The US Ninth Circuit Court of Appeals has upheld a lower court’s decision in Ed O’Bannon v. NCAA, which ruled that the NCAA’s larger amateurism rules are in violation of anti-trust laws. The appeals court also, though, vacated a key portion of the lower court’s ruling, and that makes it hard to count this as a victory for the athletes.
When the lower court ruled in favor of the plaintiffs, it laid out a proposal for how the NCAA might pay college athletes for the use of their likenesses in video games. Under this proposal, the NCAA would pay athletes up to $5,000 per year in deferred compensation. That idea was thrown out by the appeals court:
The panel concluded that the district court identified one proper less restrictive alternative to the current NCAA rules i.e., allowing NCAA member to give scholarships up to the full cost of attendance¯but the district court’s other remedy, allowing students to be paid cash compensation of up to $5,000 per year, was erroneous. The panel vacated the district court’s judgment and permanent injunction insofar as they required the NCAA to allow its member schools to pay student-athletes up to $5,000 per year in deferred compensation.
Capping the amount that athletes could be paid at $5,000 was always a silly idea—the appeals court’s decision points out that the number was settled on based on an offhand comment by one of the original case’s witnesses—but getting rid of the idea entirely adds a lot of murk to the situation.
The problem with the rulings of both the lower court and the appeals court is that they both acknowledge that the NCAA’s amateurism model offers “procompetitive benefits” that the NCAA must be given a wide latitude to maintain. In other words, both courts buy into the bullshit idea that a big part of college sports’ consumer appeal is the idea that the athletes are amateurs.
The $5,000 cap suggested by the lower court was meant to be a compromise, the idea being that paying the athletes just a a little bit wouldn’t rob them of too much of their amateur status or damage the NCAA’s model. The appeals court was hearing none of that:
We cannot agree that a rule permitting schools to pay students pure cash compensation and a rule forbidding them. From paying NIL compensation are both equally effective in promoting amateurism and preserving consumer demand. Both we and the district court agree that the NCAA’s amateurism rule has procompetitive benefits. But in finding that paying students cash compensation would promote amateurism as effectively as not paying them, the district court ignored that not paying student-athletes is precisely what makes them amateurs.
In the appeals court’s eyes, the plaintiffs didn’t do enough to prove that paying the athletes even a relatively small amount of money wouldn’t diminish the consumer appeal that the NCAA gets from its amateurism model. This is laid out pretty clearly in one of the decision’s footnotes:
The dissent criticizes us for citing “no record evidence to support [our] conclusion that paying student-athletes $5,000 in deferred compensation will significantly reduce consumer demand.” Dissent at 68 n.3. But we do not decide, and the NCAA need not prove, whether paying student athletes $5,000 payments will necessarily reduce consumer demand. The proper inquiry in the Rule of Reason’s third step is whether the plaintiff shave shown these payments will not reduce consumer demand (relative tot he existing rules). And we conclude they have not.
The decision goes on to claim that any cash payments to athletes that are not directly related to their education expenses, i.e. cost-of-attendance scholarships, would mark a “quantum leap” that must be avoided:
The difference between offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap. Once that line is crossed, we see no basis for returning to a rule of amateurism and no defined stopping point; we have little doubt that plaintiffs will continue to challenge the arbitrary limit imposed by the district court until they have captured the full value of their NIL. At that point the NCAA will have surrendered its amateurism principles entirely and transitioned from its “particular brand of football” to minor league status.
If you’re looking for silver linings, it’s that the appeals court re-emphasized that the NCAA is not above anti-trust law and should continue to be scrutinized, and didn’t go so far as to say that college athletes have no right to be compensated beyond the cost of attendance. The hangup comes from the fact that the court doesn’t believe the plaintiffs successfully argued that further compensation wouldn’t diminish the NCAA’s amateurism model, which is asking them to do the almost-impossible task of proving a negative. That’s a big hangup to get over, which makes today’s ruling mostly a victory for the NCAA. The good news is that other, more dangerous lawsuits are coming.
You can read the full decision below: