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Full Opinion
Partial Concurrence and Partial Dissent by Chief Judge THOMAS.
OPINION
Section 1 of the Sherman Antitrust Act of 1890, 15 U.S.C. § 1, prohibits “[e]very contract, combination ..., or conspiracy, in restraint of trade or commerce.” For more than a century, the National Collegiate Athletic Association (NCAA) has prescribed rules governing the eligibility of athletes at its more than 1,000 member colleges and universities. Those rules prohibit student-athletes from being paid for the use of their names, images, and likenesses (NILs). The question presented in this momentous case is whether the NCAA’s rules are subject to the antitrust laws and, if so, whether they are an unlawful restraint of trade.
After a bench trial and in a thorough opinion, the district court concluded that
We conclude that the district court’s decision was largely correct. Although we agree with the Supreme Court and our sister circuits that many of the NCAA’s amateurism rules are likely to be procom-petitive, we hold that those rules are not exempt from antitrust scrutiny; rather, they must be analyzed under the Rule of Reason. Applying the Rule of Reason, we conclude that the district court correctly identified one proper alternative to the current NCAA compensation rules — ie., allowing NCAA members to give scholarships up to the full cost of attendance— but that thé district court’s other remedy, allowing students to'be paid cash compensation of up to $5,000 per year, was erroneous. We therefore affirm in part and reverse in part.
I
A. The NCAA
American colleges and universities have been competing in sports for nearly 150 years: the era of intercollegiate athletics began, by most accounts, on November 6, 1869, when Rutgers and Princeton met in the first college football game in American history — a game more akin to soccer than to modern American football, played with “25 men to a side.” Joseph N. Crowley, In the Arena: The NCAA’s First Century 2 (2006), available at https://www.ncaa publications.com/p-4039-in-the-arena-the-ncaas-first-eentury.aspx. College football quickly grew in popularity over the next few decades.
Fin de siecle college football was a rough game. Serious injuries were common, and it was not unheard of for players to be killed during games. Schools were also free to hire nonstudent ringers to compete on their teams or to purchase players away from other schools. By 1905, these and other problems had brought college football to a moment of crisis, and President Theodore Roosevelt convened a conference at the White House to address the issue of injuries in college football. Later that year, the presidents of 62 colleges and universities founded the Intercollegiate Athletic Association to create uniform rules for college football. In 1910, the IAA changed its name to the National Collegiate Athletic Association (NCAA), and it has kept that name to this day.
The NCAA has grown to include some 1,100 member schools, organized into three divisions: Division I, Division II, and Division III. Division I schools are those with the largest athletic programs — schools must sponsor at least fourteen varsity sports, teams to qualify for Division I — and they provide the most financial aid to student-athletes. Division I has about 350 members.
For football competition only, Division I’s membership is divided into two subdivisions: the Football Bowl Subdivision (FBS) and the Football Championship Subdivision (FCS). FBS schools are permitted to offer more full scholarships to their football players and, as a result, the level of competition is generally higher in FBS than in FCS. FBS consists of about 120 of the nation’s premier college football schools.
One of the NCAA’s earliest reforms of intercollegiate sports was a requirement that the participants be amateurs. President C.A. Richmond of Union College commented in 1921 that the competition among colleges to acquire the best players had come to resemble “the contest in dreadnoughts” that had led to World War I,
The NCAA began to strengthen its enforcement capabilities ' in 1948, when it adopted what became known as the “Sanity Code” — a set of rules that prohibited schools from giving athletes financial aid that was based on athletic ability and not available to ordinary students. See Daniel E. Lazaroff, The NCAA in Its Second Century: Defender of Amateurism or Antitrust Recidivist?, 86 Or. L.Rev. 329, 333 (2007). The Sanity Code also created a new “compliance mechanism” to enforce the NCAA’s rules — “a Compliance Committee that could terminate an institution’s NCAA membership.” Id.
In 1956, the NCAA departed from the Sanity Code’s approach to financial aid by changing its rules to permit its members, for the first time, to give student-athletes scholarships based on athletic ability. These scholarships were capped at the amount of a full “grant in aid,” defined as the total cost of “tuition and fees, room and board, and required course-related books.” Student-athletes were prohibited from receiving any “financial aid based on athletics ability” in excess of the value of a grant-in-aid, on pain of losing their eligibility for collegiate athletics. Student-athletes could seek additional financial aid not related to their athletic skills; if they chose to do this, the total amount of athletic and nonathletic financial aid they received could not exceed the “cost of attendance” at their respective schools.
In August 2014, the NCAA announced it would allow athletic conferences to author
In addition to its financial aid rules, the NCAA has adopted numerous other amateurism rules that limit student-athletes’ compensation and their interactions with professional sports leagues. An athlete can lose his amateur status, for example, if he signs a contract with a professional team, enters a professional league’s player draft, or hires an agent. And, most importantly, an athlete is prohibited — with few exceptions — from receiving any “pay” based on his athletic ability, whether from boosters, companies seeking endorsements, or would-be licensors of the athlete’s name, image, and likeness (NIL).
C. The O’Bannon and Keller Litigation
• In 2008, Ed O’Bannon, a former All-American basketball player at UCLA, visited a friend’s house, where his friend’s son told O’Bannon that he was depicted in a college basketball video game produced by Electronic Arts (EA), a software company that produced video games based on college football and men’s basketball from the late 1990s until around 2013. The friend’s son turned on the video game, and O’Ban-non saw an avatar of himself — a virtual player who visually resembled O’Bannon, played for UCLA, and wore O’Bannon’s jersey number, 31. O’Bannon had never consented to the use of his likeness in the video game, and he had not been compensated for it.
In 2009, O’Bannon sued the NCAA and the Collegiate Licensing Company (CLC), the entity which licenses the trademarks of the NCAA and a number of its member schools for commercial use, in federal court. The gravamen of O’Bannon’s complaint was that the NCAA’s amateurism rules, insofar as they prevented student-athletes from being compensated for the use of their NILs, were an illegal restraint of trade under Section 1 of the Sherman Act, 15 U.S.C. § 1.
Around the same time, Sam Keller, the former starting quarterback for the Arizona State University and University of Nebraska football teams, separately brought suit against the NCAA, CLC, and EA. Keller alleged that EA had impermis-sibly used student-athletes’ NILs in its video games and that the NCAA and CLC had wrongfully turned a blind eye to EA’s misappropriation of these NILs. The complaint stated a claim under Indiana’s and California’s right of publicity statutes, as well as a number of common-law claims.
The two cases were consolidated during pretrial proceedings. The defendants moved to dismiss Keller’s right-of-publicity claims on First Amendment grounds. The district court denied the motion to dismiss, and we affirmed that decision, holding that “[ujnder California’s transformative use defense, 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.” In re NCAA StudenNAthlete Name & Likeness Licensing Litig. (“Keller”), 724 F.3d 1268, 1284 (9th Cir.2013).
In November 2013, the district court granted the plaintiffs’ motion for class certification. The court held that certification of a damages class under Rule 23(b)(3) was inappropriate, but it certified the following class under Rule 23(b)(2) for injunctive and declaratory relief:
All current and former student-athletes residing in the United States who com*1056 pete on, or competed on, an NCAA Division I'(formerly known as “Ubiversity 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.4
After class certification was granted, the plaintiffs voluntarily dismissed their damages claims with prejudice. The plaintiffs also settled their claims against EA and CLC, and the district court preliminarily approved the settlement. O’Bannon and Keller were deconsolidated, and in June 2014, the antitrust claims against the NCAA at issue in O’Bannon went to a bench trial before the district court.
D. The District Court’s Decision
After a fourteen-day bench trial, the district court entered judgment for the plaintiffs, concluding that the NCAA’s rules prohibiting student-athletes from receiving compensation for their NILs violate Section 1 of the Sherman Act. O’Bannon v. NCAA, 7 F.Supp.3d 955 (N.D.Cal.2014).
1. The Markets
The court began by identifying the markets in which the NCAA allegedly restrained trade. It identified two markets that were potentially affected by the challenged NCAA rules.
a. The college education market
First, the court found that there is a “college education market” in which FBS football and Division I basketball schools compete to recruit the best high school players by offering them “unique bundles of goods and services” that include not only scholarships but also coaching, athletic facilities, and the opportunity to face high-quality athletic competition. Id. at 965-66. The court found that very few athletes talented enough to play FBS football or Division I basketball opt not to attend an FBS/Division I school; hardly any choose to attend an FCS, Division II, or Division III school or to compete in minor • or foreign professional sports leagues, and athletes are not allowed to join either the NFL or the NBA directly from high’ school.
b. The group licensing market
The second market identified by the district court was a “group licensing market” in which, but for the NCAA’s compensation rules, college football and basketball athletes would be able to sell group licenses for the use of their NILs. Id. The court broke this “group licensing market” down into three submarkets in which players’ NILs could be profitably licensed: (1) live game telecasts, (2) sports video games, and (3) game rebroadcasts, advertisements, and' other archival footage.
2. The Rule of Reason
Having concluded that the NCAA’s compensation rules potentially restrained competition in these two markets, the court proceeded to analyze the legality of the challenged NCAA rules with respect to those markets, applying the Rule of 'Reason. Id. at 984-1009. The district court found that the NCAA’s rules have an anti-competitive effect in the college education market but not in the group licensing market. It then concluded that the rules serve procompetitive purposes. Finally, it determined that the procompetitive purposes of the rules could be achieved by less restrictive alternative restraints and that the current rules were therefore unlawful.
a. Anticompetitive effects
At the first step of the Rule of Reason, the court found that the NCAA’s rules have an anticompetitive effect on the college education market. Were it not for those rules, the court explained, schools would compete with each other by offering recruits compensation exceeding the, cost of attendance, which would “effectively lower the price that the recruits must pay for the combination of educational and athletic opportunities that the schools provide.” Id. at 972. The rules prohibiting compensation for the use of student-athletes’ NILs are thus a price-fixing agree
The court found in the alternative that the college education market can be thought of as a market in which student-athletes are sellers rather than buyers and the schools are purchasers of athletic services. In the court’s alternative view, the college education market is a monopsony— a market in which there is only one buyer (the NCAA schools, acting collectively) for a particular good or service (the labor and NIL rights of student-athletes), and the colleges’ agreement not to pay anything to purchase recruits’ NILs causes harm to competition. Id. at 973, 991.
By contrast, the court found that the NCAA’s rules do not have an anticompeti-tive effect on any of the submarkets of the group licensing market. The court explained that although these submarkets exist, there would be no competition in any of them if the challenged NCAA rules were abolished. The court reasoned that the value of an NIL license to a live game broadcaster or a video game company would depend on the licensee’s acquiring eveyy other NIL license that was available. A live game broadcaster, for example, would need to acquire a license from every team or player whose games it might telecast. Similarly, a video game producer would want to acquire NIL rights for all of the teams it needed to include in the game. Given these requirements, the court deemed it highly unlikely that groups of student-athletes would compete with each other to sell their NIL rights; on the contrary, they would have an incentive to cooperate to make sure that the package of NIL rights sold to buyers was as complete as possible. Id. at 993-98. With respect to archival footage, meanwhile, the court found that the NCAA’s licensing arrangement with T3Media did not deprive student-athletes of any compensation they might otherwise receive because T3Media is prohibited from licensing footage of current athletes and must obtain the consent of any former athlete whose NIL appears in its footage. Id. at 998-99.
b. Procompetitive purposes-
At the second step of the Rule of Reason, the NCAA proffered four procompeti-tive purposes for its rules prohibiting student-athletes from receiving compensation for the use of their NILs: (1) preserving “amateurism” in college sports; (2) promoting competitive balance in FBS football and Division I basketball; (3) integrating academics and athletics; and (4) increasing output in the college education market. Id. at 999. The court accepted the first and third justifications in part while rejecting the others.
(1) Amateurism. The NCAA argued to the district court that restrictions on student-athlete compensation are “necessary to preserve the amateur tradition and identity of college sports.” Id. It contended that amateurism had been one of the NCAA’s core principles since its founding and that amateurism is a key driver of college sports’ popularity with consumers and fans. Id. at 999-1000.
The district court rejected the NCAA’s contention that it had a “longstanding commitment to amateurism,” concluding instead that the NCAA’s definition of amateurism was “malleable,” changing frequently over time in “significant and contradictory ways.” Id. at 1000. The court suggested that, even today, the NCAA’s definition of amateurism is inconsistent: although players generally cannot receive
The district court was not persuaded that amateurism is the primary driver-of consumer demand for college sports — but it did find that amateurism serves some procompetitive purposes. The court first concluded that consumers are primarily attracted to college sports for reasons unrelated to amateurism, such as loyalty to their alma mater or affinity for the school in their region of the country. Id. at 977-78. It also found much of the NCAA’s evidence about amateurism unreliable. For example, the NCAA provided a survey conducted by Dr. J. Michael Dennis, a “survey research expert,” which purported to show that Americans “generally oppose! ] the idea of paying college football and basketball players.” Id. at 975. The court deemed the Dennis survey “unpersuasive” for a couple reasons, one of which was that it believed the survey’s initial question skewed the results by priming respondents to think about illicit payments to student-athletes rather than the possibility of allowing athletes to be paid. Id.
But the district court ultimately found that the NCAA’s “current understanding of amateurism” plays some role in preserving “the popularity of the NCAA’s product.” Id. at 1005. It found that the NCAA’s current rules serve a procompeti-tive benefit by promoting this understanding of amateurism, which in turn helps preserve consumer demand for college sports.
(2) Competitive Balance. The NCAA argued before the district court that restricting compensation to student-athletes helps level the playing field between FBS and Division I schools in recruiting, thereby maintaining competitive balance among those schools’ football and basketball teams. Id. at 1001-02.
The district court acknowledged that promoting competitive balance could be a valid procompetitive purpose under the antitrust laws, but it concluded that the challenged NCAA rules do not promote competitive balance. The court noted that numerous economists have studied the NCAA over the years and that “nearly all” of them have concluded that the NCAA’s compensation rules do not promote competitive balance. Id. at 978. The court also explained that although the NCAA forbids its member schools to pay student-athletes anything beyond a fixed scholarship, it allows schools to spend as much as they like on other aspects of their athletic programs, such as coaching, facilities, and the like, which “negate[s] whatever equalizing effect the NCAA’s restraints on student-athlete compensation might have once had.” Id. at 1002. The court concluded that competitive balance was thus not a viable justification for restricting student-athlete compensation.
(3) Integrating Academics and Athletics. The NCAA’s third procompetitive justification for its restraints on student-athlete compensation was that these restraints integrate academics and athletics and thereby “improve the quality of educational services provided to student-athletes.” Id. According to the NCAA, student-athletes derive long-term benefits from participating fully in academic life at their schools, which the compensation rules encourage them to do. Id. at 979-80.
The district court allowed that this was a viable procompetitive justification for the
(4) Increasing Output. The fourth and final procompetitive justification alleged by the NCAA was that the restraints on student-athlete compensation “increase output” in the college education market by increasing the available opportunities for students to play FBS football or Division I basketball. Id. at 1003-04. The NCAA contended that its rules accomplish this goal by attracting schools with a philosophical commitment to amateurism to compete in Division I and by enabling schools to compete in Division I that otherwise could not afford to do so. Id. at 1004.
The district court rejected this justification. The court found the idea that schools join Division I because of a philosophical commitment to amateurism “implausible,” noting that some major-conference schools had lobbied to change the NCAA’s scholarship rules to raise compensation limits. Id. at 981. The court also explained that schools in FCS, Division II, and Division III are subject to the same amateurism rules as Division I schools, making it unlikely that schools choose to join Division I because of the amateurism rules. Id.
The court likewise found no support in the record for the notion that the NCAA’s compensation rules enable more schools to compete in Division I. The court found that, because Division I schools do not share revenue, there is no reason to believe that the cost savings from not paying student-athletes are being used to fund additional scholarships at low-revenue schools or to enable those schools to join Division I. Id. at 1004. The court also noted that the plaintiffs were not seeking to require that all schools pay their student-athletes; rather,’ they sought an injunction permitting schools to do so. Schools that could not afford to pay their student-athletes would not need to do so if the plaintiffs prevailed and would therefore not be driven out of Division I by a ruling in the plaintiffs’ favor. Id.
c. Less restrictive alternatives
Having found that the NCAA had presented two procompetitive justifications for “circumscribed” limits on student-athlete compensation — i.e., increasing consumer demand for college sports and preventing the formation of a “wedge” between student-athletes and other students — the court proceeded to the third and final step of the Rulé of Reason, where it considered whether there were means of achieving the NCAA’s procompetitive purposes that were “substantially less restrictive” than a total ban on compensating student-athletes for use of their NILs. Id. at 1004-05.
The court held that the plaintiffs had identified two legitimate, less restrictive alternatives to the current NCAA rules:
After entering judgment for the plaintiffs on their antitrust claims, the district court permanently enjoined the NCAA from prohibiting its member schools from (1) compensating FBS football and Division I men’s basketball players for the use of their NILs by awarding them grants-in-aid up to the full cost of attendance at their respective schools, or (2) paying up to $5,000 per year in deferred compensation to FBS football and Division I men’s basketball players for the use of their NILs, through trust funds distributable after they leave school. The NCAA timely appealed, and we have jurisdiction under 28 U.S.C. § 1291.
II
We review the district court’s findings of fact after the bench trial for clear error and review the district court’s conclusions of law de novo. FTC v. Burn-Lounge, Inc., 753 F.3d 878, 883 (9th Cir.2014). Our clear-error review of the district court’s findings of fact is “deferential”; “we will accept the district court’s findings of fact unless we are left with the definite and firm conviction that a mistake has been committed.” Id. (alteration and internal quotation marks omitted).
Ill
On appeal, the NCAA contends that the plaintiffs’ Sherman Act claim fails on the merits, but it also argues that we are precluded altogether from reaching the merits, for three independent reasons: (1) The Supreme Court held in NCAA v. Board of Regents of the University of Oklahoma, 468 U.S. 85, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984), that the NCAA’s amateurism rules are “valid as a matter of law”; (2) the compensation rules at issue here are not covered by the Sherman Act at all because they do not regulate commercial activity; and (3) the plaintiffs have no standing to sue under the Sherman Act because they have not suffered “antitrust injury.” We find none of these three arguments persuasive.
A. Board of Regents Did Not Declare the NCAA’s Amateurism Rules “Valid as a Matter of Law”
We consider, first, the NCAA’s claim that, under Board of Regents, all NCAA amateurism rules are “valid as a matter of law.”
Board of Regents concerned the NCAA’s then-prevailing rules for televising college football games. The rules allowed television networks to negotiate directly with schools and conferences for the right to televise games, but they imposed caps on the total number of games that could be broadcast on television each year and the number of games that any particular school could televise. 'Id. at 91-94, 104
The Court observed that the television rules resembled two kinds of agreements that are ordinarily considered per se unlawful when made among horizontal competitors in the same market: a price-fixing agreement (in that the rules set a minimum aggregate price that the television networks were required to pay the NCAA’s members) and an output-restriction agreement (in that the rules artificially capped the number of televised game licenses for sale). Id. at 99-100, 104 S.Ct. 2948. But it concluded that applying a per se rule of invalidity to the NCAA’s television rules would be “inappropriate” because college football is “an industry in which horizontal restraints on competition are essential if the product is to be available at all.” Id. at 100-01, 104 S.Ct. 2948. The Court elaborated:
What the NCAA and its member institutions market in this case is competition itself — contests between competing institutions. Of course, this would be completely ineffective if there were no rules on which the competitors agreed to create and define the competition to be marketed. A myriad of rules affecting such matters as the size of the field, the number of players on a team, and the extent to which physical violence is to be encouraged or proscribed, all must be agreed upon, and all restrain the manner in which institutions compete. Moreover, the NCAA seeks to market a particular brand of football' — college football.... In order to preserve the character and quality of th[is] “product, ” athletes must not be paid, must be required to attend class, and■the like. And the integrity of the “product” cannot be preserved except by mutual agreement; if an institution adopted such restrictions unilaterally, its effectiveness as a competitor on the playing field might soon be destroyed. Thus, the NCAA plays a vital role in enabling college football to preserve its character, and as a result enables a product to be marketed which might otherwise be unavailable. In performing this role, its actions widen consumer choice — not only the choices available to sports fans but also those available to ’athletes — and hence can be viewed as procompetitive.
Id. at 101-02, 104 S.Ct. 2948 (emphasis added). The Court held that the NCAA’s rules should therefore be analyzed under the Rule of Reason.
Applying the Rule of Reason, the Court struck down the television rules on the ground that they did not serve any legitimate procompetitive purpose. Id. at 113— 20, 104 S.Ct. 2948. It then concluded its opinion by stating:
The NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports. There can be no question but that it needs ample latitude to play that role, or that the preservation of the student-athlete in higher education adds richness and diversity to intercollegiate athletics and is entirely consistent with the goals of the Sherman Act. But consistent with the Sherman Act, the role of the NCAA must be to preserve a tradition that might otherwise die; rules that restrict output are hardly consistent with this role. Today we hold only that the record supports the District Court’s conclusion that by curtailing output and blunting the ability of member institutions to respond to consumer preference, the NCAA has restricted rather than enhanced the place of intercollegiate athletics in the Nation’s life.
Id. at 120, 104 S.Ct. 2948 (emphasis added).