NCAA Play for Pay? Ninth Circuit Rules Antitrust Rule of Reason Does Not Require Payments for ‘Name, Image, or Likeness’

On September 30, 2015, the Ninth Circuit Court of Appeals upheld a lower court’s ruling that the amateurism rules of the National Collegiate Athletic Association (NCAA) violate federal antitrust laws. The Ninth Circuit panel considering the NCAA’s appeal rejected one dramatic change that had been ordered by U.S. District Judge Claudia Wilken. O’Bannon v. National Collegiate Athletic Association, Ninth Circuit Court of Appeals, Nos. 14-16601 and 14-17068 (September 30, 2015).

In the 2014 lower court case, Judge Wilken had ordered that the NCAA could no longer enforce its rules limiting payments to athletes. Judge Wilken also had directed the NCAA to allow its member institutions to pay male Division I football and basketball players up to $5,000 per year in deferred compensation “for the licensing or use of . . . [their] names, images, and likenesses” (NIL) in addition to the federally-defined “cost of attendance” for scholarships awarded after August 1, 2015. In August of 2014, the NCAA had announced that it would allow its members to pay male Division I football and basketball players the full “cost of attendance.”

In considering the NCAA’s appeal of the lower court’s ruling, the Ninth Circuit panel applied a “Rule of Reason” analysis to the NCAA’s proposed limits on payments to athletes and upheld Judge Wilken’s finding that past NCAA restrictions violated the Sherman Antitrust Act. The panel also approved a remedy of ordering the NCAA to permit “full cost of attendance” scholarships. However, a split-panel rejected Judge Wilken’s order requiring the NCAA to allow up to $5,000 per year for NIL.

After rejecting many of the NCAA’s arguments, the panel focused on the third step of the Rule of Reason analysis—whether there are substantially less-restrictive alternatives to the challenged rules that are “virtually as effective” as the challenged rules “without significantly increased cost.” The district court had found full-cost-of-attendance scholarships and NIL payments to be such alternatives. The Ninth Circuit panel found no clear error in the decision that full-cost-of- attendance-scholarships are an appropriate alternative, but the majority found that the direction of NIL payments was clear error:

in finding that paying students cash compensation would promote amateurism as effectively as not paying them, the district court ignored that not paying student-athletes is precisely what makes them amateurs [emphasis in original].

Chief Judge Thomas, who concurred in part and dissented in part, stated that he would have upheld the NIL payments.