that

15

the interest in maintaining a competitive balance’ among ‘athletic

16

teams is legitimate and important.’” (citing Board of Regents, 468

17

U.S. at 117)).

18

“hypothesis that legitimates the maintenance of competitive

19

balance as a procompetitive justification under the Rule of Reason

20

is that equal competition will maximize consumer demand for the

21

product.”

22

See April 11, 2014 Order at 33; American

As the Supreme Court has explained, the

Board of Regents, 468 U.S. at 119-20.

Here, the NCAA has not presented sufficient evidence to show

23

that its restrictions on student-athlete compensation actually

24

have any effect on competitive balance, let alone produce an

25

optimal level of competitive balance.

26

economists who have studied the issue, as summarized by Drs. Noll

27

and Rascher, is that the NCAA’s current restrictions on

28

compensation do not have any effect on competitive balance.
83

The consensus among sports

1

Although Dr. Rubinfeld disagreed with this conclusion, he could

2

not identify another economist who shared his view and did not

3

offer any testimony to rebut the specific findings of the academic

4

literature cited by Drs. Noll and Rascher.

5

him whether his opinions were based on any academic literature,

6

Dr. Rubinfeld directed the Court to the economic articles cited in

7

his most recent report on competitive balance.

8

articles cited in that report found that the NCAA’s restrictions

9

on student-athlete compensation promote competitive balance.

When the Court asked

But none of the

In

United States District Court
For the Northern District of California

10

fact, the only article his report cited that actually examined

11

competitive balance in college sports was a 2004 article by Katie

12

Baird, which Dr. Noll quoted during his testimony.

13

testified, that article concluded, “‘[L]ittle evidence supports

14

the claim that NCAA regulations help level the playing field.

15

best, they appear to have had a very limited effect, and at worst

16

they have served to strengthen the position of the dominant

17

teams.’”

18

Rubinfeld’s independent analysis of competitive balance was also

19

unpersuasive because it did not show a causal link between the

20

NCAA’s challenged rules and competitive balance.

21

importantly, his analysis did not show that consumer demand for

22

the NCAA’s product would decrease if FBS football or Division I

23

basketball teams were less competitively balanced than they

24

currently are.

25

is driven primarily by factors such as school loyalty and

26

geography.

27
28

As Dr. Noll

Trial Tr. 230:18-231:11 (quoting Baird article).

At

Dr.

More

As found above, the popularity of college sports

Neither of these is dependent on competitive balance.

In its post-trial brief, the NCAA cites a passage from Board
of Regents which states that the district court in that case found
84

1

that the NCAA’s “restrictions designed to preserve amateurism”

2

served to promote competitive balance.

3

district court order, 546 F. Supp. 1276, 1296, 1309-10 (W.D. Okla.

4

1982)).

5

more importantly, is contrary to the evidence presented in this

6

case.

7

football and Division I basketball have grown exponentially since

8

Board of Regents was decided and that, as a result of this growth,

9

many schools have invested more heavily in their recruiting

468 U.S. at 119 (citing

That factual finding is not binding on this Court and,

The record in this case shows that revenues from FBS

United States District Court
For the Northern District of California

10

efforts, athletic facilities, dorms, coaching, and other amenities

11

designed to attract the top student-athletes.

12

several witnesses referred to as an “arms race,” has likely

13

negated whatever equalizing effect the NCAA’s restraints on

14

student-athlete compensation might have once had on competitive

15

balance.

16

the wealth of academic studies concluding that the restraints on

17

student-athlete compensation do not promote competitive balance --

18

preclude this Court from giving any significant weight to the

19

district court’s factual findings in Board of Regents.

20

This trend, which

These changed factual circumstances -- in addition to

Accordingly, the NCAA may not rely on competitive balance

21

here as a justification for the challenged restraint.

22

evidence is not sufficient to show that it must create a

23

particular level of competitive balance among FBS football and

24

Division I basketball teams in order to maximize consumer demand

25

for its product.

26

restraint actually helps it achieve the optimal level of

27

competitive balance.

Its

Nor is it sufficient to show that the challenged

28
85

1

C.

2

The NCAA asserts that its restrictions on student-athlete

Integration of Academics and Athletics

3

compensation help educate student-athletes and integrate them into

4

their schools’ academic communities.

5

integration of academics and athletics serves to improve the

6

quality of educational services provided to student-athletes in

7

the restrained college education market.14

8

that this goal -- improving product quality -- may be a legitimate

9

procompetitive justification.

It argues that the

Courts have recognized

See County of Tuolumne v. Sonora

United States District Court
For the Northern District of California

10

Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001) (recognizing that

11

improving product quality may be a legitimate procompetitive

12

justification); Law, 134 F.3d at 1023 (recognizing that

13

“increasing output, creating operating efficiencies, making a new

14

product available, enhancing service or quality, and widening

15

consumer choice” may be procompetitive justifications).

16

The evidence presented by the NCAA suggests that integrating

17

student-athletes into the academic communities at their schools

18

improves the quality of the educational services that they

19

receive.

20

testified about the benefits that student-athletes derive from

21

participating in their schools’ academic communities.

22

confirmed that they appreciated receiving these educational

As noted above, several university administrators

Plaintiffs

23
24
14

25
26
27
28

In its post-trial brief, the NCAA argues that the integration of
academics and athletics also increases consumer demand for its other
product -- FBS football and Division I basketball games. It presented
scant evidence at trial to support this assertion. In any event, to the
extent that the NCAA contends that its restrictions on student-athlete
compensation increase consumer demand for FBS football and Division I
basketball games, the Court addresses that argument in its discussion of
the NCAA’s asserted procompetitive justification of amateurism.

86

1

benefits when they were student-athletes, while Dr. Heckman

2

testified that these benefits also carry long-term value.

3

That said, the NCAA has not shown that the specific

4

restraints challenged in this case are necessary to achieve these

5

benefits.

6

educational benefits described above regardless of whether or not

7

the NCAA permitted them to receive compensation for the use of

8

their names, images, and likenesses.

9

receive scholarships, for instance, and would almost certainly

Indeed, student-athletes would receive many of the same

They would continue to

United States District Court
For the Northern District of California

10

continue to receive tutoring and other academic support services.

11

As long as the NCAA continued to monitor schools’ academic

12

progress rates and require that student-athletes meet certain

13

academic benchmarks -- a requirement that is not challenged

14

here -- the schools’ incentives to support their student-athletes

15

academically would remain unchanged.

16

athletes’ own incentives to perform well academically would remain

17

the same, particularly if they were required to meet these

18

academic requirements as a condition of receiving compensation for

19

the use of their names, images, and likenesses.

20

requirement might even strengthen student-athletes’ incentives to

21

focus on schoolwork.

22

Similarly, the student-

Such a

As found above, the only way in which the challenged rules

23

might facilitate the integration of academics and athletics is by

24

preventing student-athletes from being cut off from the broader

25

campus community.

26

compensation may help schools achieve this narrow procompetitive

27

goal.

28

NCAA may not use this goal to justify its sweeping prohibition on

Limited restrictions on student-athlete

As with the NCAA’s amateurism justification, however, the

87

1

any student-athlete compensation, paid now or in the future, from

2

licensing revenue generated from the use of student-athletes’

3

names, images, and likenesses.

4

D.

5

The NCAA argues that the challenged restraint increases the

Increased Output

6

output of its product.

7

output may be a legitimate procompetitive justification.

8

Board of Regents, 468 U.S. at 114; Law, 134 F.3d at 1023.

9

Courts have recognized that increased
See

Here, the NCAA argues that its restrictions on student-

United States District Court
For the Northern District of California

10

athlete compensation increase the number of opportunities for

11

schools and student-athletes to participate in Division I sports,

12

which ultimately increases the number of FBS football and Division

13

I basketball games played.

14

output in two ways: first, by attracting schools with a

15

“philosophical commitment to amateurism” to compete in Division I

16

and, second, by enabling schools that otherwise could not afford

17

to compete in Division I to do so.

18

Trial Brief, at 24.

19

It claims that its rules increase this

Docket No. 279, NCAA Post-

Neither of these arguments is persuasive.

The NCAA has not presented sufficient evidence to show that a

20

significant number of schools choose to compete in Division I

21

because of a “philosophical commitment to amateurism.”

22

in the findings of fact, some Division I conferences have recently

23

sought greater autonomy from the NCAA specifically so that they

24

could enact their own rules, including new scholarship rules.

25

These efforts suggest that many current Division I schools are

26

committed neither to the NCAA’s current restrictions on student-

27

athlete compensation nor to the idea that all Division I schools

28

must award scholarships of the same value.
88

As noted

1

Similarly, the NCAA’s argument that the current rules enable

2

some schools to participate in Division I that otherwise could not

3

afford to do so is unsupported by the record.

4

nor its member conferences require high-revenue schools to

5

subsidize the FBS football or Division I basketball teams at

6

lower-revenue schools.

7

any cost savings by not paying their student-athletes, there is no

8

evidence that those cost savings are being used to fund additional

9

teams or scholarships.

Neither the NCAA

Thus, to the extent that schools achieve

In any event, Plaintiffs are not seeking

United States District Court
For the Northern District of California

10

an injunction requiring schools to provide compensation to their

11

student-athletes -- they are seeking an injunction to permit

12

schools to do so.

13

portion of their athletic budget for this purpose would not be

14

forced to do so.

15

schools’ athletic programs would be driven to financial ruin or

16

would leave Division I if other schools were permitted to pay

17

their student-athletes.

18

increasing spending on training facilities at many schools suggest

19

that these schools would, in fact, be able to afford to offer

20

their student-athletes a limited share of the licensing revenue

21

generated from their use of the student-athletes’ own names,

22

images, and likenesses.

23

increased output as a justification for the challenged restraint

24

here.

25

IV.

26

Schools that cannot afford to re-allocate any

There is thus no reason to believe that any

The high coaches’ salaries and rapidly

Accordingly, the NCAA may not rely on

Less Restrictive Alternatives
As outlined above, the NCAA has produced sufficient evidence

27

to support an inference that some circumscribed restrictions on

28

student-athlete compensation may yield procompetitive benefits.
89

1

First, it presented evidence suggesting that preventing schools

2

from paying FBS football and Division I basketball players large

3

sums of money while they are enrolled in school may serve to

4

increase consumer demand for its product.

5

evidence suggesting that this restriction may facilitate its

6

member schools’ efforts to integrate student-athletes into the

7

academic communities on their campuses, thereby improving the

8

quality of educational services they offer.

9

NCAA has met its burden under the rule of reason to that extent,

Second, it presented

Thus, because the

United States District Court
For the Northern District of California

10

the burden shifts back to Plaintiffs to show that these

11

procompetitive goals can be achieved in “‘other and better

12

ways’” -- that is, through “‘less restrictive alternatives.’”

13

Bhan v. NME Hospitals, Inc., 929 F.2d 1404, 1410 n.4 (9th Cir.

14

1991) (citations omitted).

15

“As part of their burden to show the existence of less

16

restrictive alternatives, [] plaintiffs must also show that ‘an

17

alternative is substantially less restrictive and is virtually as

18

effective in serving the legitimate objective without

19

significantly increased cost.’”

20

1159 (citations omitted; emphasis in original).

21

less restrictive alternatives “should either be based on actual

22

experience in analogous situations elsewhere or else be fairly

23

obvious.”

24

¶ 1913b (3d ed. 2006).

25

restrictive alternative is not feasible with “evidence that the

26

proffered alternative has been tried but failed, that it is

27

equally or more restrictive, or otherwise unlawful.”

County of Tuolomne, 236 F.3d at
In addition, any

Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law
A defendant may show that a proffered less

28
90

Id.

1

A court need not address the availability of less restrictive

2

alternatives for achieving a purported procompetitive goal “when

3

the defendant fails to meet its own obligation under the rule of

4

reason burden-shifting procedure.”

5

1024 n.16 (“Because we hold that the NCAA did not establish

6

evidence of sufficient procompetitive benefits, we need not

7

address question of whether the plaintiffs were able to show that

8

comparable procompetitive benefits could be achieved through

9

viable, less anticompetitive means.”).

Id.; see also Law, 134 F.3d at

Thus, in the present case,

United States District Court
For the Northern District of California

10

the Court does not consider whether Plaintiffs’ proposed less

11

restrictive alternatives would promote competitive balance or

12

increase output because the NCAA failed to meet its burden with

13

respect to these stated procompetitive justifications.

14

the Court’s inquiry focuses only on whether Plaintiffs have

15

identified any less restrictive alternatives for both preserving

16

the popularity of the NCAA’s product by promoting its current

15

Rather,

17
18
19
20
21
22
23
24
25
26
27
28

15

The Court notes, however, that the NCAA could easily adopt
several less restrictive rules if it wished to increase competitive
balance or output. With respect to competitive balance, for instance,
the NCAA could adopt a more equal revenue distribution formula. As
noted above, its current formula primarily rewards the schools that
already have the largest athletic budgets. This uneven distribution of
revenues runs counter to the association’s stated goal of promoting
competitive balance. See, e.g., Salvino, 542 F.3d at 333 (noting that
“disproportionate distribution of licensing income would foster a
competitive imbalance” among Major League Baseball teams); Smith v. Pro
Football, Inc., 593 F.2d 1173, 1188 (D.C. Cir. 1978) (“The least
restrictive alternative of all, of course, would be for the NFL to
eliminate the draft entirely and employ revenue-sharing to equalize the
teams’ financial resources [as] a method of preserving ‘competitive
balance’ nicely in harmony with the league’s self-proclaimed ‘jointventure’ status.”). As for the NCAA’s stated goal of increasing output,
the NCAA already has the power to achieve this goal in a much more
direct way: by amending its current requirements for entry into Division
I or increasing the number of athletic scholarships Division I schools
are permitted to offer.

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understanding of amateurism and improving the quality of

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educational opportunities for student-athletes by integrating

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academics and athletics.

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As set forth in the findings of fact, Plaintiffs have

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identified two legitimate less restrictive alternatives for

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achieving these goals.

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and Division I basketball schools to award stipends to student-

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athletes up to the full cost of attendance, as that term is

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defined in the NCAA’s bylaws, to make up for any shortfall in its

First, the NCAA could permit FBS football

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For the Northern District of California

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grants-in-aid.

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in trust limited and equal shares of its licensing revenue to be

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distributed to its student-athletes after they leave college or

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their eligibility expires.

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from funding the stipends or payments held in trust with anything

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other than revenue generated from the use of the student-athletes’

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own names, images, and likenesses.

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these stipends and deferred payments would increase price

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competition among FBS football and Division I basketball schools

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in the college education market (or, alternatively, in the market

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for recruits’ athletic services and licensing rights) without

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undermining the NCAA’s stated procompetitive objectives.

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Second, the NCAA could permit its schools to hold

The NCAA could also prohibit schools

Permitting schools to award

The NCAA notes that Dr. Noll did not discuss a system of

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holding payments in trust for student-athletes in his expert

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reports or during his testimony.

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Plaintiffs from proposing such a system as a less restrictive

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alternative here.

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restrictive alternatives that are “based on actual experience in

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analogous situations elsewhere” or otherwise “fairly obvious.”

However, this does not bar

As noted above, courts may consider any less

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Areeda & Hovenkamp, Antitrust Law ¶ 1913b.

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for holding payments in trust falls squarely within this category.

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One of Plaintiffs’ experts, Dr. Rascher, discussed the creation of

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a trust in his opening report, which was disclosed to the NCAA

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more than eight months before trial.

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Report ¶¶ 80, 86.

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of Dr. Rascher’s report here, it notes that the report provided

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the NCAA with ample notice of this proposal.

Plaintiffs’ proposal

See Sept. 2013 Rascher

Although the Court does not rely on the content

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Plaintiffs’ counsel

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For the Northern District of California

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The Court also notes that, over the past two decades, numerous
commentators have suggested that the NCAA could hold payments in trust
for its student-athletes without violating generally accepted
understandings of amateurism used by other sports organizations. See,
e.g., Sean Hanlon & Ray Yasser, “‘J.J. Morrison’ and His Right of
Publicity Lawsuit Against the NCAA,” 15 Vill. Sports & Ent. L.J. 241,
294 (2008) (“Searching for a solution to the problem posed by this
Comment, commentators have suggested a ‘have-your-cake-and-eat-it-too’
approach whereby a trust would be created, allowing student-athletes the
ability to preserve their amateur status while their athletic
eligibility remains. The money generated through the use of the
commercial value of their identity would be placed in a trust until the
expiration of their athletic eligibility.”); Kristine Mueller, “No
Control over Their Rights of Publicity: College Athletes Left Sitting
the Bench,” 2 DePaul J. Sports L. & Contemp. Probs. 70, 87-88 (2004)
(“One suggestion put forth is to create a trust for the athletes, which
would become available to them upon graduation. . . . [This proposal]
allows the athletes to reap the financial benefits of their labors,
while maintaining the focus on amateur athletics.”); Vladimir P. Belo,
“The Shirts Off Their Backs: Colleges Getting Away with Violating the
Right of Publicity,” 19 Hastings Comm. & Ent. L.J. 133, 155 (1996)
(“Should the NCAA hold steadfastly to its notions of amateurism and
resist payment to the athletes, the trust fund alternative could be a
fair and reasonable compromise. First of all, it could be limited to
certain merchandising monies, such as those associated with selling game
jerseys or any other revenue from marketing a student-athlete’s name and
likeness.”); Stephen M. Schott, “Give Them What They Deserve:
Compensating the Student-Athlete for Participation in Intercollegiate
Athletics,” 3 Sports Law. J. 25, 45 (1996) (“Revenue from television
rights, tickets sales, and donations from boosters could be used to
establish these trust funds. Overall, some type of trust fund may
provide the best alternative way of compensating the student-athlete and
preserving the educational objectives of the NCAA.”); Kenneth L.
Shropshire, “Legislation for the Glory of Sport: Amateurism and
Compensation,” 1 Seton Hall J. Sport L. 7, 27 (1991) (“From an NCAA
established trust fund the student athlete could receive a student life
stipend.”).

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also raised the issue repeatedly during trial and several of the

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NCAA’s key witnesses -- including Dr. Emmert, Mr. Pilson, and Dr.

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Rubinfeld -- were specifically given an opportunity to respond to

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the idea.

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explanation as to why the NCAA could not implement a trust payment

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system like the one Plaintiffs propose.

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concludes that a narrowly tailored trust payment system -- which

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would allow schools to offer their FBS football and Division I

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basketball recruits a limited and equal share of the licensing

None of these witnesses provided a persuasive

The Court therefore

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For the Northern District of California

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revenue generated from the use of their names, images, and

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likenesses -- constitutes a less restrictive means of achieving

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the NCAA’s stated procompetitive goals.

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V.

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Summary of Liability Determinations
For the reasons set forth above, the Court concludes that the

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NCAA’s challenged rules unreasonably restrain trade in violation

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of § 1 of the Sherman Act.

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prohibiting student-athletes from receiving any compensation for

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the use of their names, images, and likenesses restrains price

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competition among FBS football and Division I basketball schools

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as suppliers of the unique combination of educational and athletic

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opportunities that elite football and basketball recruits seek.

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Alternatively, the rules restrain trade in the market where these

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schools compete to acquire recruits’ athletic services and

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licensing rights.

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Specifically, the association’s rules

The challenged rules do not promote competitive balance among

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FBS football and Division I basketball teams, let alone produce a

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level of competitive balance necessary to sustain existing

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consumer demand for the NCAA’s FBS football and Division I
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basketball-related products.

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the NCAA’s output of Division I schools, student-athletes, or

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football and basketball games.

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limited procompetitive benefits by marginally increasing consumer

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demand for the NCAA’s product and improving the educational

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services provided to student-athletes, Plaintiffs have identified

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less restrictive ways of achieving these benefits.

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Nor do the rules serve to increase

Although the rules do yield some

In particular, Plaintiffs have shown that the NCAA could
permit FBS football and Division I basketball schools to use the

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For the Northern District of California

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licensing revenue generated from the use of their student-

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athletes’ names, images, and likenesses to fund stipends covering

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the cost of attendance for those student-athletes.

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permit schools to hold limited and equal shares of that licensing

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revenue in trust for the student-athletes until they leave school.

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Neither of these practices would undermine consumer demand for the

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NCAA’s products nor hinder its member schools’ efforts to educate

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student-athletes.

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VI.

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It could also

Remedy
“The several district courts of the United States are

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invested with jurisdiction to prevent and restrain violations” of

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§ 1 of the Sherman Act.

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that Plaintiffs must make a showing of irreparable harm in order

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to obtain permanent injunctive relief here, it failed to cite any

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authority holding that such a showing is required in an action

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brought under the Sherman Act.

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district courts the authority to enjoin violations of its

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provisions and does not impose any additional requirements on

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plaintiffs who successfully establish the existence of an

15 U.S.C. § 4.

Although the NCAA asserts

The Sherman Act itself gives

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unreasonable restraint of trade.

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enter an injunction to remove any unreasonable elements of the

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restraint found in this case.17

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Accordingly, this Court will

Consistent with the less restrictive alternatives found, the

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Court will enjoin the NCAA from enforcing any rules or bylaws that

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would prohibit its member schools and conferences from offering

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their FBS football or Division I basketball recruits a limited

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share of the revenues generated from the use of their names,

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images, and likenesses in addition to a full grant-in-aid.

The

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For the Northern District of California

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injunction will not preclude the NCAA from implementing rules

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capping the amount of compensation that may be paid to student-

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athletes while they are enrolled in school; however, the NCAA will

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not be permitted to set this cap below the cost of attendance, as

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the term is defined in its current bylaws.

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The injunction will also prohibit the NCAA from enforcing any

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rules to prevent its member schools and conferences from offering

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to deposit a limited share of licensing revenue in trust for their

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FBS football and Division I basketball recruits, payable when they

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leave school or their eligibility expires.

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injunction will permit the NCAA to set a cap on the amount of

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money that may be held in trust, it will prohibit the NCAA from

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setting a cap of less than five thousand dollars (in 2014 dollars)

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for every year that the student-athlete remains academically

Although the

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In a footnote to its post-trial brief, the NCAA argues for the
first time that “a number of states have made it illegal to offer
[student-athletes] compensation beyond a scholarship or grant-in-aid to
entice them to attend a particular school.” NCAA Post-Trial Brief at
35. However, all of the statutes it cites for support expressly exempt
colleges and universities or distinguish between the prohibited payments
and scholarships, financial aid, and other grants.

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eligible to compete.

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concerns about student-athlete compensation would be minimized or

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negated if compensation was capped at a few thousand dollars per

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year.

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NCAA permits student-athletes to receive if they qualify for a

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Pell grant and the amount that tennis players may receive prior to

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enrollment.

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suggests that the NCAA’s legitimate procompetitive goals will be

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undermined by allowing such a modest payment.

The NCAA’s witnesses stated that their

This is also comparable to the amount of money that the

None of the other evidence presented at trial

Schools may offer

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lower amounts of deferred compensation if they choose but may not

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unlawfully conspire with each another in setting these amounts.

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To ensure that the NCAA may achieve its goal of integrating

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academics and athletics, the injunction will not preclude the NCAA

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from enforcing its existing rules -- or enacting new rules -- to

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prevent student-athletes from using the money held in trust for

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their benefit to obtain other financial benefits while they are

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still in school.

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representation that they are only seeking to enjoin restrictions

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on the sharing of group licensing revenue, the NCAA may enact and

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enforce rules ensuring that no school may offer a recruit a

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greater share of licensing revenue than it offers any other

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recruit in the same class on the same team.

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compensation schools decide to place in trust may vary from year

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to year.

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continuing to enforce all of its other existing rules which are

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designed to achieve its legitimate procompetitive goals.

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includes its rules prohibiting student-athletes from endorsing

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commercial products, setting academic eligibility requirements,

Furthermore, consistent with Plaintiffs’

The amount of

Nothing in the injunction will preclude the NCAA from

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prohibiting schools from creating athlete-only dorms, and setting

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limits on practice hours.

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preclude the NCAA from enforcing its current rules limiting the

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total number of football and basketball scholarships each school

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may award, which are not challenged here.

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Nor shall anything in this injunction

The injunction will not be stayed pending any appeal of this

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order but will not take effect until the start of next FBS

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football and Division I basketball recruiting cycle.

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For the Northern District of California

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CONCLUSION
College sports generate a tremendous amount of interest, as

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well as revenue and controversy.

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and conflicting opinions about the best policies to apply in

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regulating these sports.

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whether the NCAA violates antitrust law by agreeing with its

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member schools to restrain their ability to compensate Division I

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men’s basketball and FBS football players any more than the

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current association rules allow.

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the Court finds that this restraint does violate antitrust law.

Interested parties have strong

Before the Court in this case is only

For the reasons set forth above,

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To the extent other criticisms have been leveled against the

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NCAA and college policies and practices, those are not raised and

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cannot be remedied based on the antitrust causes of action in this

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lawsuit.

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other perceived inequities in college athletics and higher

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education generally, could be better addressed as a policy matter

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by reforms other than those available as a remedy for the

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antitrust violation found here.

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be undertaken by the NCAA, its member schools and conferences, or

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Congress.

It is likely that the challenged restraints, as well as

Such reforms and remedies could

Be that as it may, the Court will enter an injunction,
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in a separate order, to cure the specific violations found in this

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case.

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The clerk shall enter judgment in favor of the Plaintiff

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class.

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parties shall not file any post-trial motions based on arguments

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that have already been made.

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IT IS SO ORDERED.

Plaintiffs shall recover their costs from the NCAA.

The

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United States District Court
For the Northern District of California

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Dated: August 8, 2014

CLAUDIA WILKEN
United States District Judge

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