## Facts

- Edward C. O’Bannon Jr., a former UCLA men’s basketball player, challenged NCAA rules barring Division I men’s basketball and FBS football players from receiving compensation for commercial use of their names, images, and likenesses (NILs) beyond grant-in-aid.
- The class alleged that the NCAA’s compensation limits prevented athletes from sharing in revenues generated through licensing for broadcasts, video games, and related commercial uses.
- The district court, after a bench trial, found the NCAA’s NIL rules to be an unreasonable restraint of trade under Sherman Act § 1 and entered a permanent injunction.
- The injunction required the NCAA to allow (1) grants-in-aid up to the full cost of attendance and (2) up to $5,000 per year per athlete in deferred NIL compensation held in trust and paid after eligibility.
- The NCAA appealed the liability ruling and remedy; plaintiffs cross-appealed aspects of the relief.

## Issues

1. Whether NCAA “amateurism” rules limiting NIL compensation are subject to Sherman Act § 1 scrutiny under the Rule of Reason.
2. Whether the NCAA’s NIL compensation limits produce anticompetitive effects in a properly defined market and cause cognizable injury to the affected athletes.
3. Whether less restrictive alternatives required the NCAA to permit (a) cost-of-attendance scholarships and (b) $5,000 annual deferred NIL payments.

## Decision

- The Ninth Circuit affirmed that the NCAA’s compensation rules are subject to antitrust scrutiny and analyzed under the Rule of Reason.
- The court affirmed the finding that the challenged NIL restrictions had significant anticompetitive effects and violated Sherman Act § 1.
- The court affirmed injunctive relief requiring the NCAA to permit scholarships up to the full cost of attendance.
- The court reversed the portion of the injunction requiring the NCAA to allow up to $5,000 per year in deferred NIL trust payments.
- A separate opinion would have affirmed the trust-payment remedy as well.

## Legal Principles

- NCAA regulations are not categorically exempt from antitrust laws; even rules linked to “amateurism” must be assessed under the Rule of Reason.
- A restraint that caps athlete NIL compensation at zero can constitute anticompetitive price-fixing in a market where schools compete to recruit elite athletes with compensation packages.
- Procompetitive justifications may include maintaining a distinction between college and professional sports and supporting the integration of academics and athletics.
- Under the Rule of Reason, plaintiffs may prevail by showing a substantially less restrictive alternative that is virtually as effective at achieving procompetitive benefits without materially increasing costs or reducing consumer demand.
- Antitrust relief may permit education-related benefits (such as cost-of-attendance scholarships) while rejecting mandated cash-like NIL payments when such payments are found to risk undermining the procompetitive product differentiation justification.

## Conclusion

The Ninth Circuit held the NCAA’s NIL compensation restrictions unlawfully restrained trade under Sherman Act § 1, required the NCAA to allow scholarships up to the full cost of attendance as a less restrictive alternative, but rejected an injunction compelling schools to provide up to $5,000 per year in deferred NIL compensation.


O'Bannon v. Nat'l Collegiate Athletic Ass'n, 802 F.3d 1049 (9th Cir. 2015)