The United States Court of Appeals for the 9th Circuit denied a rehearing en banc in the controversial O’Bannon v. NCAA case this past December. With the Bowl games recently ended and March Madness (and the deadline to petition the Supreme Court) quickly approaching, it seems like an appropriate time to revisit the state of the O’Bannon case.
The Decision of the District Court
The main question was whether the NCAA’s rule prohibiting student-athletes from receiving compensation was an unreasonable restraint on trade in violation of the Sherman Antitrust Act. The District Court held that it was, imposing a permanent injunction on the NCAA. The injunction stopped the NCAA from enforcing two of its “no compensation” rules:
- It could no longer disallow schools from awarding grants-in-aid up to the full cost of attendance; and
- It could no longer prohibit students from receiving up to $5,000/year for licenses to use their names/images/likenesses, placed in trust and available upon graduation.
The Decision of the 9th Circuit
In its opinion, the 9th Circuit affirmed the NCAA was subject to antitrust scrutiny under the Sherman Act, as the District Court ruled. The 9th Circuit also affirmed that under the legal standard referred to as “Rule of Reason,” the NCAA’s rule disallowing student-athletes to receive grants-in-aid up to the full cost of attendance to their school was an unreasonable restraint on trade and therefore illegal.
The Court, however, reversed on the final point—that student athletes should be permitted to receive a maximum of $5,000 a year held in trust by the school. The Court credited the NCAA’s argument that such compensation defeats the principle of amateurism that is traditionally affiliated with college sports. Judge Bybee, writing for the majority, reasoned, “[t]he 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.”
What is the practical impact of this decision?
Instead of merely being able to offer prospective students the total cost of tuition and fees, room and board, and required course-related books, universities may now offer the total amount of cost of attendance, including costs related to athletics. This gives universities a couple more plays in their playbooks to compete with other schools for athletes’ attendance, thereby placing less of a restraint on trade yet still preserving a passion-filled American tradition.
The state of affairs will, however, be in flux for at least the next few months. Both parties have until about the opening tip of March Madness to petition the U.S. Supreme Court to rehear the case. It should be an exciting time of year to follow sporting events and sports law alike.