DALE McCOURT_ Plaintiff-Appellee_ v.doc

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					   II. ANTITRUST ISSUES IN
 PROFESSIONAL AND AMATEUR
         ATHLETICS

E. Interleague and Intraleague Disputes
  The MID-SOUTH GRIZZLIES (a Joint               Rehearing Denied Dec. 5, 1983
 Venture); JOHN EDWARD BOSACCO;
   MID-SOUTH GRIZZLIES (a Limited            Before SEITZ, Chief Judge, and
   Partnership); and CONSOLIDATED         GIBBONS and ROSENN, Circuit Judges.
     INDUSTRIES, INC., Appellants
                    v.                             OPINION OF THE COURT
 The NATIONAL FOOTBALL LEAGUE,
      an unincorporated association;          GIBBONS, Circuit Judge.
 BALTIMORE FOOTBALL CLUB, INC.;
  BUFFALO BILLS, INC.; CHARGERS               Mid-South Grizzlies, a joint venture, and
  FOOTBALL COMPANY; CHICAGO               its members (the Grizzlies) appeal from a
    BEARS FOOTBALL CLUB, INC.;            summary judgment in favor of the defendants
     CINCINNATI BENGALS, INC.;            in their suit against the National Football
CLEVELAND BROWNS, INC.; DALLAS            League (NFL), the league members, and
  COWBOYS FOOTBALL CLUB, INC.;            League Commissioner Pete Rozelle, seeking
 DETROIT LIONS, INC.; FIVE SMITHS,        damages under Section 4 of the Clayton Act,
  INC.; GREEN BAY PACKERS, INC.;          15 U.S.C. s 15 (1973). The suit concerns the
   HOUSTON OILERS, INC.; KANSAS           defendants' refusal to grant the plaintiffs a
CITY CHIEFS FOOTBALL CLUB, INC.;          football franchise. On appeal the Grizzlies
   LOS ANGELES RAMS FOOTBALL              contend that the district court erred: (1) in
 COMPANY; MIAMI DOLPHINS, LTD.;           granting summary judgment while the
  MINNESOTA VIKINGS FOOTBALL              Grizzlies'     discovery    requests     were
      CLUB, INC.; NEW ENGLAND             outstanding; and (2) in granting summary
  PATRIOTS FOOTBALL CLUB, INC.;           judgment when there were disputed issues of
NEW YORK FOOTBALL GIANTS, INC.;           material fact.1 We affirm.
 NEW YORK JETS FOOTBALL CLUB,
     INC.; NEW ORLEANS SAINTS             I. Background
LOUISIANA PARTNERSHIP; OAKLAND
    RAIDERS, LTD.; PHILADELPHIA               The NFL is a not-for-profit business
   EAGLES FOOTBALL CLUB, INC.;            league, qualified for exemption from federal
  PITTSBURGH STEELERS SPORTS,             income tax under section 501(c)6 of the
 INC.; PRO-FOOTBALL, INC.; ROCKY          Internal Revenue Code, 26 U.S.C. s 501(c)(6)
  MOUNTAIN EMPIRE SPORTS, INC.;           (1967). The league has 28 members, each of
   SAN FRANCISCO FORTY NINERS;            which is an entity organized for profit,
SEATTLE PROFESSIONAL FOOTBALL,            engaged in the business of fielding a
    A General Partnership; ST. LOUIS      professional football team. The NFL was
 FOOTBALL CARDINALS COMPANY;              formed by the merger of two predecessor
 TAMPA BAY AREA NFL FOOTBALL,             football leagues. That merger took place
       INC. and PETE ROZELLE.             following the enactment, in 1966, of Pub.L.
                                          89-800, s 6(b)(1), 80 Stat. 1515, which
              No. 82-1793.                amended Pub.L. 87-331, s 1, 75 Stat. 732
  United States Court of Appeals, Third   (1961), 15 U.S.C. s 1291. Section 1291,
                 Circuit
              720 F.2d 772
      1983-2 Trade Cases P 65,695         1 The court's decision is reported. Mid-South
         Argued Sept. 13, 1983.           Grizzlies v. National Football League, 550 F.Supp.
          Decided Nov. 4, 1983.           558 (E.D.Pa.1982).




                                                                                 664
enacted in 1961, granted to certain                  members. Id. Article 3.1(b). Elsewhere,
professional sports leagues a limited                applicants for membership may be admitted
exemption from the antitrust laws with respect       by the affirmative vote of not less than
to the joint sale of television broadcast rights     three-fourths or 20 members, whichever is
for league games, and the 1966 amendment             greater. Id. Article 3.3(c). No league
permitted “a joint agreement by which the            member may have a financial interest, direct
members of two or more football leagues              or indirect, in any other league member. Id.,
combine their operations in expanded single          Article 9.1(B)(1).
leagues ... if such agreement increases rather
than decreases the number of professional                 The combined league began functioning in
football clubs so operating.”        The 1961        1970 with 26 members. Thereafter new home
exemption with respect to joint sale of              territories were designated for Tampa, Florida,
television broadcasting rights, intended to          and Seattle, Washington, and member teams
overrule the judgment in United States v.            with franchises for those home territories
National Football League, 116 F.Supp. 319            began participating in league play in 1976.
(E.D.Pa.1953), does not “otherwise affect the        The uncontradicted affidavit of Commissioner
applicability or nonapplicability of the             Rozelle establishes that the initiative for
antitrust laws” to any other activities of           establishing those franchises came from the
persons engaged in professional team sports.         NFL, which negotiated for a stadium location,
15 U.S.C. s 1294. The 1966 exemption does            determined methods of providing the
no more than permit the combination of               franchise with players, and only then
members of two or more leagues into one.             evaluated and selected owners. See, e.g.,
                                                     Rozelle Deposition, Appendix at 1290a,
    Under the 1974 constitution and by-laws          1431a-1440a.
of the NFL each member obliges itself to
operate a professional football club which is a          As authorized by 15 U.S.C. s 1291, the
member of the league. Each member has a              NFL has made a joint sale to three major
designated “home territory” within which it          television networks of the regular season and
has “the exclusive right ... to exhibit              post-season television rights.      Television
professional football games played by teams          revenues are divided equally among all
of the League,” and “[n]o club in the League         members. Receipts from the sale of tickets
shall be permitted to play games within the          are shared between the home team, 60% and
home territory of any other club unless a home       the visiting team, 40%. Each home team
club is a participant.” Home territory is            retains other revenues, derived from its local
defined as a designated city and “the                operations.3 On average, however, more than
surrounding territory to the extent of 75 miles      70% of each team's revenue is derived from
in every direction from the exterior corporate       sources other than its operations at the home
limits of such city.”2        Constitution and       location.     See Defendants' Motion for
By-Laws, Article IV, Appendix at 1129a,              Summary Judgment, Affidavit of Pete
1138a. The addition of a new league member           Rozelle, Appendix at 188a.
within the home territory *776 of any member
requires unanimous consent of the league
                                                     3 These include revenue from non-network
                                                     coverage of pre-season games, and revenue from food
                                                     and beverage concessions, parking, and sale of team
2 There are special provisions for the New York      paraphernalia.    Such revenue varies both with
and San Francisco Metropolitan areas and for Green   attendance and depending on the terms of stadium
Bay, Wisconsin.                                      leases.




                                                                                             665
    In 1974 and 1975 the Grizzlies                 make no complaint about the operation of the
participated in the World Football League          NFL arrangements for joint sale of television
from a home team location in Memphis,              rights. They do not charge, for example, that
Tennessee. The members of that league could        the demise of the World Football League was
be found to have been competitors of the           caused by the NFL's television marketing
members of the NFL in the national market          practices. Nor do they charge that if they had
for network television revenue. The World          been admitted those practices should have
Football League disbanded, however, halfway        been changed. Rather, as with the 60-40 split
through the 1975 football season. The NFL          of ticket sale revenue, they sought to
had no franchise at Memphis, and a home            participate.
team designation for that location would not
infringe upon the home territory of any NFL            *777 Determining what the Grizzlies do
member. Upon the demise of the World               not charge as antitrust violations is somewhat
Football League the Grizzlies applied to the       easier than determining what is charged. The
NFL for admission to the league with a             complaint alleges that Memphis is a highly
designated home territory at Memphis.              desirable submarket for major league
                                                   professional football, that the refusal to
    At meetings with the NFL Expansion             consider it as a home territory for a franchise
Committee, and with the full NFL                   was made pursuant to an agreement or
membership, the Grizzlies urged that it had in     understanding or conspiracy among NFL
place at Memphis an established, functioning       members, the NFL and the Commissioner,
professional football enterprise.         The      that no valid basis for rejection of the
application was rejected. This lawsuit             Grizzlies was articulated or formulated by the
followed.                                          defendants, and that the rejection amounted to
                                                   an unreasonable restraint of trade, or a group
II. The Complaint                                  boycott. One motive for that conspiracy is
                                                   alleged to have been a desire to punish,
     The Grizzlies' complaint, filed on            intimidate and restrain plaintiffs from
December 3, 1979, does not charge that the         participation in major league professional
provisions of the NFL's Constitution and           football because they had entered into
By-Laws reserving to its members franchise         competition with NFL members by
exclusivity for designated home territories        participating in the World Football League.
violates the antitrust laws.     Indeed, the       The exclusion, so motivated, and having the
Grizzlies sought such an exclusive franchise       effects alleged, is said to be a violation of
for themselves. Thus this case does not            Section 1 of the Sherman Act, and an attempt
present any issue of possible antitrust            to monopolize interstate trade and commerce
violation from the exclusion of potential          in professional football in violation of Section
competitors in the designated exclusive home       2 of that Act.
territories.
                                                                        ***
    Nor do the Grizzlies complain that the
NFL's 60-40 home team-visitor revenue                                The Merits
sharing arrangement, which is not exempted
from antitrust scrutiny by 15 U.S.C. s 1291,          A. Sherman Act Section 1
caused any injury to their business or property.
Indeed, the Grizzlies sought to participate in         Public Law 89-800 establishes as a matter
that arrangement. Moreover, the Grizzlies          of law that the merger which produced the




                                                                                         666
NFL from two formerly competing leagues               competition among league members or
did not violate the antitrust laws. Public Law        between league members and non-members in
87-331 establishes as a matter of law that the        other markets to which the Grizzlies point.
members may lawfully pool revenues from the
sale of television rights. The parties agree that         The Grizzlies identify as the relevant
in other respects a *783 rule of reason analysis      product market major-league professional
is appropriate.6 The Grizzlies, moreover,             football, and as the relevant geographic
make no contention that the 60-40 sharing of          market the United States. The trial court
ticket sale revenue is an unreasonable restraint      found these markets to be relevant. 550
of trade.                                             F.Supp. at 571 n. 33. The court observed as
                                                      well that “[t]here is no doubt that the NFL
     [3] Under a rule of reason analysis a            currently has a monopoly in the United States
Section 1 violation and a right to recover            in major league football.” 550 F.Supp. at 571.
under Section 4 of the Clayton Act can be             The Grizzlies pose as the question on this
established by proof: (1) that the defendants         appeal “whether it can be said as a matter of
contracted, combined, or conspired among              law that defendants neither acquired nor
each other; (2) that the combination or               maintained monopoly power over any relevant
conspiracy produced adverse, anticompetitive          market in an unlawful manner.” Appellants'
effects within relevant product and geographic        Brief at 27.
markets; (3) that the objects of and conduct
pursuant to that contract or conspiracy were              *784 As to the acquisition of dominant
illegal; and (4) that the plaintiff was injured as    position and monopoly power, the facts are
a proximate result of that conspiracy. Fleer          undisputed. Long before the Grizzlies and the
Corp. v. Topps Chewing Gum, Inc., 658 F.2d            World Football League came into existence,
139, 147 (3d Cir.1981), cert. denied, 455 U.S.        Congress authorized the merger of the two
1019, 102 S.Ct. 1715, 72 L.Ed.2d 137 (1982),          major football leagues extant in 1966, and
quoting Martin B. Glauser Dodge Co. v.                granted to the merged league the power to
Chrysler Corp., 570 F.2d 72, 81 (3d Cir.1977),        pool television revenues. That congressional
cert. denied, 436 U.S. 913, 98 S.Ct. 2253, 56         decision conferred on the NFL the market
L.Ed.2d 413 (1978). In this case there is no          power which it holds in the market for
dispute about the requisite concert of action         professional football. Congress could not
among the defendants. The defendants do               have been unaware that necessary effect of the
deny injury to competition in any relevant            television revenue sharing scheme which it
market from their rejection of the Grizzlies'         approved for the NFL would be that all
application. They urge that any limitations on        members of that league would be strengthened
actual or potential competition in any relevant       in their ability to bid for the best available
market were insulated from antitrust scrutiny         playing and coaching personnel, to the
by the 1961 and 1966 statutes referred to, or,        potential disadvantage of new entrants.
are reasonable as a matter of law. They also
urge that as a matter of law there was no                 [4] In an effort to bolster its “unlawful
                                                      acquisition of monopoly power” contention,
                                                      however, the Grizzlies point to certain
                                                      activities of the NFL and its predecessors
6 In the complaint the Grizzlies alleged that their
exclusion was the result of a group boycott, which    which occurred prior to the 1966 legislation
was a per se violation of Section 1 of the Sherman    authorizing its formation. They point out that
Act. The per se violation contention is not made in   in 1961, when the old NFL was seeking
this court.                                           legislation which would overrule United




                                                                                          667
States v. National Football League, 116                This reading of the 1966 legislation is at
F.Supp. 319 (E.D.Pa.1953), which prohibited        least plausible. It poses two separate issues.
certain television revenue sharing practices, it   One is the issue of abuse of monopoly power
admitted a new team in Minnesota, the home         against potential rivals of the NFL in the
state of the Senate Majority Leader and            business of promoting professional football as
Chairman of the Committee which considered         a spectator spectacle. The other is the issue of
the bill; that in 1966 when the old NFL and        admitting others to a share in the NFL's
AFL leagues were seeking a statutory               dominant market position. Although the
exemption which would permit their merger, a       Grizzlies' briefs, both here and in the district
team was added in New Orleans, the home            court, tend to blur the distinction between
state of a powerful senator and powerful           those issues, the complaint makes clear that
congressman who supported the legislation.         only the second is presented in this case. The
Even the post merger addition of Seattle and       only basis on which the Grizzlies seek
Tampa Bay, according to the Grizzlies, was         recovery under Section 4 of the Clayton Act is
prompted by a desire to limit the term of          that they were denied admission to the
proposed legislation prohibiting home teams        monopoly, and thus were deprived of a share
from blacking out televised games when they        of the NFL's monopoly power. No claim is
were playing. See Pub.L. 93-107, s 1, 87 Stat.     made that abuse of NFL market power led to
350, repealed by Pub.L. 93- 107, s 2, 87 Stat.     the demise of the *785 World Football
351 (1973). If these allegations are true, as      League, and no issue is before us concerning
we must assume for purposes of a summary           activities of the NFL, since that demise, which
judgment motion, they are, perhaps,                may have inhibited the development of
instructive on the nature of the federal           competition by another football league. The
legislative process. For purposes of rule of       NFL structure as a barrier to entry to the
reason analysis, however, they are irrelevant.     market by another football league is relevant
It would take a court bolder than this to claim    in this case only to the extent that it bears on
that the congressionally authorized acquisition    the obligation to permit entry to the NFL.7
of market power, even market power                     There are two possible sources of any
amounting to monopoly power, was unlawful          NFL obligation to permit entry to its shared
under Section 1 of the Sherman Act.                market power; the 1966 statute, and the
                                                   Sherman Act.        Each will be considered
     But, the Grizzlies urge, the 1966 statute     separately.
did not confer the authority to abuse the
market power, even though it may have                  [5] The provision in the 1966 statute that
authorized its acquisition. Rather, the merger     “such agreement increases rather than
was approved only “if such agreement               decreases the number of professional football
increases rather than decreases the number of      clubs so operating” cannot reasonably be
professional clubs so operating.” 15 U.S.C. s
1291. Paraphrasing their argument, it is the
Grizzlies' contention that the statute which
authorized NFL acquisition of monopoly             7 There is no doubt that the NFL structure
power in the professional football market          authorized by the 1961 and 1966 legislation in itself
                                                   presents a formidable barrier to entry by a
required not only that the league members
                                                   competitive football league.             That legally
refrain from abusing that power against            countenanced barrier might well, if abused against
potential competitors, but that it take            extra-league competitors, result in antitrust liability.
affirmative steps to share its market power        But the issue of competition by another league is not
with others.                                       presented here, except to the limited extent noted.




                                                                                               668
construed as addressing competition, the                [6] Since the 1966 statute is not directed at
preservation of which is the object of the          preservation of competition in the market for
Sherman Act. The basic thrust of the 1966           professional football, and cannot be construed
statute is to authorize an arrangement which        as conferring any economic benefit on the
eliminated competition among the only two           class to which the Grizzlies belong, we
viable competitors then in the professional         conclude that it does not oblige the NFL to
football market. The reference to an increase       permit entry by any particular applicant to the
in the number of professional football teams        NFL shared market power.
“so operating” is a reference to professional
teams operating under the antitrust exemption           We turn, therefore, to the Sherman Act.
for television revenue sharing provided in the      As noted above, Sherman Act liability
1961 statute. Thus what the 1966 statute            requires an injury to competition. In this case
suggests is that more home team territories         the competition inquiry is a narrow one,
would be added, not to increase competition         because the Grizzlies are not seeking recovery
in professional football, but to permit             as potential competitors outside the NFL.
geographic enlargement of the NFL's market          They identify as the antitrust violation the
power.                                              league's negative vote on their application for
                                                    membership.
     The Grizzlies urge that home team regions
derive important economic benefits from the              From affidavits, pleadings, and discovery
presence of a professional football team, in the    materials which comprise the summary *786
form of hotel, restaurant and travel business,      judgment record it could be found, and the
stadium employment, and the like.                   trial court assumed, that the Grizzlies met all
Undoubtedly that is so, and probably such           the qualifications for membership specified in
derivative economic benefits were in the            the NFL Constitution and By-Laws. 550
minds of those Senators and Congressmen             F.Supp. at 568. It is undisputed that in 1974
interested in NFL expansion. Those benefits,        expansion teams were located at Tampa,
however, do not result from competition with        Florida, and at Seattle, Washington, raising to
the NFL or even from competition, other than        28 the number of league competitors for the
athletic, among its members. Rather they            1976 season. It is also undisputed that in
result from the presence of a franchisee which      deciding on expansion the NFL Expansion
shares the NFL market power over                    Committee considered a socioeconomic study
professional football. Moreover, even if one        prepared for it by the Stanford Research
assumes that Congress intended in the 1966          Institute in December of 1973, which
statute to extend incidental economic benefits      identified fourteen potential locations for new
on businesses in new home territory areas, it is    franchises, including Memphis.8             The
difficult to see what standing the Grizzlies        Expansion        Committee        met       with
have to rely on that intent with respect to their   representatives of the Grizzlies, but made a
claim for league membership. Finally, even if
there was a congressional intent to confer
economic benefits in some new home
territories, nothing in the 1966 statute or its     8 The other areas are Mexico City, Birmingham,
                                                    Alabama, Seattle, Washington, Nassau County, New
sparse legislative history suggests a basis for
                                                    York, Anaheim, California, Chicago, Illinois,
concluding that businesses in Memphis,              Phoenix, Arizona, Honolulu, Hawaii, Tampa, Florida,
Tennessee, rather than in other metropolitan        the Tidewater area of Virginia, Charlotte-Greensboro,
areas were to receive them.                         North Carolina, Indianapolis, Indiana, and Orlando,
                                                    Florida.




                                                                                              669
negative recommendation on expansion, as of           The NFL defendants' position is that the
1975, beyond 28 teams. The full membership        summary judgment record establishes
of the league accepted the recommendation of      conclusively the absence of competition,
the expansion committee.                          actual or potential, among league members.
                                                  Rather, they urge, the league is a single entity,
    The NFL's stated reasons for rejecting the    a joint venture in the presentation of the
Grizzlies' application included scheduling        professional football spectacle.
difficulties created by the presence of an odd
number of teams, a long-running collective            For the most part the congressionally
bargaining dispute with league players,           authorized arrangements under which the NFL
several pending antitrust lawsuits, and league    functions eliminate competition among the
concern over legislation prohibiting television   league members. Indeed it is undisputed that
blackouts in home team territories, all of        on average more than 70% of each member
which allegedly made consideration of             club's revenue is shared revenue derived from
expansion unpropitious.         The Grizzlies     sources other than operations at its home
contend that there are material issues of         location. The Grizzlies do not challenge the
disputed fact as to the accuracy of these         legality of the NFL's revenue sharing
reasons. They contend that at trial they could    arrangements, and seek to participate in them.
prove that the motivation for their rejection     The Grizzlies emphasize that there
was to punish them for having attempted in        nevertheless remains a not insignificant
the past to compete with the NFL in the World     amount of intra-league non- athletic
Football League, or to reserve the Memphis        competition. We need not, in order to affirm
location for friends of present league team       the summary judgment, accept entirely the
owners.                                           NFL's position that *787 there is no
                                                  intra-league competition. Conceivably within
    [7][8][9] Assuming, without deciding, that    certain geographic submarkets two league
the summary judgment record presents              members compete with one another for ticket
disputed fact issues with respect to the actual   buyers, for local broadcast revenue, and for
motivation of the NFL members, those              sale of the concession items like food and
disputed facts are not material, under Section    beverages and team paraphernalia.9 Thus
1 of the Sherman Act, if the action               rejection of a franchise application in the New
complained of produced no injury to               York metropolitan area, for example, might
competition.                                      require a different antitrust analysis than is
                                                  suggested by this record. But the Grizzlies
     As to competition with NFL members in        were obliged, when faced with the NFL denial
the professional football market, including the   of the existence of competition among NFL
market for sale of television rights, the         members and a potential franchisee at
exclusion was patently pro-competitive, since     Memphis, to show some more than minimal
it left the Memphis area, with a large stadium    level of potential competition, in the product
and a significant metropolitan area population,   markets in which league members might
available as a site for another league's          compete. They made no such showing. The
franchise, and it left the Grizzlies'
organization as a potential competitor in such
a league.      If there was any injury to         9 Thus we need not, in order to affirm, approve the
competition, actual or potential, therefore, it   suggestion in Levin v. National Basketball Ass'n, 385
must have been to intra-league competition.       F.Supp. 149, 152 (S.D.N.Y.1974), that there can
                                                  never be competition among league members.




                                                                                            670
record establishes that the NFL franchise                Gamco, Inc. v. Providence Fruit & Produce
nearest to Memphis is at St. Louis, Mo., over            Bldg., 194 F.2d 484 (1st Cir.), cert. denied,
280 miles away. There is no record evidence              344 U.S. 817, 73 S.Ct. 11, 97 L.Ed. 636
that professional football teams located in              (1952), they urge that because the NFL is a
Memphis and in S4. Louis would compete for               practical monopoly it had an obligation to
the same ticket purchasers, for the same local           admit members on fair, reasonable, and equal
broadcast outlets, in the sale of team                   terms,      absent    some     procompetitive
paraphernalia, or in any other manner.                   justification for their exclusion.       This
                                                         Grizzlies argument suffers from the same
     The Grizzlies contend on appeal, although           defect as the others. The essential facilities
they did not so contend in the trial court, that         doctrine is predicated on the assumption that
league members compete in what they call the             admission of the excluded applicant would
“raw material market” for players and                    result in additional competition, in an
coaching personnel. Entirely apart from the              economic rather than athletic sense. The
propriety of considering a legal theory not              Grizzlies have simply failed to show how
presented in the trial court,10 there are major          competition in any arguably relevant market
defects in this Grizzlies' argument. First, the          would be improved if they were given a share
Grizzlies exclusion from the league in no way            of the NFL's monopoly power.
restrained them from competing for players by
forming a competitive league. Second, they                   Since on the record before us the Grizzlies
fail to explain how, if their exclusion from the         have shown no actual or potential injury to
league reduced competition for team                      competition resulting from the rejection of
personnel, that reduction caused an injury to            their application for an NFL franchise, they
the Grizzlies' business or property. See Van             cannot succeed on their section 1 Sherman
Dyk Research Corp. v. Zerox Corp., 631 F.2d              Act claim.
251, 255 (3d Cir.1980), cert. denied, 452 U.S.
905, 101 S.Ct. 3029, 69 L.Ed.2d 405 (1981).                 *788 B. Sherman Act Section 2.
(Section 4 plaintiff has burden of proving that
injury was caused by illegality relied on).                  The Grizzlies also plead a violation of
     One final Grizzlies' argument in support of         Section 2 of the Sherman Act. 15 U.S.C. s 2
their section 1 Sherman Act claim bears                  (1973). That section prohibits attempts to
mentioning. Relying on the essential facilities          monopolize. In section 2 cases the alleged
doctrine developed in cases such as Silver v.            monopolist is prohibited from acting “in an
New York Stock Exchange, 373 U.S. 341, 83                unreasonably exclusionary manner vis-a-vis
S.Ct. 1246, 10 L.Ed.2d 389 (1963);                       rivals or potential rivals....” Byars v. Bluff
Associated Press v. United States, 326 U.S. 1,           City News Co., Inc., 609 F.2d 843, 853 (6th
65 S.Ct. 1416, 89 L.Ed. 2013 (1945), and                 Cir.1979). See also Official Airline Guides,
                                                         Inc. v. FTC, 630 F.2d 920, 926-28 (2d
                                                         Cir.1980), cert. denied, 450 U.S. 917, 101
10 See Halderman v. Pennhurst State School &             S.Ct. 1362, 67 L.Ed.2d 343 (1981) (Federal
Hospital, 673 F.2d 628, 639 (3d Cir.) (in banc), cert.   Trade Commission Act s 5 claim); Mid Texas
granted, 457 U.S. 1131, 102 S.Ct. 2956, 73 L.Ed.2d       Communications v. American Telephone &
1348 (1982); Caisson Corp. v. Ingersoll Rand Co.,
                                                         Telegraph Co., 615 F.2d 1372, 1387 (5th
622 F.2d 672, 680 (3d Cir.1980); Teen-Ed, Inc. v.
Kimball International, Inc., 620 F.2d 399, 401 (3d       Cir.1980), cert. denied, 449 U.S. 912, 101
Cir.1980); Toyota Industrial Trucks U.S.A., Inc. v.      S.Ct. 286, 66 L.Ed.2d 140 (1981).
Citizens Nat'l Bank of Evans City, 611 F.2d 465 (3d
Cir.1979).




                                                                                              671
    [10] Our analysis of the section 1 Sherman
Act claim applies equally to the Grizzlies'
section 2 claim. Congress by legislation in
1961 and 1966 authorized the NFL acquisition
of the market power which it holds, and the
Grizzlies cannot challenge that acquisition.
The only action they complain of is their
exclusion from the shared monopoly, but they
have failed to show that their admission would
be contra-competitive in any way. Indeed the
Memphis home team market has been left by
the NFL for potential competitors. Thus on
this record summary judgment on the section
2 Sherman Act claim was also proper.

                 Conclusion

    The court did not err in considering the
defendants' summary judgment motion on the
present record. There are no disputed fact
issues material to the legal issues presented.
The trial court did not err in applying the
Sherman Act. Thus the judgment appealed
from will be affirmed.




                                                 672
       NATIONAL BASKETBALL                         declaratory [*564] judgment on similar
           ASSOCIATION, et al.,                    grounds against the Los Angeles Memorial
Plaintiff-Counterdefendants-Counterclaim           Coliseum Commission [**2] (the Coliseum).
             ants-Appellants,                      The district court, believing the result
                    v.                             controlled by the decision in the first Los
SDC BASKETBALL CLUB, INC. and LOS                  Angeles Raiders case,1 dismissed the case
  ANGELES MEMORIAL COLISEUM                        upon the Clippers' motion for summary
             COMMISSION,                           judgment. Finding genuine issues of material
Defendants-Counterclaimant-Counterdefen            fact, we reverse and remand to the district
             dants-Appellees                       court for further proceedings.

                No. 86-5891                                                 I.
UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT                           The Clippers currently operate a
815 F.2d 562; 1987 U.S. App. LEXIS 17693;          professional basketball franchise in the Los
    1987-1 Trade Cas. (CCH) P67,543                Angeles Sports Arena. The franchise is a
 February 4, 1987, Argued and Submitted            member of the NBA, an organization of
           April 21, 1987, Filed                   professional basketball teams that operates as
                                                   a joint venture under New York law. In the
                                                   early 1980s, the then San Diego Clippers
PRIOR HISTORY: [**1]                               desired to move their franchise to Los
                                                   Angeles. The Clippers abandoned their effort
Appeal from the United States District Court       after the NBA filed suit in the Southern
for the Southern District of California, D.C.      District of California. The suit was resolved
No. CV 84-1430-N, Leland C. Nielsen,               via a stipulation that any subsequent suits
District Judge, Presiding                          regarding a move must be brought in the
                                                   Southern District.
OPINION:       [*563] Before:  Warren J.
Ferguson, Dorothy W. Nelson and Robert R.              In 1984, this court rendered the decision
Beezer, Circuit Judges.                            [**3] in Raiders I. The Raiders I panel found
                                                   that the National Football League (NFL) was
   OPINION                                         not immune from the antitrust laws as a single
                                                   business entity.      726 F.2d at 1387-90.
WARREN J. FERGUSON, Circuit Judge:                 Possible antitrust violations within the league
                                                   thus properly are tested by “rule of reason”
    Once again this court must consider the        antitrust analysis. The Raiders I panel found
application of federal antitrust law to a sports   that a reasonable jury applying the rule of
league's effort to restrain the movement of a      reason standard could have found that the
member franchise. In this case, the league,
the National Basketball Association (NBA),
seeks declaratory judgment that it may restrain
the movement of its franchise, the Los             1 Los Angeles Memorial Coliseum Comm'n v.
                                                   National Football League, 726 F.2d 1381 (9th Cir.),
Angeles Clippers (nee San Diego Clippers),
                                                   cert. denied, 469 U.S. 990, 83 L. Ed. 2d 331, 105 S.
and that it may impose a charge upon them for      Ct. 397 (1984) [hereinafter Raiders I]; see also Los
the Clippers' unilateral usurpation of the         Angeles Memorial Coliseum Comm'n v. National
“franchise opportunity” available in the Los       Football League, 791 F.2d 1356 (9th Cir. 1986)
Angeles market.        The NBA also seeks          [hereinafter Raiders II].




                                                                                            673
NFL violated antitrust laws in restraining Al     The NBA argues that Article 9A is a new
Davis's Oakland Raiders from moving to the        constitutional provision codifying previous
Los Angeles Coliseum. Id. at 1390-98.             practice. The Clippers argue that Article 9A
                                                  is rather [**5] an amendment to Article 9 that,
    The then extant clause directly governing     by virtue of the NBA constitution, must be
the movement of franchises within the NBA,        unanimously approved by the member teams.
Article 9 of the NBA constitution, was similar    The Clippers thus argue that Article 9A was
to a clause abandoned by the NFL prior to the     not properly adopted at the time of the
Raiders' litigation as potentially violative of   Clippers' move, when the Clippers voted
federal antitrust laws. See Raiders I, 726 F.2d   against it.
at 1385 & n.1. Seeing the Raiders I decision
as a window of opportunity, the Clippers,              The NBA brought suit in the Southern
through their president Alan Rothenberg, on       District for declaratory judgment that it could
May 14, 1984, announced to the NBA their          as a league consider the Clippers' [*565] move
move to Los Angeles. They asserted that the       to Los Angeles and sanction the Clippers for
move was to take place on the following day       failing to seek league approval without
and that any action taken by the NBA to           violating the antitrust laws. It also sought
restrain that move would violate the antitrust    damages from the Clippers on a variety of
laws. The NBA attempted to appoint an             state-law claims, including breach of fiduciary
investigatory committee [**4] to examine the      duty and breach of contract. The NBA sought
move, but abandoned the effort in the face of     damages from the Coliseum for tortious
the Clippers' continued assertions that the       interference with the contractual relations
investigation violated antitrust law. To avoid    between the Clippers and the NBA. The
potential liability, the NBA scheduled the        Clippers and the Coliseum responded and
Clippers games in Los Angeles and made no         counterclaimed against the NBA and
effort to sanction the club.                      individually against its member teams for
                                                  declaratory judgment that consideration by the
     The NBA asserts that Article 9 was not       NBA of the Clippers' move would violate the
the only limitation upon franchise movement.      antitrust laws.
Article 9 provided that no team could move
into a territory operated by another franchise        After voluminous pleading and the denial
without that franchise's approval.         The    of five summary judgment motions, the
Clippers complied with this requirement. as       district judge suggested on the eve of trial that
the Los Angeles Lakers agreed in writing to       the NBA could not possibly win its case under
waive their rights under Article 9. The NBA       the guidelines established in Raiders [**6] I.
argues, however, that the league as a body        The judge further expressed doubt that the
must be permitted to consider moves in order      league had any valid provision for the
to give effect to a number of constitutional      consideration of franchise movement. At the
provisions for the exclusiveness of franchise     hearing on the final summary judgment
territories. Article 9, it contends, limits the   motions, he repeated his continuing frustration
actions of the NBA as a league and does not       with the case by noting that he couldn't “see
prescribe the only strictures on franchise        spending my time . . . on this case without
movement.                                         some instruction from the circuit.” The district
                                                  judge also refused NBA counsel's request for a
    The NBA also began proceedings to adopt       written opinion.
a new rule governing the consideration of
franchise moves, later adopted as Article 9A.         The district judge entered an order




                                                                                        674
granting summary judgment for the Clippers           Cross, 805 F.2d 866, 871 (9th Cir. I 986), in
on April 28, 1986. The order awarded the             this case there remain genuine issues of fact
Clippers and the Coliseum declaratory relief         and summary judgment should not have been
but not damages on their antitrust claims. The       granted.
order dismissed all of the NBA's claims.
Although it is not entirely clear, the district          The antitrust issues are directly controlled
court appears to have dismissed the antitrust        by the two Raiders opinions, although the
claims as nonmeritorious, and the pendent            district judge had the benefit only of Raiders I
state claims due to the dismissal of the             when he rendered judgment. Collectively, the
primary federal claim. The Clippers' and             Raiders opinions held that rule of reason
Coliseum's     other    counterclaims     were       analysis governed a professional sports
dismissed by stipulation, and thus the               league's efforts to restrict franchise movement.
judgment is final for appeal.                        More narrowly, however, Raiders I merely
                                                     held that a reasonable jury could have found
    After the district court granted summary         that the NFL's application of its franchise
judgment, the Raiders panel rendered its             movement rule was an unreasonable restraint
opinion regarding damages and state-law              of trade. See Raiders I, 726 F.2d at 1398.
claims. Resting on that decision's award in          Raiders II confirmed that the jury's liability
offset for the “expansion opportunity” [**7]         verdict affirmed in Raiders I “held Rule 4.3
lost to the league by the Raiders' move, see         [the franchise [**13] movement rule] invalid
Raiders II, 791 F.2d at 1371-73, the NBA             only as it was applied to the Raiders' proposed
requests that this court enter judgment in its       move to Los Angeles.” Raiders II, 791 F.2d at
favor for the expansion opportunity taken by         1369. The Clippers' and the Coliseum's
the Clippers in their move to Los Angeles.           efforts to characterize Raiders I as presenting
The NBA also requests summary judgment on            guidelines for franchise movement rules are
its pendent claims for declaratory relief            thus unavailing. Neither the jury's verdict in
regarding the effect of the NBA constitution.        Raiders, nor the court's affirmance of that
The NBA further requests that summary                verdict, held that a franchise movement rule,
judgment on all other counts be reversed and         in and of itself, was invalid under the antitrust
the case remanded for trial.                         laws.

                      ***                                Raiders I did establish the law of this
                                                     circuit in applying the rule of reason to a
    This court will uphold a grant of summary        sports league's franchise relocation rule, “a
judgment only if there remain no genuine             business practice in an industry which does
[*567] issues of material fact and if the district   not readily fit into the antitrust context.”
court properly applied the law [**12] to the         Raiders I, 726 F.2d at 1391. Any antitrust
facts. On review, this court views the facts in      plaintiff “must prove these elements: '(1) An
the light most favorable to the nonmoving            agreement among two or more persons or
party. Ashton v. Cory, 780 F.2d 816, 818 (9th        distinct business entities; (2) Which is
Cir. 1986). Summary judgment is disfavored,          intended to harm or unreasonably restrain
of course, in heavily factual settings such as       competition; (3) And which actually causes
complex antitrust cases that involve issues of       injury to competition.” Id. (quoting Kaplan v.
motive and intent. See Poller v. CBS, 368            Burroughs Corp., 611 F.2d 286, 290 (9th Cir.
U.S. 464, 473, 7 L. Ed. 2d 458, 82 S. Ct. 486        1979), cert. denied, 447 U.S. 924, 100 S. Ct.
(1962). While the proper case may warrant            3016, 65 L. Ed. 2d 1116 (1980)). The Raiders
summary judgment, see, e.g., Barry v. Blue           I panel carefully examined the structure of




                                                                                           675
professional football in applying the Kaplan             from the Raiders I panel's painstaking efforts
standard, a structure in which the “teams are            to guide sports leagues toward procedures that
not [**14] true competitors, nor can they be.”           might, in all cases, withstand antitrust
Id. The Raiders I panel concluded that the               analysis. See Raiders I, 726 F.2d at 1397.
relevant market for professional football, the           The objective factors and procedures
history       and      purpose        of     the         recounted by the Clippers are “well advised,”
franchise-movement rule, and the lack of                 id., and might be sufficient to demonstrate
justification     of     the      rule    under          procompetitive purposes that would save the
ancillary-restraint doctrine all supported the           restriction from the rule of reason. They are
jury's verdict. In so doing, of course, the              not, however, necessary conditions to the
panel set down no absolute rule for sports               legality of franchise relocation rules.
leagues. Instead, it examined the facts before
it and concluded that the jury's conclusion that             Since a careful analysis of Raiders I makes
the NFL violated the antitrust laws was                  it clear that franchise movement restrictions
supported by the record.                                 are not invalid as a matter of law, for the
                                                         district judge to grant summary judgment
     Yet the Clippers argue, as they must to             against the NBA, he must have found that the
support summary judgment, that the “NBA                  NBA had adduced no facts upon which a
three-quarters rule . . . is illegal under Raiders       reasonable jury could have found that NBA
I”--i.e., either that the NBA rule is void as a          consideration of the Clippers' move was a
matter of law under Raiders I, or that the NBA           reasonable restraint of trade. As we have
has not adduced genuine issues of fact to                demonstrated, antitrust analysis under Raiders
allow the rule to stand. The Clippers assert             I indicates that the question of what restraints
that the rule “is illegal as applied . . . [but that     are reasonable is one of fact. We believe that
under Raiders I], a professional sports league's         numerous issues of fact remain.
club relocation rule must at least be 'closely
tailored' and incorporate objective standards                The NBA asserts a number of genuine
and criteria such as population, economic                issues of fact: (1) the purpose of the restraint
projections, playing facilities, regional                as demonstrated by the NBA's use of a variety
balance, and television revenues.” Putting to            of criteria in evaluating franchise movement,
the side, for the moment, NBA's adamant                  (2) the market created by professional
[**15] and repeated assertions that such                 basketball, which the NBA alleges is
standards have been incorporated in the                  substantially different      from     that of
evaluation of franchise movements, the                   professional football, and (3) the actual effect
Clippers misperceive the effect of the Raiders           the NBA's limitations on movements might
cases. The Clippers' confusion, and that of a            have on trade. The NBA's assertions, if
number of commentators,3 may [*568] derive
                                                             (Continued)

3 See, e.g., Roberts, Sports Leagues and the             1984 Duke L.J. 1013, 1014, 1026 (recognizing
Sherman Act: The Use and Abuse of Section 1 to           Raiders I as the affirmance of a jury verdict based
Regulate Restraints on Intraleague Rivalry, 32 UCLA      upon a particular situation, but arguing that the case
L. Rev. 219, 280-81 (1984) (recognizing the Raiders      allows the uncompensated diversion of “an exquisite
I decision as the affirmance of a jury verdict, yet      corporate opportunity); Comment, Keeping the Home
arguing that Raiders I “effectively bars a league from   Team at Home, 74 Calif. L. Rev. 1329, 1332 & n.19
preventing relocation to an area where another           (1986) (assuming that the Raiders decisions remove
member club is already based”); Weistart, League         control of franchise movements from sports leagues)
Control of Market Opportunities: A Perspective on        [hereinafter cited as Gray Comment]. [**16]
Competition and Cooperation in the Sports Industry,




                                                                                                   676
further documented at trial, create an entirely     the movement of franchises than the
different factual setting than that of the          admittedly invalid Article 9.       Since the
Raiders and the NFL. Further, as the NBA            replacement provision, Article 9A, was not in
correctly notes, the antitrust issue here is        place at the time of the Clippers' move,
vastly different than that in the Raiders cases:    defendants argue that the NBA had no right to
[**17] the issue here is “whether the mere          consider, condition, or [*569] approve the
requirement that a team seek [NBA] Board of         Clippers' move. The NBA's argument has
Governor approval before it seizes a new            always been, however, that the general NBA
franchise location violates the Sherman Act.”       provisions regarding the territories of
The NBA here did not attempt to forbid the          franchises imply the right of the league to
move. It scheduled the Clippers in the Sports       consider and condition the movement of
Arena, and when faced with continued                franchises. The league cites long-standing
assertions of potential antitrust liability,        precedent for the imposition of charges upon
brought this suit for declaratory relief. Given     new franchises. The parties are in dispute
the Raiders I rejection of per se analysis for      about the previous imposition of charges for
franchise movement rules of sports leagues,         the movement of franchises to new territories.
and the existence of genuine issues of fact         The defendants [**19] argue that the absence
regarding the reasonableness of the restraint,      of an express agreement regarding such
the judgment against the NBA must be                regulation indicates that no regulation was
reversed.                                           intended. The NBA argues that precedent
                                                    within the league and the existence of various
    Similarly, the district court's grant of        provisions providing for careful allocation of
summary judgment for antitrust declaratory          franchise territories create an implied
relief to the defendants ignores genuine issues     provision.
of fact and misinterprets Raiders I, and must
be reversed. The district court granted the             The interpretation of the agreement hinges
Clippers judgment on their Count I, which           upon undetermined issues of fact. Despite
asserted that Article 9, Article 9A if effective,   defendants' arguments that the facts in dispute
and any meeting of the NBA to consider the          are irrelevant, Article 9 governed only the
Clippers' move, all violate the antitrust laws.     approval of the team whose territory was
Raiders II, however, reemphasized that only         invaded. Depending upon the intent of the
the particular application of the franchise         parties, it seems plausible either that no
movement rules in that case violated antitrust      further regulation was intended or that the
law. The mere existence of Article 9, Article       league as a whole would have final approval
[**18] 9A, and various provisions for               to effectuate the territorial concerns of other
franchise movement evaluation, cannot violate       provisions.
antitrust law. Further, the NBA has adduced
sufficient facts to create a genuine issue of the        Cases cited by defendants, denying
reasonability of the restraint.                     evidence of custom or usage where no
                                                    ambiguity is present, and those cited by the
    The district judge also dismissed the           NBA, employing the ongoing construction of
NBA's request for a declaration that the NBA        the contract by the parties, are not in conflict.
constitution allowed the league to consider the     Since the defendants' construction of the
Clippers' move. A glance at the briefs and the      agreement would render meaningless both the
pleadings below reveals a wealth of factual         territoriality concepts implicit in the
disputes. Defendants argue that the NBA             agreement and what is at least alleged, if not
constitution contains no other restriction on       yet proven, past practice, evidence of the




                                                                                          677
intent of the parties should be [**20] allowed.     Brandwein v. California Bd. of Osteopathic
As one court noted, where practice conflicts        Examiners, 708 F.2d 1466, 1475 (9th Cir.
with the language of the agreement as it may        1983).
appear to the court, “the parties by their
actions have created the 'ambiguity' required           The Clippers assert that Raiders II
to bring the rule into operation.” Crestview        demands dismissal of state-law claims for
Cemetery Ass'n v. Dieden, 54 Cal. 2d 744,           breach of the implied promise of good faith
754, 356 P.2d 171, 178, 8 Cal. Rptr. 427, 434       and fair dealing. The Raiders II decision,
(1960). Evidence of intent, of course, is a         however, dismissed the Raiders' recovery on
question of fact. Conclusory assertions that        those grounds because, on the evidence
“the silence of the NBA constitution on             presented in that case, the only reasonable
franchise relocations is clearly a matter of        conclusion was either that no party breached
deliberate omission” do not serve to change         that promise, or that both parties had. 791
this. Since there are genuine issues of fact,       F.2d at I 362-63. The issue in this case is
summary judgment for the defendants on this         clearly not identical to that in Raiders. It is
issue must be reversed, and the NBA's request       not clear which party, [**22] if any, broke the
for judgment from this court is denied.             [*570] duty of good faith and fair dealing. It
                                                    therefore presents yet another question to be
                       C.                           determined at trial before the district court.

    The NBA also raised in its complaint a              The NBA requests that this court enter
number of noncontract pendent claims that           judgment for it under the “expansion
were dismissed by the summary judgment.             opportunity” theory of damages discussed in
The league argues that the Clippers violated        Raiders II. 791 F.2d at 1371-73. The majority
fiduciary duties imposed upon joint venturers       in Raiders II, however, found only that the
as well as contractual duties imposed upon          expansion opportunity taken by the Raiders in
contract parties. The league argues that the        their move to Los Angeles limited the Raiders'
Coliseum tortiously interfered with the joint       recovery of antitrust damages. The majority
venture. These claims were not addressed by         revealed nothing about the origin of that
the defendants' summary judgment motions or         offset. Therefore, the existence of a recovery
by any of the parties at argument of those          for expansion opportunity must find its source
motions.        [**21] While the other,             somewhere other than antitrust law: i.e., the
contract-related, pendent claims rise or fall       express or implied provisions of the NBA
with the defendant's contract-based defense to      constitution. This theory, however, presents
declaratory relief, these claims are logically      issues of fact and is properly left to the district
unrelated to that defense.                          court.

    Without the benefit of an opinion, this         CONCLUSION
court can only assume that these pendent state
claims were dismissed as a result of the                The pervasive issues of material fact that
dismissal of the federal claims. See Schultz v.     remain warrant the return of this case, in its
Sundberg, 759 F.2d 714, 718 (9th Cir. 1985)         entirety, to the district court for trial. We
(holding that the district court may exercise its   therefore reverse the district court's grant of
discretion to dismiss pendent claims after          summary judgment and remand the case to the
dismissal of federal claims on summary              district court for trial.
judgment). The better practice would have
been to dismiss without prejudice.          See         REVERSED and REMANDED.




                                                                                            678
UNITED STATES FOOTBALL LEAGUE,            INC., KANSAS CITY CHIEFS
  ARIZONA OUTLAWS, BALTIMORE            FOOTBALL CLUB, INC., MIAMI
   STARS FOOTBALL ASSOCIATES,             DOLPHINS, LTD., SEATTLE
   BIRMINGHAM STALLIONS, LTD.,          PROFESSIONAL FOOTBALL and
       CHICAGO USFL LIMITED           ALVIN R. ROZELLE, individually and as
PARTNERSHIP, CHICAGO FOOTBALL          Commissioner of the National Football
FRANCHISE LIMITED PARTNERSHIP,            League, Defendants-Appellees,
     DENVER GOLD SPORTS, INC.,                  Cross-Appellants.
   HOUSTON GAMBLERS LTD., IMI
EXPRESS, INC., JAX PROFESSIONALS,           Docket Nos. 87-7137, 87-7271
     INC., LAEFC, LTD., MEMPHIS       UNITED STATES COURT OF APPEALS
    SHOWBOATS, LTD., FOOTBALL              FOR THE SECOND CIRCUIT
      GENERALS, INC., BAY AREA          842 F.2d 1335; 1988 U.S. App. LEXIS
     FOOTBALL PARTNERS LTD.,          19313; 1988-1 Trade Cas. (CCH) P67,930
BREAKERS LIMITED PARTNERSHIP,                  June 22, 1987, Argued
   SOUTH TEXAS SPORTS, INC., and      March 10, 1988, Decided; March 28, 1988,
  ORLANDO FOOTBALL PARTNERS,                         Amended
       INC., Plaintiffs-Appellants,
            Cross-Appellees,          PRIOR HISTORY: [*1] Appeal from a
                    v.                judgment of the United States District Court
NATIONAL FOOTBALL LEAGUE, THE         for the Southern District of New York (Peter
 FIVE SMITHS, INC., INDIANAPOLIS      K. Leisure, Judge), entered after a jury trial,
 COLTS, INC., BUFFALO BILLS, INC.,    finding that defendants had unlawfully
 CHICAGO BEARS FOOTBALL CLUB,         monopolized       major-league    professional
  INC., CINCINNATI BENGALS, INC.,     football in the United States and awarding
CLEVELAND BROWNS, INC., DALLAS        plaintiffs $ 1.00 in damages to be trebled;
 COWBOYS FOOTBALL CLUB, INC.,         from an order denying plaintiffs' motion for
ROCKY MOUNTAIN EMPIRE SPORTS,         judgment notwithstanding the verdict on their
   INC., THE DETROIT LIONS, INC.,     other antitrust claims, and for a new trial on
      GREEN BAY PACKERS, INC.,        damages on the monopolization of
     HOUSTON OILERS INC., LOS         professional football claim, or in the
      ANGELES RAMS FOOTBALL           alternative for a new trial; and from a
  COMPANY, MINNESOTA VIKINGS          judgment denying plaintiffs' request for
     FOOTBALL CLUB, INC., NEW         injunctive relief. Defendants have filed a
   ENGLAND PATRIOTS FOOTBALL          conditional cross-appeal. Affirmed.
 CLUB, INC., NEW ORLEANS SAINTS
   LOUISIANA PARTNERSHIP, NEW         DISPOSITION: Affirmed.
YORK FOOTBALL GIANTS, INC., NEW
 YORK JETS FOOTBALL CLUB INC.,        JUDGES: Before: CARDAMONE, PIERCE
     THE PHILADELPHIA EAGLES          and WINTER, Circuit Judges.
   FOOTBALL CLUB, PITTSBURGH
 STEELERS SPORTS, INC., ST. LOUIS     OPINION: WINTER, Circuit Judge:
     FOOTBALL CARDINALS CO.,
 CHARGERS FOOTBALL COMPANY,                This appeal follows a highly publicized
  SAN FRANCISCO FORTY-NINERS,         trial and jury verdict of $ 1.00. The plaintiff is
     LTD., TAMPA BAY AREA NFL         a now-defunct professional football league
  FOOTBALL, INC., PRO-FOOTBALL        that began play in this decade; the defendant is




                                                                             679
a football league founded nearly seventy years            and appropriate injunctive relief, the USFL
ago. The older of the two leagues, the                    alleged that the NFL violated Sections 1 and 2
National Football League, is a highly                     of the Sherman Anti-Trust Act, 15 U.S.C.
successful entertainment product. So many                 @@ 1 and 2 (1982), and the common law.
Americans watched NFL games between 1982                  Forty-eight days of trial before Judge Leisure
and 1986 that its twenty-eight teams shared $             produced a trial transcript of nearly 7100
2.1 billion in rights fees from the three major           pages and thousands of additional pages in
television networks, and perhaps as much as $             exhibits.
1 billion in gate receipts. The newer league,
the United States Football League, began play                 After five days of deliberations, the jury
in March 1983 with twelve teams and network               found that the NFL had willfully acquired or
and cable television contracts with the                   maintained monopoly power in a market
American Broadcasting Company (“ABC”)                     consisting of major-league professional
and     the     Entertainment     and      Sports         football in the United States. The jury also
Programming Network (“ESPN”). After three                 found that the NFL's unlawful monopolization
seasons and losses [*3] in the neighborhood of            of professional football had injured the
$ 200 million, the USFL played its last game              USFL.4 The jury awarded the USFL only $
in July 1985. Meanwhile, in October, 1984,                1.00 in damages, however, an amount that,
blaming its older competitor for its                      even when trebled, was no consolation for the
difficulties, the USFL instituted this litigation.        USFL.
Plans to play in the fall of 1986 were
abandoned after the jury's verdict that is the                The jury rejected the remainder of the
principal subject of this appeal.                         USFL's claims. [*5] It found that the NFL had
                                                          neither monopolized a relevant television
    The USFL and certain of its member                    submarket nor attempted to do so; that the
clubs1 brought this suit in the Southern                  NFL did not commit any overt act in
District of New York against the NFL, its                 furtherance of a conspiracy to monopolize;
commissioner, Alvin R. “Pete” Rozelle, and                that the NFL did not engage in a conspiracy in
twenty-seven of its twenty-eight member                   restraint of trade; that the NFL's television
clubs.2 Seeking damages of $ 1.701 billion3               contracts were not unreasonable restraints of
                                                          trade; that the NFL did not control access to
                                                          the three major television networks; and that
                                                          the NFL did not interfere either with the
1 The Tampa Bay franchise withdrew as a plaintiff         USFL's ability to obtain a fall television
at the time of the filing of the First Amended            contract or with its spring television contracts.
Complaint. The Arizona Outlaws have withdrawn
                                                          The USFL's common law claims were also
their appeal.
                                                          rejected.
2 The Los Angeles Raiders, Ltd., were not named
as defendants in this action. [*4]                             Judge Leisure denied the USFL's motions
                                                          for judgment notwithstanding the verdict on
3 The complaint requested that “the Court award           its claims of monopolization of the television
the plaintiffs three-fold the amount of actual damages,   submarket,      attempted     monopolization,
not less than $ 440,000,000 in the aggregate ($
1,320,000,000 when trebled)”; in the joint pretrial
order, plaintiffs sought “threefold the amount of
actual damages in excess of $ 567,000,000 in the          4 NFL Commissioner Rozelle was not found
aggregate (in excess of $ 1,700,000,000 when              personally liable on the USFL's monopolization
trebled).”                                                claim.




                                                                                                680
unreasonable restraint of trade by means of         that the NFL, by contracting with the three
the network television contracts and essential      major networks and by acting coercively
facilities, and for a new trial on damages on       toward them, prevented the USFL from
the monopolization of professional football         acquiring a network television contract
claim, or in the alternative for a new trial.       indispensable to its survival.        The jury
United States Football League v. National           expressly rejected the television claims.
Football League, 644 F. Supp. 1040 (S.D.N.Y.
1986) (“Opinion No. 16”). The district court             The jury was clearly entitled by the
also denied the USFL's request for injunctive       evidence to find that the NFL's fall contracts
[*6] relief.                                        with the three networks were not an
                                                    anticompetitive barrier to the USFL's bidding
     On this appeal, the USFL claims that a         against the NFL to acquire a network contract.
“litany of erroneous opinions, rulings and          Moreover, there was ample evidence that the
instructions” by Judge Leisure resulted in a        USFL failed because it did not make the
“verdict of confusion” that “sent one of the        painstaking investment and patient efforts that
most egregious violators in the history of the      bring credibility, stability and public
federal antitrust laws on its way with a pat on     recognition to a sports league. In particular,
the back.” USFL Br. at 3-4. Specifically, the       there was evidence that the USFL abandoned
USFL contends that the NFL could not legally        its original strategy of patiently building up
enter into a pooled-rights agreement with all       fan loyalty and public recognition by playing
three networks; that Judge Leisure's jury           in the spring. The original plan to contain
instructions “destroyed” the effectiveness of       costs by adherence to team salary guidelines
the USFL's proof of its television claims and       was discarded from the start. Faced with
set improperly high standards of liability; that    rising [*8] costs and some new team owners
he improperly allowed the NFL to introduce          impatient for immediate parity with the NFL,
evidence that the USFL was mismanaged; that         the idea of spring play itself was abandoned
he excluded other evidence critical to              even though network and cable contracts were
establishing the USFL's claims; and that his        available. Plans for a fall season were
incorrect rulings and instructions on damages       therefore announced, thereby making 1985
prevented the USFL from receiving                   spring play a “lame-duck” season. These
appropriate relief. We affirm.                      actions were taken in the hope of forcing a
                                                    merger with the NFL through the threat of
    SUMMARY                                         competition and this litigation. The merger
                                                    strategy, however, required that USFL
    We briefly summarize our principal              franchises move out of large television
rulings.     The jury's finding of illegal          markets and into likely NFL expansion cities.
monopolization of a market of major-league          Because these moves further eroded fan
professional football was based upon evidence       loyalty and reduced the value of USFL games
of NFL attempts to co-opt USFL owners, an           to television, the USFL thereby ended by its
NFL Supplemental Draft of USFL players, an          own hand any chance of a network contract.
NFL roster increase, and NFL conduct
directed at particular [*7] USFL franchises.            Notwithstanding the jury's evident
These activities, however, were hardly of           conclusions that the USFL's product was not
sufficient impact to support a large damages        appealing largely for reasons of the USFL's
verdict or to justify sweeping injunctive relief.   own doing and that the networks chose freely
For that reason, the USFL candidly admits           not to purchase it, the USFL asks us to grant
that “at the heart of this case” are its claims     sweeping injunctive relief that will reward its




                                                                                         681
impatience and self-destructive conduct with a      USFL's initial 1983 spring playing season;
fall network contract. It thus seeks through
court decree the success it failed to achieve       e. Rotating the Super Bowl among the three
among football fans. Absent a showing of            networks and not submitting the Super Bowl,
some unlawful harm to competition, we               playoff and even regular-season television
cannot [*9] prevent a network from showing          rights to competitive bidding;
NFL games, in the hope that the network and
fans will turn to the USFL. The Sherman Act         f. Pursuing a strategy outlined in the
does not outlaw an industry structure simply        so-called “Porter Presentation” to “conquer”
because it prevents competitors from                and bankrupt the USFL, including: co-opting
achieving immediate parity.          This is        powerful USFL owners, such as Donald
particularly so in the case of major-league         Trump and Alfred Taubman, by offering them
professional football because Congress              NFL franchises; encouraging ABC not to
authorized a merger of the two leagues              continue USFL broadcasts; pressuring ABC
existing in 1966 and thus created the industry      by giving it an unattractive schedule for its
structure in question.                              Monday Night Football program in 1984;
                                                    targeting important USFL players for signing
    THE TRIAL                                       with the NFL through means such as the
                                                    NFL's Supplemental Draft and expanded
    1. The Parties' Contentions                     roster; and attempting to bankrupt the weakest
                                                    USFL teams by driving up USFL player
    The USFL contended at trial that the NFL        salaries in order to diminish the USFL's size
maintained a monopoly in the market for             and credibility;
major league professional football and in a
submarket for the network broadcasting rights       g. Collaborating with the City of Oakland to
to such football by the following allegedly         destroy the Oakland Invaders of the USFL in
predatory tactics:                                  order to hurt the credibility and image of the
                                                    Invaders and the entire USFL; [*11]
a. Signing multiyear contracts with the three
major television networks;                          h. Threatening to move an existing NFL
                                                    franchise or to create a new NFL franchise
b. Pressuring the major networks to abstain         solely to injure the USFL franchise in
from televising USFL games in the spring or         Oakland; and
fall, and successfully preventing any network
telecasts of the USFL in the fall, by               i. Attempting to preclude the USFL's New
threatening not to renew NFL contracts or by        Jersey Generals from moving to New York
assigning unattractive NFL games under              City.
existing contracts;
                                                        The NFL contended that the relevant
c. Establishing contracts with the networks         television submarket included entertainment
for artifically high rights fees that, because of   broadcasting generally and that it had not
the so-called “dilution effect” [*10] on            monopolized either the market for major
demand for advertising during NFL games,            league professional football or the television
precluded network broadcasts of the USFL;           submarket because:

d. Seeking to prevent any of the three major        a. Its contracts with the three major networks
networks from signing a contract for the            were not exclusionary;




                                                                                        682
                                                 Invaders. Opinion No. 16, 644 F. Supp. at
b. The USFL's failure to secure a fall           1058.
network contract was the result of the
independent judgment of each network that            The USFL was unsuccessful on its
the USFL was an inferior product, and of the     remaining claims. The jury found that none of
USFL's self-destructive strategy of forcing a    the defendants had violated Section 2 by
merger with the NFL;                             attempting to monopolize a relevant market
                                                 (Question No. 7), or by conspiring to
c. It never pressured a network by               monopolize (Questions Nos. 12-14).            In
threatening non-renewal or by assigning a        addition, the jury found that even though “one
schedule of unattractive games;                  or more defendants [had] participated in a
                                                 contract, combination or conspiracy to
d. It never undertook the strategy outlined in   exclude competition within major league
the Porter Presentation;                         professional football” (Question No. 20), that
                                                 combination was not an unreasonable restraint
e. It never sought to injure the USFL's          of trade in violation of Section 1 (Question
Oakland franchise or to preclude the New         No. 21). The fatal [*44] blow, however, was
Jersey Generals from playing in New York         the complete rejection of the USFL's
City; and                                        television claims. The jury found that the
                                                 NFL had not willfully acquired or maintained
f. The losses suffered by the USFL were due      a monopoly in a relevant television submarket
to its own mismanagement.                        (Question No. 4). It further found that the
                                                 NFL's contracts with all three television
                    ***                          networks for the right to broadcast the league's
                                                 regular season and championship games
   The Verdict                                   through the 1986-87 season were not an
                                                 unreasonable restraint of trade violative of
    The jury found the NFL liable on the         Section 1 (Question No. 24). Finally, the jury
USFL's claim of actual monopolization,           rejected the USFL's “essential facilities”
concluding that the older league had willfully   claim, specifically finding that “defendants
acquired or maintained monopoly power in a       [did not] have the ability to deny actual or
market     consisting   of    major    league    potential competitors access to a national
professional football in the United States       broadcast television contract” (Question No.
(Question No. 4). The jury also found [*43]      33), although it also found that such a contract
that the NFL's unlawful monopolization had       was “essential to the ability of a major league
caused injury to the USFL (Question No. 5).      professional football league to compete
In ruling on the NFL's motion for judgment       successfully in the United States” (Question
notwithstanding the verdict with respect to      No. 31) and “that potential competitors of the
these findings, the district court held that     NFL, cannot as a practical matter, duplicate
sufficient evidence existed that the NFL had     the benefits of a network contract” (Question
engaged in predatory conduct. This evidence      No. 32).17
related to: (1) NFL efforts to co-opt USFL
owners and potential owners; (2) the NFL
Supplemental Draft of USFL players; (3) the      17 In ruling that any inconsistency in these verdicts
NFL's move to a forty-nine-man roster; and       did not require a new trial, a ruling not challenged on
(4) the NFL's activity directed at specific      appeal, the district court first recognized that
USFL franchises such as the Oakland              inconsistent verdicts in a civil case are fully
                                                 permissible in this circuit. Opinion No. 16, 644 F.




                                                                                            683
    DISCUSSION                                            contract with only one network. See, e.g.,
                                                          United States v. James, 106 S. Ct. 3116, 3121
    On appeal, the USFL raises a host of                  (1986) (statute foreclosing government
claims with respect to the NFL's liability, the           “liability of any kind . . . for any damage from
district court's evidentiary rulings, damages             or by floods” “outlines immunity in sweeping
charge, and denial of injunctive relief.                  terms . . . It is difficult to imagine broader
                                                          language”); United States v. Holroyd, 732
1. Liability                                              F.2d 1122, 1124, 1128 (2d Cir. 1984) (statute
                                                          proscribing willful filing with IRS of “any”
    a. The Sports Broadcasting Act                        statement not believed to be accurate “means
                                                          what it says on its face” and covers all
    The USFL contends that the Sports                     statements to IRS). Moreover, the legislation
Broadcasting Act of 1961 limits the antitrust             does contain express limitations on the
exemption for pooled-rights contracts to a                exemption designed to protect college football
single contract with one network. Therefore,              from televised competition with the NFL,
it argues, the NFL's multiple contractual                 which suggests by implication that no other
arrangements with three networks violates the             limitations exist.
injunction in United States v. National
Football League, 116 F. Supp. 319 (E.D. Pa.                   Faced       with     statutory      language
1953), a decision claimed by the USFL                     unambiguously hostile to its claims, the USFL
collaterally to estop the NFL from denying                resorts to alleged ambiguities in the legislative
that its arrangements with the networks                   history. Upon examination, however, the
violate Section 1 of the Sherman Act.                     legislative history offers no reason to depart
                                                          from the statutory language. For example,
    The Sports Broadcasting Act states that:              NFL Commissioner [*47] Rozelle stated
                                                          during the congressional hearings on the Act
The antitrust laws . . . shall not apply to all           that if all the networks were tied up by the
joint agreement by or among persons engaging              NFL, a competing league “would . . . possibly
in or conducting the organized professional               be at a major disadvantage” and that the bill
team sport[] of football, . . . by which any              was designed to allow the NFL to televise on
league of clubs participating in professional             one network. Telecasting of Professional
football . . . contests sells or otherwise                Sports Contests: Hearings on H.R. 8757
transfers all or any part of the rights of such           Before the Antitrust Subcomm. (Subcomm.
league's member clubs in the sponsored                    No. 5) of the House Comm. on the Judiciary,
telecasting of the game[] [*46] of football. . . .        87th Cong., 1st Sess. 35 (1961). These
                                                          remarks were made, however, during a
15 U.S.C. @ 1291 (emphasis added). This                   colloquy in which Rozelle twice stated
statutory language thus neither states nor                explicitly that the proposed legislation would
implies that the exemption limits the NFL to a            allow the NFL to utilize all three networks.
                                                          Moreover, he predicted that, although the NFL
                                                          had a present intention to use only one
    (Continued)
                                                          network, in twenty years a “single network
                                                          may no longer be desirable, and it may
Supp. at 1045 (citing Globus v. Law Research Serv.,
Inc., 418 F.2d 1276, 1290 n.17 (2d Cir. 1969), cert.      become much better for the public and the
denied, 397 U.S. 913 (1970)). The court also              league to use more than one network.” Id.
plausibly reconciled the actual verdicts in the instant   Rozelle's testimony thus provides little
case. Id. at 1046-48.                                     comfort to the USFL.




                                                                                                684
    More tellingly, the USFL also relies upon     rights of its members to a purchaser.” S. Rep.
the following passage in the House Report         No. 1087, 87th Cong., 1st Sess., reprinted in
accompanying the 1961 legislation:                1961 U.S. Code Cong. & Admin. News 3042,
Some concern has been expressed that the          3044 (emphasis added).
language of this section might be considered
to give an absolute exemption from the                In any event, the passage of the 1966
antitrust [*48] laws for any kind of television   NFL-AFL merger statute provides conclusive
arrangements entered into by a league, and        evidence that Congress did not intend the
particularly an arrangement which might           1961 Act to prohibit NFL contracts with more
involve several networks and might thus           than one network. When considering this
exclude a competing league from all               legislation, Congress was explicitly informed
television coverage. This is not the intent of    that the merged league would continue to
H.R. 9096 which is designed to permit the sale    broadcast its games on “at least 2 networks,” 18
of television rights by a league and its member
clubs to a single network. The committee
does not intend that an exemption from the        18 During the hearings on the merger bill,
antitrust laws should be made available to a      Commissioner Rozelle testified “that because of the
                                                  logistics of handling perhaps 13 or 14 games on a
league or its members where the intent or
                                                  Sunday afternoon, [the NFL] would require at least 2
effect of a joint agreement is to exclude a       networks.” Professional Football League Merger:
competing league or its members from the          Hearings on S. 3817 Before the Antitrust Subcomm.
sale of any of their television rights.           (Subcomm. 5) of the House Comm. on the Judiciary,
                                                  89th Cong., 2d Sess. 64 (1966). In response to the
H.R. Rep. No. 1178, 87th Cong., 1st Sess. 4       question of whether New York City residents would
(1961).     This language was apparently          be able to see professional football on television
                                                  when the other New York club was playing a home
included at the suggestion of AFL
                                                  game, Rozelle said that the league would try to do so,
Commissioner Joe Foss, who testified that the     “which is why I feel we will probably have to go to
proposed legislation should guard against         two networks, to assure that each of the 26 or 28
agreements with networks that unreasonably        teams has all of its road games brought back to its
excluded competing leagues. See Opinion           home city.” Id. at 66. Moreover, the NFL and AFL
No. 2, 634 F. Supp. at 1162.                      submitted a memorandum to the subcommittee
                                                  concerning whether the merger would result in
                                                  reduced broadcasts of football games:
    We believe the USFL exaggerates the
import of that statement in the House Report.         Because a single network cannot practicably
The report says no more than that multiple            establish as many as twenty-eight regional
pooled-rights agreements may be the subject           networks and because the expanded league
of a monopolization or unreasonable restraint         desires to maintain its present level of club
of trade [*49] claim by a competing league.           television income, the plan contemplates the
                                                      continued use of two networks by the
Precisely such claims were submitted to the
                                                      expanded league, e.g., on a conference or
jury in this case and rejected by it.                 other divisional basis. Thus, both during the
                                                      period prior to the expiration of the existing
    The Senate Report does not expressly              television contracts and afterwards, it is
address the issue of multiple network                 contemplated that there will be continued
contracts, other than to conclude ambiguously         home viewer access to duplicate broadcasts,
that the public interest would be served “with        including telecasts of other league games
                                                      into home cities on days when the home
minimal sacrifice of antitrust principles by          team is playing at home.
exempting joint agreements under which a
league sells or transfers pooled television       Id. at 119 (emphasis added).




                                                                                             685
and no concern whatsoever was expressed in         CBS business study ordered by Neil Pilson,
Congress that such conduct was either              CBS Sports' President, [*52] and completed in
undesirable or would go beyond the scope of        June 1984. CBS conducted the study because
the 1961 Act's exemption. Moreover, while          it was apprehensive over ABC's signing a
permitting the merger, Congress added a            USFL fall contract and desired the leverage a
further limitation to the exemption to protect     second league would afford it in its
high school games [*50] from televised             negotiations with the NFL.        The study
competition with the NFL. The lack of a “one       estimated the economic impact on CBS of the
network” limitation in the 1966 merger bill        televising of USFL games in the fall under
thus dooms the USFL's claims. Accordingly,         various scenarios. One scenario posited only
we hold that the mere existence of the NFL         ABC televising USFL games on Sundays.
contracts with the three networks does not         The scenarios most pertinent to the present
violate the antitrust laws. Having made this       discussion posited CBS and either NBC or
determination, we need not consider whether        ABC televising USFL games. Under these
the decree in United States v. National            scenarios, CBS would televise both USFL and
Football League has any collateral-estoppel        NFL games on Sundays. The final scenario
effect.                                            posited USFL games being televised by NBC
                                                   and ABC on fall Sundays. No study was
    b. The “Dilution Effect”                       made of CBS being the only network with a
                                                   USFL contract because CBS was not
    The USFL does not argue that there was         interested in such an arrangement. See supra
insufficient evidence to support the jury's        note 11.
rejection of its claim that the NFL prevented it
from obtaining a network contract. The                 As explained by Pilson, the value of a
failure to make this argument is                   USFL fall contract to CBS was determined (in
understandable in light of the swift dismissal     simplified fashion) as follows. From the
such a claim would encounter. However, the         estimated gross advertising revenues would be
USFL does the next-best thing by attacking         subtracted estimates of: (i) expenses related
the district court's instructions regarding        to production; (ii) losses in revenues that
“intent and effect” and “legitimate business       would otherwise have been earned by
purpose,” both discussed immediately infra,        programs preempted by USFL games, or
on grounds that these instructions led the jury    “preemptive impact”; (iii) decreases in
to ignore an “unchallenged showing of              advertising [*53] revenues from NFL games
anticompetitive effect” and “textbook              resulting from the addition of USFL games, or
example of an anticompetitive practice.”           “dilution effect”; and (iv) rights fees to the
Moreover, the USFL continues to seek broad         USFL.      Pilson testified that when these
injunctive relief concerning the NFL's             estimates were made in June 1984, the
television contracts on the ground that such       resultant calculation, CBS's profit, was
relief is necessary to bring competition to the    negative. The USFL argues that, but for the
industry. Because these claims are based on        “dilution effect” of $ 50 million, the sum
the so-called “dilution effect” of the NFL's       would have been sufficiently positive to make
contracts with the three networks, a separate      a USFL contract attractive.        The USFL
discussion of the concept of a “dilution effect”   assumes that the “dilution effect” was
and its role in the professional football          experienced equally by all three networks and
industry is necessary.                             thus concludes that the effect of NFL's
                                                   network contracts was to exclude all
    The term “dilution effect” comes from a        competition.




                                                                                       686
    The district court instructed the jury to        Moreover, whatever “dilution effect” ABC's
analyze the NFL's television contracts in light      prime-time games might suffer was not
of the CBS study. Specifically, the jury was         necessarily identical to that faced by CBS.
told to consider “the high NFL rights fees           The jury might easily conclude, absent
charged to the networks, which plaintiffs            evidence to the contrary, that the “dilution
allege triggered a dilution effect that makes it     effect” on CBS from back-to-back NFL-USFL
economically infeasible for any network to           telecasts on Sunday afternoons would be
offer a satisfactory television contract to any      greater than on ABC, which would not
professional football league other than the          broadcast NFL games on Sunday. And there
NFL.” The jury rejected the USFL's claims as         was no evidence to the contrary. The USFL,
to the “dilution effect” in finding that the NFL     which bore the burden of proof on this issue,
had not monopolized a television submarket,          called two witnesses from ABC in a position
that the NFL television contracts were not an        to testify about the “dilution effect” on ABC.
unreasonable restraint, and [*54] that the NFL       Neither witness was questioned about the
did not have the power to exclude a                  “dilution effect.” Both did testify, however,
competing league from obtaining a network            that the USFL's exodus from major television
contract.     There was ample evidence to            markets and its other difficulties greatly
support these conclusions.                           diminished the value of USFL telecasts by
                                                     1985 and 1986.
    First, the USFL concedes, as it must, that
the “dilution effect” is nonexistent when the             Third, the conduct of the NFL and the
NFL network            contracts    expire    and    networks indicates that neither believed their
negotiations over new contracts are under            contracts to be exclusionary. Notwithstanding
way. Whatever exclusionary effect exists is          the early opinion of the NFL's Moyer about a
only for the term of the three NFL network           network without a contract being an “open
contracts, and all leagues are free to compete       invitation to a new league,” the NFL's actual
on the basis of the quality of their product         conduct displayed no marked desire to lock up
upon the expiration of these contracts. The          all three networks. Prime-time weekday [*56]
district court's instructions directed the jury to   telecasts were offered to NBC and CBS, both
consider the length of these contracts, then         of whom already had NFL contracts, before
five years, in determining whether they were         ABC was approached. It was the testimony of
reasonable.        Its verdict, therefore, is        both the ABC executives and CBS's Pilson,
dispositive because the duration of the              elicited by counsel for the USFL, that Rozelle
contracts was hardly unreasonable as a matter        routinely used the threat of leaving them
of law.                                              without an NFL contract in order to extract
                                                     from them the largest possible rights fees. If
    Second, there was no evidence that the           the “dilution effect” theory of exclusion were
result of the calculations described above           correct, the NFL could not credibly threaten to
would be the same for ABC as for CBS.                leave one network without a contract. If the
ABC's contract was largely confined to               theory were correct, moreover, the last
televising a single NFL game in prime time on        network to sign with the NFL would have a
a weekday night. Its Sundays were free of            bargaining advantage because its agreement
football, and it would not encounter the             would be essential to the NFL's monopoly,
scheduling problems faced by CBS in                  much as the owner of the last lot in a tract of
televising both NFL and USFL games on                land needed for a construction project can
Sunday afternoons. [*55] ABC was thus free           demand the highest price.              In the
to schedule games so as to maximize revenue.         NFL-network negotiations, the opposite was




                                                                                          687
the case, and the last network to sign was at a     among the USFL owners, the financial
bargaining disadvantage. Thus, in 1982, the         condition of some of the franchises, and the
NFL first signed agreements with ABC and            “lame-duck” spring season of 1985 further
NBC and then approached CBS. According to           lessened the value of USFL telecasts in 1986.
Pilson, CBS regarded itself as being in a very      In fact, Pilson himself testified that by 1986
disadvantageous bargaining position. As a           the events described above had rendered the
result, CBS paid $ 736 million for the new          “dilution effect” irrelevant to CBS's decision
contract, an increase of more than 100% over        not to televise the USFL. In light of this
its previous contract. [*57] On the basis of        evidence, the jury was free to conclude that
this evidence, therefore, the jury would have       the revenues to be expected from USFL
been hard-pressed to conclude that the NFL          telecasts were so low that no network would
needed a contract with CBS to freeze out a          purchase them even if there were no “dilution
competing league, a circumstance that would         effect.”19
have precluded a credible threat to leave CBS
without a contract and the resultant hefty
increase in rights fees.
                                                    19 The USFL's brief offers an extreme version of
     Fourth, even if the “dilution effect” theory   the “dilution effect,” which we quote:
were alive and well in 1986, the jury could
have found that that “effect” was not a cause                 The NFL's television-related conduct
of the USFL's failure to get a network contract         constitutes a textbook example of an
in that year. The CBS study was made in                 anticompetitive practice available only to
                                                        one who dominates the market. In a normal,
1984 and was based on estimates of revenues
                                                        competitive market, the NFL's extraction of
that were plainly excessive given the                   monopoly rents by fixing its rights fees at an
circumstances of 1986. Immediately after the            artificially high level would prove
study was completed, the Supreme Court                  pro-competitive by attracting new businesses
decided      National     Collegiate     Athletic       into the market. Cf. Matsushita Elec. Indus.
Association v. Board of Regents, 468 U.S. 85            Co. v. Zenith Radio Corp., 475 U.S. 574,
(1984), invalidating the NCAA's exclusive               583 (1986). But by tying up the only three
                                                        television networks capable of providing the
control over the televising of college football
                                                        revenue to support a competing league, and
games. This decision had the effect of                  increasing the actual rights fees charged
multiplying greatly the number of college               each of them by 625% in less than ten years
games telecast and of reducing advertising              (a feat only attainable through the exercise
revenue generally for football games. An                of market power), the NFL forces the
ABC witness also testified there was a                  networks in turn to raise NFL advertising
proliferation of sporting events on network             prices above competitive levels. This in turn
                                                        creates a disincentive to televise a rival,
and cable television after the fall of 1984 that        competitively-priced football league in the
also reduced [*58] the advertising fees that            fall because such a lower-priced league
could be charged for professional football. In          would drive down advertising rates and
addition, there were the problems of the USFL           reduce the NFL viewing audience. This
itself. The league had failed to establish fan          disincentive, termed the “dilution effect” and
loyalty in most places because of repeated              quantified by CBS at $ 50 million, applies
                                                        equally to all the networks and prevents
franchise moves. Most importantly, the USFL
                                                        them from considering fairly the merits of a
had abandoned most major television markets,            new league. USFL Br. at 39 (footnote and
thereby rendering telecasts of its games much           citation to record omitted).
less valuable than had been estimated by the
earlier CBS study. Finally, the disagreements




                                                                                               688
    c. “Intent and Effect” Charge                         through the exercise of superior foresight and
                                                          skill or because of natural advantages . . ., or
    We now consider the district court's                  because of economic or technological
instruction regarding liability on the USFL's             efficiency; . . . or by laws passed by Congress.
television-related claims. The USFL contends              ...
that it should not have been required to show
that the intent and effect of the NFL's                       In this regard, you should be aware that in
television contracts with the major networks              1966 Congress passed a law permitting the
were exclusionary (rather than simply intent              merger of the two major football leagues then
or effect) in order to prove a Section 2 claim.           existing. . . . [*60]
In addition, the USFL contends that the
district court erred with respect to the Section              Accordingly, I instruct you that the 1966
1 television instruction because it applied the           merger of the AFL and the NFL cannot be the
intent-and-effect      standard       to     the          basis for inferring that the NFL acquired
Rule-of-Reason claims.        We reject both              monopoly power unlawfully.
contentions.
                                                              In addition, in 1961 Congress passed a
    The district court gave the following                 statute that provides that a contract between a
charge with respect to the USFL's Section 2               professional sports league and a television
television-related claims:20                              network for the sale of pooled telecast rights is
    A company may not be found to have                    not a restraint of trade in violation of the
wilfully acquired or maintained monopoly                  antitrust laws.
power if it has acquired that power solely
                                                              Accordingly, I instruct you that the
    (Continued)                                           making of these contracts by the NFL with the
                                                          television networks constitutes the lawful
      Even putting aside the unproven factual premises    acquisition of power, even if you were to find
-- the existence of monopoly rents, the identical         that these contracts gave the NFL monopoly
impact of the “dilution effect” upon all networks, the    power, unless you found that the intent and
quantification of $ 50 million as realistic for 1986 --
                                                          effect of these agreements is to exclude a
this theory appears to posit a uniquely
sadomasochistic economic relationship in which the        competing league or its members from selling
more the seller charges, the happier the buyer is.        any of their television rights.
Needless to say, the network executives who testified
did not describe their negotiations with Rozelle as       (emphasis added).      This instruction was
fitting that model. Nor was there evidence indicating     consistent with the Sports Broadcasting Act,
why the networks had to be “forced” by high NFL           discussed infra, as exempting from antitrust
rights fees to charge advertising prices the market
would bear anyway.
                                                          scrutiny a league's pooled-rights contracts
                                                          with networks unless they constitute illegal
20 The USFL incorrectly claims that the district          monopolization or an unreasonable restraint of
court's instructions applied a more stringent standard    trade so far as competing leagues are
of proof to its television claims than to other claims.   concerned.        More     importantly,    the
In fact, the intent-and-effect charge was given on all    intent-and-effect charge was consistent with
the monopolization issues. The USFL also claims it
                                                          the legal standards [*61] for illegal
was surprised by the intent-and-effect charge. It was
aware before trial, however, that the NFL would seek      monopolization under Section 2.
such a charge. In any event, no claim of harm other
than a passing psychic injury to otherwise robust            The Supreme Court has repeatedly defined
counsel is made.                                          monopolization as the “willful acquisition or




                                                                                                689
maintenance” of monopoly power. E.g.,               effect helps the trier of fact to evaluate the
Aspen Skiing Co. v. Aspen Highlands Skiing          actual effect of challenged business practices
Corp., 472 U.S. 585, 596 n.19 (1985); United        in light of the intent of those who resort to
States v. Grinnell Corp., 384 U.S. 563, 570-71      such practices. n21 As Justice Stevens stated
(1966); Berkey Photo, Inc. v. Eastman Kodak         in Aspen Skiing, Evidence of intent is merely
Co., 603 F.2d 263, 274 (2d Cir. 1979), cert.        relevant to the question whether the
denied, 444 U.S. 1093 (1980).              The      challenged conduct is fairly characterized as
willfulness [*62] element certainly requires        “exclusionary” or “anticompetitive” -- to use
proof of intent. See Aspen Skiing, 472 U.S. at      the words in the trial court's instructions -- or
602 n.28 (quoting United States v. Aluminum         “predatory,” to use a word that scholars seem
Co. of Am., 148 F.2d 416, 432 (2d Cir. 1945)        to favor. Whichever label is used, there is
(“Alcoa”) (“In order to fall within @ 2, the        agreement on the proposition that “no
monopolist must have . . . the intent to            monopolist monopolizes unconscious of what
monopolize.”)). Proof of effect is required by      he is doing.” As Judge Bork stated more
definition alone to satisfy the “acquisition or     recently:    “Improper exclusion (exclusion
maintenance” requirement.                           [*64] not the result of superior efficiency) is
                                                    always deliberately intended.”
    A requirement that both intent and effect
be proven is necessary to enable a trier of fact    472 U.S. at 602-03 (quoting R. Bork, The
to make the critical distinction between            Antitrust Paradox 160 (1978)).21
conduct that defeats a competitor because of
efficiency and consumer satisfaction, and               The present case is in fact a useful
conduct that “not only (1) tends to impair the      example of the intent-and-effect approach to
opportunities of rivals, but also (2) either does   determining whether certain practices are
not further competition on the merits or does
so in an unnecessarily restrictive way.” Aspen
Skiing, 472 U.S. at 605 n.32 (quoting 3 P.
Areeda & D. Turner, Antitrust Law 78                21 The USFL contends that the district court
(1978)). Hopes and dreams alone cannot              improperly added a specific intent requirement to
                                                    Section 2 by instructing the jury that it “should infer
support a Section 2 claim of monopolization.
                                                    no anticompetitive intent from the mere existence of”
Berkey Photo, 603 F.2d at 273-75. If they did,      the NFL's three network contracts. This argument is
the nationwide advertisement “Ford wants to         groundless. The quoted language simply restated the
be your car company” would constitute an            district court's holding in its Opinion No. 2
open-and-shut Section 2 case. [*63] Success         interpreting the Sports Broadcasting Act of 1961. In
alone is not enough or the antitrust laws would     any event, the district court instructed the jury that
have their greatest impact on the most              “monopoly power is obtained intentionally and this
                                                    element is satisfied, if defendants acquired it by
efficient entrepeneurs and would injure rather      means other than superior skill or historical accident”
than protect consumers.                             or “by any means of wielding monopoly power to
                                                    prevent or impede competition.” This instruction
    Proof of intent and effect is also of           applied to both the professional football market and
evidentiary value. Distinguishing between           television submarket claims and fully complied with
efficient and predatory conduct is extremely        Alcoa's requirement of only general intent for a
                                                    monopolization violation. See 148 F.2d at 432. The
difficult because it is frequently the case that
                                                    usefulness in this area of the distinction between
“competitive and exclusionary conduct look          specific and general intent, moreover, may be
alike.”       Easterbrook, On Identifying           diminished by Aspen's description of the intent
Exclusionary Conduct, 61 Notre Dame L.              requirement as an evidentiary tool to evaluate
Rev. 972, 972 (1986). Evidence of intent and        business conduct.




                                                                                               690
predatory. As the preceding discussion of the     balance       the      procompetitive         and
“dilution effect” indicates, the jury's           anticompetitive effects of any restraint. See
conclusion that the NFL's three network           e.g., National Soc'y of Professional Eng'rs v.
contracts were not exclusionary was supported     United States, 435 U.S. 679, 691 & n.17
by evidence that a quality league could either    (1978). Except for Oreck Corp. v. Whirlpool
have overcome the “dilution effect” or have       Corp., 579 F.2d 126, 133 (2d Cir.) (in banc),
acquired a contract when the NFL's contracts      cert. denied, 439 U.S. 946 (1978), the cases
expired. The conduct of the NFL itself and        cited by the USFL are per se price-fixing
the networks showed their disbelief in any        cases. [*67] We have previously stated,
exclusionary effect by the NFL's threatening      however, that we “doubt” that the
to leave a network without NFL games and          purpose-or-effect requirement stated in Oreck
the networks' taking the threat seriously. The    “is a disjunctive rule,” and that “it is difficult
evidence also supported the conclusion that       to conceive of a viable private action for
when the NFL locked up the third network,         damages under section 1 if some unreasonable
CBS, in the 1982 negotiations, it did so to       restraint of trade has not been effected.”
obtain $ 736 million in rights fees, not to       Borger v. Yamaha Int'l Corp., 625 F.2d 390,
exclude competitors.                              397 & n.4 (2d Cir. 1980). Other courts agree,
                                                  see, e.g., Cascade Cabinet Co. v. Western
    Judge Leisure's instructions to the jury      Cabinet & Millwork, Inc., 710 F.2d 1366,
with respect to the Section 1 Rule -of-Reason     1372-73 (9th Cir. 1983); Davis-Watkins Co. v.
claim stated that intent was not determinative    Service Merchandise, 686 F.2d 1190, 1202-03
as to whether a practice was an unreasonable      (6th Cir. 1982); H & B Equip. Co. v.
restraint of trade:                               International Harvester Co., 577 F.2d 239, 246
                                                  (5th Cir. 1978), and we now hold, for reasons
    Examining the combination's purpose may       stated in our discussion of the Section 2 claim,
assist you in determining the effects of the      that an anticompetitive effect must be shown
agreement on competition. The mere fact that      to make out a Section 1 Rule-of-Reason
the defendants [*66] had a good motive or         violation.
sound purpose for entering into an agreement,
however, does not in and of itself prevent you        d. Legitimate Business Opportunities and
from finding that the agreement was an            Profit-Maximization Charge
unreasonable restraint of trade.
                                                      The USFL further argues that the district
    On the other hand, the mere fact that         court erroneously charged the jury that the
defendants entered into an agreement with the     NFL's three network contracts were lawful if
intent of excluding competition, is not enough    motivated by any “legitimate” purpose,
to establish a Section [1] violation. Even if     including profit maximization. The pertinent
you find that defendants' intent was evil or      [*68] charge reads as follows:
unlawful, you still must find evidence of
anticompetitive effect before you can find a          Plaintiffs allege that the NFL coerced the
particular restraint of trade is unreasonable.    networks not to give the plaintiffs a contract. .
                                                  . . So long as they have a legitimate business
We disagree with the USFL that proof of           purpose in doing so, defendants have no duty
either anticompetitive intent or effect is        to limit themselves in entering into the
sufficient in a Rule-of-Reason case under         television contracts so that other football
Section 1. Unlike a per se price-fixing case, a   leagues would have an easier time entering the
Rule-of-Reason case requires the fact finder to   market, or to foresee that other leagues might




                                                                                         691
do so, or for any reasons to decline a                    The USFL challenges this charge on the
profitable business opportunity.                      ground     that     setting   prices    at    a
                                                      profit-maximizing level is an anticompetitive
    This charge was consistent with settled           act. We disagree. Prices not based on
precedent. “[A] firm with lawful monopoly             superior efficiency [*70] do not injure
power has no general duty to help its                 competitors, see Matsushita Elec. Indus. Co.
competitors, whether by holding a price               v. Zenith Radio Corp., 475 U.S. 574, 582-83
umbrella over their heads or by otherwise             (1986), but rather invite competitive entry. As
pulling its competitive punches.” Olympia             we stated in Berkey Photo:
Equip. Leasing Co. v. Western Union Tel.
Co., 797 F.2d 370, 375 (7th Cir. 1986), cert.             Setting a high price may be a use of
denied, 107 S. Ct. 1574 (1987); see Ball                  monopoly power, but it is not in itself
Memorial Hosp., Inc. v. Mutual Hosp. Ins.,                anticompetitive. Indeed, although a
Inc., 784 F.2d 1325, 1338 (7th Cir. 1986);                monopolist may be expected to charge
Berkey Photo, 603 F.2d at 274, 276, 287. A                a somewhat higher price than would
monopolist may not, of course, use its market             prevail in a competitive market, there
power, whether obtained lawfully or not, to               is probably no better way for it to
prevent or impede competition in the relevant             guarantee that its dominance will be
market. [*69] See Aspen Skiing, 472 U.S. at               challenged than by greedily extracting
605; Berkey Photo, 603 F.2d at 274. The jury              the highest price it can.
was thus properly instructed that:
                                                      603 F.2d at 294. The USFL responds to this
        A    monopoly       achieved        or        argument by falling back on its claim that
    maintained as a result of . . . legitimate        professional football is not a typical market
    good business practices is not                    because of the “dilution effect,” an argument
    unlawful. A monopolist has the same               rejected by the jury and discussed supra.
    right to compete as any other
    company. Under the antitrust laws, a                  e. Television Submarket Definition
    monopolist is encouraged to compete
    vigorously with its competitors and to                Regarding        the   relevant    television
    remain responsive to the needs and                submarket, the district court instructed the
    demands of its customers. At the                  jury, first, to determine who were the potential
    same time, a monopolist cannot use its            purchasers of television broadcast rights for
    lawfully acquired power to maintain               professional football in the fall. The jury was
    its monopoly.                                     then, second, to determine from the
                                                      perspective of those buyers what other
     In addition, there is nothing in the antitrust   products,       if    any,    were    reasonably
laws that requires a monopolist to act against        interchangeable [*71] with broadcast rights to
its own self interest so long as the monopolist       professional football. The USFL claims in
does not at the same time exercise its power to       particular that, in instructing the jury to
maintain that power. Thus, a monopolist is            determine who were potential purchasers, the
under no duty affirmatively to help or aid its        district court erred by stating that:
competitors and is free to set as its legitimate
goal the maximization of its own profits so               If you find that a professional football
long as it does not exercise its power to                 league would reasonably consider
maintain that power.                                      selling its broadcast rights to cable
                                                          television companies or to individual




                                                                                            692
   television stations, then all those             objection was thus waived under Fed. R. Civ.
   buyers must be included in the                  P. 51. Contrary to its claim on appeal, the
   relevant submarket.                             USFL did not “distinctly” object to this
                                                   instruction, but merely proposed changes in
    We do not agree with the USFL that this        language in the draft charge.             These
charge was error because it emphasized the         suggestions did not constitute a general
view of potential buyers in determining the        objection to the entire charge. Indeed, the
relevant submarket. See United States v. E.I.      district    judge     expressly    stated   his
du Pont de Nemours & Co., 351 U.S. 377, 404        understanding that the parties had objected
(1956); see also United States v. Waste            only “to the extent [of] proposed changes in
Management, Inc., 743 F.2d 976, 979-80 (2d         the charge” (emphasis added). This was
Cir. 1984) (defining relevant market by first      apparently the understanding of the USFL as
determining potential buyers and then              well because the league raised a “general
determining what products were reasonably          objection” to the intent-and-effect charge.
interchangeable from buyers' perspectives);
JBL Enters., Inc. v. Jhirmack Enters., Inc., 698                        ***
F.2d 1011, 1016-17 (9th Cir.), cert. denied,
464 U.S. 829 (1983). The fact that a cable            CONCLUSION
contract might be less desirable, even much
less desirable, to a league [*72] than a               For the foregoing reasons, we affirm the
network contract is not relevant to                jury's verdict and the judgments entered
determining the product submarket.                 thereon. We thus need not consider the NFL's
                                                   conditional cross-appeal.
    In any event, the USFL never objected to
the relevant submarket instruction, and the           Affirmed.




                                                                                        693
  WILLIAM H. SULLIVAN II, Plaintiff -            several prejudicial errors were committed
             Appellee,                           during the trial, we vacate the judgment and
                v.                               remand for a new trial.
  NATIONAL FOOTBALL LEAGUE, &
    MEMBERS OF THE NATIONAL                      I. BACKGROUND
   FOOTBALL LEAGUE, Defendants -
            Appellants.                               Under Article 3.5 of the NFL’s
                                                 constitution and by-laws, three-quarters of the
                No. 94-1031                      NFL club owners must approve all transfers of
UNITED STATES COURT OF APPEALS                   ownership interests in an NFL team, other
       FOR THE FIRST CIRCUIT                     than transfers within a family. In conjunction
34 F.3d 1091; 1994 U.S. App. LEXIS 25613;        with this rule is an uncodified policy against
            1994-2 Trade Cas.                    the sale of ownership interests in an NFL club
              (CCH) P70,720                      to the public through offerings of publicly
       September 16, 1994, Decided               traded stock. The members, however, retain
                                                 full authority to approve any given transfer by
SUBSEQUENT HISTORY:            [**1] The         a three-quarters vote according to Article 3.5.
Name of this Case has been Amended by the
Court September 29, 1994. As Amended on              Sullivan owned the Patriots from the
Denial of Rehearing October 26, 1994,            team’s inception in 1959 until October of
Reported at: 1994 U.S. App. LEXIS 38394.         1988. When Sullivan formed the Patriots, he
Certiorari Denied February 27, 1995,             and his partner sold non-voting shares of the
Reported at: 1995 U.S. LEXIS 1685.               team to the public beginning in 1960. At that
                                                 time, the Patriots were in the old American
PRIOR HISTORY: APPEAL FROM THE                   Football League (“AFL”), which was separate
UNITED STATES DISTRICT COURT FOR                 [**3] from the NFL, and which had no policy
THE DISTRICT OF MASSACHUSETTS.                   against public ownership of teams. In 1966,
Hon. Edward F. Harrington, U.S. District         the AFL and the old NFL merged into a single
Judge.                                           league. Under the terms of the merger, the
                                                 new NFL would adopt the old NFL’s policy
OPINION: [*1095] TORRUELLA, Circuit              against public ownership. The Patriots,
Judge. The National Football League and          however, were allowed to retain their level of
twenty-one organizations owning NFL              public ownership as a special exception to the
franchises (referred to collectively as the      rule under a grandfather clause.
“NFL”) appeal the judgment entered against
them after a jury found that the NFL violated        In 1976, Sullivan sought to acquire the
the antitrust laws by restricting owners of      publicly held shares of the Patriots through a
member football clubs from selling shares in     merger of the club into a new Sullivan-owned
their teams to the public. Plaintiff-appellee,   company. Stockholders approved the transfer
William H. Sullivan, former owner of the New     and the transaction was subsequently
England Patriots [**2] football team (the        consummated, although some shareholders
“Patriots”), was awarded a total of $ 51         subsequently brought suit, challenging the
million in damages for the losses Sullivan       sufficiency of the purchase price. After
incurred when he had to sell the Patriots to a   protracted litigation, the shareholders obtained
private buyer after the NFL prevented him        a judgment requiring Sullivan to pay them a
from offering 49% of the team to the public in   higher price for their shares. The Patriots then
the form of publicly traded stock. Because       became a fully privately owned club.




                                                                                       694
    Sullivan and his son, Chuck Sullivan, who      still undecided). Pete Rozelle, NFL
owned the stadium where the Patriots played,       Commissioner at the time, told Sullivans that
began to experience financial difficulties and     he was not in favor of Sullivan’s proposals
increasing debt burdens in the mid-1980s. The      and that league approval was “very dubious.”
Sullivans decided that they needed to raise        Sullivan ultimately never asked for a vote on
capital to alleviate their financial problems.     amending the ownership policy or on waiving
After the Boston Celtics professional [**4]        the policy for the Patriots, and the NFL never
basketball franchise made a public offering of     held such a vote. Sullivan claims that he did
40% of the team in December of 1986, the           not ask for a vote because it would have been
Sullivans decided to pursue a similar deal with    futile.
the Patriots in order to raise cash to cover
some of their debts.                                   In October of 1988, Sullivan sold the
                                                   Patriots for approximately $ 83.7 million to
    On October 19, 1987, the Sullivans met         KMS Patriots L.P. (“KMS”), a limited
with Stephens, Inc., a small investment            partnership owned by Victor Kiam and
banking firm in Little Rock, Arkansas. They        Francis Murray. Sullivan alleges that, absent
discussed a debt financing deal whereby            the NFL’s public ownership policy, he would
Stephens would loan the Sullivans $ 80             have been able to retain a majority share of a
million dollars, with half going to the Patriots   rapidly appreciating asset with a high potential
and the other half to Chuck Sullivan’s             for future profits. Instead, Sullivan asserts, he
company which owned the Patriots’ stadium.         was forced [**6] to sell the Patriots at a
The Patriots’ portion of the loan would be         depressed price to private buyers.
repaid out of the proceeds of the sale of 49%
of the Patriots through the offering of public          On May 16, 1991, Sullivan sued the NFL
stock. Stephens agreed to look into the            claiming that, among other things, the NFL
possibility of arranging the deal, but informed    had violated the Sherman Antitrust Act, 15
the Sullivans that they would first have to get    U.S.C. @@ 1-2, by preventing him from
NFL approval. Sullivan ultimately never            selling 49% of the Patriots to the public in an
obtained NFL approval and the deal with            equity offering. Sullivan alleged that, as a
Stephens never progressed beyond some              result, he was forced to sell the entire team to
preliminary discussions.                           a private buyer at a fire sale price in order to
                                                   pay off existing debts. Prior to trial, the
    At a meeting of the NFL owners on              district court dismissed Sullivan’s claim under
October 27, 1987, Sullivan raised his stock        @ 2 of the Sherman Act along with various
sale [*1096] idea with the other owners and        state law claims. After a trial on Sullivan’s
asked for a modification of the NFL’s policy       claim under @ 1 of the Sherman Act, the jury
against public ownership to allow for certain      rendered a verdict for Sullivan in the amount
controlled sales of minority interests in NFL      of $ 38 million, which the judge later reduced
[**5] clubs. Alternatively, Sullivan requested     through remittitur to $ 17 million. Pursuant to
a waiver from the public ownership policy for      15 U.S.C. @ 15, which provides for treble
his contemplated public offering of the            damages for antitrust violations, the court
Patriots. Sullivan’s request was eventually        entered a final judgment for Sullivan of $ 51
tabled at this meeting. Discussions continued      million.
among the owners and, at one point, Sullivan
counted 17 of the 21 owners needed for
approval as being in favor of allowing him to
make his public offering (seven owners were




                                                                                         695
II. ANALYSIS                                        business justifications. Id. at 526-27 (citing
                                                    Business Electronics Corp. v. Sharp
The NFL has raised a number of issues on            Electronics Corp., 485 U.S. 717, 723, 99 L.
appeal concerning the application of @ 1 of         Ed. 2d 808, 108 S. Ct. 1515 (1988)).
the Sherman Act to the facts of this case,          Anticompetitive effects, more commonly
which, according to the NFL, entitle it to          referred         [*1097] to as “injury to
judgment as a matter [**7] of law. We               competition” or “harm to the competitive
address these issues first to see if the present    process,” are usually measured by a reduction
case should be dismissed, and we ultimately         in output and an increase in prices in the
conclude that it should not. We next address        relevant market. National Collegiate Athletic
the NFL’s allegations of trial error and we         Ass’n v. Board of Regents of Univ. of Okla.,
find that several of them require that we           468 U.S. 85, 104-07, 82 L. Ed. 2d 70, 104 S.
overturn the verdict in this case and order a       Ct. 2948 (1984) (“Restrictions on price and
new trial.                                          output are [**9] the paradigmatic examples
                                                    of restraints of trade”) (hereinafter “NCAA”);
    The first set of issues involves the district   Chicago Professional Sports Ltd. Partnership
court’s denial of the NFL’s motions for             v. National Basketball Association, 961 F.2d
judgment as a matter of law under Fed. R.           667, 670 (7th Cir.), cert. denied, 121 L. Ed. 2d
Civ. P. 50. We review the court’s decision de       334, 113 S. Ct. 409 (1992). Injury to
novo, using the same stringent decisional           competition has also been described more
standards that controlled the district court.       generally in terms of decreased efficiency in
Gallagher v. Wilton Enterprises, Inc., 962          the marketplace which negatively impacts
F.2d 120, 125 (1st Cir. 1992); Hendricks &          consumers. Town of Concord v. Boston
Assocs., Inc. v. Daewoo Corp., 923 F.2d 209,        Edison Co., 915 F.2d 17, 21-22 (1st Cir.
214 (1st Cir. 1991). Under these standards,         1990), cert. denied, 499 U.S. 931, 113 L. Ed.
judgment for the NFL can only be ordered if         2d 268, 111 S. Ct. 1337 (1991); Interface
the evidence, viewed in the light most              Group, Inc. v. Massachusetts Port Auth., 816
favorable to Sullivan, points so strongly and       F.2d 9, 10 (1st Cir. 1987). Thus, an action
overwhelmingly in favor of the NFL, that a          harms the competitive process “when it
reasonable jury could not have arrived at a         obstructs the achievement of competition’s
verdict for Sullivan. Gallagher, 962 F.2d at        basic goals -- lower prices, better products,
124-25; Hendricks, 923 F.2d at 214.                 and more efficient production methods.”
                                                    Town of Concord, 915 F.2d at 22.
III. ISSUES ALLEGEDLY REQUIRING
JUDGMENT [**8] FOR THE NFL                               The jury determined in this case, via a
                                                    special verdict form, that the relevant market
    A. Lack of Antitrust Injury                     is the “nationwide market [**10] for the sale
                                                    and purchase of ownership interests in the
    To establish an antitrust violation under @     National Football League member clubs, in
1 of the Sherman Act, Sullivan must prove           general, and in the New England Patriots, in
that the NFL’s public ownership policy is “in       particular.” The jury went on to find that the
restraint of trade.” Monahan’s Marine, Inc. v.      NFL’s policy had an “actual harmful effect”
Boston Whaler, Inc., 866 F.2d 525, 526 (1st         on competition in this market.
Cir. 1989). Under antitrust law’s “rule of
reason,” the NFL’s policy is in restraint of            The NFL argues on appeal that Sullivan
trade if the anticompetitive effects of the         has not established the existence of any injury
policy outweigh the policy’s legitimate             to competition, and thus has not established a




                                                                                          696
restraint of trade that can be attributed to the           we accept that a market exists for such
NFL’s ownership policy. The league’s attack                ownership interests.
is two-fold, asserting (1) that NFL clubs do
not compete with each other for the sale of                   1. No Competition Subject to Injury as
ownership interests in their teams so there                Matter of Law
exists no competition to be injured in the first
place; and (2) Sullivan did not present                    The NFL correctly points out that member
sufficient evidence of injury to competition               clubs must cooperate in a variety of ways, and
from which a reasonable jury could conclude                may do so lawfully, in order to make the
that the NFL’s policy restrains trade. Although            football league a success. See United States
we agree with the NFL that conceptualizing                 Football League v. National Football League,
the harm to competition in this case is rather             842 F.2d 1335, 1372 (2d Cir. 1988); Los
difficult, precedent and deference to the jury             Angeles Memorial Coliseum Comm’n v.
verdict ultimately require us to reject the                National Football League, 726 F.2d 1381,
NFL’s challenge to the finding of injury to                1391-92 (9th Cir.), cert. denied, 469 U.S. 990
competition.                                               (1984) (hereinafter “L.A. Coliseum”); North
                                                           American Soccer League v. National Football
    Critically, the NFL does not challenge on              League, 670 F.2d 1249, 1251 (2d Cir.), cert.
appeal the jury’s initial finding of the relevant          denied, 459 U.S. 1074, 103 S. Ct. 499, 74,
market and no         [**11]      corresponding            [*1098] L. Ed. 2d 639 (1982) (hereinafter
challenge was raised at trial.1 As a result, the           “NASL”). On the other hand, it is well
NFL faces an uphill battle in its attack on the            established that NFL clubs also compete with
presence of an injury to competition. Given                each other, both on and off the field, for things
the existence of a relevant market for                     like fan support, players, coaches, ticket sales,
ownership interests in NFL teams, it is                    local broadcast revenues, and the sale of team
reasonable to presume that a policy restricting            paraphernalia. Mid-South Grizzlies v.
the buying and selling of such ownership                   National Football League, 720 F.2d 772, 786-
interests injures competition in that market.              87 (3d Cir. 1983), [**13] cert. denied, 467
The NFL nevertheless maintains that NFL                    U.S. 1215, 81 L. Ed. 2d 364, 104 S. Ct. 2657
teams do not compete against each other for                (1984); L.A. Coliseum, 726 F.2d at 1390,
the sale of their ownership interests, even if             1393, 1395, 1397. The question of whether
                                                           competition exists between NFL teams for
                                                           sale of their ownership interests, such that the
1 The NFL argues in passing that certain expert            NFL’s ownership policy injures this
testimony related to the relevant market issue was         competition, is ultimately a question of fact.
inherently unreasonable and thus could not support         The NFL would have us find, however, that,
the jury’s relevant market finding. We do not
consider this passing argument to be sufficient to
                                                           as a matter of law, NFL teams do not compete
raise the relevant market issue on appeal as matters       against each other for the sale of their
averted to in a perfunctory manner, unaccompanied          ownership interests. We decline to make such
by some effort at developed argumentation, are             a finding.
deemed waived on appeal. United States v.
Innamorati, 996 F.2d 456, 468 (1st Cir. 1993). More            The NFL relies on a series of cases which
importantly, the NFL did not challenge the relevant
                                                           allegedly stand for the “well established” rule
market issue in either its directed verdict motion or in
its motion for judgment as a matter of law. We will        that a professional sports league’s restrictions
not consider arguments which could have been, but          on who may join the league or acquire an
were not, advanced below. Domegan v. Fair, 859             interest in a member club do not give rise to a
F.2d 1059, 1065 (1st Cir. 1988).                           claim under the antitrust laws. Seattle Totems




                                                                                                 697
Hockey Club, Inc. v. National Hockey                   The Fishman and Levin cases concerned
League, 783 F.2d 1347 (9th Cir.), cert. denied,   the National Basketball Association’s
479 U.S. 932, 93 L. Ed. 2d 357, 107 S. Ct. 405    (“N.B.A.”) rejection of plaintiffs’ attempts to
(1986); Fishman v. Estate of Wirtz, 807 F.2d      buy an existing team. Fishman, 807 F.2d at
520 (7th Cir. 1986); [**14]        Mid-South      525-31; Levin, 385 F. Supp. at 150-51. Those
Grizzlies, 720 F.2d at 772; Levin v. National     cases also based their finding that there was
Basketball Ass’n, 385 F. Supp. 149 (S.D.N.Y.      no injury to competition on the fact that the
1974). These cases, all involving a               plaintiffs were seeking to join with, rather
professional sport’s league’s refusal to          than compete against, the N.B.A. Fishman,
approve individual transfers of team              807 F.2d at 544; [**16] Levin, 385 F. Supp.
ownership or the creation of new teams, do        at 152. Neither case considered whether
not stand for the broad proposition that no       competition between teams for investment
NFL ownership policy can injure competition.      capital was injured. As pointed out in Piazza
See, e.g., NASL, 670 F.2d at 1259-61 (finding     v. Major League Baseball, 831 F. Supp. 420
that the NFL’s policy against cross-ownership     (E.D.Pa. 1993), Fishman explicitly recognized
of NFL teams and franchises in competing          the potential for competition in the market for
sports leagues, which also effectively barred     ownership of teams, although the plaintiff had
certain owners who owned other sports             failed to raise the issue, and Levin simply
franchises from purchasing NFL teams,             presumed, incorrectly, that there could never
injured competition between the NFL and           be any competition among league members.
competing sports leagues and thus violated @      Piazza, 831 F. Supp. at 430-31 & n.16 (citing
1 of the Sherman Act).                            Fishman, 807 F.2d at 532 n.9; and Levin, 385
                                                  F. Supp. at 152).
    None of the cases cited by the NFL
considered the particular relevant market that        The important distinction to make
was found by the jury in this case or a league    between the cases cited by the NFL and the
policy against public ownership. Seattle          present case is that here Sullivan alleges that
Totems and Mid-South Grizzlies considered         the NFL’s policy against public ownership
potential inter-league competition when a         generally restricts competition between clubs
sports league rejected plaintiffs’ applications   for the sale of their ownership interests,
for new league franchises. Seattle Totems, 783    whereas in the aforementioned cases, a
F.2d at 1349-50; [**15] Mid-South Grizzlies,      league’s refusal to approve a given sale
720 F.2d at 785-86. Those decisions found no      transaction or a new team merely prevented
injury to competition because the plaintiffs      particular outsiders from joining the league,
were not competing with the defendant sports      but did not      [*1099]     limit competition
leagues, but rather, were seeking to join those   between [**17] the teams themselves. To
leagues. Seattle Totems, 783 F.2d at 1350;        put it another way, the NFL’s public
Mid-South Grizzlies, 720 F.2d at 785-86.          ownership policy allegedly does not merely
Mid-South Grizzlies left open the possibility     prevent the replacement of one club owner
that potential intra-league competition           with another -- an action having little evident
between NFL football clubs could be harmed        effect on competition -- it compromises the
by the NFL’s action, but found that the           entire process by which competition for club
plaintiff in that case had not presented          ownership occurs.2 [**18]
sufficient evidence of harm to such
competition. Mid-South Grizzlies, 720 F.2d at
786-87.                                           2 This same argument distinguishes cases cited by
                                                  the NFL for the proposition that a franchisor’s
                                                  disapproval of a proposed sale of a franchise does not




                                                                                            698
    We take a moment to briefly address a               interests of the whole rather than interests
related argument raised by the NFL to the               separate from those of the corporation itself.”
effect that NFL clubs are unable to conspire            Copperweld, 467 U.S. at 770. As emphasized
with each other under @ 1 of the Sherman Act            in City of Mt. Pleasant, Iowa v. Associated
because they function as a single enterprise in         Elec. Co-op., Inc., 838 F.2d 268 (8th Cir.
relation to the league’s public ownership               1988), upon which the NFL relies for the
policy. The NFL asserts that the Supreme                application of Copperweld to this case, the
Court’s holding in Copperweld Corp. v.                  critical inquiry is whether the alleged antitrust
Independence Tube Corp., 467 U.S. 752, 81 L.            conspirators have a “unity of interests” or
Ed. 2d 628, 104 S. Ct. 2731 (1984), controls            whether, instead, “any of the defendants has
the facts of this case and overturns prior              pursued interests diverse from those of the
caselaw holding that NFL clubs do not                   cooperative itself.” Id. at 274-77 (defining
constitute a single enterprise but rather, are          “diverse” as “interests which tend to show that
separate entities which were capable of                 any two of the defendants are, or have been,
conspiring with each other under @ 1. See               actual or potential competitors”). As we have
L.A. Coliseum, 726 F.2d at 1387-90; NASL,               already noted, NFL member clubs compete in
670 F.2d at 1256-58.                                    several ways off the field, which [**20]
                                                        itself tends to show that the teams pursue
    We do not agree that Copperweld, which              diverse interests and thus are not a single
found a corporation and its wholly owned                enterprise under @ 1.
subsidiary to be a single enterprise for
purposes of @ 1, Copperweld, 467 U.S. at                    Ultimately, the NFL’s Copperweld
771, applies to the facts of this case or affects       challenge is subsumed under the question of
the prior precedent concerning the NFL. See             whether or not the evidence can support a
McNeil v. National Football League, 790 F.              finding that NFL teams compete against each
Supp. 871, 879-80 (D.Minn. 1992) [**19]                 other for the sale of their ownership interests.
(holding that Copperweld did not apply to the           Proof of such competition defeats both the
NFL and its member clubs and finding the                NFL’s challenge to the existence of an injury
clubs to be separate entities capable of                to competition and the NFL’s Copperweld
conspiring together under @ 1). Copperweld’s            argument as well. Insufficient proof of such
holding turned on the fact that the subsidiary          competition would require a judgment in favor
of a corporation, although legally distinct from        of the NFL anyway, regardless of the
the corporation itself, “pursued the common             implications under Copperweld. As we
                                                        discuss below, the jury’s finding that there
                                                        exists competition between teams for the sale
    (Continued)
                                                        of ownership interests was based on sufficient
give rise to an antitrust injury. See Kestenbaum v.
                                                        evidence.
Falstaff Brewing Corp., 514 F.2d 690 (5th Cir. 1975),
cert. denied, 424 U.S. 943, 47 L. Ed. 2d 349, 96 S.        2. Insufficient Evidence of Harm to
Ct. 1412 (1976); McDaniel v. General Motors Corp.,      Competition
480 F. Supp. 666 (E.D.N.Y. 1979). Individual
decisions to block the sale of a franchise do not       The NFL contends that Sullivan did not
implicate the harm to competition that is caused by a
                                                        present sufficient evidence concerning: (1) the
policy restricting all sales of a certain type of
ownership interest. Only the broad-based policy has     existence of competition between NFL clubs
the potential to compromise the entire competitive      for the sale of ownership interests, or (2) a
process for the buying and selling of a good in a       decrease in output, an increase in prices, a
relevant market.                                        detrimental effect on efficiency or other




                                                                                              699
incidents of harm to competition in the              for the sale of ownership interests -- a jury
relevant market, from which a reasonable jury        could reasonably interpret these statements as
could conclude that [**21] the NFL’s policy          expressing a belief that the competition exists
injured competition. Although we agree that          between teams for the sale of ownership
[*1100] the evidence of all these factors is         interests. The statements of the two NFL
rather thin, we disagree that the evidence is        owners imply that greater access to capital for
too thin to support a jury verdict in Sullivan’s     all teams will put increased pressure on some
favor.                                               teams to compete with others for that capital,
                                                     and all the statements reveal that the
    With respect to evidence of the existence        ownership rules, particularly the rule against
of competition for the sale of ownership             public ownership, is the main obstacle
interests, one of Sullivan’s experts, Professor      preventing such access. The fact that
Roger Noll, testified that “one of the ways in       ownership by “consolidated groups” is not
which the NFL exercises monopoly power in            necessarily the same as public ownership
the market for the franchises and ownership is       [**23] does not affect the conclusion that
by excluding certain people from owning all          teams face competitive pressure in selling
or part -- any type part of an NFL franchise.”       their ownership interests generally to whoever
Dr. Noll explained that this “enables a group        might buy them. We also note that evidence of
of owners, in this case, you only need eight         actual, present competition is not necessary as
owners, to exclude from the League and from          long as the evidence shows that the potential
competing with them, people who might be             for competition exists. See L. A. Coliseum,
more effective competitors than they are.” The       726 F.2d at 1394 (discussing significance of
record also contains statements from several         potential competition, especially where
NFL owners which could reasonably be                 challenged policy limits such competition so
interpreted as expressions of concern about          that it is not evident in practice). It would be
their ability to compete with other teams in         difficult indeed to provide direct evidence of
the market for investment capital in general,        competition when the NFL effectively
and for the sale of ownership interests in           prohibits it.
particular. For example, Arthur Rooney II of
the Pittsburgh Steelers stated in a letter that he       The NFL focusses on the fact that
did not “believe that the individually or family     Professor Noll testified that many of the
owned teams will [**22] be able to compete           purchasers of Patriots’ stock would be New
with the consolidated groups.” Ralph Wilson          England sports fans and others in the New
of the Buffalo Bills stated that big                 England area. The NFL points out that other
corporations should not own teams because it         NFL teams would not compete with the
gives them an “unfair competitive advantage”         Patriots for the sale of stock to their own fans.
over other teams since corporations will             This argument slightly distorts Professor
funnel money into the team and make it “more         Noll’s testimony. Professor Noll stated that
competitive” than the other franchises. Former       local souvenir buyers would be one portion of
NFL Commissioner Pete Rozelle admitted               the market for Patriots stock. Professor Noll
that similar sentiments had been expressed by        also testified several times that other investors
NFL members.                                         would buy Patriots stock as well, for
                                                     investment purposes. [**24] Noll’s point
   Although it is not precisely clear that the       was that the souvenir buyers would serve to
“competition” about which Noll, Rooney, and          bid up the price of the stock above what the
Wilson were discussing is the same                   price would normally be if the Patriots were a
competition at issue here -- that is competition     regular company. His testimony did not




                                                                                           700
preclude a finding that NFL teams compete          likely, the price you could get for one of our
against each other for investment capital via      franchises if you wanted to sell it, because you
the sale of ownership interests.                   are eliminating a very broad market . . . . And
    The record also contains sufficient            they have said that there is a depression on the
evidence of the normal incidents of injury to      price they could get for their franchise.”
competition from the NFL’s policy -- reduced
output, increased prices, and reduced                   The NFL points [**26]         out that the
efficiency -- to support the jury’s verdict. As    alleged effect of its ownership policy is to
Dr. Noll pointed out in his testimony, the         reduce prices of NFL team ownership
NFL’s policy “excludes individuals . . . who       interests, rather than to raise prices which is
might want to own a share of stock in a            normally the measure of an injury to
professional football team.” Several NFL           competition. E.g., Town of Concord, 915 F.2d
officials themselves admitted that the policy      at 22. We acknowledge that it is not clear
restricts the market for investment capital        whether, absent some sort of dumping or
among NFL teams. There is thus little dispute      predatory pricing, see, e.g., Monahan’s
that the NFL’s ownership policy reduces the        Marine, Inc. v. Boston Whaler, Inc., 866 F.2d
available output of ownership interests.           525, 527 (1st Cir. 1989), a decrease in prices
                                                   can indicate injury to competition in a relevant
     [*1101] The NFL is correct that, in one       market. The Supreme Court has emphasized,
sense, the overall pool of potential output is     however, that overall consumer preferences in
fixed because there are only 28 NFL teams          setting output and prices is more important
and, although their value may fluctuate, the       than higher prices and lower output, per se, in
quantity of their ownership interests cannot.      determining whether there has been an injury
However, the NFL’s public ownership policy         to competition. NCAA, 468 U.S. at 107. In
completely wipes out a certain type [**25] of      this case, regardless of the exact price effects
ownership interest -- public ownership of          of the NFL’s policy, the overall market effects
stock. By restricting output in one form of        of the policy are plainly unresponsive to
ownership, the NFL is thereby reducing the         consumer demand for ownership interests in
output of ownership interests overall. In other    NFL teams. Dr. Noll testified that fans are
words, the NFL is literally restricting the        interested in buying shares in NFL teams and
output of a product -- a share in an NFL team.     that the NFL’s policy deprives [**27] fans of
     There was considerable testimony              this product. Moreover, evidence was
concerning the price effects of the NFL policy.    presented concerning the public offering of
Both of Sullivan’s experts testified that the      the Boston Celtics professional basketball
policy depressed the price of ownership            team which demonstrated, according to some
interests in NFL teams because NFL                 of the testimony, fan interest in buying
franchises would normally command a                ownership of professional sports teams. Thus,
premium on the public market relative to their     a jury could conclude that the NFL’s policy
value in the private market, which is all that     injured competition by making the relevant
the league currently permits. Professor Noll       market       “unresponsive      to    consumer
                                                                    3
testified that fan loyalty would push up the       preference.” Id. [**28]
price of ownership interests if sales to the
public     were    allowed.      Even   former
Commissioner Pete Rozelle acknowledged             3 The NFL maintains that price and output are not
that “it was pointed out, with justification, it   affected because its ownership policy does not limit
has been over the years, that [the ownership       the number of games or teams, does not raise ticket
policy] does restrict your market and, very        prices or the prices of game telecasts and does not
                                                   affect the normal consumer of the NFL’s product in




                                                                                            701
     As for overall efficiency of production in             financial strength and viability, which in turn
the relevant market,4 Sullivan’s experts                    would benefit the entire NFL because the
testified that the NFL’s policy hindered                    league has a strong interest in having strong,
efficiency gains, and that allowing public                  viable teams.
ownership would make for better football                    [**29]
teams. Professor Noll stated that the NFL’s
public ownership policy prevented individuals                   The NFL presented a large amount of
who [*1102] might be “more efficient and                    evidence to the contrary and now claims on
much better at running a professional football              appeal that Sullivan’s position was based on
team” from owning teams. Dr. Noll also stated               nothing more than sheer speculation. We have
that publicly owned NFL teams would be                      reviewed the record, however, and we cannot
better managed, and produce higher quality                  say that the evidence was so overwhelming
entertainment for the fans. Noll testified that             that no reasonable jury could find against the
the ownership rule excluded certain types of                NFL and in favor of Sullivan. We therefore
management structures which would likely be                 refuse to enter judgment in favor of the NFL
more efficient in running the teams, resulting              as a matter of law.
in higher franchise values. One NFL owner,
Lamar Hunt, acknowledged that increased                         B. Ancillary Benefits
access to capital can improve a team’s
operations and performance. A memorandum                        The NFL next argues that even if its
prepared by an NFL staff member stated that                 public ownership policy injures competition in
changes to the NFL’s public ownership policy                a relevant market, it should be upheld as
could contribute to each NFL team’s own                     ancillary to the legitimate joint activity that is
                                                            “NFL football” and thus not violative of the
    (Continued)                                             Sherman Act. We take no issue with the
                                                            proposition that certain joint ventures enable
any other way. Such facts might be relevant to an           separate business entities to combine their
inquiry of whether the NFL’s policy harms overall           skills and resources in pursuit of a common
efficiency, see infra note [4], but it is not relevant to   goal that cannot be effectively pursued by the
whether the policy affects output and prices in the
                                                            venturers acting alone. See, e.g., Broadcast
relevant market for ownership interests. Just because
consumers of “NFL football” are not affected by             Music, Inc. v. Columbia Broadcasting System,
output controls and price increases does not mean that      Inc., 441 U.S. 1, 60 L. Ed. 2d 1, 99 S. Ct. 1551
consumers of a product in the relevant market are not       (1979). We also do not dispute that a
so affected. In this case, two types of consumers are       “restraint” that is ancillary to the functioning
denied products by the NFL policy: consumers who            of such a joint [**30] activity -- i.e. one that
want to buy stock of the Patriots or other teams, and       is required to make the joint activity more
consumers like Sullivan who want to “purchase”
investment capital in the market for public financing.
                                                            efficient -- does not necessarily violate the
                                                            antitrust laws. Broadcast Music, 441 U.S. at
4 Although the product at issue in the relevant             23-25; Rothery Storage & Van Co. v. Atlas
market is “ownership interests,” efficiency in              Van Lines, Inc., 253 U.S. App. D.C. 142, 792
production of that product can be measured by the           F.2d 210, at 223-24 (D.C. Cir. 1986), cert.
value of the ownership interest. That is, an improved       denied, 479 U.S. 1033, 93 L. Ed. 2d 834, 107
product produced more efficiently will be reflected in
                                                            S. Ct. 880 (1987); see also Northwest
the value of the output in question (regardless of the
price). In this case, the value of the product depends      Wholesale Stationers, Inc. v. Pacific
on the success of the Patriots’ football team, the          Stationery & Printing Co., 472 U.S. 284, 295-
overall efficiency of its operations, and the success of    96, 86 L. Ed. 2d 202, 105 S. Ct. 2613 (1985).
the NFL in general.                                         We further accept, for purposes of this appeal,




                                                                                                   702
that rules controlling who may join a joint           alternative to the policy exists that would
venture can be ancillary to a legitimate joint        provide the same benefits as the current
activity and that the NFL’s own policy against        restraint. L.A. Coliseum, 726 F.2d at 1396.
public ownership constitutes one example of           The record contains evidence of a clearly less
such an ancillary rule. Finally, we accept the        restrictive alternative to the NFL’s ownership
NFL’s claim that its public ownership policy          policy that would yield the same benefits as
contributes to the ability of the NFL to              the current policy. Sullivan points to one
function as an effective sports league, and that      proposal to amend the current ownership
the NFL’s functioning would be impaired               policy by allowing for the sale of minority,
[**31]       if publicly owned teams were             nonvoting shares of team stock to the public
permitted, because the short-term dividend            with restrictions on the size of the holdings by
interests of a club’s shareholder would often         any one individual. Dividend payments, if
conflict with the long-term interests of the          any, would be within the firm control of the
league as a whole. That is, the policy avoids a       NFL majority owner. Under such a policy, it
detrimental conflict of interests between team        would be reasonable for a jury to conclude
shareholders and the league.                          that private control of member clubs is
                                                      maintained, [**33] conflicts of interest are
    We disagree, however, that these factors          avoided, and all the other “benefits” of the
are sufficient to establish as a matter of law        NFL’s joint venture arrangement are
that the NFL’s ownership policy does not              preserved while at the same time teams would
unreasonably restrain trade in violation of @ 1       have access to the market for public
of the Sherman Act. The holdings in                   investment capital through the sale of
Broadcast Music, Rothery Storage, and                 ownership interests.
Northwest Stationers, do not throw the “rule
of reason” out the window merely because                  C. Causation of Injury in Fact
one establishes that a given practice among
joint venture participants is ancillary to                The NFL next argues that Sullivan did not
legitimate and efficient activity -- the injury to    present sufficient evidence to support a
competition must still be weighed against the         finding by the jury that the NFL’s public
purported benefits under the rule of reason.          ownership policy caused injury in fact to
See, e.g., Broadcast Music, 441 U.S. at 24            Sullivan. An antitrust plaintiff must prove that
(holding only that a particular ancillary             he or she suffered damages from an antitrust
restraint did not constitute a per se violation of    violation and that there is a causal connection
the Sherman Act and remanding for a                   between the illegal practice and the injury.
determination of the case under a rule of             Associated General Contractors, Inc. v.
reason analysis); Northwest Stationers, 472           California State Council of Carpenters, 459
U.S. at 293-98 [**32]           (same); see also      U.S. 519, 532-33 & n.26, 74 L. Ed. 2d 723,
SCFC ILC, Inc. v. Visa U.S.A. Inc., 819 F.            103 S. Ct. 897 (1983); Blue Shield of Virginia
Supp. 956, 979-80 (D.Utah 1993) (finding that         v. McCready, 457 U.S. 465, 476-78, 73 L. Ed.
the existence of a joint [*1103] venture may          2d 149, 102 S. Ct. 2540 (1982); Engine
save a restraint from per se illegality but not       Specialties, Inc. v. Bombardier Ltd., 605 F.2d
from the normal rule of reason scrutiny).             1, 13 (1st Cir. 1979), cert. denied, 446 U.S.
                                                      983, 64 L. Ed. 2d 839, 100 S. Ct. 2964 (1980).
    One basic tenet of the rule of reason is that     [**34] “Plaintiffs need not prove that the
a given restriction is not reasonable, that is, its   antitrust violation was the sole cause of their
benefits cannot outweigh its harm to                  injury, but only that it was a material cause.”
competition, if a reasonable, less restrictive        Engine Specialties, 605 F.2d at 14.




                                                                                            703
    Sullivan asserted at trial that the NFL’s       Real Estate, Inc. v. Greater Lowell Bd. of
ownership policy forced him to sell the             Realtors, 850 F.2d 803, 816 (1st Cir.), cert.
Patriots at a depressed price, far below what       denied, 488 U.S. 955, 102 L. Ed. 2d 381, 109
the team would have been worth in a market          S. Ct. 392 (1988); Out Front Productions, Inc.
that included public ownership of the team.         v. Magid, 748 F.2d 166, 170 (3d Cir. 1984).
“But for” the NFL’s policy, Sullivan claims,        [**36]      Such a requirement only applies,
he would have been able to offer 49% of the         however, where the plaintiff cannot otherwise
Patriots to the public for $ 70 million, pay off    prove that the illegal practice exists or that
his debts, and retained ownership of a much         [*1104]        the practice is preventing the
more valuable and profitable team.                  plaintiff from competing in the relevant
                                                    market; in such cases, a refused demand is the
    The NFL contends that Sullivan failed to        only reliable evidence of causation. Out Front,
establish a causal connection between his           748 F.2d at 169-70. In cases like the present
“forced” sale of the Patriots and the NFL’s         one, an official request and official refusal is
ownership policy because (1) Sullivan never         not necessary to establish causality because
officially requested a vote on his proposals to     there is other evidence showing that
amend or waive the policy so there is no way        defendant’s practice caused injury in fact to
of knowing whether the policy would have            the plaintiff. Zenith Radio Corp. v. Hazeltine
prevented a public offering in the first place;     Research, 395 U.S. 100, 120 n.15, 23 L. Ed.
and (2) Sullivan never established that the         2d 129, 89 S. Ct. 1562 (1969); Continental
public stock sale was feasible or potentially       Ore Co. v. Union Carbide & Carbon Corp.,
successful and thus an alternative to what          370 U.S. 690, 699-702, 8 L. Ed. 2d 777, 82 S.
ultimately happened (i.e., even if the NFL did      Ct. 1404 (1962). There is certainly no blanket
not have a policy against public ownership,         requirement, as the NFL maintains, in Wells
[**35] Sullivan would still have had to sell        or any other case, that Sullivan must call for a
his team because the Patriots stock sale would      vote and obtain an official refusal from the
not have happened or would not have raised          NFL, even if such a request would be futile.
enough money to pay off Sullivan’s debts and        See, e.g., Wells, 850 F.2d at 816 [**37]
prevent a fire sale of the team). Although the      (finding failure to request access to multiple
evidence of causation is not overwhelming, it       listing service was critical because “there was
is nevertheless sufficient to support the           no evidence of a group boycott;” although
verdict.                                            court noted request “may have been futile,”
                                                    there was no evidence to indicate that it would
    Regarding the NFL’s first claim that            have been, so an actual request was required);
Sullivan never called for a vote from the           Chicago Ridge Theatre Ltd. Partnership v. M
owners to change or waive the ownership             & R Amusement Corp., 855 F.2d 465, 470
policy, Sullivan presented sufficient evidence      (7th Cir. 1988) (futility obviates the need for a
to show that the NFL essentially rejected           demand). Certainly, if Sullivan can prove
Sullivan’s request, even though no official         futility independent of any official request, he
vote was taken. Under certain circumstances,        need not show that he actually called for a
an antitrust plaintiff must make a demand on        vote and received a denial from the other NFL
the defendant to allow the plaintiff to take        owners.
some action or obtain some benefit, which the
defendant’s challenged practice is allegedly            The jury in this case heard evidence that
preventing the plaintiff from taking or             would allow it to conclude that the NFL
obtaining, in order to prove that the practice      effectively denied Sullivan’s request for a
caused injury in fact to the plaintiff. See Wells   waiver or amendment of the public ownership




                                                                                          704
policy, and that an official vote would indeed      approval as the prerequisite -- before Stephens
have been futile. The NFL’s policy against          could proceed any further with efforts to
public ownership was long-standing, and the         prepare for the placement of Patriots stock.
policy withstood several efforts to change it
over the years as proffered amendment                   As discussed above, NFL approval was
proposals were never brought to a vote.             never obtained. Therefore, the jury could
Sullivan requested a wavier of, or amendment        conclude that lack of approval was the reason
to, the policy at a meeting of the owners on        Stephens was unwilling to proceed with the
October 27, 1987. His request was tabled.           deal, even though Stephens also expressed
After      [**38]     further discussions, then-    some concern about Sullivan’s financial and
Commissioner Pete Rozelle said that he              legal troubles. The jury also heard testimony
opposed the proposal and that the chances for       that Charles Allen, a prominent investment
league approval were “very dubious.”                banker in New York, thought the Patriots
Although Sullivan was only four votes shy of        public offering was feasible and that he was
winning a vote, with seven votes still              potentially interested in arranging the deal.
undecided, the jury could reasonably conclude       Sullivan himself testified that the stock sale
that, in light of the Commissioner’s statement,     was feasible based on his experience with the
Sullivan tried but failed to convince those         previous public offering of Patriots stock in
undecided owners to vote in his favor and that      1960, and based on the public offering of the
an actual vote would have been futile. The          [**40]      Boston Celtics. Finally, one of
evidence is thus sufficient to support a finding    Sullivan’s experts, Patrick Brake, testified that
that the NFL’s policy was effectively enforced      the public offering would have been feasible
against Sullivan and that the policy did in fact,   had the NFL not blocked it.
when considered with the evidence discussed
below, prevent Sullivan from making his                 In addition, despite significant financial
public offering of 49% of the Patriots.             and legal problems with the Patriots, the
                                                    [*1105] evidence is sufficient to support a
    Sullivan also presented sufficient evidence     finding that Sullivan could have solved these
to support a finding that the Patriots stock sale   problems in the course of the public offering
was both feasible and potentially successful.       and, further, that he could have brought off a
Sullivan met with Stephens, Inc., an                successful stock sale that would have raised at
investment banking firm, to discuss a deal          least $ 70 million.
whereby Stephens would arrange for a loan of
$ 80 million to Sullivan and his son, half of            The NFL focusses its challenge to the
which would be paid back out of the proceeds        potential success of Sullivan’s offering on the
of the Patriots stock offering, which Stephens      testimony of Patrick Brake, who provided the
would also arrange. In a subsequent letter,         $ 70 million figure as the value for the stock
Stephens stated that it [**39]         had been     sale. According to the NFL, Brake’s testimony
retained to assist in the “private placement of     could not support the jury’s finding on
$ 80 million of debt” and set out some              causation because it was not supported by any
preliminary terms and conditions. Although          facts, it was not grounded in any rational
specifics of the public offering were not           methodology, and it ignored important factors
discussed, and Stephens did not determine           indicating that the Patriots offering would not
whether the stock offering was ultimately           be a success. The NFL does not challenge the
feasible, Stephens repeatedly made it clear to      admissibility of Brake’s opinion but, instead,
Sullivan that NFL approval was required --          claims that his opinion cannot support the
indeed Stephens specifically singled out NFL        jury’s finding that the Patriots stock sale




                                                                                          705
would have been a success if the NFL had          and was apprised of some of the debt and loss
allowed it to happen.                             history of the club. Other testimony and
                                                  evidence at trial supported the claim that stock
    “When an expert opinion is [**41] not         of NFL teams would sell for a premium above
supported by sufficient facts to validate it in   the club’s private sale value and the claim that
the eyes of the law, or when indisputable         TV revenues to the NFL teams would
record facts contradict or otherwise render the   increase. Sullivan himself testified that a
opinion unreasonable, it cannot support a         public offering would be successful based
jury’s verdict.” Brooke Group, Ltd. v. Brown      upon the success [**43]           of his earlier
& Williamson Tobacco Corp., 125 L. Ed. 2d         offering of Patriots stock and on the results of
168, 113 S. Ct. 2578, 2589 (1993); accord         the Celtics public offering. There was also
Price v. General Motors Corp., 931 F.2d 162,      testimony -- highly disputed, but potentially
165 (1st Cir. 1991); Richardson v.                credible testimony nonetheless -- to the effect
Richardson-Merrell, Inc., 273 U.S. App. D.C.      that the Celtics’ stock offering was a success
32, 857 F.2d 823, 829 (D.C. Cir. 1988), cert.     and that the Patriots stock offering could be
denied, 493 U.S. 882, 107 L. Ed. 2d 171, 110      patterned after the Celtics offering.
S. Ct. 218 (1989). A jury verdict cannot rest
solely on an expert’s “bottom line”                   As for the source of Brake’s specific $70
conclusion, without some underlying facts and     million figure for the likely proceeds from a
reasons, or a logical inferential process to      sale of 49% of the Patriots, Brake explained a
support the expert’s opinion. Mid-State           two-step public offering process which, after
Fertilizer Co. v. Exchange National Bank, 877     subtracting underwriting fees, would yield the
F.2d 1333, 1339 (7th Cir. 1989).                  Sullivan’s $ 70 million. Brake arrived at this
                                                  figure after starting with a base value of $ 150
    We agree that the facts and reasoning         million for the Patriots. Given the $ 80 million
underlying Brake’s opinions and testimony         private sale price of the Patriots obtained by
leave much to be desired from the standpoint      Sullivan when he actually sold the team, and
of a factfinder charged [**42]            with    given the testimony by Brake and others that
determining the facts. As a matter of law,        public stock of NFL teams would sell at a
however, Brake provided enough of a basis for     premium, we cannot say that the opinion by
his opinions and had sufficient facts to back     Brake, an investment banking expert, was
his opinions up, to support, in combination       unreasonable or “not supported by sufficient
with the evidence from other sources, a jury      facts to validate it in the eyes of the law.”
finding of potential success of the Patriots      Brooke Group, 113 S. Ct. at 2589.
stock sale venture. To begin with, Brake
stated in his testimony that his opinion was           Brake’s testimony was not merely
based on a review of documents and                conclusory. Rather, it was [**44] embellished
depositions in the case, a review of the          by various explanations and justifications. His
prospectus for the Boston Celtics public          testimony was also not overwhelmingly
offering, the fact that future television         contradicted by the weight of the evidence or
revenues for the Patriots were likely to          inherently [*1106]               contradictory,
increase due to the Patriots’ appearance in the   unreasonable or irrational. Brake did overlook
Super Bowl, and the fact that the public stock    some important factors that contradicted his
for NFL teams, like the Patriots, would trade     opinion, but he was questioned about these
at a premium value over what the club would       factors on cross-examination and the NFL
otherwise be worth. Brake also stated that he     argued them before the jury. The factors do
looked at a financial statement of the Patriots   not invalidate Brake’s opinion as a matter of




                                                                                        706
law; rather, they merely go to the weight and      conclude that the NFL did not prevent
credibility of his opinions which are matters      Sullivan from pursuing his stock sale, but
for the jury to consider. The basis of the         instead, Sullivan simply dropped the idea for
opinion regarding the success of the Patriots      reasons unrelated to the NFL’s policy. If the
public offering may be flimsy, but it is not       jury had reached such a conclusion, Sullivan
nonexistent or irrational as a matter of law.      would have failed to prove that his injury was
                                                   caused by the antitrust policy, and judgment
     Although we share the NFL’s skepticism        for the NFL would be required.
that Sullivan would have succeeded in his
public offering if the NFL had allowed him to          The      NFL      proposed       instructions
try it, we cannot say that, as a matter of law,    concerning Sullivan’s failure to ask for a vote
the evidence was so overwhelming that no           essentially stating that such a failure would
reasonable jury could find that the NFL’s          result in judgment for the NFL if it was
policy harmed Sullivan by preventing him           reasonable to require Sullivan to make such a
from doing something he would otherwise            request. The court refused to give the
have been able to do. We therefore reject the      instruction because it felt that to do so would
NFL’s claim that it is entitled to a judgment in   be to comment on the evidence, and the court
its favor on the basis that Sullivan failed to     did [**59] not want to comment on any of
prove his [**45] injury was caused by the          the evidence presented at trial. We understand
alleged antitrust violation.                       the court’s concern but believe that, under the
                                                   facts of this case, there is a crucial point of
                     ***                           law contained in the NFL’s instruction that
                                                   was not otherwise provided to the jury.
    B. Failure to Request an Official Vote of
the Owners                                             The jury was instructed generally on the
                                                   issue of causation, but it was not told that it
    As discussed in Section II.C. above, in        [*1110] had to determine whether the NFL’s
order to establish that the policy actually        policy against public ownership was actually
caused injury to himself, Sullivan must prove      enforced against Sullivan; that is, whether the
that the NFL effectively denied his request to     policy, the alleged antitrust restraint, actually
waive or amend its policy against public           restrained Sullivan in any way from making a
ownership. While there is evidence that            49% public offering of his team. Although the
supports a finding that the NFL’s policy           NFL could, and did, argue that Sullivan’s
effectively blocked Sullivan from pursuing his     failure to ask for a vote was evidence that the
public offering, there is also sufficient          policy did not cause injury to Sullivan, there
evidence to support a contrary finding.            was no legal hook upon which the jury could
[**58] Sullivan’s failure to request a vote        hang the NFL’s argument. The failure of
from the owners after he discovered that he        Sullivan to request a vote is a critical and
was four votes shy of obtaining a waiver with      potentially dispositive issue in this case. If the
seven owners still undecided, combined with        alleged restraint of trade does not even exist in
former Commissioner Rozelle’s testimony            practice, the whole case essentially
that he told Sullivan that Rozelle would put to    disappears. Therefore, the jury should have
the owners any plan that Sullivan wished,          been directed to make a specific finding as to
could support a finding that Sullivan was a        whether the public ownership policy was
“dormant plaintiff” who did not “spring into       enforced against Sullivan.
action” until it was “time to file suit.” Out
Front, 748 F.2d at 170. As such, a jury could




                                                                                          707
    If the jury is instructed [**60]       that     district court agreed, that a jury cannot be
Sullivan must prove that the NFL’s policy was       asked to compare what are essentially apples
enforced against him, the jury will have cause      and oranges, and that it is impossible to
to consider the crucial matter of whether the       conduct a balancing of alleged anticompetitive
NFL actually enforced its policy against            and procompetitive effects of a challenged
Sullivan or rather, whether the NFL never had       practice in every definable market.
the chance to enforce its policy because
Sullivan was never prepared to pursue his               The issue of defining the proper scope of a
public offering. The instructions as proffered      rule of reason analysis is a deceptive body of
by the NFL may need to be tailored to avoid         water, containing unforeseen currents and
commenting on the evidence surrounding the          turbulence lying just below the surface of an
“missing” vote by the NFL owners, but that          otherwise calm and peaceful ocean. The
does not excuse the court from giving no            waters are muddied by the Supreme Court’s
instruction at all on the issue. The failure to     decision [**65] in NCAA -- one of the
give some instruction concerning the failure of     more extensive examples of the Court
Sullivan to request a vote was error.               performing a rule of reason analysis -- where
                                                    the Court considered the value of certain
                     ***                            procompetitive effects that existed outside of
                                                    the relevant market in which the restraint
   D. Balancing     Procompetitive  and             operated. NCAA, 468 U.S. at 115-20
Anticompetitive Effects in the Relevant             (considering the NCAA’s interest in
Market                                              protecting live attendance at untelevised
                                                    games and the NCAA’s “legitimate and
    As we noted above, the rule of reason           important” interest in maintaining competitive
analysis requires a weighing of the injury and      balance between amateur athletic teams as a
the benefits to competition attributable to a       justification for a restraint that operated in a
practice that allegedly violates the antitrust      completely different market, the market for
laws. Monahan’s Marine, 866 F.2d at 526.            the telecasting of collegiate football games). 9
The district court instructed the jury on its       Other courts have demonstrated similar
verdict form to balance the injury to               confusion. See, e.g., L.A. Coliseum, 726 F.2d
competition in the relevant market with the         at 1381, 1392, 1397, 1399 (stating that the
benefits to competition in that same [**64]         “relevant market provides the basis on which
relevant market. The NFL protested, claiming        to balance competitive harms and benefits of
that all procompetitive effects of its policy,      the restraint at issue” but then considering a
even those in a market different from that in
which the alleged restraint operated, should be
considered. The NFL’s case was premised on          9 The Supreme Court did not expressly consider
the claim that its policy against public            the issue presented here. Therefore, it is impossible to
ownership was an important part of the              tell whether the Court was consciously applying the
effective functioning of the league as a joint      rule of reason to include a broad area of
venture. Although it was not readily apparent       procompetitive benefits in a variety of markets, or
that this beneficial effect applied to the market   whether the Court was simply not being very careful
                                                    and inadvertently extended the rule of reason past its
for ownership interests in NFL teams, the
                                                    proper scope. There is certainly no language, as
relevant market found by the jury, the NFL          Sullivan suggests, indicating that the Court was
argued that its justification should necessarily    considering the alleged benefit of “competitive
be weighed by the jury under the rule of            balance” only to the extent that it had procompetitive
reason analysis. Sullivan responded, and the        effects in the market for televised football games.




                                                                                                708
wide variety of alleged benefits, and then           effects of the intrabrand market of competition
directing the finder of fact to “balance the gain    between NFL teams for the sale of their
to interbrand competition against the loss of        ownership interests, is arguably refuted by the
intrabrand competition”, where the two types         Supreme Court’s holding in Continental T.V.,
of competition operated in [**66] different          Inc. v. GTE Sylvania Inc., 433 U.S. 36, 53 L.
markets).                                            Ed. 2d 568, 97 S. Ct. 2549 (1977). Continental
                                                     T.V. explicitly recognized that positive effects
    To our knowledge, no authority has               on interbrand competition can justify
squarely addressed this issue. On the one            anticompetitive      effects   on     intrabrand
hand, several courts have expressed concern          competition. Id. at 51-59. Although
over the use of wide ranging interests to            Continental T.V. can reasonably be
justify an otherwise anticompetitive practice,       interpreted as referring only to interbrand and
and others have found particular justifications      intrabrand components of the same relevant
to be incomparable and not in correlation with       market, Hornsby Oil Co., Inc. v. Champion
the alleged restraint of trade. Smith v. Pro         Spark Plug Co., 714 F.2d 1384, 1394 (5th Cir.
Football, Inc., 193 U.S. App. D.C. 19, 593           1983), there is also some indication that
F.2d 1173, 1186 (D.C. Cir. 1978); [**67]             interbrand and intrabrand competition
Brown v. Pro Football, Inc., 812 F. Supp. 237,       necessarily refer to distinct, yet related,
238 (D.D.C. 1992); Chicago Pro. Sports Ltd.          markets. [**69] Continental T.V., 433 U.S.
Partnership v. National [*1112] Basketball           at 52 n.19 (“The degree of intrabrand
Ass’n, 754 F. Supp. 1336, 1358 (N.D.Ill.             competition is wholly independent of the level
1991). We agree that the ultimate question           of interbrand competition.”). Arguably, the
under the rule of reason is whether a                market put forward by the NFL -- that is the
challenged practice promotes or suppresses           market for NFL football in competition with
competition. Thus, it seems improper to              other forms of entertainment -- is closely
validate a practice that is decidedly in restraint   related to the relevant market found by the
of trade simply because the practice produces        jury such that the procompetitive benefits in
some unrelated benefits to competition in            one can be compared to the anticompetitive
another market.                                      harms in the other. Clearly this question can
                                                     only be answered upon a much more in-depth
    On the other hand, several courts,               inquiry that we need not, nor find it
including this Circuit, have found it                appropriate to, embark upon at this time.
appropriate in some cases to balance the
anticompetitive effects on competition in one            Finally, we note that although balancing
market with certain procompetitive benefits in       harms and benefits in different markets may
other markets. See, e.g., NCAA, 468 U.S. at          be unwieldy and confusing, such is the case
115-20; Grappone, Inc. v. Subaru of New              with a number of balancing tests that a court
England, Inc., 858 F.2d 792, 799 (1st Cir.           or jury is expected to apply all the time.
1988); M & H Tire Co. v. Hoosier Racing Tire         Indeed, Justice Brandeis’ famous formulation
Corp., 733 F.2d 973, 986 (1st Cir. 1984); L.A.       of the rule of reason seems to contemplate the
Coliseum, 726 F.2d at 1381, 1392, 1397,              balancing of a wide variety of factors and
1399. Moreover, [**68] the district court’s          considerations, many of which are not
argument that it would be impossible to              necessarily comparable or correlative:
compare the procompetitive effects of the
NFL’s policy in the interbrand market of                The true test of legality is whether the
competition between the NFL and other forms             restraint imposed is such as merely
of entertainment, with the anticompetitive              regulates and perhaps thereby




                                                                                           709
   promotes [**70]          competition or         proper scope of the rule of reason analysis. As
   whether it is such as may suppress or           we point out in note [4] above, and as Sullivan
   even      destroy     competition.     To       himself points out, to the extent the NFL’s
   determine that question the court must          policy strengthens and improves the league,
   ordinarily consider the facts peculiar          resulting in increased competition in the
   to the business to which the restraint is       market for ownership interests in NFL clubs
   applied; its condition before and after         through, for example, more valuable teams,
   the restraint was imposed; the nature           the jury may consider the NFL’s justifications
   of the restraint and its effect, actual or      as relevant factors in its rule of reason
   probable. The history of the restraint,         analysis. The danger of the proffered
   the evil believed to exist, the reason          instructions on the verdict form is that they
   for adopting the particular remedy, the         may have mislead the jury into thinking that it
   purpose or end sought to be attained,           was precluded from considering the NFL’s
   are all relevant facts.                         justifications [**72]       for its ownership
                                                   policy. Therefore, the relevant market
Board of Trade of the City of Chicago v.           language on the verdict form should be
United States, 246 U.S. 231, 238, 62 L. Ed.        removed, or else the jury should be informed
683, 38 S. Ct. 242 (1918).                         that evidence of benefits to competition in the
                                                   relevant market can include evidence of
    Although the issue of the proper scope of      benefits flowing indirectly from the public
the rule of reason analysis is more                ownership policy that ultimately have a
appropriately resolved in a case where it is       beneficial impact on competition in the
dispositive and more fully briefed, we can         relevant market itself.
draw at least one general conclusion from the
caselaw at this point: courts should generally        E. References to Prior Antitrust Cases
give a measure of latitude to antitrust            Against the NFL
defendants in their efforts to explain the
procompetitive justifications for their policies       Despite a pretrial motion in limine and
and practices; however, courts should also         repeated objections by the NFL, the district
maintain some vigilance by excluding               court allowed the jury to hear numerous
justifications that are so unrelated to the        references to prior antitrust cases against the
[**71] challenged practice that they amount        NFL. Evidence about prior antitrust violations
to a collateral attempt to salvage a practice      by the defendant may, in appropriate cases, be
that is decidedly in restraint of trade.           admissible to show things like market power,
                                                   intent to monopolize, motive, or method of
    In any event, we need not enter these          conspiracy. United States Football League v.
dangerous waters to resolve the instant            National Football League, 842 F.2d 1335,
dispute. The NFL wanted the jury to consider       1371 (2d Cir. 1988) (hereinafter “USFL”).
its proffered justifications for the public        Because of the inherently prejudicial nature of
[*1113] ownership policy -- namely that the        such evidence, however, evidence of prior
policy enhanced the NFL’s ability to               antitrust cases involving the NFL are only
effectively produce and present a popular          admissible if Sullivan can demonstrate that
entertainment product unimpaired by the            the conduct underlying those prior judgments
conflicting interests that public ownership        had a direct, [**73] logical relationship to
would       cause.    These    procompetitive      the conduct at issue in the present case. USFL,
justifications should have been considered by      842 F.2d at 1371; International Shoe Mach.
the jury, even under Sullivan’s theory of the      Corp. v. United Shoe Mach. Corp., 315 F.2d




                                                                                        710
449, 454 (1st Cir.), cert. denied, 375 U.S. 820,     the relevant market portions of these cases
11 L. Ed. 2d 54, 84 S. Ct. 56 (1963) (plaintiff      and, on the contrary, focussed primarily on the
must show “that his claimed injury stemmed           issue of whether the NFL’s public ownership
directly and proximately from the same type          policy was unreasonable. As such, that
of practice condemned in the prior                   evidence was prejudicial, without any
Government action”); see also Coleman                balancing relevance to justify its admission
Motor Co. v. Chrysler Corp., 525 F.2d 1338,          into evidence.
1351 (3d Cir. 1975). In many of the instances
where Sullivan or his counsel made references             The references to prior NFL cases were
to prior antitrust cases at trial, Sullivan failed   made in a number of different contexts during
to satisfy this burden.                              the trial (including during direct examination,
                                                     cross-examination, and at closing argument),
     Sullivan argues that the prior cases were       and they contained a variety of different
relevant either to certain testimony regarding       information. These references are not likely to
the reasonableness of the NFL’s ownership            be repeated in precisely the same context upon
policy and voting requirements or to the issue       a new trial. Therefore, instead of identifying
of defining the relevant market. Because none        which particular pieces of evidence were
of the cases mentioned at trial concerned the        inadmissible, we think it would be more
NFL’s ownership policy at issue here,                useful to point out more generally that
evidence of those prior cases is not relevant to     references to prior NFL cases are not relevant
the reasonableness of the NFL’s policy against       to the issue of the reasonableness of the NFL’s
public [**74] ownership. The general voting          public ownership [**75] policy and such
requirements are not in dispute, so cases            references should be excluded if they contain
touching solely upon them are also not               information about the unreasonableness of
relevant. Certain limited portions of some           other policies of the NFL which were at issue
prior antitrust decisions are relevant to the        in the other cases.
issue of defining the relevant market. The
testimony and commentary at trial concerning            Reversed and remanded.
these prior cases, however, was not limited to




                                                                                          711
      CHICAGO PROFESSIONAL                        equal number of legal victories. Suit and titles
   SPORTS LIMITED PARTNERSHIP                     are connected. The Bulls want to broadcast
       and WGNCONTINENTAL                         more of their games over WGN television, a
     BROADCASTING COMPANY,                        “superstation” carried on cable systems
       Plaintiffs-Appellees, Cross-               nationwide. The Bulls' popularity makes
                Appellants,                       WGN attractive to these cable systems; the
                    v.                            large audience makes WGN attractive to the
      NATIONAL BASKETBALL                         Bulls. Since 1991 the Bulls and WGN have
      ASSOCIATION, Defendant-                     been authorized by injunction to broadcast 25
       Appellant, Cross-Appellee.                 or 30 games per year. 754 F. Supp. 1336
    Nos. 95-1341, 95-1376, 95-3935, 95-           (1991). We affirmed that injunction in 1992,
                   4021                           see 961 F.2d 667, and the district court
                                                  proceeded to determine whether WGN could
UNITED STATES COURT OF APPEALS                    carry even more games--and whether the NBA
   FOR THE SEVENTH CIRCUIT                        could impose a “tax” on the games broadcast
                                                  to a national audience, for which other
95 F.3d 593; 1996 U.S. App. LEXIS 23942;          superstations have paid a pretty penny to the
    1996-2 Trade Cas.(CCH) P71,554                league. After holding a nine-week trial and
                                                  receiving 512 stipulations of fact, the district
                                                  court made a 30-game allowance permanent,
         June 4, 1996, ARGUED                     [**6] 874 F. Supp. 844 (1995), and held the
      September 10, 1996, DECIDED                 NBA's fee excessive, 1995-2 Trade Cas. P
                                                  71,253. Both sides appeal. The Bulls want to
                                                  broadcast 41 games per year over WGN; the
  SUBSEQUENT          HISTORY:       [**1]        NBA contends that the antitrust laws allow it
Rehearing Denied October 7, 1996, Reported        to fix a lower number (15 or 20) and to collect
at: 1996 U.S. App. LEXIS 26354.                   the tax it proposed. With apologies to both
                                                  sides, we conclude that they must suffer
PRIOR HISTORY: Appeals from the United            through still more litigation.
States District Court for the Northern District
of Illinois, Eastern Division. No. 90 C 6247.       Our 1992 opinion rejected the league's
Hubert L. Will, Judge.                            defense based on the Sports Broadcasting Act,
                                                  15 U.S.C. §§ 1291-95, but our rationale
DISPOSITION: Vacated and remanded.                implied that the NBA could restructure its
                                                  contracts to take advantage of that statute.
                     ***                          961 F.2d at 670-72. In 1993 the league tried to
                                                  do so, signing a contract that transfers all
JUDGES: Before BAUER, CUDAHY, and                 broadcast rights to the National Broadcasting
EASTERBROOK, Circuit Judges. CUDAHY,              Company. NBC shows only 26 games during
Circuit Judge, concurring.                        the regular season, however, and the network
                                                  contract allows the league and its teams to
OPINIONBY: EASTERBROOK                            permit telecasts at other times. Every team
                                                  received the right to broadcast all 82 of its
OPINION: [*595] EASTERBROOK, Circuit              regular-season games (41 over the air, 41 on
Judge. In the six years since they filed this     cable), unless NBC telecasts a given contest.
antitrust suit, the Chicago Bulls have won four   The NBA-NBC contract permits the league to
National Basketball Association titles and an     exhibit 85 games per year on superstations.




                                                                                        712
Seventy were licensed to the Turner stations       Broadcasting Act leaves the antitrust laws in
(TBS and TNT), leaving 15 potentially[**7]         force.
available for WGN to license from the league.
It disdained the opportunity. The Bulls sold 30      Our prior opinion observed that the Sports
games directly to WGN, treating these as           Broadcasting Act, as a special-interest
over-the-air broadcasts authorized by the NBC      exception to the antitrust laws, receives a
contract--not to mention the district court's      beady-eyed reading. A league has to jump
injunction. The Bulls' only concession             through every hoop; partial compliance
(perhaps more to [*596] the market than to the     doesn't do the trick. The NBA could have
league) is that WGN does not broadcast a           availed itself of the Sports Broadcasting Act
Bulls game at the same time as a basketball        by taking over licensing and by selling
telecast on a Turner superstation.                 broadcast rights in the Bulls' games to one of
                                                   the many local stations in Chicago, rather than
  Back in 1991 and 1992, the parties were          to WGN. The statute offered other options as
debating whether the NBA's television              well. Apparently the league did not want to
arrangements satisfied § 1 of the Sports           use them, in part for tax reasons and in part
Broadcasting Act, 15 U.S.C. § 1291. We held        because it sought to avoid responsibilities that
not, because the Act addresses the effects of      come from being[**9] a licensor, rather than a
“transfers” by a “league of clubs,” and the        regulator, of telecasts. Such business decisions
NBA had prescribed rather than “transferred”       are understandable and proper, but they have
broadcast rights. The 1993 contract was            consequences under the Sports Broadcasting
written with that distinction in mind. The         Act. By signing a contract with NBC that left
league asserted title to the copyright interests   the Bulls, rather than the league, with the
arising from the games and transferred all         authority to select the TV station that would
broadcast rights to NBC; it received some          broadcast the games, the NBA made its
back, subject to contractual restrictions.         position under the Sports Broadcasting Act
Section 1 has been satisfied. But the league       untenable. For as soon as the Bulls picked
did not pay enough attention to § 2, 15 U.S.C.     WGN, any effort to control cable system
§ 1292, which reads:                               retransmission of the WGN signal tripped
                                                   over § 2. The antitrust laws therefore apply,
   Section 1291 of this title shall not apply      and we must decide what they have to say
   to any joint agreement described in the         about the league's effort to curtail superstation
   first[**8] sentence in such section             transmissions.
   which prohibits any person to whom
   such rights are sold or transferred from          Three issues were left unresolved in 1992.
   televising any games within any area,           One was whether the Bulls and WGN, as
   except within the home territory of a           producers, suffer antitrust injury. 961 F.2d at
   member club of the league on a day              669-70. The NBA has not pursued this
   when such club is playing at home.              possibility, and as it is not jurisdictional
                                                   (plaintiffs suffer injury in fact), we let the
The NBA-NBC contract permits each club to          question pass. The other two issues are
license the broadcast of its games, and then,      related. We concluded in 1992 that the district
through the restriction on superstation            court properly condemned the NBA's
broadcasts, attempts to limit telecasts to the     superstation rule under the quick-look version
teams' home markets. Section 2 provides that       of the Rule of Reason, see National Collegiate
this makes § 1 inapplicable, so the Sports         Athletic Association v. Board of Regents of
                                                   the University of Oklahoma,[**10] 468 U.S.




                                                                                         713
85, 82 L. Ed. 2d 70, 104 S. Ct. 2948 (1984),        held the fee to be invalid. Our opinion
because (a) the league did not argue that it        compelled the judge to concede that a fee is
should be treated as a single entity, and (b) the   proper in principle. 961 F.2d at 675-76. But
anti-freeriding     justification     for     the   the judge thought the NBA's fee excessive.
superstation rule failed because a fee collected    Instead of starting with the price per game it
on nationally telecast games would                  had negotiated with Turner (some $450,000),
compensate other teams (and the league as a         and reducing to account for WGN's smaller
whole) for the value of their contributions to      number of cable outlets, as it did, the judge
the athletic contests being broadcast. 961 F.2d     concluded that the league should have started
at 672-76. Back in the district court, the NBA      with the advertising revenues WGN
argued that it is entitled to be treated as a       generated[**12] from retransmission on cable
single firm and therefore should possess the        (the “outer market revenues”). Then it should
same options as other licensors of                  have cut this figure in half, the judge held, so
entertainment products; outside of court, the       that the Bulls could retain “their share” of
league's Board of Governors adopted a rule          these revenues. The upshot: the judge cut the
requiring any club that licenses broadcast          per game fee from roughly $138,000 to
rights to superstations to pay a fee based on       $39,400.
the amount the two Turner stations pay for
games they license directly from the league.           The district court's opinion concerning the
                                                    fee reads like the ruling of an agency
  Plaintiffs say that the single-entity argument    exercising a power to regulate rates. Yet the
was forfeited by its omission from the first        antitrust laws do not deputize district judges
appeal, but we think not. As our 1992 opinion       as one-man regulatory agencies. The core
observed, the case went to initial trial and        question in antitrust is output. Unless a
decision within seven weeks, 961 F.2d at 676,       contract reduces output in some market, to the
a salutary development made possible in             detriment of consumers, there is no antitrust
[*597] part by judicial willingness to entertain    problem. A high price is not itself a violation
in subsequent rounds of the case arguments          of the Sherman Act. See Broadcast Music,
that could not be fully developed[**11] in          Inc. v. CBS, Inc., 441 U.S. 1, 9-10, 19-20, 22
such short compass. If defendants in complex        n.40, 99 S. Ct. 1551, 60 L. Ed. 2d 1 (1979);
cases feared that any arguments omitted from        Buffalo Broadcasting Co. v. ASCAP, 744 F.2d
the first phase of the case would be lost           917 (2d Cir. 1984). WGN and the Bulls argue
forever, they would drag their heels in order to    that the league's fee is excessive, unfair, and
ensure that nothing was overlooked, a step          the like. But they do not say that it will reduce
that would benefit no one. Cf. Schering Corp.       output. They plan to go on broadcasting 30
v. Illinois Antibiotics Co., 89 F.3d 357 (7th       games, more if the court will let them, even if
Cir. 1996). That is why we noted that the           they must pay $138,000 per telecast. Although
argument would be available in the ensuing          the fee exceeds WGN's outer-market
stages of the case, 961 F.3d at 672-73, and         revenues, the station evidently obtains other
why the district court properly entertained and     benefits--for example, [**13] (i) the presence
resolved it on the merits.                          of Bulls games may increase the number of
                                                    cable systems that carry the station,
  The district court was unimpressed by the         augmenting its revenues 'round the clock; (ii)
NBA's latest arguments. It held that a sports       WGN slots into Bulls games ads for its other
league should not be treated as a single firm       programming; and (iii) many viewers will
unless the teams have a “complete unity of          keep WGN on after the game and watch
interest”--which they don't. The court also         whatever comes next. Lack of an effect on




                                                                                          714
output means that the fee does not have             McDonald's is a cartel. Whether the best
antitrust significance. Once antitrust issues are   analogy is to a system of franchises (no one
put aside, how much the NBA charges for             expects a McDonald's[**15] outlet to compete
national telecasts is for the league to resolve     with other members of the system by offering
under its internal governance procedures. It is     pizza) or to a corporate holding company
no different in principle from the question         structure (on which see Copperweld Corp. v.
how much (if any) of the live gate goes to the      Independence Tube Corp., 467 U.S. 752, 81 L.
visiting team, who profits from the sale of         Ed. 2d 628, 104 S. Ct. 2731 (1984)) does not
cotton candy at the stadium, and how the            matter from this perspective. The point is that
clubs divide revenues from merchandise              antitrust law permits, indeed encourages,
bearing their logos and trademarks. Courts          cooperation inside a business organization the
must respect a league's disposition of these        better to facilitate competition between that
issues, just as they respect contracts and          organization and other producers. To say that
decisions by a corporation's board of directors.    participants in an organization may cooperate
Charles O. Finley & Co. v. Kuhn, 569 F.2d           is to say that they may control what they make
527 (7th Cir. 1978); cf. Baltimore Orioles,         and how they sell it: the producers of Star
Inc. v. Major League Baseball Players               Trek may decide to release two episodes a
Association, 805 F.2d 663 (7th Cir. 1986).          week and grant exclusive licenses to show
                                                    them, even though this reduces the number of
  According to the league, the analogy to a         times episodes appear on TV in a given
corporate board is apt in more ways than this.      market, just as the NBA's superstation rule
The NBA[**14] concedes that it comprises 30         does.
juridical entities--29 teams plus the national
organization, each a separate corporation or          The district court conceded this possibility
partnership. The teams are not the league's         but concluded that all cooperation among
subsidiaries; they have separate ownership.         separately incorporated firms is forbidden by
Nonetheless, the NBA submits, it functions as       § 1 of the Sherman Act, except to the extent
a single entity, creating a single product          Copperweld permits. Copperweld, according
(“NBA Basketball”) that competes with other         to the district court, “is quite narrow, and rests
basketball leagues (both college and                solely upon the fact that a parent corporation
professional), other sports (“Major League          and its wholly-owned subsidiary have a
Baseball”, “college football”), and other           'complete unity of interest' “ (quoting[**16]
entertainments such as plays, movies, opera,        from 467 U.S. at 771). Although that phrase
TV shows, Disneyland, and Las Vegas.                appears in Copperweld, the Court offered it as
Separate ownership of the clubs promotes            a statement of fact about the parent-subsidiary
local boosterism, which increases interest;         relation, not as a proposition of law about the
each ownership group also has a powerful            limits of permissible cooperation. As a
[*598]incentive to field a better team, which       proposition of law, it would be silly. Even a
makes the contests more exciting and thus           single firm contains many competing interests.
more attractive. These functions of                 One division may make inputs for another's
independent team ownership do not imply that        finished goods. The first division might want
the league is a cartel, however, any more than      to sell its products directly to the market, to
separate ownership of hamburger joints (again       maximize income (and thus the salary and
useful as an incentive device, see Benjamin         bonus of the division's managers); the second
Klein & Lester F. Saft, The Law and                 division might want to get its inputs from the
Economics of Franchise Tying Contracts, 28          first at a low transfer price, which would
J.L. & Econ. 345 (1985)) implies that               maximize the second division's paper profits.




                                                                                           715
Conflicts are endemic in any multi-stage firm,     one team would be like one hand clapping);
such as General Motors or IBM, see Robert G.       and a league need not deprive the market of
Eccles, Transfer Pricing as a Problem of           independent centers of decisionmaking. The
Agency, in Principals and Agents: The              district court's legal standard was therefore
Structure of Business 151 (Pratt & Zeckhauser      incorrect, and a judgment resting on the
eds. 1985), but they do not imply that these       application of that standard is flawed.
large firms must justify all of their acts under
the Rule of Reason. Or consider a partnership        Whether the NBA itself is more like a single
for the practice of law (or accounting): some      firm, which would be analyzed only under § 2
lawyers would be better off with a lockstep        of the Sherman Act, or like a joint venture,
compensation agreement under which all             which would be subject to the Rule of Reason
partners with the same seniority[**17] have        under § 1, is a tough question under
the same income, but others would prosper          Copperweld. It has characteristics of both.
under an “eat what you kill” system that           Unlike the colleges and universities that
rewards bringing new business to the firm.         belong to the National Collegiate Athletic
Partnerships have dissolved as a result of these   Association, which the Supreme Court treated
conflicts. Yet these wrangles--every bit as        as a joint venture in NCAA, the NBA has no
violent as the dispute among the NBA's teams       existence independent of sports. It makes
about how to generate and divide broadcast         professional basketball; only it can make
revenues-- do not demonstrate that law firms       “NBA Basketball” games; and unlike the
are cartels, or subject to scrutiny under the      NCAA the NBA also “makes” teams. After
Rule of Reason their decisions about where to      this case was last here the NBA[**19] created
open offices or which clients to serve.            new teams in Toronto and Vancouver, stocked
                                                   with players from the 27 existing teams plus
  Copperweld does not hold that only conflict-     an extra helping of draft choices. All of this
free enterprises may be treated as single          makes the league look like a single firm. Yet
entities. Instead it asks why the antitrust laws   the 29 clubs, unlike GM's plants, have the
distinguish between unilateral and concerted       right to secede (wouldn't a plant manager
action, and then assigns a parent-subsidiary       relish that!), and rearrange into two or three
group to the “unilateral” side in light of those   leagues. Professional sports leagues have been
functions. Like a single firm, the parent-         assembled from clubs that formerly belonged
subsidiary combination cooperates internally       to other leagues; the National Football League
to increase efficiency. Conduct that “deprives     and the NBA fit that description, and the
the marketplace of the independent centers of      teams have not surrendered their power to
decisionmaking that competition assumes”,          rearrange things yet again. Moreover, the
467 U.S. at 769, without the efficiencies that     league looks more or less like a firm
come with integration inside a firm, go on the     depending on which facet of the business one
“concerted” side of the line. And there are        examines. See Phillip E. Areeda, 7 Antitrust
entities in the middle: “mergers, joint            Law P 1478d (1986). From the perspective of
ventures, and various vertical agreements”         fans and advertisers (who use sports telecasts
[**18] ( id. at 768) that reduce the number of     to reach fans), “NBA Basketball” is one
independent decisionmakers yet may improve         product from a single source even though the
efficiency. These are assessed under the Rule      Chicago Bulls and Seattle Supersonics are
of Reason. We see no reason why a sports           highly distinguishable, just as General Motors
league cannot be treated as a single firm in       is a single firm even though a Corvette differs
this typology. It produces a single product;       from a Chevrolet. But from the perspective of
cooperation is essential (a [*599] league with     college basketball players who seek to sell




                                                                                        716
their skills, the teams are distinct, and because    F.2d 1173, 1179 (D.C. Cir. 1978). But Justice
the human capital of players[**20] is not            Rehnquist filed a strong dissent from the
readily transferable to other sports (as even        denial of certiorari in the soccer case, arguing
Michael Jordan learned) the league looks             that “the league competes as a unit against
more like a group of firms acting as a               other forms of entertainment”, NFL v. North
monopsony. That is why the Supreme Court             American Soccer League, 459 U.S. 1074,
found it hard to characterize the National           1077, 74 L. Ed. 2d 639, 103 S. Ct. 499 (1982),
Football League in Brown v. Pro Football,            and the fourth circuit concluded that the
Inc., 135 L. Ed. 2d 521, 116 S. Ct. 2116, 2126       Professional Golf Association should be
(1996): “the clubs that make up a professional       treated as one firm for antitrust purposes, even
sports league are not completely independent         though that sport is less economically
economic competitors, as they depend upon a          integrated than the NBA.                Seabury
degree of cooperation for economic survival. .       Management, Inc. v. PGA of [*600] America,
. . In the present context, however, that            Inc., 878 F. Supp. 771 (D. Md. 1994),
circumstance makes the league more like a            affirmed[**22] in relevant part, 52 F.3d 322
single bargaining employer, which analogy            (4th Cir. 1995). Another court of appeals has
seems irrelevant to the legal issue before us.”      treated an electric cooperative as a single firm,
To say that the league is “more like a single        Mt. Pleasant v. Associated Electric
bargaining employer” than a multi-employer           Cooperative, 838 F.2d 268 (8th Cir. 1988),
unit is not to say that it necessarily is one, for   though the co-op is less integrated than a
every purpose.                                       sports league. These cases do not yield a clear
                                                     principle about the proper characterization of
  The league wants us to come to a conclusion        sports leagues--and we do not think that
on this subject (six years of litigation is          Copperweld         imposes       one      “right”
plenty!) and award it the victory. Yet as we         characterization. Sports are sufficiently
remarked in 1992, “characterization is a             diverse that it is essential to investigate their
creative rather than exact endeavor.” 961 F.2d       organization and ask Copperweld's functional
at 672. The district court plays the leading         question one league at a time--and perhaps
role, followed by deferential appellate review.      one facet of a league at a time, for we do not
We are not authorized to announce and apply          rule out the possibility that an organization
our own favored characterization unless[**21]        such as the NBA is best understood as one
the law admits of only one choice. The               firm when selling broadcast rights to a
Supreme Court's ambivalence in Brown, like           network in competition with a thousand other
the disagreement among judges on similar             producers of entertainment, but is best
issues, implies that more than one                   understood as a joint venture when curtailing
characterization is possible, and therefore that     competition for players who have few other
the district court must revisit the subject using    market opportunities. Just as the ability of
the correct legal approach.                          McDonald's franchises to coordinate the
                                                     release of a new hamburger does not imply
  Most courts that have asked whether                their ability to agree on wages for counter
professional sports leagues should be treated        workers, so the ability of sports teams to agree
like single firms or like joint ventures have        on a TV contract need not[**23] imply an
preferred the joint venture characterization.        ability to set wages for players. See Jesse W.
E.g., Sullivan v. NFL, 34 F.3d 1091 (1st Cir.        Markham & Paul V. Teplitz, Baseball
1994); North American Soccer League v.               Economics and Public Policy (1981); Arthur
NFL, 670 F.2d 1249 (2d Cir. 1982); Smith v.          A. Fleisher III, Brian L. Goff & Robert D.
Pro Football, Inc., 193 U.S. App. D.C. 19, 593       Tollison, The National Collegiate Athletic




                                                                                           717
Association: A Study in Cartel Behavior            Association, 961 F.2d 667, 673 (7th Cir.
(1992).                                            1992); Will v. Comprehensive Accounting
                                                   Corp., 776 F.2d 665, 670-74 (7th Cir. 1985);
  However this inquiry may come out on             Carl Sandburg Village Condominium Ass'n
remand, we are satisfied that the NBA is           No. 1 v. First Condominium Development
sufficiently integrated that its superstation      Co., 758 F.2d 203, 210 (7th Cir. 1985).
rules may not be condemned without analysis        During the[**25] lengthy trial of this case, the
under the full Rule of Reason. We affirmed         NBA argued that it lacks market power,
the district court's original injunction after     whether the buyers are understood as the
applying the “quick look” version because the      viewers of games (the way the district court
district court had characterized the NBA as        characterized things in NCAA) or as
something close to a cartel, and the league had    advertisers, who use games to attract viewers
not then made a Copperweld argument. After         (the way the Supreme Court characterized a
considering this argument, we conclude that        related market in Times-Picayune Publishing
when acting in the broadcast market the NBA        Co. v. United States, 345 U.S. 594, 97 L. Ed.
is closer to a single firm than to a group of      1277, 73 S. Ct. 872 (1953)). College football
independent firms. This means that plaintiffs      may predominate on Saturday afternoons in
cannot prevail without establishing that the       the fall, but there is no time slot when NBA
NBA possesses power in a relevant market,          basketball predominates. The NBA's season
and that its exercise of this power has injured    lasts from November through June; games are
consumers. Even in the NCAA case, the first        played seven days a week. This season
to use a bobtailed Rule of Reason, see Diane       overlaps all of the other professional and
P. Wood, Antitrust 1984: Five Decisions in         college sports, so even sports fanatics have
Search of a Theory, 1984 Sup. [**24] Ct. Rev.      many other options. From advertisers'
69, 110-12, the Court satisfied itself that the    perspective--likely the right one, because
NCAA possesses market power. The district          advertisers are the ones who actually pay for
court had held that there is a market in college   telecasts--the market [*601] is even more
football telecasts on Saturday afternoon in the    competitive. Advertisers seek viewers of
fall, a time when other entertainments do not      certain demographic characteristics, and
flourish but college football dominates. Only      homogeneity       is    highly    valued.     A
after holding that this was not clearly            homogeneous audience facilitates targeted
erroneous did the Court cast any burden of         ads: breakfast cereals and toys for cartoon
justification on the NCAA. 468 U.S. at 111-        shows, household appliances and detergents
13; see also International Boxing Club v.          for daytime soap operas, automobiles and beer
United States, 358 U.S. 242, 3 L. Ed. 2d 270,      for sports. If the NBA assembled for
79 S. Ct. 245 (1959).                              advertisers an audience[**26] that was
                                                   uniquely homogeneous, or had especially high
  Substantial    market     power     is   an      willingness-to-buy, then it might have market
indispensable ingredient of every claim under      power even if it represented a small portion of
the full Rule of Reason. Digital Equipment         airtime. The parties directed considerable
Corp. v. Uniq Digital Technologies, Inc., 73       attention to this question at trial, but the
F.3d 756, 761 (7th Cir. 1996); Sanjuan v.          district judge declined to make any findings of
American Board of Psychiatry & Neurology,          fact on the subject, deeming market power
Inc., 40 F.3d 247, 251 (7th Cir. 1994); Hardy      irrelevant. As we see things, market power is
v. City Optical, Inc., 39 F.3d 765, 767 (7th       irrelevant only if the NBA is treated as a
Cir. 1994); Chicago Professional Sports            single firm under Copperweld; and given the
Limited Partnership v. National Basketball         difficulty of that issue, it may be superior to




                                                                                         718
approach this as a straight Rule of Reason          entity, its conduct certainly merits more than a
case, which means starting with an inquiry          quick look. Perhaps so, but, since the single
into market power and, if there is power,           entity question is unresolved, I would prefer to
proceeding to an evaluation of competitive          address[**28] the problem from a slightly
effects.                                            different direction.

  Perhaps this can be accomplished using the            For the “quick look” approach should have
materials in the current record. Although the       a narrow application, reflecting its recent and
judge who presided at the trial died earlier this   sharply delimited origin in the NCAA case.
year, the parties may be willing to agree that      Nat'l Collegiate Athletic Ass'n v. Bd. of
an assessment of credibility is unnecessary, so     Regents of the Univ. of Oklahoma, 468 U.S.
that a new judge could resolve the dispute          85, 82 L. Ed. 2d 70, 104 S. Ct. 2948 (1984).
after reviewing the transcript, exhibits, and       That case, involving a loose alliance of
stipulations, and entertaining argument. See        colleges which had agreed on price and output
Fed. R. Civ. P. 63. At all events, the judgment     restrictions on broadcast of their football
of the district court is vacated, and the case is   games, held that under some circumstances a
remanded for proceedings consistent with            full analysis of market power is not required
this[**27]      opinion.     Pending      further   to determine that an agreement is
proceedings in the district court or agreement      anticompetitive. This framework should not
among the parties, the Bulls and WGN must           be extended to the more highly integrated and
respect the league's (and the NBC contract's)       economically unitary NBA.
limitations on the maximum number of
superstation telecasts.                               The colleges which made up the NCAA
                                                    were entirely separate economic entities,
CONCURBY: CUDAHY                                    competing with each other in many areas
                                                    unrelated to their athletic encounters. There is,
CONCUR:                                             of course, a sort of continuum of economic
CUDAHY, Circuit Judge, concurring:                  integration, with entities at different points
                                                    along the continuum warranting differing
  Although I agree with the majority's firm         levels of antitrust concern. At one end are
conclusion that the “quick look” doctrine does      loose alliances of economic actors having
not apply to these complex facts, I must            independent concerns (like the NCAA), the
indicate some differences in significant            anticompetitive nature of whose agreements is
matters that are reached in the course of the       obvious from a “quick look.” At the other end
majority opinion. Thus, in arriving at its          are fully-integrated entities [**29]in which the
conclusion that a full Rule of Reason analysis      economic interests of the participants are so
is required, the majority seems to be               completely aligned that antitrust scrutiny of
extrapolating from its discussion of whether        their policies is unnecessary except where § 2
the NBA may be a “single entity.”                   of the Sherman Act is violated. In the center is
Classification as a “single entity” means           the broad range of organizations (generally
immunity from Sherman Act, § 1,                     like the NBA) whose separate constituents are
considerations, a distinction much more             individually owned but are closely but not
drastic than the conclusion that the conduct in     completely tied economically to their
question here deserves a “quizzical look”           organizations. These entities are [*602]
rather than a mere “quick look.” So, although       capable of anticompetitive agreements, but a
it is not entirely clear, the majority seems to     full Rule of Reason analysis is necessary to
be saying that, since the NBA may be a single       ensure that productive cooperation is not




                                                                                          719
mistaken for anticompetitive conduct. Single          according to the majority, to “defendants in
entity aside, there is certainly enough concern       complex cases” without elaboration. Why we
here for the efficiency of the league as a            should have more forgiving policies for highly
competitor in the entertainment market to             skilled and highly compensated counsel in big
require full Rule of Reason analysis.                 corporate cases than for pro se litigants or
                                                      appointed counsel of perhaps lesser
  On a more clear-cut point, I think it was           qualification is certainly unclear to me. Our
appropriate for Judge Will to examine the size        earlier opinion in this case states that “the
of the NBA's fee for the WGN broadcasts of            NBA did not contend in the district court that
Bulls games. In this connection, the majority         the NBA is a single entity, let alone that it is a
rejects considerations of fairness “and the           single entity as a matter of law.” Chicago
like” and asserts that, “The core question in         Professional Sports Ltd. Partnership v.
antitrust is output.” Maj. Op. at 5, 6. For better    National Basketball Ass'n, 961 F.2d 667, 673
or for worse, under the highly reductive view         (7th Cir. 1992), cert. denied, 506 U.S. 954,
that currently prevails in antitrust matters, this    121 L. Ed. 2d 334, 113 S. Ct. 409 (1992). We
somewhat grating aphorism appears[**30] to            also stated that:
be correct. The Holy Grail of consumer
welfare means that more is better no matter               Characterization is a creative rather
how the more is distributed. Taking these                than exact endeavor. Appellate review
principles as a given, it is still difficult for me      is accordingly deferential. The district
to understand how output can be disjoined                court held a trial, heard the evidence,
from cost under the circumstances of this case.          and     concluded      that    the   best
In fact, Judge Will found as a fact that, “[the          characterization of the NBA is the third
NBA's proposed fee] may well at some future              we have mentioned: a joint venture in
date decrease output and distribution of Bulls           the production of games but more like a
games on WGN . . . .” Dist. Ct. Findings of              cartel in the sale of its output. Whether
Fact, Conclusions of Law and Opinion, NBA                this is the best characterization of
App. at 77a. But, particularly since output is           professional sports is a subject that has
currently constrained to 30 games, rather than           divided[**32] courts and scholars for
whatever the market would produce, it is                 some years, making it hard to
difficult to ascertain whether the fee is high           characterize the district judge's choice
enough to reduce output below the                        as clear error.
competitive level. Since it is not clear to me
that the magnitude of Judge Will's adjustment         961 F.2d at 672. No one seems to have argued
was justified by antitrust considerations alone,      that the basic structure of the NBA has
I would include this issue with other matters         changed since that opinion. I think, therefore,
to be considered on remand.                           that, despite dicta in our earlier opinion
                                                      speculating that “perhaps the parties will join
  That said, I turn to the single entity issue,       issue more fully [regarding the single entity
where the discussion of the majority is               status of the NBA] in the proceedings still to
deserving of comment both as to substance             come in the district court,” 961 F.2d at 673,
and to procedure. My first reservation is             there is a real question whether we can reach
procedural and concerns whether this issue            the single entity issue--fascinating though it
may be reached at all. The majority announces         may be.
an exception--without[**31] precedent to my
knowledge--from the usual rules of waiver of            However, on the assumption that the “single
issues on appeal. The exception applies,              entity” question may be reached (and




                                                                                             720
presumably will be reached on remand) a               structure, can make inefficient decisions only
number of considerations will be relevant.            if the individual teams have some chance of
Assuming as I must that the sole goal of              economic gain at the expense of the league.
antitrust is efficiency or, put another way, the
maximization of total societal wealth, the              Another form of the same question is
question whether a sports league is a “single         whether a sports league is more like a single
entity” turns on whether the actions of the           firm or like a joint venture. With efficiency
league have any potential to lessen economic          the sole criterion, a joint venture warrants
competition among the separately owned                scrutiny for at least two reasons--(1) the
[*603]teams.1 The fact that teams compete on          venture could possess market power with
the floor is more or less irrelevant to whether       respect to the jointly produced product
they compete economically--it is only their           (essentially act like a single firm with
economic competition[**33] which is                   monopoly power) or (2) the fact that the
germane to antitrust analysis. In principle, of       venturers remain competitors in other arenas
course, a sports league could actually be a           might either distort the way the joint product
single firm and the individual teams could be         is managed or allow the venturers to use the
under unified ownership and management.               joint product as a smokescreen behind which
Such a firm would, of course, be subject to           to cut deals to reduce competition in the other
scrutiny only under § 2 of the Sherman Act            arenas. The most convincing “single entity”
and not under § 1. From the point of view of          argument involving the NBA is that the teams
wealth      maximization,      a    league    of      produce only the joint product of “league
independently-owned teams, if it is no more           basketball” and that there is thus no
likely than a single firm to make inefficient         significant economic competition between
management decisions, should be treated as a          them. NBA Br. at 25-27. If this is the case, the
single entity. The single entity question thus        argument goes, type (2) concerns drop out and
would boil down to “whether member clubs of           only type (1) concerns remain. Type (1)
a sports league have legitimate economic              concerns, of course, are exactly those
interests of their own, independent of the            appropriate for § 2 analysis of a single firm.
league and each other.” Sports Leagues
Revisited at 127. It follows that a sports              There are, however, flaws in this single
league, no matter what its ownership                  entity argument. The assumption underlying it
                                                      is that league sports are a different and more
                                                      desirable product than a[**35] disorganized
                                                      collection of independently arranged games
1
  See, e.g., Michael S. Jacobs, Professional Sports   between teams. For this reason, it is contended
Leagues, Antitrust and the Single-Entity Theory: a    that joining sports teams into a league is
Defense of the Status Quo, 67 Ind. L.J. 25 (1991);
Gary R. Roberts, The Antitrust Status of Sports
                                                      efficiency-enhancing and desirable. I will
Leagues Revisited, 64 Tul. L. Rev. 117 (1989);        accept this premise.2 It is perhaps true, as
Myron C. Grauer, The Use and Misuse of the Term       argued by the NBA and many commentators,
“Consumer Welfare”: Once More to the Mat on the       that sports are different from many joint
Issue of Single Entity Status for Sports Leagues      ventures because the individual teams cannot,
Under Section 1 of the Sherman Act, 64 Tul. L. Rev.   even in principle, produce the product--league
71 (1989); Lee Goldman, Sports, Antitrust, and the
Single Entity Theory, 63 Tul. L. Rev. 751 (1989);
Gary R. Roberts, Sports Leagues and the Sherman
                                                      2
Act: The Use and Abuse of Section 1 to Regulate         But the Green Bay Packers and the Chicago Bears
Restraints on Intraleague Rivalry, 32 UCLA L. Rev.    played, presumably before enthusiastic crowds,
219 (1984), for discussions of this issue.            before there was a National Football League.




                                                                                            721
sports. However, the fact that cooperation is      The NBA argues that the broadcasting of
necessary to produce league basketball does        more Bulls games to these fans will disturb
not imply that the league will necessarily         the competitive balance among teams.
produce its product in the most efficient          However, one can also speculate that, since
fashion. There is potential for inefficient        sports viewing has become more of a
decisionmaking regarding the joint product of      television activity than an “in the flesh”
“league basketball” even when the individual       activity, these fans might prefer to have a
teams engage in no economic activity outside       league composed of fewer, better teams (like
of the league. This potential arises because the   the Bulls). If this were the case, league
structure of the league is such that all           policies designed to shore up all of the current
“owners” of the league must be “owners” of         teams would be inefficient. The point, of
individual teams and decisions are made by a       course, is not that this speculation is
vote of the teams. This means that the league      necessarily correct, but that the efficient
will not necessarily make efficient decisions      number of teams (or, more generally, the
about the number of teams fielded or, more         efficient competitive balance) may not be
generally, the competitive balance among           obtained as a matter of course given the
teams. Thus, the fact that several teams are       current league ownership framework.
required to make a league does[**36] not
necessarily imply that the current makeup of         The team owners thus retain independent
the league is the most desirable or “efficient”    economic interests. This would be the case
one.                                               even if they did not compete for the revenues
                                                   of the league. Teams do compete for broadcast
   The NBA's justification for its restriction     revenues, however. “A conflicting economic
of Bulls broadcasts centers on the need to         interest between[**38] the league and an
maintain a competitive balance among teams.        individual club can exist only when league
[*604] Such a balance is needed to ensure that     revenues are distributed unequally among the
the league provides high quality entertainment     member clubs based on club participation in
throughout the season so as to optimize            the games generating the revenue.” Sports
competition      with     other     forms     of   Leagues and the Sherman Act at 297-99.
entertainment. Competitive balance is not the      When teams receive a disproportionate share
only contributor to the entertainment value of     of the broadcast revenues generated by their
NBA basketball, however. Fan enjoyment of          own games, such a situation exists.
league sports depends on both the opportunity
to identify with a local or favorite team and        The analysis of this issue is tricky, however,
the thrill of watching the best quality of play.   since decisions about how to allocate
A single firm owning all of the teams would        broadcasting revenues are made by the league.
presumably arrange for the number of teams         It may be that “member clubs of a league do
and their locations efficiently to maximize fan    not have any legitimate independent economic
enjoyment of the league season. There is,          interests in the league product” and “each
however, no reason to expect that the[**37]        team has an ownership interest in every game”
current team owners will necessarily make          (including an equal a priori ownership interest
such decisions efficiently, given their            in the broadcast rights to every game). Sports
individual economic interests in the financial     Leagues Revisited at 135-36. If this
health of their own teams.                         assumption is correct, then whatever
                                                   arrangements for revenue distribution the
 It's not surprising that farflung fans want to    league decides to make will be, like bonuses
watch the Bulls' superstars on a superstation.     to successful salespeople in an ordinary firm,




                                                                                         722
presumptively efficient. If, however, broadcast              result of [*605] the vote might not be to
rights inure initially to the two teams                      distribute bonuses in the most efficient
participating in a particular game and if, as is             fashion. The potential for this type of
certainly the case, some games are more                      inefficiency is particularly great when, as with
attractive to fans than others, the league                   the NBA, the league is “the only game in
cannot[**39] be presumed to have made                        town” so that a team does not have the option
decisions allocating those broadcast revenues                of going elsewhere if it is not receiving
efficiently.                                                 revenues commensurate with its contribution
                                                             to the overall league product.4 In any event, a
  The analogy, within the context of an                      group of team owners who do not share all
ordinary firm, is to allow the salespeople to                revenues from all games might well make
vote on the bonuses each is to get. Each                     decisions that do not maximize the profit of
salesperson has some incentive, of course, to                the league as a whole. 5
promote the overall efficiency of the firm on
which his or her salary, or perhaps the value                  As      this    discussion   demonstrates,
of his or her firm stock, depends and therefore              determining whether the potential for
to award the larger bonuses to the most                      inefficient decisionmaking survives within a
productive salespersons. However, in this
scenario each salesperson has two ways of                        (Continued)
maximizing personal wealth--increasing the
overall efficiency of the firm and                           2d 133, 115 S. Ct. 1252 (1995); Los Angeles
redistributing income within the firm.3 The                  Memorial Coliseum Comm'n v. National Football
                                                             League, 726 F.2d 1381, 1388-90 (9th Cir. 1984),
                                                             cert. denied, 469 U.S. 990, 105 S. Ct. 397, 83 L. Ed.
                                                             2d 331 (1984); North American Soccer League v.
3
  Those favoring the single entity treatment of sports       NFL, 670 F.2d 1249, 1252 (2d Cir. 1982), cert.
leagues frequently compare them to law firms,                denied, 459 U.S. 1074, 74 L. Ed. 2d 639, 103 S. Ct.
making the argument that sports leagues are like law         499 (1982); Smith v. Pro Football, Inc., 193 U.S.
firms, law firms are single entities, therefore sports       App. D.C. 19, 593 F.2d 1173, 1179 (D.C. Cir. 1978);
leagues are single entities. See, e.g., Myron C.             Levin v. National Basketball Ass'n, 385 F. Supp. 149,
Grauer, Recognition of the National Football League          150 (S.D.N.Y. 1974). Therefore, one might equally
as a Single Entity Under Section 1 of the Sherman            well argue that sports leagues have never been treated
Act: Implications of the Consumer Welfare Model,             as single entities and, to the extent that law firms are
82 Mich. L. Rev. 1, 23-35 (1983); Maj. Op. at 7-8.           like them, law firms should not be treated as single
This argument is only valid, however, if law firms           entities either.
should be treated as single entities. If law firms do, in
                                                             4
fact, have some of the same potential for                      The hypothetical example of a team taking its
inefficiencies as sports leagues because of the diverse      broadcast rights elsewhere does seem to suggest,
economic interests of the partners, the economically         however, that broadcast rights are at bottom the
correct solution is still to treat sports leagues as joint   property of the teams participating in a given game.
ventures. A mere analogy to law firms is not                 Indeed, if the team does not own the broadcast rights
convincingly invoked by those seeking to defend their        to the games in which it participates, it is hard to
arguments on purely economic (rather than                    understand what it means to own a team at all.
precedential) grounds.
                                                             5
                                                               See Herbert Hovenkamp, Exclusive Joint Ventures
  Applying the same logic in reverse, there is               and Antitrust Policy, 1995 Colum. Bus. L. Rev. 1
considerable precedent for treating sports leagues as        (1995), for a general discussion of the ways in which
joint ventures. Nat'l Collegiate Athletic Assoc. v. Bd.      joint ventures can act inefficiently either by excluding
of Regents of the Univ. of Oklahoma, 468 U.S. 85, 82         members (or, here perhaps, overincluding members)
L. Ed. 2d 70, 104 S. Ct. 2948 (1984); Sullivan v.            or by excluding products (superstation broadcasts,
National Football League, 34 F.3d 1091, 1099 (1st            perhaps?).
Cir. 1994), cert. denied, 513 U.S. 1190, 131 L. Ed.




                                                                                                         723
joint venture because of the independent             “concluded that all cooperation among
economic interests of the partners is                separately incorporated firms is forbidden by
extraordinarily complex and confusing. For           § 1 of the Sherman Act, except to the extent
this reason, a simple, if not courageous, way        Copperweld permits.” Maj. Op. at 7, citing
out of the problem might be to establish a           Copperweld Corp. v. Independence Tube
legal presumption that a single entity cannot        Corp., 467 U.S. 752, 771, 81 L. Ed. 2d 628,
exist without single ownership. To avoid the         104 S. Ct. 2731 (1984). Copperweld
complexities[**41] and confusions of                 concluded that a parent corporation and its
attempted analysis, one might simply ordain          wholly-owned subsidiary have a “complete
that combinations that lack diverse economic         unity of interest” and hence should be treated
interests should opt for joint ownership of a        [*606] as a single entity. Here the district
single enterprise to avoid antitrust problems.       court simply concluded that the NBA, because
On the other hand, judges may want to play           it involved cooperation between separately-
economist to the extent of resisting                 owned teams, was subject to antitrust analysis.
simplifying assumptions.                             Dist. Ct. Findings of Fact, Conclusions of Law
                                                     and Opinion, NBA App. at 34a. This
  In any event, sports leagues argue that they       conclusion is a far cry from deciding that all
must maintain independent ownership of the           cooperation among separately incorporated
teams because separate ownership enhances            firms is forbidden.
the appearance of competitiveness demanded
by fans. But the leagues cannot really expect          I also cannot agree with the majority's
the courts to aid them in convincing                 analysis of the type of “unity [**43]of
consumers that competition exists if it really       interest” required for single entity status. The
does not. If consumers want economic                 majority states, Maj. Op. at 7, that “even a
competition between sports teams, then               single firm contains many competing
independent ownership and preservation of            interests.” The opinion goes on to cite the
independent economic interests is likely an          competition for salary and bonuses between
efficient choice for a sports league. But that       division managers as an example. However,
choice, as with other joint ventures, brings         when Copperweld talks about unity of
with it the attendant antitrust risks. The NBA       interests in the single entity context, I think it
cannot have it both ways.                            must be taken to mean unity of economic
                                                     interests of the decisionmakers. See
  Relating all of this to the majority's             Copperweld, 467 U.S. at 769. A single firm
treatment of the single entity issue, I see two      does not evidence diverse economic interests
problems with the majority analysis. First, as       to the outside world because final decisions
already noted, divorcing the question of single      are made by the owners or stockholders, who
entity from the question of ownership is likely      care only about the overall performance of the
to lead to messy and inconsistent[**42]              firm. Only because this is the case can single
application of antitrust law. The bottom line        firms be assumed to behave in the canonical
may be that the inquiry into whether separate        profit-maximizing fashion. The diverse
economic interests are maintained by the             interests mentioned in the majority opinion
participants in a joint enterprise is likely to be   seem as irrelevant to the antitrust analysis as is
no easier than a full Rule of Reason analysis.       the on-court rivalry between teams in the
                                                     NBA.
  Second, some of the majority's discussion of
independent interests is puzzling. The                 Thus, when Copperweld refers to conduct
majority contends that the district court            that “deprives the marketplace of the




                                                                                            724
independent centers of decisionmaking that          as joint ventures rather than[**45] single
competition assumes,” it does not refer to          entities because there remains a potential that
“decisionmakers”           whose        economic    league policy will be made to satisfy the
independence is only potential. The antitrust       independent economic interests of some group
issue is really[**44] whether, as a result of       of teams, rather than to maximize the overall
some cooperative venture, economic interests        performance of the league. Thus, it is possible,
which remain independent coordinate their           if more Bulls games were broadcast, league
decisions. As Copperweld notes, “the officers       profits might increase. But, if the revenue
of a single firm are not separate economic          from the broadcast of Bulls games goes
actors pursuing separate economic interests . .     disproportionately to the Bulls, the other
. .” Id. Therefore, their joint decisionmaking is   league members may not vote for this more
of no antitrust concern. Employees or               efficient result.
divisions within a firm, on the other hand,
may remain separate economic actors                   There may, of course, be cases in which
pursuing separate economic interests but they       independent ownership of the partners in a
do not make the final decisions governing the       joint venture does not pose any real possibility
firm's operations. They may compete for             of inefficient decisionmaking. This would be
shares of the firm's revenues, but they do not      the case if the parties did not compete in any
decree how that revenue will be shared. Thus        other arena and if all revenues were shared in
their conflict or cooperation does not pose         fixed proportions among the partners. In
antitrust issues either. Joint ventures, on the     general, however, a plausible case can be
other hand, are subject to antitrust scrutiny       made for the proposition that independent
precisely because separate economic interests       ownership should presumptively preclude
are joined in decisionmaking, with the              treatment as a single entity. This certainly
potential for distorted results.                    does not mean, of course, that “all cooperation
                                                    among separately incorporated firms is
  As long as teams are individually owned and       forbidden by § 1 of the Sherman Act,” Maj.
revenue is not shared in fixed proportion, the      Op. at 7. It would mean only that such
teams both retain independent economic              cooperation must ordinarily be justified under
interests and make decisions in concert.            the Rule of Reason. Justification might[**46]
Where this is the case, there is a strong           not be more difficult than the elusive search
argument that sports leagues should be treated      for treatment as a single entity.




                                                                                          725
      ST. LOUIS CONVENTION &                 PRIOR HISTORY: [**1] Appeals from the
  VISITORS COMMISSION, Plaintiff -          United States District Court for the Eastern
        Appellant/Cross - Appellee,         District of Missouri. 4:95-CV-2443(JCH).
                    v.                      Honorable Jean C. Hamilton.
  NATIONAL FOOTBALL LEAGUE;
  B & B HOLDINGS, INC.;THE FIVE             DISPOSITION: Affirmed.
   SMITHS, INC.; BUFFALO BILLS,
        INC.; CHICAGO BEARS                 JUDGES: Before WOLLMAN and MURPHY,
           FOOTBALL CLUB,                   Circuit Judges, and KYLE,1 District Judge.
      INC.;CLEVELAND BROWNS
     FOOTBALL COMPANY, INC.;                OPINIONBY: MURPHY
   DALLAS COWBOYS FOOTBALL
   CLUB, LTD.; PBDSPORTS, LTD;              OPINION:
   THE DETROIT LIONS, INC.; THE             [*852] MURPHY, Circuit Judge.
     GREEN BAY PACKERS, INC;
        HOUSTONOILERS, INC.;                  After St. Louis lost its professional football
     INDIANAPOLIS COLTS, INC.;              team to Phoenix in 1988, extensive efforts
  KANSAS CITY CHIEFS FOOTBALL               began to obtain another team and resulted in the
    CLUB, INC.;MIAMI DOLPHINS,              successful relocation of the Los Angeles Rams
     LTD.; MINNESOTA VIKINGS                in 1995. Many millions of dollars were spent in
     FOOTBALL CLUB, INC.; NEW               order to accomplish the relocation, and the St.
   ENGLANDPATRIOTS, LIMITED                 Louis Convention and Visitors Center (CVC)
       PARTNERSHIP; THE NEW                 sued the National Football League and twenty
    ORLEANS SAINTS; NEW YORK                four of[**2] its member teams (collectively the
   FOOTBALL GIANTS,INC.; NEW                NFL) alleging that these expenditures were
    YORK JETS FOOTBALL CLUB,                made necessary by actions of the NFL in
    INC.; PHILADELPHIA EAGLES               violation of antitrust and [*853] tort law. The
    HOLDINGS, L.P.;PITTSBURGH               case was tried before a jury for over four weeks
       STEELERS SPORTS, INC.;               before it ended in a judgment in favor of the
        CHARGERS FOOTBALL                   NFL. CVC appeals the dismissal of its claim for
            COMPANY; SAN                    Sherman Act conspiracy and tortious
     FRANCISCOFORTY-NINERS,                 interference with contract. The NFL cross
  LIMITED; SEATTLE SEAHAWKS,                appeals the refusal of the district court 2 to rule
      INC.; PRO-FOOTBALL INC.,              that the league and the member teams do not
       Defendants -Appellees/Cross -        amount to a single entity for antitrust purposes.
                Appellant.                  We affirm the judgment.
           Nos. 97-4055/97-4223

UNITED STATES COURT OF APPEALS
                                            1
    FOR THE EIGHTH CIRCUIT                    The Honorable Richard H. Kyle, United States
                                            District Judge for the District of Minnesota, sitting by
154 F.3d 851; 1998 U.S. App. LEXIS 21483;   designation.
     1998-2 Trade Cas.(CCH) P72,258

        June 10, 1998, Submitted            2
                                             The Honorable Jean C. Hamilton, Chief Judge, United
        September 3, 1998, Filed            States District Court for the Eastern District of
                                            Missouri.



                                                                                     726
                       I.                          team owners to permit relocation, and the
                                                   proposal for the Rams to move was initially
                      A.                           voted down by the owners. It was later
                                                   approved after the Rams agreed to pay the NFL
  The move of the St. Louis Cardinals football     a $29 million relocation fee. CVC eventually
team to Phoenix in 1988 caused the Missouri        agreed with the Rams to pay $20 million of this
state legislature, the city of St. Louis and the   fee, despite a clause in their contract allowing
surrounding county to undertake to find a          CVC to cancel if the fee were to exceed $7.5
replacement by the beginning of the 1995           million.
season. The legislature assigned the effort to
procure a team to CVC, a body previously             The Rams began playing in St. Louis in 1995,
created by[**3] the Missouri legislature and       and in that year CVC was unable to make some
empowered to promote the convention and            of the payments owed to the team. CVC then
tourism business in St. Louis. See Mo. St. Ann.    brought this suit against the league and twenty
§§ 67.601, 67.607. The initial goal was to         four of its member teams. It also made an
obtain one of the two NFL expansion franchises     agreement with the Rams that they would
to be established in 1993. In order to attract a   receive half of any recovery obtained in the case
team the city resolved to build a convention       in return for forgiveness of the money CVC
center in downtown St. Louis called America's      owed them. The theory CVC presented at trial
Center which would include a new football          was that the league's relocation rules and the
stadium. The football stadium was called the       way they had been applied had created an
Trans World Dome, and its $258 million cost        atmosphere in which teams were unwilling to
was paid from state and local government           relocate. It contended that this anti-
funds. The stadium lease was assigned to CVC       relocation[**5] atmosphere had discouraged
which became its manager and initially             interested teams from bidding on the St. Louis
subleased the right to present football in the     lease. The result was a one buyer market which
dome to private parties.                           forced the CVC to give more favorable lease
                                                   terms than it would have in a competitive
  Problems associated with control over the        market.
lease and the potential ownership group caused
St. Louis to be passed over in the NFL's                                  B.
expansion voting. The new franchises were
awarded to Jacksonville, Florida and Charlotte,      The league was formed in 1966 by a union of
North Carolina. This forced the St. Louis          the American Football League and the National
football enthusiasts to adopt another strategy,    Football League, and it functions as the
and      they turned their attention toward        governing body of a joint venture of thirty
attracting an existing team. They founded a        professional football teams producing “NFL
civic organization called FANS, Inc. (Football     football.” The teams are independently owned
at the New Stadium), to assist their efforts.      and managed by different business interests.
FANS, acting on behalf of CVC, then[**4]           The league is organized through the League
approached the Los Angeles Rams and began to       Constitution and Bylaws, [*854] an agreement
negotiate a deal for the team to move to St.       among team members that sets out rules for
Louis. As a result a written agreement was         league management of matters such as game
eventually signed by CVC and the Rams.             rules, game schedules, team ownership, and
                                                   location of teams. Most decisions affecting the
  The NFL League Constitution and Bylaws           league are made by vote of team representatives
require a favorable vote by three fourths of the   at NFL meetings. When NFL members decided



                                                                                       727
to create two new team franchises for 1993,           FANS made an initial presentation to the
representatives from various cities made            Rams, but talks ended because of problems with
presentations to team owners in order to win a      Clinton and Orthwein having control over the
franchise.                                          lease and because FANS had leaked
                                                    information about the negotiations to the press,
  St. Louis political leaders and business people   including the Rams' list of features it desired in
were among those who made presentations to          a new stadium (the “wish list”). Discussions
the league, and they emphasized the benefits an     resumed only after CVC gained control over the
NFL team could expect[**6] from the stadium         lease, and the Rams told CVC that they would
lease and the city. But there were problems with    discontinue any business dealings if the CVC
the St. Louis application for a team. At the time   approached any other team about moving to St.
of the expansion decisions the exclusive right to   Louis. CVC never contacted any other team to
use the Trans World Dome for professional           solicit a bid on the lease. CVC considered it the
football games was held by St. Louis NFL, Inc.,     better course to focus on only one team, and it
which was controlled by two St. Louis               believed its presentation during the expansion
businessmen, Jerry Clinton who owned one            process should have been sufficient to stimulate
third and Jim Orthwein who owned the                the interest of other teams.
remaining two thirds. The fact that rights to
lease the stadium for football were held by           The Rams and CVC eventually agreed on a
individuals who were unrelated to CVC caused        lease. The Rams agreed to pay to CVC $25,000
the owners to pass over St. Louis as the site of    rent per game,[**8] plus half of the game day
an expansion team.                                  expenses. In return the Rams would receive all
                                                    of the ticket revenue from Rams games, 75% of
  CVC's next option was to arrange for an           the first $6 million in advertising revenue and
existing team to leave its home city and relocate   90% of the remainder, 100% of the profit from
to St. Louis. Community members formed the          the concessions at Rams games and a portion of
civic organization FANS, Inc. in January of         the concessions profit from other events. Rams
1994, headed by former Senator Thomas               president John Shaw estimated the lease would
Eagleton, to accomplish the task which they         produce approximately $40 million per season
were increasingly anxious to complete. Around       in revenue for the Rams. CVC agreed to a
this time     Congressman Richard Gephardt          number of other obligations, including promises
alerted FANS that the Los Angeles Rams were         to pay $28 million to fulfill bond obligations
considering relocating from their stadium in        which the Rams owed on Anaheim Stadium, to
Anaheim, California. He had seen a newspaper        build a $9.9 million training facility for the
report that the Rams were discussing a possible     team, and to pay the team's moving costs. Once
move to Baltimore, Maryland. Congressman            the Rams and CVC reached their agreement,
Gephardt concluded that since Baltimore had         the Rams presented their relocation application
been one of [**7]St. Louis' main competitors        to the league owners for approval in March,
during the expansion process, the city should       1995.
follow Baltimore's lead and approach the Rams.
FANS then contacted John Shaw, the Rams                                     C.
president, and began negotiations on a
relocation agreement and stadium lease. During        Relocation decisions by the NFL come under
this period, St. Louis was competing with           Article 4.3 of the league constitution which
Hartford and Anaheim in addition to Baltimore.      provides that “no member club shall have the
                                                    right to transfer its franchise or playing site to a
                                                    different city, either within or outside its home



                                                                                          728
territory, without prior approval by the                     move, a NFL team which wanted to move
affirmative vote of three-fourths of the existing            would negotiate a lease and relocation
member clubs of the [*855] league.” While                    agreement with its new landlord and then apply
[**9]not expressed in the governing documents,               to the league for permission to relocate. Only
the league claims the right to assess a relocation           the moving team participated in the NFL
fee on any team seeking to move. At the time                 application process; the new landlord had no
CVC was dealing with the Rams, the NFL had                   direct involvement.
levied one previous relocation fee; the
Cardinals had been assessed $7.5 million for                   Owners voted down the initial application by
their move to Phoenix.                                       the Rams because of disagreements between the
                                                             league and the team on several of the relocation
  After a successful antitrust challenge to an               terms, including payment of a relocation fee,
application of Article 4.3 to the relocation of              sharing of revenues from the sale of “personal
the Oakland Raiders to Los Angeles, see Los                  seat licenses” (options to purchase tickets), and
Angeles Memorial Coliseum Comm'n v. NFL,                     possible indemnification of the league for
726 F.2d 1381 (9th Cir. 1984) (Raiders I),3 the              television payments it might owe as a
NFL commissioner had issued procedures for                   consequence of the move. After the initial
obtaining league approval of any proposed                    league vote, and in anticipation of the
relocation and nine non-exclusive factors (the               assessment of a relocation fee, CVC agreed
guidelines)4 that team owners should consider                with the Rams it would pay up to $7.5 million
in deciding how to vote on a move. No                        of any fee. Either party had the right to void the
guidelines have been promulgated on the                      agreement should the fee exceed that amount
imposition or computation of a relocation fee.
Under the rules in effect at the time of the Rams              The Rams and the NFL reentered
                                                             negotiations, and the NFL commissioner said
                                                             that the relocation could be approved if the
3
                                                             Rams would pay a higher fee. The NFL had
  In Raiders I the Ninth Circuit held that Article 4.3 had   “the right to assess whatever fee they thought
impermissibly foreclosed competition between stadia
seeking NFL tenants and granted exclusive territories to
                                                             necessary” since the initial relocation proposal
NFL teams. 726 F.2d at 1395. Future applications of          had[**11] not satisfied the league guidelines.
the rule could withstand scrutiny, however, if the NFL       The Rams then agreed to pay a $29 million
adopted objective factors for consideration by team          relocation fee,5 to forgo any share in the next
owners before voting, as well as clarified procedures        two relocation fees levied by the league, to
including an opportunity for any applicant to make a         share $17 million in personal seat license
presentation to the league. Id. at 1397. The NFL
                                                             revenue with the NFL, and to indemnify the
commissioner subsequently issued such guidelines.
CVC complains that the guidelines and the rule have          league for up to $12.5 million of any extra
had the effect of discouraging competitive bidding for       expenses arising from the league's television
available stadia, thereby driving up the cost for a          contract. The Rams relocation was approved on
locality seeking a team.                                     April 12, 1995.


4                                                            5
  These factors include consideration of the adequacy          The relocation fee was described by the commissioner
of the team's current stadium, the extent of                 as reflecting among other things the increased value of
demonstrated fan support for the team, and the extent to     the team after the move to St. Louis and the value of
which the owner has contributed to the need for              that franchise opportunity compared to Anaheim.
relocation.




                                                                                                     729
  The agreement between CVC and the Rams                   guidelines, and their application over time
about CVC's obligating itself on any relocation            functioned as an agreement among the league
fee was not revealed to the NFL owners during              and the individual teams to restrain relocations,
these negotiations, and it does not appear that            creating an atmosphere which deterred teams
the owners were informed about it until after              from moving and therefore from bidding on the
the April 12 vote.6 Following the vote, the                Trans World Dome lease. It contended that the
Rams and CVC once again entered                            Rams were the only team willing to take the
negotiations, this time on how the charges                 risk of an attempted relocation so they were the
assessed by the NFL on the Rams would be                   only bidder on the lease. As a consequence the
paid. [**12] The parties agreed in June of 1995            Rams were able to obtain very favorable terms
that CVC would pay $20 million of the                      from CVC which caused it to lose between $77
relocation fee and that CVC would be [*856]                and $122 million. CVC requested damages
directly liable to the NFL for its payment. CVC            under the Clayton Act which, if established,
did not exercise the agreement's escape clause,            would be trebled to between $241 and $366
and the Rams began playing in St. Louis in                 million, and attorney fees. See 15 U.S.C. § 15.
1995. During that year CVC experienced                     The tortious interference claim was based on
difficulties meeting its financial obligations to          the theory that the $29 million relocation[**14]
the Rams and did not pay approximately $14                 fee assessed on the Rams was levied through
million of the amount due. CVC and Rams                    economic duress, since its only choices were to
president Shaw then agreed that CVC would                  agree to increase its share of the fee from $7.5
sue the NFL and that the Rams would receive a              million to $20 million or abandon the deal with
right to half of any recovery in place of the              the Rams. It asserted that the fee made its
payments due.                                              contract with the Rams substantially more
                                                           burdensome       which    constituted     tortious
                          II.                              interference under Missouri law, as did the use
                                                           of economic duress.
                          A.
                                                                                  B.
  CVC filed this case against the league and
twenty four member teams on December 18,                     A number of motions were brought during the
1995, claiming that their actions had violated             pretrial period, including one by the NFL for
Sections 1 and 2 of the Sherman Antitrust Act,             summary judgment on the Section 1 claim. The
15 U.S.C. §§ 1, 2, and that the imposition of the          NFL argued that the league and teams form a
high relocation fee tortiously interfered with             single economic enterprise incapable of
CVC's contract with the Rams. CVC's theory                 conspiring among themselves. The court denied
was that Article 4.3, the accompanying                     the motion on the basis of collateral estoppel.
                                                           The Ninth Circuit had previously ruled against
                                                           the NFL on the same issue in Raiders I, 726
6
  The record is not clear on when the NFL owners           F.2d at 1387-90 (league not a single economic
learned about CVC's agreement to contribute to any         enterprise because teams have independent
relocation fee. John Shaw testified that he informed       value, are separately owned and managed, earn
Commissioner Tagliabue of the agreement before the         different profits, and compete in various ways).
April 12 vote, but on cross he said that he had withheld
                                                           The district court was not persuaded that two
information about the agreement from the NFL and
team owners and had insisted that CVC do the same.         subsequent cases dealing with the concept of
Tagliabue testified that he did not inform the owners      single economic enterprise required a different
about CVC's undertaking in regard to the fee until after   result. Copperweld Corp v. Independence Tube
they had voted.                                            Corp., 467 U.S. 752, 81 L. Ed. 2d 628, 104 S.



                                                                                               730
Ct. 2731 (1984)[**15] (parent and wholly             fact caused the absence of competing bids on
owned subsidiary cannot conspire with each           the Trans World Dome lease before a jury
other under Section 1) and City of Mt. Pleasant      would be permitted to decide whether harm to
v. Associated Elec. Coop., Inc., 838 F.2d 268,       competition from Article 4.3 and its
274-76 (8th Cir. 1988) (test is whether entities     enforcement outweighed the positive effects on
have “pursued interests diverse from those of        competition. See NCAA, 468 U.S. at 100;
the cooperative itself”). See White Earth Band       Chicago Board of Trade v. United States, 246
of Chippewa Indians v. Alexander, 683 F.2d           U.S. 231, 238, 62 L. Ed. 683, 38 S. Ct. 242
1129, 1134 (8th Cir. 1982) (change in law            (1918).[**17] This was because CVC's claim
required to prevent collateral estoppel).            was unlike cases alleging damage from a direct
                                                     application of a regulation, see Raiders I, 726
  In a second summary judgment motion the            F.2d at 1384-85 (case arose from owners' vote
NFL argued for dismissal of all of CVC's             against relocation under Article 4.3 which
claims. The district court granted the motion as     required approval for a move). There was
to the Missouri antitrust claims on the basis that   nothing in the NFL Constitution and Bylaws or
they were preempted by federal law, citing           in the deposition evidence to suggest that there
Partee v. San Diego Chargers Football Co., 34        was an explicit ban or limit on competitive
Cal. 3d 378, 668 P.2d 674, 194 Cal. Rptr. 367        bidding for leases.
(Cal. 1983) (en banc), and denied it in all other
respects. The remaining issues for trial were          The court also denied summary judgment on
discussed in some detail in the course of its        CVC's Section 2 and tortious interference
ruling.                                              claims. It held that CVC could make out a
                                                     Section 2 monopoly leveraging claim if it could
  The court's discussion of the Section 1 claim      show that the NFL used a monopoly position in
gave direction on several legal points. It           the professional football market to gain an
indicated that CVC could not succeed on this         advantage in the market for stadia. More
antitrust claim with a theory that Article 4.3       evidence was necessary in order to evaluate the
was per se anticompetitive, but instead would        NFL's claim that the stadium market was not
have to show that the alleged[**16]                  distinct from the market for professional
anticompetitive effect of the rule outweighed its    football. The court determined that there were
procompetitive features. The court relied on         questions of material fact on the tortious
National Collegiate Athletic Ass'n v. Board of       interference claim. These included whether
Regents of Univ. of Oklahoma, 468 U.S. 85,           CVC's renegotiation of its lease agreement with
100-103, [*857] 104 S. Ct. 2948, 82 L. Ed. 2d        the Rams was a necessary consequence of
70 (1984) (NCAA) (league limits on number of         enforcement of Article 4.3 and whether the
televised games), and Raiders I, 726 F.2d at         NFL intended to interfere with that contract.
1387 (league rule requiring vote to allow a team     With the case focused[**18] on these issues,
to relocate). These cases had held that certain      the parties went to trial.
rules of sports leagues governing matters such
as the number of games to be televised and the                             C.
division of home territories among professional
teams, while perhaps ordinarily per se                 CVC's case consisted largely of the testimony
anticompetitive, were necessary for the              of various owners, league commissioner Paul
existence of the league and should therefore be      Tagliabue, Rams president John Shaw, and
judged under a rule of reason analysis. CVC          several experts. It also presented testimony of
would also have to offer proof that the alleged      individuals involved in the Rams relocation to
conspiracy to suppress movement of teams in          St. Louis. FANS leader Senator Eagleton,



                                                                                        731
Congressman Gephardt, and St. Louis County          testified about the negotiations between the
Executive George Westfall all testified about       Rams and CVC and about the Rams' dealings
their involvement in the relocation and the         with the NFL during the voting on the
interaction with NFL officials. CVC focuses in      relocation proposal. [**20] In addition to
this appeal on three bodies of evidence.            testifying about the Rams interest in relocating
                                                    and their negotiations with CVC, he also
  CVC attempted to show that past applications      discussed his own experience with the league
of Article 4.3 and the related guidelines and the   and his views about other teams. Shaw testified
NFL approach to team relocations had created        that based on his experience representing the
an atmosphere in which teams were afraid to         Rams at league meetings Article 4.3 prevented
move and that they did not bid on CVC's lease       team movement, that the NFL took an
as a result. Several team owners stated in          antagonistic approach toward relocations, and
deposition testimony that the purpose of the        that there were high risks of alienating the
rules was to ensure stability, and they also        league or possible penalties in any attempt to
testified to differing interpretations of the       move a NFL team. The Rams benefitted in their
guidelines and of their relative importance in      negotiations with CVC because no other team
deciding how to vote. CVC argued that this          was bidding as a result of Article 4.3 and its
evidence showed teams could anticipate league       application, and this enabled him to demand a
disapproval of any moves or use of the rules to     more favorable lease from CVC than he would
extract concessions upon relocating and that        have been able to get in a competitive
teams would therefore[**19] not seek out and        environment.
bid on opportunities to move. Leonard Tose, the
former owner of the Philadelphia Eagles,              Among the experts called by CVC was
testified that the NFL had sued to stop the         Professor John Siegfried, an economics
Eagles from moving to Phoenix and taken             professor at Vanderbilt University who has
actions which CVC claims necessitated sale of       done research on the economics of sports.
the team. Victor Kiam, the former owner of the      Siegfried said that in his opinion the relocation
New England Patriots, also testified about the      policies had a direct effect on the lease price.
attempt to relocate his team, which met with        He testified that any team which challenged the
resistance and a forced sale.                       regulations would be the only bidder on an
                                                    available lease (in antitrust terms, a
  CVC claims that the uncertainty about             “monopsony”) and could therefore extract
imposition of a relocation fee and its amount       favorable terms from the[**21] captive buyer.
was one reason why teams did not seek out           In a “freely competitive marketplace with full
relocation opportunities. The league had            dissemination of information” he would expect
assessed a relocation fee of $7.5 million on the    teams to seek out the best lease opportunities
St. Louis Cardinals when the team moved to          and to bid against each other on them. He based
Phoenix in the first team relocation after the      his conclusions on “observed market behavior”
guidelines were issued. CVC offered evidence        and the “prospect of earning higher returns at
on the benefits a predictable formula for           the Trans World Dome.”
calculating the fee would have and pointed out
that the NFL has not adopted one.                    CVC also used circumstantial evidence to
                                                    support its argument that the NFL culture
  [*858] CVC called Rams president John             caused the lack of bidding on its lease. CVC
Shaw in its case in chief. He explained during      argued that the purpose of the NFL rules was to
his testimony that the Rams would obtain a          deter relocation and that they accomplished that
portion of any recovery in this case. Shaw          purpose and prevented other teams from



                                                                                        732
bidding on the lease. It claimed that the market    actions must have been what had prevented
would normally produce competition for a            other teams from bidding on the Trans World
lucrative lease, and offered the testimony of       Dome lease, as opposed to showing that there
Stanley “Bud” Adams, Jr., owner of the              had been a connection in fact between the
Houston Oilers football team, who stated he         allegedly anticompetitive behavior and the
would have expected high competition for the        absence of competitive bidding. CVC was
lease. CVC contends in its brief that from this     asked to explain its Section 1 theory at the
evidence “a reasonable jury could infer that        conference. Counsel responded that “this
some external factor was disrupting free            application and enforcement [*859] of the
competition -- and that a set of relocation         relocation policies had a very substantial
policies designed and intended to frustrate team    deterrent effect upon anybody but the Rams
movement were the most likely candidate.”           entering into negotiations with CVC.” At this
                                                    point the NFL moved again for judgment as a
                       D.                           matter of law, see Fed. R. Civ. P. 50(a). It
                                                    argued that without a showing that the NFL's
  The NFL moved for judgment as a matter of         rules and actions had in fact deterred bidding on
law at the close of CVC's[**22] case, after four    the St. Louis lease, CVC's claim was in essence
weeks of evidence, and the district court           a per se attack on Article 4.3 and the guidelines,
granted the motion as to two of CVC's three         and the court had already indicated that the rule
remaining claims. The court found that CVC          of reason was the proper method of analysis.
had failed to present evidence that the
relocation fee caused a breach in its lease           After further briefing and oral argument, the
agreement with the Rams, and breach is a            court described the critical question as whether
necessary element of tortious interference under    there was evidence tending to show that “the
Missouri law. CVC instead modified its              alleged restraint arises out of 'the agreement of
agreement with the Rams to accommodate the          the teams to adopt Article 4.3 to empower the
size of the fee. The court also found that there    commissioner to adopt[**24] and promulgate
had been no evidence that the NFL had               rules in enforcing 4.3 which has resulted in
intended to interfere with the contract, another    conduct which has precluded teams from
required element under state law. Judgment was      coming to bid competitively in St. Louis.'“ In
granted in the NFL's favor on the Section 2         other words, in order to go to the jury CVC had
claim as well, since CVC had not shown that         to show more than a theoretical connection
the NFL had a monopoly in the professional          between the allegedly anticompetitive actions
football market or that there was a secondary       and the events surrounding the Rams move to
market in NFL stadia. CVC has not appealed          St. Louis.
the ruling on the Section 2 claim. The court
permitted the Section 1 claim to proceed,             Since the court concluded that CVC had
despite expressing misgivings about CVC's           presented no evidence to show that the NFL's
case.                                               rule and the guidelines actually had caused
                                                    league teams other than the Rams to refrain
  After the NFL had presented two days of           from competitive bidding on the Trans World
evidence and was close to finishing its case, the   Dome lease, it granted the Rule 50 motion.
court convened the charge conference to             CVC had not shown that it had either tried to
prepare for submission of the Section 1 claim to    learn if other teams might be interested in
the jury. The parties again disagreed about         relocating, that there were teams actually
whether CVC could make a submissible[**23]          interested in moving to St. Louis, or that the
case by showing that the NFL's rules and            failure of the others to bid on the lease was due



                                                                                        733
to the NFL's policies and acts. There was no        surfaced during the expansion period had been
showing that there had been interested teams        corrected or that certain acts alleged to have
who had failed to contact CVC or that at the        been taken by the commissioner to prevent
time CVC was seeking a team there were team         team relocation had occurred.
owners who had not bid because of past
application of league rules or acts of the            The league and teams also cross appeal. They
commissioner to stop relocations. Finally, the      challenge the district court ruling that they were
court held that CVC had failed to present           collaterally estopped from arguing that they are
evidence of antitrust[**25] injury. It said there   a single economic enterprise incapable of
had been no evidence that collusive activity of     conspiracy under Section 1 of the Sherman Act.
the league and member teams reduced                 They contend that the Supreme Court decision
competitive bidding and that the opinion            in Copperweld Corp., 467 U.S. 752, 104 S. Ct.
testimony of CVC's expert on damages lacked         2731, 81 L. Ed. 2d 628, and this court's decision
foundation in the record and was not consistent     in City of Mt. Pleasant, 838 F.2d 268, have
with its theory of liability.                       changed the law on single economic enterprise
                                                    since the Ninth Circuit decision in Raiders I.
                      III.                          They seek reversal of the collateral estoppel
                                                    ruling and dismissal of CVC's [*860]
  CVC's appeal from the judgment focuses on         Section[**27] 1 claim on the ground that they
the dismissal of its claim under Section 1 of the   amount to a single economic enterprise.
Sherman Act and of its claim for tortious
interference with contract. It seeks a new trial.                         ***
CVC argues that its evidence was sufficient to
establish a Section 1 violation, contending that      [*861] Section 1 of the Sherman Antitrust act
it had shown a connection in fact between the       makes it unlawful to form a conspiracy in
NFL rules and actions and the lack of               restraint of trade. 15 U.S.C. § 1. Restraints
competitive bidding on the lease. It also argues    which have “pernicious effect on competition
that the tortious interference claim should not     and lack of any redeeming virtue” are illegal
have been dismissed because it had established      per se under Section 1 without inquiry into the
both economic duress and actions which made         reasonableness of the restraint or the harm
its agreement with the Rams more burdensome.        caused. Northern Pac. Rw'y v. United States,
The NFL responds that CVC did not produce           356 U.S. 1, 5, 2 L. Ed. 2d 545, 78 S. Ct. 514
sufficient evidence and no evidence that it         (1958); see also Copperweld Corp., 467 U.S. at
sought bids from other teams or that other          768; [**31]United States v. Topco Associates,
teams were even in a position to move. The          Inc., 405 U.S. 596, 607-08, 31 L. Ed. 2d 515, 92
league and teams also suggest that Article 4.3      S. Ct. 1126 (1972). Analysis of whether a
and the related guidelines could not have           restriction's harm to competition outweighs any
affected the number of bidders on the lease         procompetitive effects is necessary if the
because the[**26] rules did not become              anticompetitive impact of a restraint is less
relevant until after the agreement between the      clear or the restraint is necessary for a product
Rams and CVC was completed and the Rams             to exist at all. See Chicago Board of Trade, 246
made their application to move, in other words      U.S. at 238; Broadcast Music, Inc. v. Columbia
well after any bidding period. Finally, the NFL     Broadcast Sys., Inc., 441 U.S. 1, 9-10, 60 L. Ed.
argues that CVC was unable to show there were       2d 1, 99 S. Ct. 1551 (1979). Some trade
not independent reasons for the absence of          restrictions by sports leagues have been held to
other bids, especially since other owners did not   fall into this category. NCAA, 468 U.S. at 94
know that the St. Louis lease problems which        (restriction on broadcasts of league games);



                                                                                        734
NBA v. SDC Basketball Club, Inc., 815 F.2d            by the rules and the handling of prior
562, 567-68 (9th Cir. 1987) (relocation rules);       relocations.
Sullivan v. NFL, 34 F.3d 1091, 1096 (1st Cir.
1994) (prohibition of public ownership of               CVC did not present evidence tending to
teams). The district court held in this case that     show that there was even one other team
the franchise relocation rule and guidelines for      besides the Rams that failed to bid on its lease
evaluation of proposed team moves do not fit          because of the NFL rules and past applications
the per se category of restraints and should          of them. See Monsanto, 465 U.S. at 764. In
therefore be addressed under a rule of reason         order to prove that Section 1 defendants were
analysis. This ruling has not been appealed.          acting pursuant to a conspiracy, a plaintiff must
[**32]                                                present evidence that tends “to exclude the
                                                      possibility that the alleged coconspirators acted
                        1.                            independently,” Matsushita Elec. Indus. Co.,
                                                      Ltd. v. Zenith Radio Corp., 475 U.S. 574 at 588,
  In order to prevail under Section 1, CVC must       106 S. Ct. 1348, 89 L. Ed. 2d 538 (quoting
prove that: (1) there was an agreement among          Monsanto, 465 U.S. at 764), because “conduct
the league and member teams in restraint of           as consistent with permissible competition as
trade; (2) it was injured as a direct and             with illegal conspiracy does not, standing alone,
proximate result; and (3) its damages are             support [**34]an inference of antitrust
capable of ascertainment and not speculative.         conspiracy,” The Corner Pocket of Sioux Falls,
Admiral Theatre Corp. v. Douglas Theatre              Inc. v. Video Lottery Technologies, Inc., 123
Corp., 585 F.2d 877, 883-84 (8th Cir. 1978).          F.3d 1107, 1109 (8th Cir. 1997), cert. denied
The first element is established by proof that        140 L. Ed. 2d 116, 118 S. Ct. 1054 (1998)
there was an agreement in restraint of trade and      (quoting Matsushita, 475 U.S. 574, 588, 89 L.
that the challenged action was “part of or            Ed. 2d 538, 106 S. Ct. 1348 (1986)). See also
pursuant to that agreement.” Monsanto v.              Monsanto, 465 U.S. at 764 (1984); Lovett v.
Spray-Rite Service Corp., 465 U.S. 752, 767, 79       General Motors Corp., 998 F.2d 575, 578-79
L. Ed. 2d 775, 104 S. Ct. 1464 (1984). Other          (8th Cir. 1993). 7
Section 1 challenges to rules of sports leagues
have involved situations where the defendants           [*862] CVC presented no evidence to exclude
had taken action pursuant to an allegedly             the possibility that the owners who did not bid
anticompetitive rule and the plaintiff attacked       on the St. Louis lease were acting for
the rule itself or the application of the rule. See   independent business[**35] reasons rather than
NCAA, 468 U.S. at 100-101 ; Sullivan, 34 F.3d         pursuant to the alleged agreement in restraint of
1091; SDC Basketball Club., 815 F.2d 562. In          trade. Indeed, the evidence at trial was to the
those cases there was no question that the            contrary. The deposition testimony of the
defendants were acting pursuant to an                 owners reflected their awareness of problems
agreement in restraint of trade, and the issue        with the St. Louis lease, concern for their
was whether the[**33] agreement was
unreasonable. See id. This case is different
because CVC has not challenged a vote by team         7
owners or a particular application of the rules,         The cited cases involved situations which could
                                                      amount to a per se violation of the antitrust laws. In a
see Raiders I, 726 F.2d at 1385, nor was St.
                                                      rule of reason case like this one, where there is an issue
Louis unable to obtain a NFL team. CVC                as to the cause of the lack of competitive bidding,
complains instead about market conditions and         evidence about whether the alleged agreement affected
attributes the conditions existing at the time it     the actions of the other team owners is relevant, as is
was seeking a tenant to an atmosphere created         evidence tending to exclude independent action.



                                                                                                735
existing leases, and loyalty to their                did not tend to prove that the rules deterred any
communities. These were all independent              interested owner from bidding in St. Louis or
reasons why teams might not have bid.                that other owners considered the rules a factor
Moreover, CVC did not present evidence               in their lack of interest in the lease. Shaw could
tending to show that all NFL teams would use         not identify[**37] a single team that was
the same criteria to evaluate a relocation           expressly interested in moving to St. Louis or
opportunity or automatically attempt to move to      was prevented from bidding on the lease
the city offering the most lucrative lease. CVC      because of past applications of league
argues that the parties' pretrial stipulation that   relocation rules, and there was no additional
the league Constitution and Bylaws amounted          evidence that any particular team was able to
to an agreement among the NFL and its                move at the time CVC was seeking a tenant. 8
members was all that was necessary to show the       In fact, CVC failed to ask any NFL owner
existence of a conspiracy. This evidence did not     whether they were interested [*863] in moving
tend to prove that any team acted pursuant to a      to St. Louis at the time it was seeking a team.
conspiracy to prevent bidding on the stadium         Shaw was not a disinterested witness, and in the
lease, however. “Antitrust law limits the range      absence of other evidence his testimony was not
of permissible inferences from ambiguous             enough to establish that the rule and its past
evidence in a § 1 case,” and the trial evidence      application had created an anti-relocation
did not support an inference that NFL teams
were acting pursuant to the alleged conspiracy
when they declined to bid on the Trans World         8
Dome lease. Matsushita, 475 U.S. at 588.[**36]         CVC claims that eight teams had expressed interest in
                                                     moving since 1991, but the testimony it cites in support
                                                     contains no indication that any team was interested in
                        2.                           moving in 1995, CVC's deadline for a team. It cites the
                                                     deposition testimony of New Orleans Saints owner
  The district court rested its summary              Tom Benson who said that teams had expressed interest
judgment ruling on the issue of causation. In        in St. Louis, but Benson did not identify any teams or
order to satisfy the causation element of a          the nature of any interest. CVC also does not cite any
Section 1 case, CVC had to show that the NFL's       support elsewhere in the record for Shaw's testimony
                                                     that the Houston Oilers, Cincinnati Bengals, and New
anticompetitive acts were an actual, material
                                                     England Patriots could move.
cause of the alleged harm to competition. See
National Association of Review Appraisers v.             CVC argues that the Tampa Bay Buccaneers were
Appraisal Found., 64 F.3d 1130, 1135 (8th Cir.       available to move, citing the deposition testimony of a
1995); Admiral Theatre Corp. v. Douglas              league official. That official stated, however, that the
Theatre Co., 585 F.2d 877, 883-84 (8th Cir.          team would have had to pay a penalty on its lease in
1978). Since nothing in the NFL rules expressly      order to relocate, and CVC does not point to any
                                                     testimony by team officials indicating they were
prevented competition among teams for leases         prepared to move. Senator Eagleton testified, however,
or stated that only one team could negotiate         that Jerry Clinton had negotiated with the Buccaneers
with a leaseholder at a time, CVC had to show        and claimed he could bring them to St. Louis on the
that past suppression of movement and the            same terms as the Rams if an additional $5 million
alleged anti-relocation atmosphere created by        were made available, but Eagleton did not indicate why
previous rule applications effectively prevented     St. Louis had not attempted to create a competitive
                                                     bidding situation between the teams.
all other teams from dealing with the CVC
about the St. Louis lease and entering bids on it.     CVC also claims that the Minnesota Vikings were
                                                     available, citing testimony by Senator Eagleton, but
  CVC argues that Shaw's testimony was               Eagleton testified that FANS concluded that the
sufficient to prove causation, but his testimony     Vikings were not interested in St. Louis.



                                                                                              736
atmosphere in the NFL which caused the lack          tending to show that Siegfried's economic
of bidders, especially in light of the fact that     model actually applied to the NFL and the CVC
Shaw's own team succeeded in moving after            efforts to obtain a team, his testimony is
negotiating with several cities. See H & B           insufficient to create a jury question on the
Equipment Co. v. International Harvester Co.,        issue of causation. Sip-Top, 86 F.3d at 830
577 F.2d 239, 247 (5th Cir. 1978) (plaintiff         (judgment as a matter of law appropriate where
could not show causation based on corporate          plaintiff only relies on speculation to support
officer's testimony alone). Shaw was not a           theory).
participant in what is alleged to have been a
refusal to approach CVC, and his testimony on          CVC relies also on circumstantial evidence to
the motivation of other owners to refrain from       prove causation. It claims that since the purpose
bidding could not support a reasonable               of the rules was to deter team movement and
inference that the rules prevented[**38] the         there was a lack of competitive bidding on the
competitive bidding which CVC wished to have         Trans World Dome lease, it can be inferred that
on the St. Louis stadium.                            the rules were the cause of the harm allegedly
                                                     suffered. See Alexander v. National Farmers
  CVC contends that the testimony of its expert,     Org., 687 F.2d 1173, 1209-10 (8th Cir. 1982)
Professor John Siegfried, establishes a causal       (“causal links also may properly be a matter of
link between the NFL's actions and the lack of       inference from the circumstances and evidence
competitive bidding on the lease. A jury may         as a whole.”). CVC cites the Alexander case to
not rest its verdict on an expert's conclusion       support its position, but the facts there were
“without some underlying facts and reasons, or       significantly different. The[**41] plaintiff had
a logical inferential process to support the         produced substantial evidence that its
expert's opinion.” Sullivan, 34 F.3d at 1105         competitor in the dairy distribution business
(citing Mid-State Fertilizer Co. v. Exchange         threatened and harassed buyers to stop dealing
National Bank, 877 F.2d 1333, 1339 (7th Cir.         with it; the defendant's actions were planned at
1989)). Here, there was no evidence on which         its board meetings and “there was no doubt that
the jury could have drawn a logical inference        the unlawful conspiracy was the material cause”
from Siegfried's opinion. Siegfried testified that   of the plaintiff's injury. Id. . The fact that the
he would have expected to see bidding on the         rules were allegedly intended to discourage
lease, but there was no evidence to support a        relocation does not support the inference that
finding that there were teams that were actually     they prevented all other teams besides the Rams
able and desiring to bid, but were prevented         from pursuing a possible move to St. Louis.
from doing it. Moreover, Siegfried rested his        There were many legitimate reasons why
conclusions on economic theory that states that      owners may not have bid, and without evidence
in a freely competitive market NFL teams             from those who did not bid about why they had
would want to move to the most advantageous          not, the circumstantial evidence was insufficient
lease opportunity, but there was no evidence         to allow the case to be presented to the jury on
which tended to show that this was actually the      causation.
case, especially in light of admissions by CVC
witnesses that several team owners would not           The district court found it particularly
move because[**40] of loyalty to their               significant that CVC had not presented
communities or ownership of their stadia.            evidence to show that it had sought bids from
Siegfried also testified that he had not seen any    other teams. See Read v. Medical X-Ray
of the lease agreements involved in the case,        Center, P.C., 110 F.3d 543, 546 (8th Cir.), cert.
any relocation agreement, or any documentation       denied 139 L. Ed. 2d 230, 118 S. Ct. 299
on the lease negotiations. Without evidence          (1997); Admiral Theatre Corp., 585 F.2d at



                                                                                         737
893-94. Where a plaintiff has otherwise failed     not make out the element of causation
to present evidence of causation, [**42]he must    necessary for a Section 1 claim.
show that he made “a demand on the defendant
to allow the plaintiff to take some action or                              3.
obtain some benefit, which the defendant's
challenged practice is allegedly [*864]              The district court also ruled that CVC failed
preventing the plaintiff from taking or            to present evidence to make out a submissible
obtaining, in order to prove that the practice     case of antitrust injury. CVC says that its
caused injury in fact.” Sullivan v. National       evidence tended to prove that the NFL's policies
Football League, 34 F.3d 1091, 1103 (1st Cir.      caused a reduction in competitive bidding
1994); see also Out Front Productions, Inc. v.     which is an antitrust injury. The NFL replies
Magid, 748 F.2d 166, 169-70 (3d Cir. 1984).        that the theory of CVC's case was that the very
The record shows no effort by CVC to solicit       existence[**44] of Article 4.3 and the
bids from other NFL teams and CVC did not          guidelines limited team bidding. It did not show
contact any other NFL team to encourage it to      that they operated to make CVC's financial
consider the St. Louis opportunity. The            obligations greater than they should have been,
negotiations between CVC and the Rams were         there was no antitrust injury. The league and
carried out in secret, and there was undisputed    team also argue that the rules did not result in a
evidence that CVC had made a conscious             reduction in output of the number of NFL
decision to negotiate with only one team at a      games, teams, or stadia which would be
time. In fact, the Rams had informed CVC they      necessary to show antitrust injury, citing
would back away if there were negotiations         Chicago Prof'l Sports Ltd. Partnership v. NBA,
with other teams and even suspended talks          95 F.3d 593 (7th Cir. 1996).
when CVC leaked information to the press.
                                                     Antitrust injury is “injury of the type the
  CVC claims that the evidence about its           antitrust laws were intended to prevent and
presentation to the NFL owners during the          flows from that which makes defendants' acts
expansion process and its publication of the       unlawful.” Brunswick Corp. v. Pueblo Bowl-O-
Rams “wish list” during its negotiations was       Mat, Inc., 429 U.S. 477, 489, 50 L. Ed. 2d 701,
sufficient to[**43] show that it had sought        97 S. Ct. 690 (1977). CVC failed to offer proof
interest from other teams. There was undisputed    of antitrust injury because it did not present
testimony that St. Louis had been passed over      evidence to show that there was a suppression
for expansion because of problems with its         of bidding on the St. Louis lease. There was no
ownership group and lease, and there was no        evidence at trial that any other willing and able
evidence that CVC made owners aware that           bidder besides the Rams was in the market for a
these problems had been rectified. Publication     stadium and interested in the St. Louis
of the benefits the Rams sought in St. Louis was   opportunity at the time CVC was in the market
not the same as informing other owners CVC         for a tenant. A showing of antitrust injury
was seeking additional bidders. CVC “may not       requires proof that the possibility for the alleged
recover for losses due to factors other than the   harm to competition[**45] actually existed and
[NFL's] anticompetitive violations.” National      that competition was diminished by the
Association of Review Appraisers, 64 F.3d at       defendants' actions. “The Sherman Act does not
1135 (quoting Amerinet Inc. v. Xerox Corp.,        require competitive bidding; it prohibits
972 F.2d 1483, 1494 (8th Cir. 1992)). Since        unreasonable restraints on competition.”
CVC failed to present evidence showing that        National Society of Professional Engineers v.
the alleged conspiracy caused it injury, it did    United States, 435 U.S. 679, 55 L. Ed. 2d 637,
                                                   98 S. Ct. 1355 (1978) (organization's ethical



                                                                                        738
rules prohibited competitive bidding). CVC                                         V.
presented no evidence that it was injured by a
restraint on competition.                                     CVC had ample opportunity to prove the
                                                            causes of action that are the subject of its
  In sum, CVC did not make out a claim under                appeal, and it took some four weeks to put in its
Section 1 of the Sherman Act, and appellees                 evidence at trial. The many legal issues were
were entitled to judgment as a matter of law. 9 It          briefed and argued by the parties before the
failed to present sufficient evidence to prove              district court ruled on them. Since CVC failed
that the lack of expressed [*865] interest from             to produce sufficient evidence to make out
other teams in the St. Louis opportunity was                essential elements required under Section 1 of
caused by Article 4.3 and other acts of a                   the Sherman Act and under Missouri law on
conspiracy consisting of the league and its                 tortious interference, the league and the
members, and there was no evidence of antitrust             member teams were entitled to judgment as a
injury.                                                     matter of law. CVC has not shown on its appeal
                                                            that it should have a new trial, and the cross
                         ***                                appeal is dismissed as moot. Accordingly, we
                                                            affirm the judgment of the district court.




9
  Because the league and teams are entitled to judgment
as a matter of law on the Section 1 claim for the
reasons discussed, it is not necessary to reach the issue
raised by their cross appeal as to whether they are
unable to conspire among themselves because they are
a single economic enterprise under Copperweld Corp.,
467 U.S. 752, 81 L. Ed. 2d 628, 104 S. Ct. 2731 (1984)
and City of Mt. Pleasant, 838 F.2d 268 (8th Cir. 1988).



                                                                                                739
  II. ANTITRUST ISSUES IN
PROFESSIONAL AND AMATEUR
        ATHLETICS

F. Amateur Athletics and Antitrust
NATIONAL COLLEGIATE ATHLETIC                               promulgated playing rules, standards of
      ASSOCIATION, Petitioner                              amateurism,       standards     for     academic
               v.                                          eligibility, regulations concerning recruitment
   BOARD OF REGENTS OF THE                                 of athletes, and rules governing the size of
  UNIVERSITY OF OKLAHOMA and                               athletic squads and coaching staffs. In some
UNIVERSITY OF GEORGIA ATHLETIC                             sports, such as baseball, **2954 swimming,
          ASSOCIATION                                      basketball, wrestling and track, it has
                                                           sponsored        and     conducted        national
                  No. 83-271.                              tournaments. It has not done so in the sport of
          468 U.S. 85, 104 S.Ct. 2948                      football, however. With the *89 exception of
           Argued March 20, 1984.                          football, the NCAA has not undertaken any
            Decided June 27, 1984.                         regulation of the televising of athletic events.2

                                                               The NCAA has approximately 850 voting
*88 Justice STEVENS delivered the opinion                  members. The regular members are classified
of the Court.                                              into separate divisions to reflect differences in
                                                           size and scope of their athletic programs.
The University of Oklahoma and the                         Division I includes 276 colleges with major
University of Georgia contend that the                     athletic programs; in this group only 187 play
National Collegiate Athletic Association has               intercollegiate football. Divisions II and III
unreasonably restrained trade in the televising            include approximately 500 colleges with less
of college football games. After an extended               extensive athletic programs. Division I has
trial, the District Court found that the NCAA              been subdivided into Divisions I-A and I-AA
had violated s 1 of the Sherman Act1 and                   for football.
granted injunctive relief. 546 F.Supp. 1276
(WD Okla.1982). The Court of Appeals                           Some years ago, five major conferences
agreed that the statute had been violated but              together    with     major    football-playing
modified the remedy in some respects. 707                  independent institutions organized the College
F.2d 1147 (CA10 1983).             We granted              Football Association (CFA). The original
certiorari, 464 U.S. ----, 104 S.Ct. 272, 78               purpose of the CFA was to promote the
L.Ed.2d 253 (1983), and now affirm.                        interests of major football- playing schools
                                                           within the NCAA structure. The Universities
                           I                               of Oklahoma and Georgia, respondents in this
                                                           Court, are members of the CFA.
    The NCAA
                                                               History of the NCAA Television Plan
    Since its inception in 1905, the NCAA has
played an important role in the regulation of                  In 1938, the University of Pennsylvania
amateur collegiate sports. It has adopted and              televised one of its home games.3 From 1940


                                                           2 Presumably, however, it sells the television rights
1 Section 1 provides in pertinent part: “Every             to events that the NCAA itself conducts.
contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or         3 According to the NCAA football television
commerce among the several States, or with foreign         committee's 1981 briefing book: “As far as is known,
nations, is declared to be illegal....” 26 Stat. 209, as   there were [then] six television sets in Philadelphia:
amended, 15 U.S.C. s 1.                                    and all were tuned to the game.” App. 244.



                                                                                                     740
through the 1950 season all of Pennsylvania's          During each of the succeeding five
home games were televised. App. 303. That          seasons, studies were made which tended to
was the beginning of the relationship between      indicate that television had an adverse effect
television and college football.                   on attendance at college football games.
                                                   During those years the NCAA continued to
    On January 11, 1951, a three-person            exercise complete control over the number of
“Television Committee,” appointed during the       games that could be televised. Id., at 325-359.
preceding year, delivered a report to the
NCAA's annual convention in Dallas. Based              From 1952 through 1977 the NCAA
on preliminary surveys, the committee had          television committee followed essentially the
concluded that “television does have an            same procedure for developing its television
adverse effect on college football attendance      plans. It would first circulate a questionnaire
and unless brought under some control              to the membership and then use the responses
threatens to seriously harm the nation's overall   as a basis for formulating **2955 a plan for
athletic and physical *90 system.” Id., at 265.    the ensuing season. The plan was then
The report emphasized that “the television         submitted to a vote by means of a mail
problem is truly a national one and requires       referendum. Once approved, the plan formed
collective action by the colleges.” Id., at 270.   the basis for NCAA's negotiations *91 with
As a result, the NCAA decided to retain the        the networks. Throughout this period the
National Opinion Research Center (NORC) to         plans retained the essential purposes of the
study the impact of television on live             original plan. See 546 F.Supp., at 1283.4 Until
attendance, and to declare a moratorium on         1977 the contracts were all for either 1- or
the televising of football games. A television     2-year terms. In 1977 the NCAA adopted
committee was appointed to implement the           “principles of negotiation” for the future and
decision and to develop an NCAA television         discontinued the practice of submitting each
plan for 1951. Id., at 277-278.                    plan for membership approval. Then the
                                                   NCAA also entered into its first 4-year
    The committee's 1951 plan provided that        contract granting exclusive rights to the
only one game a week could be telecast in          American Broadcasting Cos. (ABC) for the
each area, with a total blackout on 3 of the 10    1978-1981 seasons.       ABC had held the
Saturdays during the season. A team could          exclusive rights to network telecasts of NCAA
appear on television only twice during a           football games since 1965. Id., at 1283-1284.
season. The plan also provided that the
NORC would conduct a systematic study of
the effects of the program on attendance. Id.,     4 The television committee's 1981 briefing book
at 279. The plan received the virtually            elaborates: “In 1952, the NCAA Television
unanimous       support    of    the    NCAA       Committee initiated a plan for controlling the
                                                   televising of college football games. The plans have
membership; only the University of                 remained remarkably similar as to their essential
Pennsylvania challenged it. Pennsylvania           features over the past 30 years. They have had the
announced that it would televise all its home      following primary objectives and purposes: “1. To
games. The council of the NCAA thereafter          reduce, insofar as possible, the adverse effects of live
declared Pennsylvania a member in bad              television upon football game attendance and, in turn,
standing and the four institutions scheduled to    upon the athletic and education programs dependent
                                                   upon that football attendance; “2. To spread
play at Pennsylvania in 1951 refused to do so.
                                                   television among as many NCAA member colleges as
Pennsylvania then reconsidered its decision        possible; and “3. To provide football television to the
and abided by the NCAA plan. Id., at               public to the extent compatible with the other two
280-281.                                           objectives.” App. 244.



                                                                                               741
    The Current Plan                                        procedure for permitting specific “exception
                                                            telecasts.”8
    The plan adopted in 1981 for the                            In separate agreements with each of the
1982-1985 seasons is at issue in this case.5                carrying networks, ABC and the Columbia
This plan, like each of its predecessors, recites           Broadcasting System (CBS), the NCAA
that it is intended to reduce, insofar as                   granted each the right to telecast the 14 live
possible, the adverse effects of live television            “exposures” described in the plan, in
upon football game attendance.6 It provides                 accordance with the “ground rules” set
that “all forms of television of the football *92           **2956 forth therein.9 Each of the networks
games of NCAA member institutions during                    agreed to pay a specified “minimum aggregate
the Plan control periods shall be in accordance             compensation *93 to the participating NCAA
with this Plan.” App. 35. The plan recites                  member institutions” during the 4-year period
that the television committee has awarded                   in an amount that totaled $131,750,000. In
rights to negotiate and contract for the                    essence the agreement authorized each
telecasting of college football games of                    network to negotiate directly with member
members of the NCAA to two “carrying                        schools for the right to televise their games.
networks.” Id., at 36. In addition to the                   The agreement itself does not describe the
principal award of rights to the carrying                   method of computing the compensation for
networks, the plan also describes rights for a              each game, but the practice that has developed
“supplementary series” that had been awarded                over the years and that the District Court
for the 1982 and 1983 seasons,7 as well as a                found would be followed under the current
                                                            agreement involved the setting of a
                                                            recommended fee by a representative of the
5 Because respondents sought and obtained only              NCAA for different types of telecasts, with
injunctive relief against future violations of § 1 in the   national telecasts being the most valuable,
District Court, we do not consider previous NCAA
                                                            regional telecasts being less valuable, and
television plans except to the extent that they shed
light on the purpose and effect of the current plan.        Division II or Division III games commanding

6 “The purposes of this Plan shall be to reduce,
insofar as possible, the adverse effects of live
television upon football game attendance and, in turn,
                                                            8 An “exception” telecast is permitted in the home
upon the athletic and related educational programs
                                                            team's market of games that are sold out, and in the
dependent upon the proceeds therefrom; to spread
                                                            visiting team's market of games played more than 400
football television participation among as many
                                                            miles from the visiting team's campus, but in both
colleges as practicable; to reflect properly the image
                                                            cases only if the broadcast would not be shown in an
of universities as educational institutions; to promote
                                                            area where another college football game is to be
college football through the use of television, to
                                                            played. Id., at 62-72. Also, Division II and Division
advance the overall interests of intercollegiate
                                                            III institutions are allowed complete freedom to
athletics, and to provide college football television to
                                                            televise their games, except that the games may not
the public to the extent compatible with these other
                                                            appear on a network of more than five stations
objectives.” Id., at 35 (parenthetical omitted).
                                                            without the permission of the NCAA. Id., at 73-74.
7 The supplementary series is described in a
                                                            9 In addition to its contracts with the carrying
separate article of the plan. It is to consist of no more
                                                            networks, the NCAA has contracted with Turner
than 36 exposures in each of the first two years and
                                                            Broadcasting System, Inc. (TBS), for the exclusive
no more than 40 exposures in the third and fourth
                                                            right to cablecast NCAA football games. The
years of the plan. Those exposures are to be
                                                            minimum aggregate fee for the initial two-year period
scheduled on Saturday evenings or at other times that
                                                            of the TBS contract is $17,696,000. 546 F.Supp., at
do not conflict with the principal football series that
                                                            1291-1292.
is scheduled for Saturday afternoons. Id., at 86-92.



                                                                                                      742
a still lower price.10 The aggregate of all these             *94 The plan also contains “appearance
payments presumably equals the total                      requirements” and “appearance limitations”
minimum aggregate compensation set forth in               which pertain to each of the 2-year periods
the basic agreement. Except for differences in            that the plan is in effect.          The basic
payment between national and regional                     requirement imposed on each of the two
telecasts, and with respect to Division II and            networks is that it must schedule appearances
Division III games, the amount that any team              for at least 82 different member institutions
receives does not change with the size of the             during each 2-year period.           Under the
viewing audience, the number of markets in                appearance limitations no member institution
which the game is telecast, or the particular             is eligible to appear on television more than a
characteristic of the game or the participating           total of six times and more than four times
teams. Instead, the “ground rules” provide that           nationally, with the appearances to be divided
the carrying networks make alternate                      equally between the two carrying networks.
selections of those games they wish to                    See id., at 1293. The number of exposures
televise, and thereby obtain the exclusive right          specified in the contracts also sets an absolute
to submit a bid at an essentially fixed price to          maximum on the number of games that can be
the institutions involved. See 546 F.Supp., at            broadcast.
1289-1293.11
                                                              Thus, although the current plan is more
                                                          elaborate than any of its predecessors, it
10 The football television committee's briefing book      retains the essential features of each of them.
for 1981 recites that a fee of $600,000 was paid for      It limits the total amount of televised
each of the 12 national games telecast by ABC during
                                                          intercollegiate football and the number of
the regular fall season and $426,779 was paid for
each of the 46 regional telecasts in 1980. App. 250.      games that any one team may televise. No
The report further recites that “Division I members       member is permitted to make any **2957 sale
received $27,842,185 from 1980 football television        of television rights except in accordance with
revenue, 89.8 percent of the total. Division II's share   the basic plan.
was $625,195 (2.0 percent), while Division III
received $385,195 (1.3 percent) and the NCAA                 Background of this Controversy
$2,147,425 (6.9 percent).” Id., at 251.

11 The District Court explained how the agreement             Beginning in 1979 CFA members began
eliminates competition for broadcasting rights: “First,   to advocate that colleges with major football
the networks have no intention to engage in bidding.      programs should have a greater voice in the
Second, once the network holding first choice for any     formulation of football television policy than
given date has made its choice and agreed to a rights     they had in the NCAA. CFA therefore
fee for that game with the two teams involved, the
                                                          investigated the possibility of negotiating a
other network is then in a monopsony position. The
schools cannot threaten to sell the broadcast rights to   television agreement of its own, developed
any other network. They cannot sell to NBC without        *95 an independent plan, and obtained a
committing a violation of NCAA rules. They cannot         contract offer from the National Broadcasting
sell to the network which had first choice over that      Co. (NBC). This contract, which it signed in
particular date because, again, they would be in          August 1981, would have allowed a more
violation of NCAA rules, and the network would be         liberal number of appearances for each
in violation of its agreement with NCAA. Thus,
NCAA creates a single eligible buyer for the product
                                                          institution, and would have increased the
of all but the two schools selected by the network        overall revenues realized by CFA members.
having first choice. Free market competition is thus      See id., at 1286.
destroyed under the new plan.” 546 F.Supp., at
1292-1293.                                                   In    response     the   NCAA       publicly



                                                                                                743
announced that it would take disciplinary                  *99 [3, 4] It is also undeniable that these
action against any CFA member that complied            practices share characteristics of restraints we
with the CFA-NBC contract. The NCAA                    have previously held unreasonable.           The
made it clear that sanctions would not be              NCAA is an association of schools which
limited to the football programs of CFA                compete against each other to attract
members, but would apply to other sports as            television revenues, not to mention fans and
well. On September 8, 1981, respondents                athletes. As the District Court found, the
commenced this action in the United States             policies of the NCAA with respect to
District Court for the Western District of             television rights are ultimately controlled by
Oklahoma and obtained a preliminary                    the vote of member institutions.              By
injunction preventing the NCAA from                    participating in an association which prevents
initiating   disciplinary   proceedings     or         member institutions from competing against
otherwise interfering with CFA's efforts to            each other on the basis of price or kind of
perform     its    agreement    with    NBC.           television rights that can be offered to
Notwithstanding the entry of the injunction,           broadcasters, the NCAA member institutions
most CFA members were unwilling to commit              have created a horizontal restraint--an
themselves      to   the   new     contractual         agreement among competitors on the way in
arrangement with NBC in the face of the                which they will compete with one another.18
threatened sanctions and therefore the                 A restraint of this type has often been held to
agreement was never consummated. See id.,              be unreasonable as a matter of law. Because
at 1286-1287.                                          it places a ceiling on the number of games
                                                       member institutions may televise, the
                       ***                             horizontal agreement places an artificial limit
                                                       on the quantity of televised football that is
                         II                            available to broadcasters and consumers. By
                                                       restraining the quantity of television rights
    [2] There can be no doubt that the                 available for sale, the challenged practices
challenged practices of the NCAA constitute a          create a limitation on output; our cases have
“restraint of trade” in the sense that they limit      held that such limitations are unreasonable
members' freedom to negotiate and **2959               restraints of trade.19 Moreover, the District
enter into their own television contracts. In
that sense, however, every contract is a
restraint of trade, and as we have repeatedly          18 See Arizona v. Maricopa County Medical
recognized, the Sherman Act was intended to            Society, 457 U.S. 332, 356-357, 102 S.Ct. 2466,
prohibit only unreasonable restraints of               2479-2480, 73 L.Ed.2d 48 (1982); National Society
trade.17                                               of Professional Engineers v. United States, 435 U.S.
                                                       679, 694-696, 98 S.Ct. 1355, 1366-1367, 55 L.Ed.2d
                                                       637 (1978); United States v. Topco Associates, Inc.,
                                                       405 U.S. 596, 608-611, 92 S.Ct. 1126, 1133-1135, 31
                                                       L.Ed.2d 515 (1972). See also United States v. Sealy,
                                                       Inc., 388 U.S. 350, 352-354, 87 S.Ct. 1847,
17 See, e.g., Arizona v. Maricopa County Medical       1849-1851, 18 L.Ed.2d 1238 (1967) (marketing
Society, 457 U.S. 332, 342-343, 102 S.Ct. 2466,        association controlled by competing distributors is a
2472, 73 L.Ed.2d 48 (1982); National Society of        horizontal combination). See generally Blecher &
Professional Engineers v. United States, 435 U.S.      Daniels, Professional Sports and the “Single Entity”
679, 687-688, 98 S.Ct. 1355, 1363, 55 L.Ed.2d 637      Defense Under Section One of the Sherman Act, 4
(1978); Chicago Board of Trade v. United States, 246   Whittier L.Rev. 217 (1982).
U.S. 231, 238, 38 S.Ct. 242, 243, 62 L.Ed. 683
(1918).                                                19 See, e.g., United States v. Topco Associates,
                                                       Inc., 405 U.S. 596, 608-609, 92 S.Ct. 1126,


                                                                                                 744
Court found that the minimum aggregate price           with this type of arrangement,21 on the fact
in fact operates to preclude any price                 that the NCAA is organized as a nonprofit
negotiation between broadcasters and                   entity,22 or on *101 our respect for the
institutions, *100 thereby constituting                NCAA's historic role in the preservation and
horizontal price fixing, perhaps the paradigm          encouragement of intercollegiate amateur
of an unreasonable restraint of trade.20               athletics.23 Rather, what is critical is that this

     [5][6][7][8][9][10] Horizontal price fixing
and output limitation are ordinarily
                                                       21 While judicial inexperience with a particular
condemned as a matter of law under an
                                                       arrangement counsels against extending the reach of
“illegal per se” approach because the                  per se rules, see Broadcast Music, 441 U.S., at 9-10,
probability that        these   practices are          99 S.Ct., at 1556-1557; United States v. Topco
anticompetitive is so high; a per se rule is           Associates, Inc., 405 U.S. 596, 607-608, 92 S.Ct.
applied when “the practice facially appears to         1126, 1133, 31 L.Ed.2d 515 (1972); White Motor
be one that would always or almost always              Co. v. United States, 372 U.S. 253, 263, 83 S.Ct. 696,
tend to restrict competition and decrease              702, 9 L.Ed.2d 738 (1963); the likelihood that
                                                       horizontal price and output restrictions are
output.” Broadcast Music, Inc. v. CBS, 441             anti-competitive is generally sufficient to justify
U.S. 1, 19-20, 99 S.Ct. 1551, 1562, 60                 application of the per se rule without inquiry into the
L.Ed.2d 1 (1979). In such circumstances a              special characteristics of a particular industry. See
restraint is presumed unreasonable without             Arizona v. Maricopa County Medical Society, 457
inquiry into the particular market context in          U.S. 332, 349-351, 102 S.Ct. 2466, 2475-2476, 73
which it is found. Nevertheless, we have               L.Ed.2d 48 (1982); National Society of Professional
                                                       Engineers v. United States, 435 U.S. 679, 689-690,
decided that it would be inappropriate to apply
                                                       98 S.Ct. 1355, 1364, 55 L.Ed.2d 637 (1978).
a per se rule to this case. This decision is not
based **2960 on a lack of judicial experience          22 There is no doubt that the sweeping language of s
                                                       1 applies to nonprofit entities, Goldfarb v. Virginia
                                                       State Bar, 421 U.S. 773, 786- 787, 95 S.Ct. 2004,
                                                       2012-2013, 44 L.Ed.2d 572 (1975), and in the past
    (Continued)                                        we have imposed antitrust liability on nonprofit
                                                       entities which have engaged in anticompetitive
1133-1134, 31 L.Ed.2d 515 (1972); United States v.     conduct, American Society of Mechanical Engineers,
Sealy, Inc., 388 U.S. 350, 87 S.Ct. 1847, 18 L.Ed.2d   Inc. v. Hydrolevel Corp., 456 U.S. 556, 576, 102
1238 (1967); United States v. American Linseed Oil     S.Ct. 1935, 1947, 72 L.Ed.2d 330 (1982). Moreover,
Co., 262 U.S. 371, 388-390, 43 S.Ct. 607, 611, 67      the economic significance of the NCAA's nonprofit
L.Ed. 1035 (1923); American Column & Lumber Co.        character is questionable at best. Since the District
v. United States, 257 U.S. 377, 410-412, 42 S.Ct.      Court found that the NCAA and its member
114, 120-121, 66 L.Ed. 284 (1921).                     institutions are in fact organized to maximize
                                                       revenues, see 546 F.Supp., at 1288-1289, it is unclear
20 See, e.g., Arizona v. Maricopa County Medical       why petitioner is less likely to restrict output in order
Society, 457 U.S. 332, 344-348, 102 S.Ct. 2466,        to raise revenues above those that could be realized in
2473-2475, 73 L.Ed.2d 48 (1982); Catalano, Inc. v.     a competitive market than would be a for-profit
Target Sales, Inc., 446 U.S. 643, 646-647, 100 S.Ct.   entity. Petitioner does not rely on its nonprofit
1925, 1927, 64 L.Ed.2d 580 (1980) (per curiam );       character as a basis for reversal. Tr. of Oral Arg. 24.
Kiefer-Stewart Co. v. Joseph E. Seagram & Sons,
Inc., 340 U.S. 211, 213, 71 S.Ct. 259, 260, 95 L.Ed.   23 While as the guardian of an important American
219 (1951); United States v. Socony-Vacuum Oil         tradition, the NCAA's motives must be accorded a
Co., 310 U.S. 150, 212-214, 60 S.Ct. 811, 839-840,     respectful presumption of validity, it is nevertheless
84 L.Ed. 1129 (1940); United States v. Trenton         well-settled that good motives will not validate an
Potteries Co., 273 U.S. 392, 396-398, 47 S.Ct. 377,    otherwise anticompetitive practice. See United States
379, 71 L.Ed. 700 (1927).                              v. Griffith, 334 U.S. 100, 105-106, 68 S.Ct. 941,
                                                       944-945, 92 L.Ed. 1236 (1948); Associated Press v.


                                                                                                    745
case involves an industry in which horizontal          except by mutual agreement; if an institution
restraints on competition are essential if the         adopted such restrictions unilaterally, its
product is to be available at all.                     effectiveness as a competitor on the playing
                                                       field might soon be destroyed. Thus, the
     As Judge Bork has noted:           “[S]ome        NCAA plays a vital role in enabling college
activities can only be carried out jointly.            football to preserve its character, and as a
Perhaps the leading example is league sports.          result enables a product to be marketed which
When a league of professional lacrosse teams           might otherwise be unavailable.             In
is formed, it would be pointless to declare            performing this role, its actions widen
their cooperation illegal on the ground that           consumer choice--not only the choices
there are no other professional lacrosse               available to sports fans but also **2961 those
teams.” R. Bork, The Antitrust Paradox 278             available to athletes--and hence can be viewed
(1978). What the NCAA and its member                   as procompetitive.24
institutions market in this case is competition
itself--contests      between         competing
institutions.    Of course, this would be
                                                       24 See Justice v. NCAA, 577 F.Supp. 356, 379-383
completely ineffective if there were no rules
                                                       (Ariz.1983); Jones v. NCAA, 392 F.Supp. 295, 304
on which the competitors agreed to create and          (Mass.1975); College Athletic Placement Service,
define the competition to be marketed. A               Inc. v. NCAA, 1975-1 Trade Cases P 60,117 (NJ),
myriad of rules affecting such matters as the          aff'd mem., 506 F.2d 1050 (CA3 1974). See also
size of the field, the number of players on a          Brenner v. World Boxing Council, 675 F.2d 445,
team, and the extent to which physical                 454-455 (CA2 1982); Neeld v. National Hockey
violence is to be encouraged or proscribed, all        League, 594 F.2d 1297, 1299, n. 4 (CA9 1979);
                                                       Smith v. Pro Football, Inc., 593 F.2d 1173,
must be agreed upon, and all restrain the              1180-1181 (CADC 1978); Hatley v. American
manner in which institutions compete.                  Quarter Horse Assn., 552 F.2d 646, 652-654 (CA5
Moreover, the NCAA seeks to market a                   1977); Mackey v. National Football League, 543 F.2d
particular brand of football--college football.        606, 619 (CA8 1976), cert. dism'd, 434 U.S. 801, 98
The identification of this “product” with an           S.Ct. 28, 54 L.Ed.2d 59 (1977); Bridge Corp. of
academic tradition differentiates *102 college         America v. The American Contract Bridge League,
                                                       Inc., 428 F.2d 1365, 1370 (CA9 1970), cert. denied,
football from and makes it more popular than
                                                       401 U.S. 940, 91 S.Ct. 940, 28 L.Ed.2d 220 (1971);
professional sports to which it might                  Gunter Harz Sports v. United States Tennis Assn.,
otherwise be comparable, such as, for                  511 F.Supp. 1103, 1116 (Neb.), aff'd, 665 F.2d 222
example, minor league baseball. In order to            (CA8 1981); Cooney v. American Horse Shows
preserve the character and quality of the              Assn., Inc., 495 F.Supp. 424, 430 (SDNY 1980); Los
“product,” athletes must not be paid, must be          Angeles Memorial Coliseum Comm'n v. National
required to attend class, and the like. And the        Football League, 468 F.Supp. 154, 165- 166 (CD
                                                       Cal.1979), preliminary injunction entered, 484
integrity of the “product” cannot be preserved         F.Supp. 1274 (1980), rev'd on other grounds, 634
                                                       F.2d 1197 (CA9 1980); Kupec v. Atlantic Coast
    (Continued)                                        Conference, 399 F.Supp. 1377, 1380 (MDNC 1975);
                                                       Closius, Not at the Behest of Nonlabor Groups: A
United States, 326 U.S. 1, 16, n. 15, 65 S.Ct. 1416,   Revised Prognosis for a Maturing Sports Industry, 24
1423, n. 15, 89 L.Ed. 2013 (1945); Chicago Board of    B.C.L.Rev. 341, 344-345 (1983); Kurlantzick,
Trade v. United States, 246 U.S. 231, 238, 38 S.Ct.    Thoughts on Professional Sports and the Antitrust
242, 243, 62 L.Ed.2d 683 (1918); Standard Sanitary     Law: Los Angeles Memorial Coliseum v. National
Manufacturing Co. v. United States, 226 U.S. 20, 49,   Football League, 15 Conn.L.Rev. 183, 189- 194
33 S.Ct. 9, 15, 57 L.Ed 107 (1912); United States v.   (1983); Note, Antitrust and Nonprofit Entities, 94
Trans-Missouri Freight Assn., 166 U.S. 290, 342, 17    Harv.L.Rev. 802, 817-818 (1981). See generally
S.Ct. 540, 559, 41 L.Ed. 1007 (1897).                  Hennessey v. NCAA, 564 F.2d 1136, 1151- 1154
                                                       (CA5 1977); Association for Intercollegiate Athletics


                                                                                                 746
    *103 [11] Broadcast Music squarely holds           at 1364 (footnotes omitted).
that a joint selling arrangement may be so
efficient that it will increase sellers' aggregate         [13, 14] Per se rules are invoked when
output and thus be procompetitive. See 441             surrounding      circumstances       make     the
U.S., at 18-23, 99 S.Ct., at 1561- 1564.               likelihood of anticompetitive conduct so great
Similarly, as we indicated in Continental T.V.,        as to *104 render unjustified further
Inc. v. GTE Sylvania Inc., 433 U.S. 36, 51-57,         examination of the challenged conduct.25 But
97 S.Ct. 2549, 2558-2561, 53 L.Ed.2d 568               whether the ultimate finding is the product of
(1977), a restraint in a limited aspect of a           a presumption or actual market analysis, the
market may actually enhance marketwide                 essential inquiry remains the same--whether
competition. Respondents concede that the              or not the challenged restraint enhances
great majority of the NCAA's regulations               competition.26 Under the Sherman **2962
enhance      competition      among       member       Act the criterion to be used in judging the
institutions. Thus, despite the fact that this         validity of a restraint on trade is its impact on
case involves restraints on the ability of             competition.27
member institutions to compete in terms of
price and output, a fair evaluation of their
competitive character requires consideration           25 See Jefferson Parish Hosp. Dist. No. 2 v. Hyde,
of the NCAA's justifications for the restraints.       466 U.S. ----, ----, n. 25, 104 S.Ct. 1551, 1560, n. 25,
                                                       80 L.Ed.2d 2 (1984); Arizona v. Maricopa County
    [12] Our analysis of this case under the           Medical Society, 457 U.S. 332, 350- 351, 102 S.Ct.
Rule of Reason, of course, does not change             2466, 2476, 73 L.Ed.2d 48 (1982); Continental T.V.,
                                                       Inc., 433 U.S., at 50, n. 16, 97 S.Ct., at 2557, n. 16.
the ultimate focus of our inquiry. Both per se
rules and the Rule of Reason are employed “to          26 Indeed, there is often no bright line separating
form a judgment about the competitive                  per se from Rule of Reason analysis. Per se rules
significance of the restraint.”         National       may require considerable inquiry into market
Society of Professional Engineers v. United            conditions before the evidence justifies a presumption
States, 435 U.S. 679, 692, 98 S.Ct. 1355,              of anticompetitive conduct. For example, while the
1365, 55 L.Ed.2d 637 (1978). A conclusion              Court has spoken of a “per se” rule against tying
                                                       arrangements, it has also recognized that tying may
that a restraint of trade is unreasonable may be
                                                       have procompetitive justifications that make it
“based either (1) on the nature or character of        inappropriate to condemn without considerable
the contracts, or (2) on surrounding                   market analysis. See Jefferson Parish Hosp. Dist. No.
circumstances giving rise to the inference or          2 v. Hyde, 466 U.S. ----, ----, 104 S.Ct. 1551, ----, 80
presumption that they were intended to                 L.Ed.2d 2 (1984).
restrain trade and enhance prices. Under
either branch of the test, the inquiry is              27 “The Sherman Act was designed to be a
                                                       comprehensive charter of economic liberty aimed at
confined to a consideration of impact on               preserving free and unfettered competition as the rule
competitive conditions.” Id., at 690, 98 S.Ct.,        of trade. It rests on the premise that the unrestrained
                                                       interaction of competitive forces will yield the best
    (Continued)                                        allocation of our economic resources, the lowest
                                                       prices, the highest quality and the greatest material
for Women v. NCAA, 558 F.Supp. 487, 494-495 (DC        progress, while at the same time providing an
1983); Warner Amex Cable Communications, Inc. v.       environment conducive to the preservation of our
American Broadcasting Cos., 499 F.Supp. 537, 545-      democratic political and social institutions. But even
546 (SD Ohio 1980); Board of Regents v. NCAA,          were that premise open to question, the policy
561 P.2d 499, 506-507 (Okla.1977); Note, Tackling      unequivocally laid down by the Act is competition.
Intercollegiate Athletics: An Antitrust Analysis, 87   And to this end it prohibits 'Every contract,
Yale L.J. 655, 665-666, 673-675 (1978).                combination ... or conspiracy, in restraint of trade or
                                                       commerce among the Several States.' “ Northern


                                                                                                   747
                          III                             found that by fixing a price for television
                                                          rights to all games, the NCAA creates a price
    Because it restrains price and output, the            structure that is unresponsive to viewer
NCAA's television plan has a significant                  demand and unrelated to the prices that would
potential for anticompetitive effects.28 The              prevail in a competitive market.30 And, of
findings of the District Court indicate that this
*105 potential has been realized. The District                (Continued)
Court found that if member institutions were
free to sell television rights, many more games           the local level. Because of NCAA controls, local
                                                          stations are often unable to televise games which they
would be shown on television, and that the
                                                          would like to, even when the games are not being
NCAA's output restriction has the effect of               televised at the network level. The circumstances
raising the price the networks pay for                    which would allow so-called exception telecasts arise
television rights.29 Moreover, the *106 court             infrequently for many schools, and the evidence is
                                                          clear that local broadcasts of college football would
                                                          occur far more frequently were it not for the NCAA
    (Continued)                                           controls. This is not a surprising result. Indeed, this
                                                          horizontal agreement to limit the availability of games
Pacific R. Co. v. United States, 356 U.S. 1, 4-5, 78      to potential broadcasters is the very essence of
S.Ct. 514, 517-518, 2 L.Ed.2d 545 (1958).                 NCAA's agreements with the networks. The evidence
                                                          establishes the fact that the networks are actually
28 In this connection, it is not without significance     paying the large fees because the NCAA agrees to
that Congress felt the need to grant professional         limit production. If the NCAA would not agree to
sports an exemption from the antitrust laws for joint     limit production, the networks would not pay so large
marketing of television rights. See 15 U.S.C. ss          a fee. Because NCAA limits production, the networks
1291- 1295. The legislative history of this exemption     need not fear that their broadcasts will have to
demonstrates Congress' recognition that agreements        compete head-to-head with other college football
among league members to sell television rights in a       telecasts, either on the other networks or on various
cooperative fashion could run afoul of the Sherman        local stations. Therefore, the Court concludes that the
Act, and in particular reflects its awareness of the      membership of NCAA has agreed to limit production
decision in United States v. National Football            to a level far below that which would occur in a free
League, 116 F.Supp. 319 (ED Pa.1953), which held          market situation.” 546 F.Supp., at 1294.
that an agreement between the teams of the National
Football League that each team would not permit           30 “Turning to the price paid for the product, it is
stations within 75 miles of the home city of another      clear that the NCAA controls utterly destroy free
team to telecast its games on a day when that team        market competition. NCAA has commandeered the
was playing at home violated s 1 of the Sherman Act.      rights of its members and sold those rights for a sum
See S.Rep. No. 1087, 87th Cong., 1st Sess. (1961);        certain. In so doing, it has fixed the minimum,
H.R.Rep. No. 1178, 87th Cong., 1st Sess., 2-3             maximum and actual price which will be paid to the
(1961), U.S.Code Cong. & Admin.News 1961, p.              schools appearing on ABC, CBS and TBS. NCAA
3042; 107 Cong.Rec. 20059-20060 (1961) (remarks           has created the mechanism which produces a uniform
of Rep. Celler); id., at 20061-20062 (remarks of Rep.     price for each national telecast, and a uniform price
McCulloch); Telecasting of Professional Sports            for each regional telecast. Because of the NCAA
Contests: Hearings on H.R. 8757 before the Antitrust      controls, the price which is paid for the right to
Subcommittee of the House Committee on the                televise any particular game is responsive neither to
Judiciary, 87th Cong., 1st Sess., 1-2 (1961)              the relative quality of the teams playing the game nor
(statement of Chairman Celler); id., at 3 (statement of   to viewer preference. “In a competitive market, each
Rep. McCulloch); id., at 10-28 (statement of Pete         college fielding a football team would be free to sell
Rozelle); id., at 69-70 (letter from Assistant Attorney   the right to televise its games for whatever price it
General Loevinger).                                       could get. The prices would vary for the games, with
                                                          games between prominent schools drawing a larger
29 “It is clear from the evidence that were it not for    price than games between less prominent schools.
the NCAA controls, many more college football             Games between the more prominent schools would
games would be televised. This is particularly true at    draw a larger audience than other games. Advertisers


                                                                                                     748
course, **2963 since as a practical matter all              most significant, since “Congress designed the
member institutions need NCAA approval,                     Sherman Act as a 'consumer welfare
members have no real choice but to adhere to                prescription.”' Reiter v. Sonotone Corp., 442
the NCAA's television controls.31                           U.S. 330, 343, 99 S.Ct. 2326, 2333, 60
    [15,     16]     The       anticompetitive              L.Ed.2d 931 (1979). A restraint that has the
consequences of this arrangement are                        effect of reducing the importance of consumer
apparent. Individual competitors lose their                 preference in setting price and output is not
freedom to compete.32 *107 Price is higher                  consistent with this fundamental goal of
and output lower than they would otherwise                  antitrust law.34 Restrictions on price and
be, and both are unresponsive to consumer                   output are the paradigmatic examples of
preference.33 This latter point is perhaps the              restraints of trade that the Sherman *108 Act
                                                            was intended to prohibit. See Standard Oil
    (Continued)                                             Co. v. United States, 221 U.S. 1, 52-60, 31
                                                            S.Ct. 502, 512-515, 55 L.Ed. 619 (1911).35 At
would pay higher rates for commercial time because
of the larger audience. The telecaster would then be
willing to pay larger rights fees due to the increased          (Continued)
prices paid by the advertisers. Thus, the price which
the telecaster would pay for a particular game would        year, Oklahoma was scheduled to play a football
be dependent on the expected size of the viewing            game with the University of Southern California.
audience. Clearly, the NCAA controls grossly distort        Both Oklahoma and USC have long had outstanding
the prices actually paid for an individual game from        football programs, and indeed, both teams were
that to be expected in a free market.” 546 F.Supp., at      ranked among the top five teams in the country by the
1318.                                                       wire service polls. ABC chose to televise the game
                                                            along with several others on a regional basis. A game
31 Since, as the District Court found, NCAA                 between two schools which are not well-known for
approval is necessary for any institution that wishes to    their football programs, Citadel and Appalachian
compete in intercollegiate sports, the NCAA has a           State, was carried on four of ABC's local affiliated
potent tool at its disposal for restraining institutions    stations. The USC-Oklahoma contest was carried on
which require its approval. See Silver v. New York          over 200 stations. Yet, incredibly, all four of these
Stock Exchange, 373 U.S. 341, 347-349 and n. 5, 83          teams received exactly the same amount of money for
S.Ct. 1246, 1251-1252 and n. 5, 10 L.Ed.2d 389              the right to televise their games.” 546 F.Supp., at
(1963); Associated Press v. United States, 326 U.S. 1,      1291.
17-18, 65 S.Ct. 1416, 1423, 89 L.Ed. 2013 (1945).
                                                            34 As the District Court observed: “Perhaps the
32 See Fashion Originators' Guild of America v.             most pernicious aspect is that under the controls, the
FTC, 312 U.S. 457, 465, 61 S.Ct. 703, 706, 85 L.Ed.         market is not responsive to viewer preference. Every
949 (1941); Standard Sanitary Manufacturing Co. v.          witness who testified on the matter confirmed that the
United States, 226 U.S. 20, 47-49, 33 S.Ct. 9, 14-15,       consumers, the viewers of college football television,
57 L.Ed. 107 (1912); Montague & Co. v. Lowry, 193           receive absolutely no benefit from the controls.
U.S. 38, 24 S.Ct. 307, 48 L.Ed. 608 (1904).                 Many games for which there is a large viewer demand
                                                            are kept from the viewers, and many games for which
33 “In this case the rule is violated by a price            there is little if any demand are nonetheless
restraint that tends to provide the same economic           televised.” 546 F.Supp., at 1319.
rewards to all practitioners regardless of their skill,
their experience, their training, or their willingness to   35 Even in the context of professional football,
employ innovative and difficult procedures.” Arizona        where Congress was willing to pass a limited antitrust
v. Maricopa County Medical Society, 457 U.S. 332,           exemption, see n. 28, supra, it was concerned about
348, 102 S.Ct. 2466, 2475, 73 L.Ed.2d 48 (1982).            ensuring that telecasts not be subject to output
The District Court provided a vivid example of this         limitations: “Mr. GARY. On yesterday I had the
system in practice: “A clear example of the failure of      opportunity of watching three different games. There
the rights fees paid to respond to market forces            were three different games on three different
occurred in the fall of 1981. On one weekend of that        channels.... “Would this bill prevent them from


                                                                                                      749
the same time, the **2964 television plan                      *109 [17] Petitioner argues, however, that
eliminates competitors from the market, since              its television plan can have no significant
only those broadcasters able to bid on                     anticompetitive effect since the record
television rights covering the entire NCAA                 indicates that it has no market power--no
can compete.36 Thus, as the District Court                 ability to alter the interaction of supply and
found, many telecasts that would occur in a                demand in the market.38 We must reject this
competitive market are foreclosed by the                   argument for two reasons, one legal, one
NCAA's plan.37                                             factual.

    (Continued)                                                [18, 19] As a matter of law, the absence of
                                                           proof of market power does not justify a
broadcasting three different games at one time and         naked restriction on price or output. To the
permit the league to enter into a contract so that only    contrary, when there is an agreement not to
one game would be permitted? “Mr. CELLER. The              compete in terms of price or output, “no
bill does not prevent what the gentleman saw               elaborate industry analysis is required to
yesterday. As a matter of fact the antitrust exemption     demonstrate the anticompetitive character of
provided by the bill shall not apply to any package
contract which prohibits the person to whom league
                                                           such an agreement.” Professional Engineers,
television rights are sold or transferred from             435 U.S., at 692, 98 S.Ct., at 1365.39
televising any game within any area except the home
area of a member club on the day when that club is             (Continued)
playing a home game.
                                                           games being televised than there are currently. I can
                         ***                               take a specific example from my home state of
                                                           Indiana. “I am at Ball State University, which until
     “Mr. GARY. I am an avid sports fan. I follow          recently was a division one-A institution, although
football, baseball, basketball, and track, and I am        now is a division one-AA institution in terms of
very much interested in all sports. But I am also          intercollegiate football. When Ball State plays
interested in the people of the United States being        Indiana State, that is a hotly contested game in an
able to see on television the games that are played. I     intrastate sense. That is a prime example of the type
am interested in the television audience. I want to        of game that probably would be televised. For
know that they are not going to be prohibited from         example, when Ball State is playing Indiana State at
seeing games that might otherwise be telecast. “Mr.        Terre Haute, Indiana, that [would be] a popular game
CELLER. I can assure the gentleman from Virginia           to be televised in the Muncie area, and, vice versa, in
that he need have no fears on that score.” 107             Terre Haute when the game happens to be in
Cong.Rec. 20060 (1961).                                    Muncie.” App. 506-507. See also id., at 607-608.

36 The impact on competitors is thus analogous to          38 Market power is the ability to raise prices above
the effect of block booking in the motion picture          those that would be charged in a competitive market.
industry that we concluded violated the Sherman Act:       Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S.
“In the first place, they eliminate the possibility of     ----, ----, n. 46, 104 S.Ct. 1551, 1566, n. 16, 80
bidding for films theater by theater. In that way they     L.Ed.2d 2 (1984); United States Steel Corp. v.
eliminate the opportunity for the small competitor to      Fortner Enterprises, 429 U.S. 610, 620, 97 S.Ct. 861,
obtain the choice first runs, and put a premium on the     867, 51 L.Ed.2d 80 (1977); United States v. E.I.
size of the circuit.” United States v. Paramount           DuPont de Nemours & Co., 351 U.S. 377, 391, 76
Pictures, Inc., 334 U.S. 131, 154, 68 S.Ct. 915, 927,      S.Ct. 994, 1004, 100 L.Ed. 1264 (1956).
92 L.Ed. 1260 (1948).
                                                           39 “The fact that a practice is not categorically
37 546 F.Supp., at 1294. One of respondent's               unlawful in all or most of its manifestations certainly
economists illustrated the point: “[I]t's my opinion       does not mean that it is universally lawful. For
that if a free market operated in the market for           example, joint buying or selling arrangements are not
intercollegiate television of football, that there would   unlawful per se, but a court would not hesitate in
be substantially more regional and even more local         enjoining a domestic selling arrangement by which,


                                                                                                      750
Petitioner does not quarrel with **2965 the                   *111 [20][21][22][23] As a factual matter,
District Court's *110 finding that price and              it is evident that petitioner does possess
output are not responsive to demand. Thus                 market power. The District Court employed
the plan is inconsistent with the Sherman Act's           the correct test for determining whether
command that price and supply be responsive               college football broadcasts constitute a
to consumer preference.40 We have never                   separate market-- whether there are other
required proof of market power in such a                  products that are reasonably substitutable for
case.41 This naked restraint on price and                 televised NCAA football games.43 Petitioner's
output requires some competitive justification            argument       that     it    cannot       obtain
even in the absence of a detailed market                  supracompetitive prices from broadcasters
analysis.42                                               since advertisers, and hence broadcasters, can
                                                          switch from college football to other types of
    (Continued)                                           programming simply ignores the findings of
                                                          the District Court. It found that intercollegiate
say, Ford and General Motors distributed their            football telecasts generate an audience
automobiles nationally through a single selling agent.
Even without a trial, the judge will know that these
two large firms are major factors in the automobile           (Continued)
market, that such joint selling would eliminate
important price competition between them, that they       monopoly power in any precisely defined market for
are quite substantial enough to distribute their          television programming in order to prove the restraint
products independently, and that one can hardly           unreasonable. Both lower courts found not only that
imagine a pro-competitive justification actually          NCAA has power over the market for intercollegiate
probable in fact or strong enough in principle to make    sports, but also that in the market for television
this particular joint selling arrangement 'reasonable'    programming--no matter how broadly or narrowly the
under Sherman Act s 1. The essential point is that the    market is defined--the NCAA television restrictions
rule of reason can sometimes be applied in the            have reduced output, subverted viewer choice, and
twinkling of an eye.” P. Areeda, The “Rule of             distorted pricing. Consequently, unless the controls
Reason” in Antitrust Analysis: General Issues 37-38       have       some      countervailing     procompetitive
(Federal Judicial Center June 1981) (parenthetical        justification, they should be deemed unlawful
omitted).                                                 regardless of whether petitioner has substantial
                                                          market power over advertising dollars. While the
40 Moreover, because under the plan member                'reasonableness' of a particular alleged restraint often
institutions may not compete in terms of price and        depends on the market power of the parties involved,
output, it is manifest that significant forms of          because a judgment about market power is the means
competition are eliminated. See Catalano, Inc. v.         by which the effects of the conduct on the market
Target Sales, Inc., 446 U.S. 643, 648-649, 100 S.Ct.      place can be assessed, market power is only one test
1925, 1928, 64 L.Ed.2d 580 (1980) (per curiam);           of 'reasonableness.' And where the anticompetitive
Professional Engineers, 435 U.S., at 692-695, 98          effects of conduct can be ascertained through means
S.Ct., at 1365- 1367; Paramount Famous Lasky Corp.        short of extensive market analysis, and where no
v. United States, 282 U.S. 30, 43- 44, 51 S.Ct. 42, 45,   countervailing competitive virtues are evident, a
75 L.Ed. 145 (1930).                                      lengthy analysis of market power is not necessary.”
                                                          Brief for United States as Amicus Curiae 19-20
41 See United States v. McKesson & Robbins, Inc.,         (footnote and citation omitted).
351 U.S. 305, 309- 310, 76 S.Ct. 937, 939-940, 100
L.Ed. 1209 (1956); United States v. Socony-Vacuum         43 See, e.g., United States v. Grinnell Corp., 384
Oil Co., 310 U.S. 150, 221, 60 S.Ct. 811, 843, 84         U.S. 563, 571, 86 S.Ct. 1698, 1704, 16 L.Ed.2d 778
L.Ed. 1129 (1940).        See also Klor's, Inc. v.        (1966); United States v. E.I. Du Pont de Nemours &
Broadway-Hale Stores, Inc., 359 U.S. 207, 213, 79         Co., 351 U.S. 377, 394-395, 76 S.Ct. 994,
S.Ct. 705, 710, 3 L.Ed.2d 741 (1959).                     1006-1007, 100 L.Ed. 1264 (1956); Times-Picayune
                                                          Publishing Co. v. United States, 345 U.S. 594, 612, n.
42 The Solicitor General correctly observes: “There       31, 73 S.Ct. 872, 882, n. 31, 97 L.Ed. 1277 (1953).
was no need for the respondents to establish


                                                                                                      751
uniquely attractive to advertisers and that                 non-championship events.         See id., at
competitors are unable to offer programming                 249-252, 79 S.Ct., at 249-251.49         Thus,
that can attract a similar audience. 44 These               respondents have demonstrated that there is a
findings amply support its conclusion that the              separate market for telecasts of college
NCAA possesses market power.45 Indeed, the                  football which “rest[s] on generic qualities
District Court's subsidiary finding that                    differentiating” viewers.     Times-Picayune
advertisers will pay a premium price per                    Publishing Co. v. United States, 345 U.S. 594,
viewer to reach audiences watching college                  613, 73 S.Ct. 872, 883, 97 L.Ed. 1277 (1953).
football because of their demographic                       It inexorably follows that if college football
characteristics **2966 46 is vivid evidence of              broadcasts be defined as a separate
the uniqueness of this product.47 Moreover,                 market--and we are convinced they are--then
the District Court's market *112 analysis is                the NCAA's complete control over those
firmly supported by our decision in                         broadcasts provides a solid basis for the
International Boxing Club v. United States,                 District Court's conclusion that the NCAA
358 U.S. 242, 79 S.Ct. 245, 3 L.Ed.2d 270                   possesses market power with respect to those
(1958), that championship boxing events are                 broadcasts. “When a product is controlled by
uniquely attractive to fans48 and hence                     one interest, without substitutes available in
constitute a market separate from that for                  the market, there is monopoly power.” United
                                                            States v. E.I. Du Pont de Nemours & Co., 351
                                                            U.S. 377, 394, 76 S.Ct. 994, 1006, 100 L.Ed.
                                                            1264 (1956).50
44 See 546 F.Supp., at 1297-1300. See also
Hochberg & Horowitz, Broadcasting and CATV:
The Beauty and the Bane of Major College Football,
                                                                *113 [24] Thus, the NCAA television plan
Law & Contemp. Probs., Winter-Spring 1973, at               on its face constitutes a restraint upon the
118-120.                                                    operation of a free market, and the findings of
                                                            the District Court establish that it has operated
45 See, e.g., Jefferson Parish Hosp. Dist. No. 2 v.
Hyde, 466 U.S. ----, ----, 104 S.Ct. 1551, ----, 80
L.Ed.2d 2 (1984); id., at ----, n. 7, 104 S.Ct., at 1555,
n. 7 (O'CONNOR, J., concurring in the judgment);            49 For the same reasons, it is also apparent that the
Fortner Enterprises v. United States Steel Corp., 394       unique appeal of NCAA football telecasts for viewers
U.S. 495, 504-506 and n. 2, 89 S.Ct. 1252,                  means that “from the standpoint of the
1259-1260 and n. 2, 22 L.Ed.2d 495 (1969).                  consumer--whose interests the statute was especially
                                                            intended to serve,” Jefferson Parish Hosp. Dist. No. 2
46 See 546 F.Supp., at 1298-1300.                           v. Hyde, 466 U.S. ----, ----, 104 S.Ct. 1551, ----, 80
                                                            L.Ed.2d 2 (1984), there can be no doubt that college
47 As the District Court observed, 546 F.Supp., at          football constitutes a separate market for which there
1297, the most analogous programming in terms of            is no reasonable substitute. Thus we agree with the
the demographic characteristics of its audience is          District Court that it makes no difference whether the
professional football, and as a condition of its limited    market is defined from the standpoint of broadcasters,
exemption from the antitrust laws the professional          advertisers, or viewers.
football leagues are prohibited from telecasting
games at times that conflict with intercollegiate           50 See, e.g., Jefferson Parish Hosp. Dist. No. 2 v.
football. See 15 U.S.C. s 1293.                             Hyde, 466 U.S. ----, ----, 104 S.Ct. 1551, ----, 80
                                                            L.Ed.2d 2 (1984); Northern Pacific R. Co. v. United
48 We approved of the District Court's reliance on          States, 356 U.S. 1, 7-8, 78 S.Ct. 514, 519, 2 L.Ed.2d
the greater revenue- producing potential and higher         545 (1956); Times-Picayune, 345 U.S., at 611-613,
television ratings of championship events as opposed        73 S.Ct., at 881-883. Petitioner seems to concede as
to other events to support its market definition. See       much. See Brief for Petitioner 36-37; Tr. of Oral
358 U.S., at 250-251, 79 S.Ct., at 250.                     Arg. 6.



                                                                                                      752
to raise price and reduce output. Under the             individual schools. Thus, the effect of the
Rule of Reason, these hallmarks of                      network plan is not to eliminate individual
anticompetitive behavior place upon petitioner          sales of broadcasts, since these still occur,
a heavy burden of establishing an affirmative           albeit subject to fixed prices and output
defense which competitively justifies this              limitations. Unlike Broadcast Music's blanket
apparent deviation from the operations of a             license covering broadcast rights *114 to a
free market. See Professional Engineers, 435            large number of individual compositions, here
U.S., at 692-696, 97 S.Ct., at 1365-1367. We            the same rights are still sold on an individual
turn now to the NCAA's proffered                        basis, only in a non-competitive market.
justifications.                                             [26, 27] The District Court did not find
                                                        that the NCAA's television plan produced any
                         IV                             procompetitive efficiencies which enhanced
                                                        the competitiveness of college football
    [25] Relying on Broadcast Music,                    television rights; to the contrary it concluded
petitioner argues that its television plan              that NCAA football could be marketed just as
constitutes a cooperative “joint venture”               effectively without the television plan.52
which assists in the marketing of broadcast             There is therefore no predicate in the findings
rights and hence is procompetitive. While               for petitioner's efficiency justification.
joint ventures have no immunity from the                Indeed, petitioner's argument is refuted by the
antitrust laws,51 as Broadcast Music indicates,         District Court's finding concerning price and
a joint selling arrangement may “mak[e]                 output.     If the NCAA's television plan
possible a new product by reaping otherwise             produced procompetitive efficiencies, the plan
unattainable efficiencies.”      Arizona v.             would increase output and reduce the price of
Maricopa County Medical Society, 457 U.S.               televised games. The District Court's contrary
332, 365, 102 S.Ct. 2466, 2484, 73 L.Ed.2d 48           findings accordingly undermine petitioner's
(1982) (POWELL, J., dissenting) (footnote               position. In light of these findings, it cannot
omitted). The essential contribution **2967             be said that “the agreement on price is
made by the NCAA's arrangement is to define             necessary to market the product at all.”
the number of games that may be televised, to           Broadcast Music, 441 U.S., at 23, 99 S.Ct., at
establish the price for each exposure, and to           1564.53 In Broadcast Music, the availability
define the basic terms of each contract
between the network and a home team. The
NCAA does not, however, act as a selling                52 See 546 F.Supp., at 1306-1308.
agent for any school or for any conference of
schools. The selection of individual games,             53 Compare 546 F.Supp., at 1307-1308 (“The
and the negotiation of particular agreements,           colleges are clearly able to negotiate agreements with
                                                        whatever broadcasters they choose. We are not
is a matter left to the networks and the                dealing with tens of thousands of relatively brief
                                                        musical works, but with three-hour football games
                                                        played eleven times each year.”) with Broadcast
51 See Citizen Publishing Co. v. United States, 394     Music, 441 U.S., at 22-23, 99 S.Ct., at 1564
U.S. 131, 134- 136, 89 S.Ct. 927, 928-929, 22           (footnotes omitted) (“[T]o the extent the blanket
L.Ed.2d 148 (1969); United States v. Sealy, Inc., 388   license is a different product, ASCAP is not really a
U.S. 350, 353, 87 S.Ct. 1847, 1850, 18 L.Ed.2d 1238     joint sales agency offering the individual goods of
(1967); Timken Roller Bearing Co. v. United States,     many sellers, but is a separate seller offering its
341 U.S. 593, 597- 598, 71 S.Ct. 971, 974, 95 L.Ed.     blanket license, of which the individual compositions
1199 (1951); Associated Press v. United States, 326     are raw material. ASCAP, in short, made a market in
U.S. 1, 15-16, 65 S.Ct. 1416, 1422-1423, 89 L.Ed.       which individual composers are inherently unable to
2013 (1945).                                            compete fully effectively.”).



                                                                                                  753
of a package product that no individual could                 **2968 protecting live attendance.          This
offer enhanced the total volume of music that                 concern, it should be noted, is not with
was sold. Unlike this case, there was no limit                protecting live attendance at games which are
of any kind placed on the volume that might                   shown on television; that type of interest is not
be sold in the entire market and each                         at issue in this case. Rather, the concern is
individual remained free to sell his own music                that fan interest in a televised game may
without restraint. Here production has been                   adversely affect ticket sales for games that
limited, not enhanced.54 *115 No individual                   will not appear on television.56
school is free to televise its own games
without restraint. The NCAA's efficiency                          Although the NORC studies in the 1950's
justification is not supported by the record.                 provided some support for the thesis that live
                                                              attendance would suffer if *116 unlimited
    [28] Neither is the NCAA's television plan                television were permitted,57 the District Court
necessary to enable the NCAA to penetrate                     found that there was no evidence to support
the market through an attractive package sale.                that theory in today's market.58 Moreover, as
Since broadcasting rights to college football                 the District Court found, the television plan
constitute a unique product for which there is                has evolved in a manner inconsistent with its
no ready substitute, there is no need for                     original design to protect gate attendance.
collective action in order to enable the product              Under the current plan, games are shown on
to    compete      against     its   nonexistent              television during all hours that college football
competitors.55 This is borne out by the                       games are played. The plan simply does not
District Court's finding that the NCAA's                      protect live attendance by ensuring that games
television reduces the volume of television                   will not be shown on television at the same
rights sold.

                            V
                                                              56 The NCAA's plan is not even arguably related to
    [29] Throughout the history of its                        a desire to protect live attendance by ensuring that a
regulation of intercollegiate football telecasts,             game is not televised in the area where it is to be
                                                              played. No cooperative action is necessary for that
the NCAA has indicated its concern with                       kind of “blackout.” The home team can always
                                                              refuse to sell the right to telecast its game to stations
                                                              in the immediate area. The NCAA does not now and
                                                              never has justified its television plan by an interest in
54 Ensuring that individual members of a joint                assisting schools in “blacking out” their home games
venture are free to increase output has been viewed as        in the areas in which they are played.
central in evaluating the competitive character of joint
ventures. See Brodley, Joint Ventures and Antitrust           57 During this period, the NCAA also expressed its
Policy, 95 Harv.L.Rev. 1523, 1550-1552, 1555-1560             concern to Congress in urging it to limit the antitrust
(1982). See also Note, United Charities and the               exemption professional football obtained for
Sherman Act, 91 Yale L.J. 1593 (1982).                        telecasting its games to contests not held on Friday or
                                                              Saturday when such telecasts might interfere with
55 If the NCAA faced “interbrand” competition                 attendance at intercollegiate games. See H.R.Rep.
from available substitutes, then certain forms of             No. 1178, 87th Cong., 1st Sess., 3-4 (1961); 107
collective action might be appropriate in order to            Cong.Rec. 20060-20061 (1961) (remarks of Rep.
enhance its ability to compete. See Continental T.V.,         Celler); id., at 20662; Hearings, supra n. 28, at 66-68
Inc., 433 U.S., at 54-57, 97 S.Ct., at 2559-2561. Our         (statement of William R. Reed). The provision
conclusion concerning the availability of substitutes         enacted as a result is now found in 15 U.S.C. s 1293.
in Part III, supra, forecloses such a justification in this
case, however.                                                58 See 546 F.Supp., at 1295-1296, 1315.



                                                                                                           754
time as live events.59                                     support a defense based on the assumption
                                                           that competition itself is unreasonable.”
    There is, however, a more fundamental                  Professional Engineers, 435 U.S., at 696, 98
reason for rejecting this defense. The NCAA's              S.Ct., at 1368.
argument that its television plan is necessary
to protect live attendance is not based on a                                        VI
desire to maintain the integrity of college
football as a distinct and attractive product,                 [30] Petitioner argues that the interest in
but rather on a fear that the product will not             maintaining a competitive balance among
prove sufficiently attractive to draw live                 amateur athletic teams is legitimate and
attendance when faced with competition from                important and that it justifies the regulations
televised games. At bottom the NCAA's                      challenged in this case. We agree **2969
position is that ticket sales for most college             with the first part of the argument but not the
games are unable to compete in a free                      second.
market.60 The *117 television plan protects
ticket sales by limiting output--just as any                   Our decision not to apply a per se rule to
monopolist increases revenues by reducing                  this case rests in large part on our recognition
output. By seeking to insulate live ticket sales           that a certain degree of cooperation is
from the full spectrum of competition because              necessary if the type of competition that
of its assumption that the product itself is               petitioner and its member institutions seek to
insufficiently attractive to consumers,                    market is to be preserved.61 It is reasonable to
petitioner forwards a justification that is                assume that most of the regulatory controls of
inconsistent with the basic policy of the                  the NCAA are justifiable means of fostering
Sherman Act. “[T]he Rule of Reason does not                competition among amateur athletic teams
                                                           and therefore procompetitive because they
                                                           enhance public interest in intercollegiate
59 “[T]he greatest flaw in the NCAA's argument is          athletics. The specific restraints on football
that it is manifest that the new plan for football         telecasts that are challenged in this case do
television does not limit televised football in order to   not, however, fit into the same mold as do
protect gate attendance. The evidence shows that
under the new plan, many areas of the country will
                                                           rules defining the conditions of the contest,
have access to nine hours of college football              the eligibility of participants, or the manner in
television on several Saturdays in the coming season.      which members of a joint enterprise shall
Because the 'ground rules' eliminate head-to-head          share the responsibilities and the benefits of
programming, a full nine hours of college football         the total venture.
will have to be shown on television during a nine-to-
twelve hour period on almost every Saturday of the
                                                               The NCAA does not claim that its
football season in most of the major television
markets in the country. It can hardly be said that such    television plan has equalized or is intended to
a plan is devised in order to protect gate attendance.”    equalize competition within any *118 one
546 F.Supp., at 1296.                                      league.62 The plan is nationwide in scope and

60 Ironically, to the extent that the NCAA's position
has merit, it rests on the assumption that football
telecasts are a unique product. If, as the NCAA            61 See Part II, supra.
argues, see 2965, supra, all television programming is
essentially fungible, it would not be possible to          62 It seems unlikely, for example, that there would
protect attendance without banning all television          have been a greater disparity between the football
during the hours at which intercollegiate football         prowess of Ohio State University and that of
games are held.                                            Northwestern University in recent years without the
                                                           NCAA's television plan. The District Court found


                                                                                                   755
there is no single league or tournament in               or to any readily identifiable group of
which all college football teams complete.               competitors.
There is no evidence of any intent to equalize
the strength of teams in Division I-A with                   *119 The television plan is not even
those in Division II or Division III, and not            arguably tailored to serve such an interest. It
even a colorable basis for giving colleges that          does not regulate the amount of money that
have no football program at all a voice in the           any college may spend on its football
management of the revenues generated by the              program, nor the way in which the colleges
football programs at other schools.63 The                may use the revenues that are generated by
interest in maintaining a competitive balance            their football programs, whether derived from
that is asserted by the NCAA as a justification          the sale of television rights, the sale of tickets,
for regulating all television of intercollegiate         or the sale of concessions or program
football is not related to any neutral standard          advertising.64 The plan simply imposes a
                                                         restriction on one source of revenue that is
                                                         more important to some colleges than to
    (Continued)
                                                         others.     There is no evidence that this
that in fact the NCAA has been strikingly
                                                         restriction produces any greater measure of
unsuccessful if it has indeed attempted to prevent the   equality throughout the NCAA than would a
emergence of a “power elite” in intercollegiate          restriction on alumni donations, tuition rates,
football. See 546 F.Supp., at 1310- 1311. Moreover,      or any other revenue producing activity. At
the District Court's finding that there would be more    the same time, as **2970 the District Court
local and regional telecasts without the NCAA            found, the NCAA imposes a variety of other
controls means that Northwestern could well have
                                                         restrictions designed to preserve amateurism
generated more television income in a free market
than was obtained under the NCAA regime.                 which are much better tailored to the goal of
                                                         competitive balance than is the television
63 Indeed, the District Court found that the basic       plan, and which are “clearly sufficient” to
reason the television plan has endured is that the       preserve competitive balance to the extent it is
NCAA is in effect controlled by schools that are not     within the NCAA's power to do so.65 And
restrained by the plan: “The plaintiffs and other CFA    much more than speculation supported the
members attempted to persuade the majority of
NCAA members that NCAA had gone far beyond its
                                                         District Court's findings on this score. No
legitimate role in football television.            Not   other NCAA sport employs a similar plan, and
surprisingly, none of the CFA proposals were             in particular the court found that in the most
adopted. Instead the membership uniformly adopted        closely analogous sport, college basketball,
the proposals of the NCAA administration which           competitive balance has been maintained
'legitimized' NCAA's exercises of power. The result      without resort to a restrictive television plan.66
was not surprising in light of the makeup of the
voting membership. Of approximately 800 voting
members of the NCAA, 500 or so are in Divisions II           Perhaps the most important reason for
and III and are not subjected to NCAA television
controls. Of the 275 Division I members, only 187
play football, and only 135 were members of Division
I-A at the time of the January Convention. Division      64 Moreover, the District Court found that those
I-A was made up of the most prominent                    schools which would realize increased revenues in a
football-playing schools, and those schools account      free market would not funnel those revenues into their
for most of the football games shown on network          football programs. See 546 F.Supp., at 1310.
television. Therefore, of some 850 voting members,
less than 150 suffer any direct restriction on their     65 See 546 F.Supp., at 1296, 1309-1310.
right to sell football games to television.” 546
F.Supp., at 1317.                                        66 See 546 F.Supp., at 1284-1285, 1299.



                                                                                                   756
rejecting the argument that the interest in                has restricted rather than enhanced the place
competitive balance is served by the television            of intercollegiate athletics in the Nation's life.
plan is the District Court's unambiguous and               Accordingly, the judgment of the Court of
well supported finding that many more games                Appeals is
would be televised in a free market than under
the NCAA plan.          The hypothesis that                    Affirmed.
legitimates the maintenance of competitive
balance as a procompetitive justification under              Justice WHITE, with whom Justice
the Rule of *120 Reason is that equal                      REHNQUIST joins, dissenting.
competition will maximize consumer demand
for the product.67         The finding that                                      ***
consumption will materially increase if the
controls are removed is a compelling                           “While it would be fanciful to suggest that
demonstration that they do not in fact serve               colleges are not concerned about the
any such legitimate purpose.68                             profitability of their ventures, it is clear that
                                                           other, non-commercial goals play a central
                         VII                               role in their sports programs.” J. Weistart &
                                                           C. Lowell, The Law of Sports s 5.12 (1979).
    [31] The NCAA plays a critical role in the             The NCAA's member institutions have
maintenance of a revered tradition of                      designed their competitive athletic programs
amateurism in college sports. There can be no              “to be a vital part of the educational system.”
question but that it needs ample latitude to               Constitution and Interpretations of the NCAA,
play that role, or that the preservation of the            art. II, s 2(a), reprinted in App. 216.
student- athlete in higher education adds                  Deviations from this goal, produced by a
richness and diversity to intercollegiate                  persistent and perhaps inevitable desire to
athletics and is entirely consistent with the              “win at all costs,” have in the past led, and
goals of the Sherman Act. But consistent with              continue to lead, to a wide range of
the Sherman Act, the role of the NCAA must                 competitive excesses that prove harmful to
be to preserve a tradition that might otherwise            students and institutions alike.         See G.
die; rules that restrict output are hardly                 Hanford, An Inquiry into the Need for and
consistent with this role. Today we hold only              Feasibility of a National Study of
that the record supports the District Court's              Intercollegiate Athletics 74-76 (1974); Marco,
conclusion that by curtailing output and                   The Place of Intercollegiate Athletics in
blunting the ability of member institutions to             Higher Education: The Responsibility of the
respond to consumer preference, the NCAA                   Faculty, 31 J. Higher Educ. 422, 426 (1968).
                                                           The fundamental policy *122 underlying the
                                                           NCAA's regulatory program, therefore, is to
67 See Continental T.V., Inc., 433 U.S., at 54-57,         minimize such deviations and “to maintain
97 S.Ct., at 2559-2561. See also n. 55, supra.             intercollegiate athletics as an integral part of
                                                           the education program and the athlete as an
68 This is true not only for television viewers, but       integral part of the student body and, by so
also for athletes. The District Court's finding that the   doing, retain a clear line of demarcation
television exposure of all schools would increase in
                                                           between college athletics and professional
the absence of the NCAA's television plan means that
smaller institutions appealing to essentially local or     sports.” Constitution and Interpretations of
regional markets would get more exposure if the plan       the NCAA, art. II, s 2(a), reprinted in App.
is enjoined, enhancing their ability to compete for        216. See 546 F.Supp. 1276, 1309 (WD
student athletes.                                          Okla.1982).



                                                                                                  757
     The NCAA, in short, “exist[s] primarily to      and basketball programs, see, e.g., Hennessey
enhance the contribution made by amateur             v. NCAA, supra; it also has prohibited athletes
athletic competition to the process of higher        who formerly have been compensated for
education as distinguished from realizing            playing from participating in intercollegiate
maximum return on it as an entertainment             competition, see, e.g., Jones v. NCAA, 392
commodity.” Association for Intercollegiate          F.Supp. 295 (Mass.1975), restricted the
Athletics for Women v. NCAA, 558 F.Supp.             number of athletic scholarships its members
487, 494 (DC 1983), aff'd, --- U.S.App.D.C.          may award, and established minimum
----, --- F.2d ---- (1984). In pursuing this goal,   academic standards for recipients of those
the organization and its members seek to             scholarships; and it has pervasively regulated
provide a public good--a viable system of            the recruitment process, student eligibility,
amateur athletics--that most likely could not        practice schedules, squad size, the number of
be provided in a perfectly competitive market.       games **2972 played, and many other aspects
See Hennessey v. NCAA, 564 F.2d 1136,                of intercollegiate athletics. See 707 F.2d
1153 (CA5 1977). “Without regulation, the            1147, 1153 (CA10 1983); 546 F.Supp., at
desire of member institutions to remain              1309. One clear effect of most, if not all, of
athletically competitive would lead them to          these regulations is to prevent institutions with
engage in activities that deny amateurism to         competitively and economically successful
the public.        No single institution could       programs from taking advantage of their
confidently enforce its own standards since it       success by expanding their programs,
could not trust its competitors to do the same.”     improving the quality of the product they
Note, Antitrust and Nonprofit Entities, 94           offer, and increasing their sports revenues. Yet
Harv.L.Rev. 802, 817-818 (1981).              The    each of these regulations represents a
history of intercollegiate athletics prior to the    desirable and legitimate attempt “to keep
advent of the NCAA provides ample support            university     athletics     from      becoming
for this conclusion. By mitigating what              professionalized to the extent that profit
appears to be a clear failure of the free market     making objectives would overshadow
to serve the ends and goals of higher                educational objectives.” Kupec v. Atlantic
education, the NCAA ensures the continued            Coast Conference, 399 F.Supp. 1377, 1380
availability of a unique and valuable product,       (MDNC 1975). Significantly, neither the
the very existence of which might well be            Court of Appeals nor this Court questions the
threatened by unbridled competition in the           validity of these regulations under the Rule of
economic sphere.                                     Reason. See ante, at 2960-2961, 2969; 707
                                                     F.2d, at 1153.
    In pursuit of its fundamental goal and
others related to it, the NCAA imposes                   Notwithstanding the contrary conclusion
numerous controls on intercollegiate athletic        of the District Court, 546 F.Supp., at 1316,
competition among its members, many of               and the majority, ante, at 2969, I do not
which “are similar to those which are                believe that the restraint under consideration
summarily condemned when *123 undertaken             in this case--the NCAA's television
in a more traditional business setting.” J.          plan--differs fundamentally for antitrust
Weistart & C. Lowell,supra, at s 5.12.b. Thus,       purposes from the other seemingly
the NCAA has promulgated and enforced                anticompetitive aspects of the organization's
rules limiting both the compensation of              broader program of self- *124 regulation. The
student-athletes, see, e.g., Justice v. NCAA,        television plan, like many of the NCAA's
577 F.Supp. 356 (Ariz.1983), and the number          actions, furthers several complementary ends.
of coaches a school may hire for its football        Specifically, the plan is designed “to reduce,



                                                                                           758
insofar as possible, the adverse effects of live     between the broadcasters and the NCAA
television ... upon football game attendance         rather *128 than between the broadcasters and
and, in turn, upon the athletic and related          individual schools. Knowing that some games
educational programs dependent upon the              will be worth more to them than others, the
proceeds therefrom; to spread football               networks undoubtedly exercise whatever
television participation among as many               bargaining power they possess to ensure that
colleges as practicable; to reflect properly the     the minimum aggregate compensation they
image of universities as educational                 agree to provide for the package bears some
institutions; to promote college football            relation to the average value to them of the
through the use of television, to advance the        games they anticipate televising. Because
overall interests of intercollegiate athletics,      some       schools'      games       contribute
and to provide college football television to        disproportionately to the total value of the
the public to the extent compatible with these       package, see id., at 1293, the manner in which
other objectives.” App. 35. See also App.            the minimum aggregate compensation is
244, 323, 640, 651, 672. More generally, in          distributed among schools whose games are
my view, the television plan reflects the            televised has given rise to a situation under
NCAA's fundamental policy of preserving              which less- prominent schools receive more in
amateurism and integrating athletics and             rights fees than they would receive in a
education. Nor does the District Court's             competitive market and football powers like
finding that the plan is intended to maximize        respondents receive less. Id., at 1315.
television revenues, 546 F.Supp., at
1288-1289,      1315-1316,       warrant    any          As I have said, the Court does not hold,
implication that the NCAA and its member             nor did the Court of Appeals hold, that this
institutions pursue this goal without regard to      redistributive effect alone would be sufficient
the organization's stated policies.                  to subject the television plan to condemnation
                                                     under s 1 of the Sherman Act. Nor should it,
                      ***                            for an agreement to share football revenues to
                                                     a certain extent is an essential aspect of
    “In a competitive market,” the District          maintaining some balance of strength among
Court observed, “each football-playing               competing colleges and of minimizing the
institution would be an independent seller of        tendency to professionalism in the dominant
the right to telecast its football games. Each       schools. Sharing with the NCAA itself is also
seller would be free to sell that right to any       a price legitimately exacted in exchange for
entity it chose,” and “for whatever price it         the numerous benefits of membership in the
could get.” 546 F.Supp., at 1318. Under the          NCAA, including its many-faceted efforts to
NCAA's television plan, member institutions'         maintain a system of competitive, amateur
competitive freedom is restrained because, for       athletics. For the same reasons, limiting the
the most part, television rights are brought and     number of television appearances by any
sold, not on a per-game basis, but as a              college is an essential attribute of a balanced
package deal. With limited exceptions not            amateur athletic system. Even with shared
particularly relevant to antitrust scrutiny of the   television revenues, unlimited appearances by
plan, broadcasters wishing to televise college       a few schools would inevitably give them an
football must be willing and able to purchase        insuperable advantage over all others and in
a package of television rights without               the end defeat any efforts to maintain a system
knowing in advance the particular games to           of athletic competition among amateurs who
which those rights apply.              The real      measure up to college scholastic requirements.
negotiations over price and terms take place



                                                                                          759
    The Court relies instead primarily on the         anticompetitive increase in the price of
District Court's findings that (1) the television     television rights. The District Court found, of
plan restricts output; and (2) the plan creates a     course, that “the networks are actually paying
noncompetitive price structure that is                the large fees because the NCAA agrees to
unresponsive to viewer demand. Ante, at               limit production. If the NCAA would not
2962-2963. See, *129 e.g., 546 F.Supp., at            agree to limit production, the networks would
1318-1319. These findings notwithstanding, I          not pay so large a fee.” Id., at 1294.
am unconvinced that the television plan has a         Undoubtedly, this is true. But the market for
substantial anticompetitive effect.                   television rights to college football
                                                      competitions should not be equated to the
     First, it is not clear to me that the District   markets *130 for wheat or widgets.
Court employed the proper measure of output.          Reductions in output by monopolists in most
I am not prepared to say that the District            product markets enable producers to exact a
Court's finding that “many more college               higher price for the same product. By
football games would be televised” in the             restricting the number of games that can be
absence of the NCAA controls, id., at 1294, is        televised, however, the NCAA creates a new
clearly erroneous. To the extent that output is       product --exclusive television rights--that are
measured solely in terms of the number of             more valuable to networks than the products
televised games, I need not **2975 deny that          that its individual members could market
it is reduced by the NCAA's television plan.          independently.
But this measure of output is not the proper
one. The District Court found that eliminating            The television plan makes a certain
the plan would reduce the number of games             number of games available for purchase by
on network television and increase the number         television networks and limits the incidence of
of games shown locally and regionally. Id., at        head-to-head competition between football
1307. It made no finding concerning the effect        telecasts for the available viewers. Because
of the plan on total viewership, which is the         competition is limited, the purchasing network
more appropriate measure of output or, at             can count on a larger share of the audience,
least, of the claimed anti- competitive effects       which translates into greater advertising
of the NCAA plan. This is the NCAA's                  revenues and, accordingly, into larger
position, and it seems likely to me that the          payments per game to the televised teams.
television plan, by increasing network                There is thus a relationship between the size
coverage at the expense of local broadcasts,          of the rights payments and the value of the
actually expands the total television audience        product being purchased by the networks; a
for NCAA football. The NCAA would surely              network purchasing a series of games under
be an irrational “profit maximizer” if this were      the plan is willing to pay more than would one
not the case. In the absence of a contrary            purchasing the same games in the absence of
finding by the District Court, I cannot               the plan since the plan enables the network to
conclude that respondents carried their burden        deliver a larger share of the available audience
of showing that the television plan has an            to advertisers and thus to increase its own
adverse effect on output and is therefore             revenues. In short, by focusing only on the
anticompetitive.                                      price paid by the networks for television rights
     Second, and even more important, I am            rather than on the nature and quality of the
unconvinced that respondents have proved              product delivered by the NCAA and its
that any reduction in the number of televised         member institutions, the District Court, and
college football games brought about by the           this Court as well, may well have deemed
NCAA's television plan has resulted in an             anticompetitive a rise in price that more



                                                                                            760
properly should be attributed to an increase in    [television]. The cooperation in producing the
output, measured in terms of viewership.           product makes it more competitive against
                                                   other [television] (and live) attractions.” Brief
     Third, the District Court's emphasis on the   for Petitioner 15. The Court recognizes that,
prices paid for particular games seems             “[i]f the NCAA faced 'interbrand' competition
misdirected and erroneous as a matter of law.      from available substitutes, then certain forms
The distribution of the minimum aggregate          of collective action might be appropriate in
fees among participants in the television plan     order to enhance its ability to compete.”
is, of course, not wholly based on a               Ante, at 2968, n. 55. See Continental T.V.,
competitive price structure that is responsive     Inc. v. GTE Sylvania, Inc., 433 U.S. 36,
to viewer demand and is only partially related     54-57, 97 S.Ct. 2549, 2559-2561, 53 L.Ed.2d
to the value those schools contribute to the       568 (1977). It rejects the NCAA's proffered
total package the networks agree to buy. But       procompetitive justification, however, on the
as I have already indicated, see *131 supra, at    ground that college football is a unique
2974-2975, this “redistribution” of total          product for which there are no available
television revenues is a wholly justifiable,       substitutes and “there is no need for collective
even necessary, aspect of maintaining a            action in *132 order to enable the product to
system of truly competitive college teams. As      compete against its nonexistent competitors.”
long as the NCAA cannot artificially fix the       Ante, at 2968 (footnote omitted).           This
price of the entire package and demand             proposition is singularly unpersuasive.
supercompetitive prices, this aspect of the
plan should be of little concern. And I find            It is one thing to say that “NCAA football
little, if anything, in the record to support      is a unique product,” 546 F.Supp., at 1299,
**2976 the notion that the NCAA has power          that “intercollegiate football telecasts generate
to extract from the television networks more       an audience uniquely attractive to advertisers
than the broadcasting rights are worth in the      and that competitors are unable to offer
marketplace.                                       programming that can attract a similar
                                                   audience.” Ante, at 2966 (footnote omitted).
                      III                          See 707 F.2d, at 1158-1159; 546 F.Supp., at
                                                   1298-1300. It is quite another, in my view, to
    Even if I were convinced that the District     say that maintenance or enhancement of the
Court did not err in failing to look to total      quality of NCAA football telecasts is
viewership, as opposed to the number of            unnecessary to enable those telecasts to
televised games, when measuring output and         compete effectively against other forms of
anticompetitive effect and in failing fully to     entertainment. The NCAA has no monopoly
consider whether the NCAA possesses power          power when competing against other types of
to fix the package price, as opposed to the        entertainment. Should the quality of the
distribution of that package price among           NCAA's product “deteriorate to any
participating teams, I would nevertheless hold     perceptible degree or should the cost of 'using'
that the television plan passes muster under       its product rise, some fans undoubtedly would
the Rule of Reason. The NCAA argues                turn to another form of entertainment....
strenuously that the plan and the network          Because of the broad possibilities for
contracts “are part of a joint venture among       alternative forms of entertainment,” the
many of the nation's universities to create a      NCAA “properly belongs in the broader
product--high-quality college football--and        'entertainment' market rather than in ... [a]
offer that product in a way attractive to both     narrower marke[t]” like sports or football.
fans in the stadiums and viewers on                Grauer, Recognition of the National Football



                                                                                         761
League as a Single Entity Under Section 1 of          Finally, I return to the point with which I
the Sherman Act:        Implications of the       began--the essentially noneconomic nature of
Consumer Welfare Model, 82 Mich.L.Rev. 1,         the NCAA's program of self-regulation. Like
34, n. 156 (1983). See National Football          Judge Barrett, who dissented in the Court of
League v. North American Soccer League,           Appeals, I believe that the lower courts “erred
459 U.S. 1074, 1077, 103 S.Ct. 499, 500, 74       by subjugating the NCAA's educational goals
L.Ed.2d 639 (1982) (REHNQUIST, J.,                (and, coincidentally, those which Oklahoma
dissenting from the denial of certiorari); R.     and Georgia insist must be maintained in any
Atwell, B. Grimes & D. Lopiano, The Money         event)     to     the     purely    competitive
Game 32-33 (1980); G. Hanford, supra, at 67;      commercialism of [an] 'every school for itself'
J. Michener, Sports in America 208-209            approach to television contract bargaining.”
(1976); Note, supra, 87 Yale L.J., at 661, and    707 F.2d, at 1168. Although the NCAA does
n. 31.                                            not enjoy blanket immunity from the antitrust
                                                  laws, cf. Goldfarb v. Virginia State Bar, 421
    The NCAA has suggested a number of            U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572
plausible ways in which its television plan       (1975), it is important to remember that the
might enhance the ability of college football     Sherman Act “is aimed primarily at
telecasts to compete against other forms of       combinations having commercial objectives
entertainment. Brief for Petitioner 22-25.        and is applied only to a very limited extent to
Although the District Court did conclude that     organizations ... which normally have other
the plan is “not necessary for effective          objectives.” Klor's, Inc. v. Broadway-Hale
marketing of the product,” 546 F.Supp., at        Stores, Inc., 359 U.S. 207, 213, n. 7, 79 S.Ct.
1307, its *133 finding was directed only at the   705, 710, n. 7, 3 L.Ed.2d 741 (1959).
question whether college football telecasts
would continue in the absence of the plan. It         The fact that a restraint operates on
made no explicit findings concerning the          nonprofit     educational      institutions   as
effect of the plan on viewership and thus did     distinguished from business entities is as
not reject the factual premise of the NCAA's      “relevant *134 in determining whether that
argument that the plan might enhance              particular restraint violates the Sherman Act”
competition by increasing **2977 the market       as is the fact that a restraint affects a
penetration of NCAA football. See also 707        profession rather than a business. Goldfarb v.
F.2d, at 1154-1156, 1160.        The District     Virginia State Bar, supra, at 788, n. 17, 95
Court's finding that network coverage of          S.Ct., at 2013, n. 17.          Cf. Community
NCAA football would likely decrease if the        Communications Co. v. City of Boulder, 455
plan were struck down, 546 F.Supp., at 1307,      U.S. 40, 56, n. 20, 102 S.Ct. 835, 843, n. 20,
in fact, strongly suggests the validity of the    70 L.Ed.2d 810 (1982).           The legitimate
NCAA's position. On the record now before         noneconomic goals of colleges and
the Court, therefore, I am not prepared to        universities should not be ignored in analyzing
conclude that the restraints imposed by the       restraints imposed by associations of such
NCAA's television plan are “such as may           institutions on their members, and these
suppress or even destroy competition” rather      noneconomic goals “may require that a
than “such as merely regulat[e] and perhaps       particular practice, which could properly be
thereby promot[e] competition.” Chicago           viewed as a violation of the Sherman Act in
Board of Trade v. United States, 246 U.S. 231,    another context, be treated differently.”
238, 38 S.Ct. 242, 244, 62 L.Ed. 683 (1918).      Goldfarb v. Virginia State Bar, supra, at 788,
                       IV                         n. 17, 95 S.Ct., at 2013, n. 17. The Court of
                                                  Appeals, like the District Court, flatly refused



                                                                                        762
to consider what it termed “noneconomic”           Agreements Among Colleges, 52 Fordham
justifications advanced by the NCAA in             L.Rev. 717, 728 (1984), and neither
support of the television plan. It was of the      Professional Engineers nor any other decision
view that our decision in National Society of      of this Court suggests that associations of
Professional Engineers v. United States, 435       nonprofit educational institutions must defend
U.S. 679, 98 S.Ct. 1355, 55 L.Ed.2d 637            their self-regulatory restraints solely in terms
(1978), precludes reliance on noneconomic          of their competitive impact, without regard for
factors in assessing the reasonableness of the     the legitimate noneconomic values they
television plan. 707 F.2d, at 1154; see Tr. of     promote.
Oral Arg. 24-25. This view was mistaken, and
I note that the Court does not in so many              When these values are factored into the
words repeat this error.                           balance, the NCAA's television plan seems
                                                   eminently reasonable. Most fundamentally,
    Professional Engineers did make clear that     the plan fosters the goal of amateurism by
antitrust     analysis  usually    turns      on   spreading revenues among various schools
“competitive conditions” and “economic             and reducing the financial incentives toward
conceptions.” 435 U.S., at 690, and n. 16, 98      professionalism. As the Court observes, the
S.Ct., at 1364, and n. 16. Ordinarily, “the        NCAA imposes a variety of restrictions
inquiry mandated by the Rule of Reason is          perhaps better suited than the television plan
whether the challenged agreement is one that       for the preservation of amateurism. Ante, at
promotes competition or one that suppresses        2970. Although the NCAA does attempt
competition.” Id., at 691, 98 S.Ct., at 1365.      vigorously to enforce these restrictions, the
The purpose of antitrust analysis, the Court       vast potential for abuse suggests that
emphasized, “is to form a judgment about the       measures, like the television plan, designed to
competitive significance of the restraint; it is   limit the rewards of professionalism are fully
not to decide whether a policy favoring            consistent with, and essential to the attainment
competition is in the public interest, or in the   of, the NCAA's objectives. In short, “[t]he
interest of the members of an industry.” Id., at   restraints upon Oklahoma and Georgia and
692, 98 S.Ct., at 1365. Broadly read, these        other colleges and universities with excellent
statements suggest that noneconomic values         football programs insure that they confine
like the promotion of amateurism and               those programs within the principles of
fundamental educational objectives could not       amateurism so that intercollegiate athletics
save the television plan from condemnation         supplement, rather than inhibit, educational
under the Sherman Act. *135 But these              achievement.” 707 F.2d, at 1167 (Barrett, J.,
**2978 statements were made in response to         dissenting). The collateral consequences of
“public interest” justifications proffered in      the spreading of *136 regional and national
defense of a ban on competitive bidding            appearances among a number of schools are
imposed by practitioners engaged in standard,      many: the television plan, like the ban on
profit-motivated commercial activities. The        compensating student-athletes, may well
primarily noneconomic values pursued by            encourage students to choose their schools, at
educational institutions differ fundamentally      least in part, on the basis of educational
from the “overriding commercial purpose of         quality by reducing the perceived economic
[the] day-to-day activities” of engineers,         element of the choice, see Note, supra, 87
lawyers, doctors, and businessmen, Gulland,        Yale L.J., at 676, n. 106; it helps ensure the
Byrne & Steinbach, Intercollegiate Athletics       economic viability of athletic programs at a
and Television Contracts: Beyond Economic          wide variety of schools with weaker football
Justifications in Antitrust Analysis of            teams; and it “promot[es] competitive football



                                                                                         763
among many and varied amateur teams
nationwide.” Gulland, Byrne & Steinbach,
supra, at 722 (footnote omitted). These
important contributions, I believe, are
sufficient    to    offset      any     minimal
anticompetitive effects of the television plan.

    For all of these reasons, I would reverse
the judgment of the Court of Appeals. At the
very least, the Court of Appeals should be
directed to vacate the injunction of the District
Court pending the further proceedings that
will be necessary to amend the outstanding
injunction to accommodate the substantial
remaining authority of the NCAA to regulate
the telecasting of its members' football games.




                                                    764
 LAWRENCE H. “DUDE” HENNESSEY                     certain1 of the institutions could employ. Lest
       AND WENDELL HUDSON,                        it possibly violate this bylaw and become
  Plaintiffs-Appellants, Cross-Appellees,         subject to sanctions from the association, the
                     v.                           University of Alabama,2 a voluntary member
 NATIONAL COLLEGIATE ATHLETIC                     of the NCAA, made various adjustments in its
   ASSOCIATION, an Unincorporated                 employment relationships with several of its
     Association, Defendant-Appellee,             assistant coaches. As a part of these changes,
              Cross-Appellant.                    Lawrence Hennessey, who had been an
                                                  assistant football coach for sixteen years, and
               No. 76-3798.                       Wendell Hudson, who was in his second year
   United States Court of Appeals, Fifth          as an assistant basketball coach, were reduced
                 Circuit.                         to the status of part-time coaches.3
 564 F.2d 1136; 1977-2 Trade Cas. (CCH)
                 P61,770                              In this action against NCAA, Hennessey
       Dec. 16, 1977; As Corrected                and Hudson seek a ruling that By-law 12-1 is
                                                  invalid or inapplicable, a decision which
                                                  would permit their resumption of employment
PRIOR HISTORY: Appeals from the United            as full-time coaches.          The plaintiffs'
States District Court for the Northern District   contentions are denied, both legally and
of Alabama.                                       factually, by the NCAA. Trial on the merits
                                                  was conducted on August 30-31, 1976, with
    Before GODBOLD, HILL and FAY,                 each side having the opportunity to present all
Circuit Judges.                                   evidence thought relevant to the issues.

   PER CURIAM:                                                            ***

    We affirm the judgment of the United          IV. ANTI-TRUST CLAIMS
States District Court for the Northern District
of Alabama which was based upon the                   Section 112 of the Sherman Anti-Trust Act
findings of fact and conclusions of law
contained in the district court's Memorandum
of Opinion which is reproduced here as an         1 Bylaw 12-1 applies only to the 246 “Division I”
appendix.                                         members of the NCAA, of which 137 are “football”
                                                  members of Division I. In general it can be said that
                                                  Division I is composed of the athletically more
   AFFIRMED.                                      prominent members of the association.

   MEMORANDUM OF LAW                              2 The University of Alabama will be referred to in
                                                  this opinion simply as “Alabama” except where there
    The NCAA is a non-profit association of       may be a need to distinguish between the State and
some 800 public and private colleges, formed      the University.
in part to adopt rules to govern the conduct of
                                                  3 Hennessey suffered a reduction in basic
its member institutions in the administration     compensation from $20,000 to $2,100 per year.
of intercollegiate athletics. At a special        Through assignment of other non-coaching duties,
convention in August 1975, the association        Hudson's basic compensation was not affected.
adopted Bylaw 12-1 to limit, effective
August 1, 1976, the maximum number of             12 Plaintiffs here also allege a violation of 15
assistant football and basketball coaches         U.S.C. @ 2; but the evidence is clearly insufficient to
                                                  substantiate such a claim.



                                                                                             765
prohibits “every contract, combination... or                                    ***
conspiracy, in restraint of trade or commerce
among the several states.” 15 U.S.C. @ 1. For              B. Educational Exemption
violation of this proscription, the Clayton Act
confers a private right of action, including, for          The NCAA asserts that it is outside the
a person “injured in his business or property,”        ambit of the antitrust laws. In the words of
a right to recover treble damages. 15 U.S.C.           the Supreme Court:
@@ 15, 26. Simple in wording, these Acts
nevertheless have provided the grist for many                  “The end sought [by these laws]
difficult and elusive legal concepts. Decisions            was the prevention of the restraints to
involving anti-trust claims respecting various             free competition in businesses and
aspects of sports are, perhaps, more                       commercial transactions....”     Apex
noteworthy for their number than for their                 Hosiery Co. v. Leader, 310 U.S. 469,
logical consistency.                                       493, 60 S.Ct. 982, 992, 84 L.Ed. 1311
                                                           (1940).
     Before addressing the real issues in this
case, the court should first dispose of several                “The court in Apex recognized
preliminary matters. It is fundamental that a              that the Act is aimed primarily at
single person or entity cannot by itself alone             combinations having commercial
form a “contract, combination or conspiracy,”              objectives and is applied only to a very
and yet here the plaintiffs sue only the NCAA.             limited extent to organizations, like
Is this fatal? No, because conceptually the                labor unions, which normally have
adoption and execution of the NCAA Bylaw                   other objectives.”      Klor's, Inc. v.
can be seen as the agreement and concert of                Broadway-Hale Stores, Inc., 359 U.S.
action of the various members of the                       207, 213, n. 7, 79 S.Ct. 705, 710, 3
association, as well as that of the association            L.Ed.2d 741 (1959).
itself, and it is permissible to sue but one of
several alleged co-conspirators. Indeed, it                     “The proscriptions of the Act,
should be taken as undisputed that the                     tailored as they are for the business
defendant has been a party to a contract or                world, are not at all appropriate for
combination - the question is whether that                 application in the political area. * * *
contract or combination constitutes a                      All of this caution [respecting
“restraint of trade or commerce among the                  legislation relating to political
several states” in violation of Section 1 of the           activities] would go for naught if we
Sherman Anti-Trust Act. In this context, it                permitted an extension of the Sherman
may be noted that the “voluntary” nature of                Act to regulate activities of that nature
the NCAA is likewise no answer to the                      simply because those activities have a
plaintiffs' claims.13                                      commercial impact....”           Eastern


                                                           (Continued)
13 In Goldfarb v. Virginia State Bar, 421 U.S. 773,
781-82, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), it was   has been efficacious. As should be apparent from
noted that purely advisory guidelines by a voluntary   “tying” cases, the fact that a participant in an illegal
organization, without disciplinary sanctions and       contract or combination had the legal power to
ineffective in fact, might be beyond the anti-trust    withdraw from the arrangement does not negate the
proscriptions. In the present case - as was true in    violation or even prevent that party from itself
Goldfarb - there are significant sanctions and         bringing an appropriate action for damages.
pressures for compliance and in operation the Bylaw


                                                                                                   766
    Railroad Presidents Conference v.                   the court stated, “intended to strike as broadly
    Noerr Motor Freight, Inc., 365 U.S.                 as it could in @ 1 of the Sherman Act, and to
    127, 141, 81 S.Ct. 523, 531, 5 L.Ed.2d              read into it so wide an exemption as that urged
    464 (1961).                                         on us would be at odds with that purpose.”
                                                        421 U.S. at 787, 95 S.Ct. at 2013. Addressing
     And, according to the Court of Appeals             the lawyers' claim of an exemption, the Court
for the District of Columbia,                           commented: “Whatever else it may be, the
                                                        examination of a land title is a service; the
         “[The] proscriptions of the                    exchange of such a service for money is
    Sherman Act were 'tailored * * * for                'commerce' in the most common usage of that
    the business world,' not for the                    word. It is no disparagement of the practice of
    non-commercial aspects of the liberal               law as a profession to acknowledge that it has
    arts and the learned professions. In                this business aspect....” 421 U.S. at 787, 95
    these contexts, an incidental restraint             S.Ct. at 2013. Nor should it be taken as any
    of trade, absent an intent or purpose to            attack upon the amateurism of intercollegiate
    affect the commercial aspects of the                athletics for one to acknowledge that there is a
    profession, is not sufficient to warrant            business aspect in the providing of coaching
    application of the antitrust laws.”                 for the athletes or in the providing of athletic
    Marjorie Webster Jr. College v.                     events to an interested public. The court holds
    Middle States Ass'n, 432 F.2d 650,                  that the NCAA is not entitled to a total
    654 (CADC 1970).                                    exclusion from anti-trust regulations on this
                                                        ground.15
    Therefore, says the NCAA, it - a
voluntary, non-profit organization whose                    C. State Action Exemption
activities and objectives are educational and
are carried out with respect to amatur athletics            Alternatively, the NCAA contends that, as
- is exempt from Section 1 of the Sherman               an unincorporated association composed in
Anti-Trust Act.                                         part of state institutions, it is entitled to the

    Prior to 1975 the vitality of this argument             (Continued)
could hardly be doubted. A close reading,
however, of the Supreme Court's decision in             - are, when presenting amateur athletics to a
Goldfab v. Virginia State Bar, 421 U.S. 773,            ticket-paying, televisionbuying public, engaged in a
95 S.Ct. 2004, 44 L.Ed.2d 572 (1975),                   business venture of far greater magnitude than the
supports the view that such a blanket [*1149]           vast majority of “profit-making” enterprises. The
exclusion cannot be accepted.14 “Congress,”             NCAA has a multi-million dollar annual budget; and
                                                        it negotiates and administers for itself or its members
                                                        television contracts exceeding, for all sports, over
                                                        $20,000,000 a year.The University of Alabama, just
14 Goldfarb, to be sure, involved the claim of a        one of its members, has an athletic program which
“learned profession” on behalf of lawyers, who could    involves millions of dollars annually, and which has
hardly claim to have been engaged in a non-profit       over the years, produced significant “profits” for use
venture. The Court, moreover, did with apparent         by non-athletic activities of the institution.
approval quote from an earlier decision to the effect
that the Act was intended to cover persons “engaged     15 This does not mean that nature, purpose, and
in business.” 421 U.S. at 788, 95 S.Ct. 2004. The       activities of the NCAA relied upon in the
rationale, however, should with equal force apply to    unsuccessful claim of an exemption may not have a
the “liberal arts” exemption here claimed by the        bearing upon other issues, such as “interstate
NCAA.        While organized as a non-profit            commerce” and “reasonableness.” See infra.
organization, the NCAA - and its member institutions


                                                                                                   767
“state action” exemption recognized by the                                          ***
Supreme Court in Parker v. Brown, 317 U.S.
341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). Also                    E. Reasonableness
see Saenz v. University Interscholastic
League, 487 F.2d 1026 (CA5 1973). Here                           Although Section 1 of the Sherman
again, however, the Goldfarb decision dictates              Anti-Trust       Act      proscribes     “every”
rejection of the argument. Under Goldfarb the               combination in restraint of interstate
governmental character of the defendant is but              commerce, the courts have limited the Act to
one part of the “state action” exemption, and               “unreasonable” restraints. See Standard Oil
agencies such as cities are now subject to                  Co. v. United States, 221 U.S. 1, 31 S.Ct. 502,
potential anti-trust claims. See Lafayette v.               55 L.Ed. 619 (1911).             This condition,
La. Power & Light Co., 532 F.2d 431, (CA5                   however, may be met either because a
1976). The exemption also depends upon                      restraint otherwise reasonable is accompanied
proof that the State as a sovereign, acting                 with a specific intent to accomplish a
through its legislature, has “required” (in the             forbidden restraint or because it falls within
words of Goldfarb) or “intended” (in the                    the class of restraints that are considered to be
words of Lafayette) that the subordinate                    illegal per se. See Times-Picayune Pub. Co.
governmental agency do that act which is                    v. United States, 345 U.S. 594, 73 S.Ct. 872,
attacked under the anti-trust laws. Here it is              97 L.Ed. 1277 (1953).
clear that the laws of the State of Alabama do
not require or intend, if indeed they even                       Plaintiffs view the Bylaw as a “group
permit,16 the University of Alabama to                      boycott” and therefore per se illegal. See
participate in a multi-university accord which              Fashion Originators' Guild v. FTC, 312 U.S.
limits the number of coaches. See 1940 Code                 457, 61 S.Ct. 703, 85 L.Ed. 949 (1941). The
of Alabama, tit. 52, @ 492 (Recomp.1958).17                 “group boycott” cases typically have involved
Indeed, one may ask whether, to be entitled to              situations where there was some concerted
the exemption, the NCAA would have to                       refusal to deal with persons or companies
show that the Bylaw was adopted as a result of              because of some characteristic of those
the votes of member institutions, each acting               persons and companies.19 Here, the
as directed or intended by their state                      participants in the combination - the colleges -
legislatures. Cf. Cantor v. Detroit Edison Co.,             remain free to deal with any of the persons in
428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141                the “target group” - the assistant coaches. The
(1976). The NCAA is not entitled to the                     restriction rather depends upon a particular
“state action” exemption from anti-trust                    attribute of the participants themselves;
regulation.

                                                            19 For example in the recent unreported opinion of
16 As an alternative basis for relief, plaintiffs claim     Smith v. Pro-Football, D.C.D.C., 420 F.Supp. 738
that the Bylaw contravenes state law with respect to        (1976), Judge Bryant held the “player selection draft”
decision-making on the hiring of faculty. The court         of the National Football League to be a group boycott
concludes that this theory cannot be decided in the         and per se illegal. Under the draft system, the
context of a case by these plaintiffs against the           participants in the combination agreed not to
NCAA.                                                       negotiate for the services of any player selected by
                                                            other participants. Also see Mackey v. National
17 There is no evidence - or legislative facts subject      Football League, 407 F.Supp. 1000 (Minn.1975) (the
to judicial notice - as to the legislative intent of this   “Rozelle Rule,” which may subject one team to
statute. Cf. Lafayette v. La. Power & Light Co.,            liability to another when hiring former player of the
supra, 532 F.2d 435 n. 9. [*1150]                           latter, is a group boycott and per se illegal).



                                                                                                      768
namely, how many assistant coaches they            features of the professions, may require that a
have. The situation is perhaps more clearly        particular practice, which could be properly
analogous to a “division of markets” among         viewed as a violation of the Sherman Act in
conspirators, which has also held to be a per      another context, be treated differently. We
se violation. See Timken Roller Bearing Co.        intimate no view on any other situation than
v. United States, 341 U.S. 593, 71 S.Ct. 971,      the one with which we are confronted today.
95 L.Ed. 1199 (1951). Inasmuch as the              421 U.S. at 787-88, n. 17, 95 S.Ct. at 2013.”
schools would be free to change their assistant
coaches, provided the maximum number was               While this court has declined to grant the
not exceeded, the Bylaw has a marked               NCAA and its members a total exemption
similarity to an agreement for allocation of       from the antitrust laws, it does believe that,
“market shares.” Cf. Addyston Pipe & Steel         given the nature and purposes of the NCAA
Co. v. U.S., 175 U.S. 211, 20 S.Ct. 96, 44         and its member institutions, this particular
L.Ed. 136 (1899); U.S. v. Paramount Pictures,      restraint, limiting the number of assistant
Inc., 334 U.S. 131, 68 S.Ct. 915, 92 L.Ed.         coaches who may be employed at any one
1260 (1948).                                       time by the institutions, is not a per se
                                                   violation of the antitrust laws.
    Where a restraint is of a type classified as
a per se violation, efforts to find special             This conclusion finds support in those
circumstances which justify use of the “rule of    cases previously cited with respect to the
reason” have generally been unsuccessful.          NCAA's claim of a blanket exemption.20 See
See, e.g., Response of Carolina, Inc. v. Leasco    Apex Hosiery Co. v. Leader, supra; Klor's Inc.
Response, Inc., 537 F.2d 1307, (CA5 1976);         v. Broadway-Hales Stores, Inc., supra; Eastern
Copper Liquor Inc. v. Adolph Coors Co., 506        Railroad Presidents Conference v. Noerr
F.2d 934 (CA5 1975). But cf. Joseph E.             Motor Freight, Inc., supra; Marjorie Webster
Seagram & Sons, Inc. v. Hawaiian Oke &             Jr. College v. Middle States Ass'n, supra. The
Liquors, Ltd. 416 F.2d 71 (CA9 1969).              “Call” rule of the Chicago Board of Trade was
    Nevertheless - and with some trepidation       clearly “price fixing” and yet was, under the
in view of such cases - this court concludes       circumstances, not per se illegal, the Court
that under the particular circumstances here       stating,
involved the restraint in question should be
viewed under a “rule of reason,” and not                   “But the legality of an agreement
automatically condemned as a per se                    or regulation cannot be determined by
violation.    This conclusion is at least              so simple a test as whether it restrains
suggested by a footnote in the recent Goldfarb         competition.        Every agreement
opinion:                                               concerning trade, every regulation of
                                                       trade, restrains. To bind, to restrain, is
    “The fact that a restraint operates upon a         of their very essence. The true test of
profession as distinguished from a business is,        legality is whether the restraint
of course, relevant in determining whether
that particular restraint [*1152] violates the
Sherman Act. It would be unrealistic to view
                                                   20 It should be acknowledged that a state trial court,
the practice of professions as interchangeable
                                                   confronted with the same question under a state law
with     other    business    activities,  and     patterned after the Sherman Anti-Trust Act, has
automatically to apply to the profession           reached the contrary conclusion with respect to this
antitrust concepts which originated in other       Bylaw.     See Board of Regents v. NCAA,
areas. The public service aspect, and other        Okla.Co.Dist.Ct. # CD 76-871 (unreported dec.).



                                                                                             769
   imposed is such as merely regulates            of reason,” rather than under pro se standards.
   and perhaps thereby promotes                   See Bridge Corporation of America v.
   competition, or whether it is such as          American Contract Bridge League, Inc., 428
   may suppress or even destroy                   F.2d 1365 (CA9 1970); Deesen v. Professional
   competition.       To determine that           Golfers' Ass'n, 358 F.2d 165 (CA9 1966). A
   question the court must ordinarily             similar approach has been taken with respect
   consider the facts peculiar to the             to an action by the NCAA itself which
   business to which the restraint is             although having obvious impact upon the
   applied; its condition before and after        business interests of the plaintiff, was viewed
   the restraint was imposed; the nature          as motivated by a desire to protect the
   of the restraint, and its effect, actual or    academic standards [*1153] of the member
   probable. The history of the restrain,         institutions. See College Athletic Placement
   the evil believed to exist, the reason         Service v. NCAA, 1975 Trade Cases [*$
   for adopting the particular remedy, the        60,117 (N.J.1974), aff'd, 506 F.2d 1050 (CA3
   purpose or end sought to be attained,          1974). Similarly, regulations by non-profit
   are all relevant facts. This is not            organizations to further the purposes of those
   because a good intention will save an          organizations have been viewed for
   otherwise objectionable regulation, or         reasonableness, rather than under the per se
   the reverse; but because knowledge of          tests. See Nankin Hospital v. Michigan
   intent may help the court to interpret         Hospital Services, 361 F.Supp. 1199
   facts and to predict consequences.”            (E.D.Mich. 1972); Roofire Alarm Co. v.
   Board of Trade v. U.S., 246 U.S. 231,          Royal Indemnity Co., 202 F.Supp. 166
   238, 38 S.Ct. 242, 244, 62 L.Ed. 683           (E.D.Tenn. 1962), aff'd 313 F.2d 635 (CA6
   (1918).                                        1963).

   And, in White Motor Co. v. U.S., 372 U.S.           The record in this case is devoid of any
253, 83 S.Ct. 696, 9 L.Ed.2d 938 (1963), the      evidence that adoption of the Bylaw was
Court, faced with a new situation, said,          prompted by an intent to injure Hennessey,
                                                  Hudson, or other assistant coaches, either
       “A vertical territorial limitation         individually or as a group. There was, to be
   may or may not have that purpose or            sure, an awareness by the members of the
   effect [stifling of competition]. We do        association that there would be some
   not know enough of the economic and            adversely affected by the Bylaw, but the
   business stuff out of which these              attitude expressed was one of concern, not
   arrangements emerge to be certain.             indifference. The granting of a grace period in
   They may be too dangerous to                   circumstances of academic tenure, enforceable
   sanction or they may be allowable              contracts,    and      formal     employment
   protections       against     aggressive       commitments can be seen as an effort to
   competitors or the only practicable            accommodate to the more compelling of such
   means a small company has for                  situations.
   breaking into or staying in business *
   * * and within the 'rule of reason.”'              The Bylaw was adopted after a lengthy
   372 U.S. at 263, 83 S.Ct. at 702.              study of problems facing many members of
                                                  the association in their attempt to conduct
    Thus, group boycotts whose purpose was        intercollegiate athletic programs as a part of -
to protect fair competition in sports and games   and consistent with - the educational
have, on occasion, been tested under the “rule    objectives of these member institutions. A



                                                                                        770
goal of the NCAA, one which is endowed              consequence of the Bylaw will be to stabilize,
with certain benefits to society, is to “retain a   if not depress, the compensation which any
clear line of demarcation between college           assistant coach can obtain for his services, and
athletics and professional sports.” Colleges        thereby have an adverse impact not just on
with more successful programs, both                 those displaced, such as Hennessey and
competitively and economically, were seen as        Hudson, but on all such persons. It is also
taking advantage of their success by                possible that the Bylaw will not contribute at
expanding their programs, to the ultimate           all to its intended objectives and have no
detriment of the whole system of                    “positive” effects.
intercollegiate athletics. Financial pressures
upon many members, not merely to “catch                 The court is not prepared to accept either
up,” but to “keep up,” were beginning to            such hypothesis, but is rather of the view
threaten both the competitive, and the              -admittedly bordering on speculation - that the
amateur, nature of the programs, leading quite      Bylaw will be of value in achieving the ends
possibly to abandonment by many. “Minor”            sought by the association and will have in
and “minority” sports were viewed as                time lesser, not greater, adverse effect upon
imperiled by concentration upon the “money          assistant   coaches than that           already
makers,” such as varsity football and               experienced. One may argue that the burden
basketball.                                         of proof in this respect should be upon the
                                                    NCAA, to establish reasonableness, rather
    Bylaw 12-1 was, with other rules adopted        than upon the plaintiffs, to establish the
at the same time, intended to be an “economy        contrary; and there is language in the case law
measure.” In this sense it was both in design       to support such a contention. However, the
and effect one having commercial impact.            result of that [*1154] approach would be to
But the fundamental objective in mind was to        foreclose, by way of injunction, any
preserve     and    foster    competition     in    opportunity to build up experience on which
intercollegiate athletics - by curtailing, as it    the issue could ultimately be judged. If actual
were, potentially monopolistic practices by the     experience under the Bylaw should run
more powerful - and to reorient the programs        counter to the NCAA's expectations, such
into their traditional role as amateur sports       evidence would be available to a court
operating as part of the educational processes.     evaluating the reasonableness of the restraint
                                                    in a subsequent case.
    The motive which underlies a challenged
restraint is but one element in the examination         There are, or will be, a not insignificant
for reasonableness. See Copper Liquor Inc. v.       number of assistant coaches displaced or
Adolph Coors Co., 506 F.2d 934, 945 n. 6            reduced, like Hennessey and Hudson, by the
(CA5 1975).         Additionally, one should        Bylaw.21 However, the effects upon them are
consider the relative positive and negative
effects, the power of the parties in the markets
they serve, and whether other less restrictive
means could be employed to achieve the same         21 The exact number so affected is not known.
desired ends.                                       Plaintiffs' expert concluded that the number of
                                                    assistant coaches employed at Division I football
                                                    institutions in 1975 exceeded by 111 the number of
    The ultimate effects of the Bylaw, positive     positions at such schools under the Bylaw. This is not
and negative, are difficult to determine on the     a reliable estimate of the actual number affected in
basis of evidence taken just a month after its      view of the built-in “grade” period and of the effects
effective date. It is possible, of course, that a   of normal attrition.



                                                                                              771
not likely to be as severe or prolonged, except   only that (1) the grace period could have been
perhaps with respect to a few older coaches       extended to themselves as well as to those
such as Hennessey, as suggested by plaintiffs.    with academic tenure, etc., or (2) a more
There are, indeed, many opportunities for         efficient method would have been to fix a
coaches to pursue their vocations in addition     maximum amount which a school could pay
to those now partially limited with Division I    its assistant coaches, regardless of the number.
members of the NCAA: colleges which are in        The grace period, however, in this context
other divisions of the NCAA; colleges which       should be seen not as supporting the objective
are not in the NCAA; professional teams; and      of the Bylaw, but as a counter-productive
high schools. While these opportunities may       measure justified by other considerations - and
not be as rewarding, either financially or        to further extend those provisions would add
emotionally, to many coaches, the fact of their   more delay in achieving the goals of the
existence must be taken into account in           Bylaw. Nor can the court view a limitation of
measuring the “market power” of the NCAA          compensation of employees as less a restraint
Division I teams and the economic effects of      than one which limits the total number of
the rule.                                         employees.

    The long-range consequences of the                The court is of the opinion that the Bylaw
Bylaw - at least if the fears of the NCAA have    must be measured under Section 1 of the
some justification - may indeed be to benefit     Sherman Anti-Trust Act by the “rule of
assistant coaches by preserving the number of     reason” standard and that, so evaluated, it is
institutions which remain as potential            not an unreasonable restraint.
employers of such coaches. Moreover, one
should not consider just the position of the      V. CONCLUSION
assistant coaches - the public and the athletes
themselves have a potential interest in the           The plaintiffs come close, but fall short,
continuation of the extensive athletic            on each of the theories advanced. By separate
programs on the college level.                    order filed herewith, judgment is entered in
                                                  favor of the defendant.
    Would some less restrictive measure
suffice to accomplish the aims of the NCAA           This the 27th day of September, 1976.
in this respect? The NCAA, acting through its
member institutions after much study,                 S/ Sam C. Pointer, Jr. United States
concluded in the negative. The evidence           District Judge
supports that decision. The plaintiffs suggest




                                                                                        772
      NORMAN LAW, ANDREW                         level coaches to $16,000. Basketball coaches
     GREER, PETER HERRMANN,                      affected by the rule filed a class action
      MICHAEL JARVIS,JR., and                    challenging the restriction under Section 1 of
    CHARLES M. RIEB, individually                the Sherman Antitrust Act. The district court
         and on behalf of others                 granted summary judgment on the issue of
      similarlysituated, Plaintiffs-             liability to the coaches and issued a permanent
                Appellees,                       injunction restraining the NCAA from
                    v.                           promulgating this or any other rules
      NATIONAL COLLEGIATE                        embodying similar compensation restrictions.
               ATHLETIC                          The NCAA now appeals, and we affirm.
      ASSOCIATION,Defendant-
    Appellant, and WILLIAM HALL,                 I. Background
            Amicus Curiae.
               No. 96-3034                         The NCAA is a voluntary unincorporated
                                                 association      of     approximately        1,100
UNITED STATES COURT OF APPEALS                   educational institutions.1      The association
    FOR THE TENTH CIRCUIT                        coordinates the intercollegiate athletic
                                                 programs of its members by adopting and
134 F.3d 1010; 1998 U.S. App. LEXIS 940;         promulgating playing rules, standards of
 1998-1 Trade Cas.(CCH) P72,047; 1998            amateurism,       standards     for     academic
           Colo. J. C.A.R. 609                   eligibility, regulations concerning recruitment
                                                 of student athletes, rules governing the size of
          January 23, 1998, Filed                athletic squads and coaching staffs, and the
                                                 like. The NCAA aims to “promote
SUBSEQUENT HISTORY: [**1] Certiorari             opportunity for equity in competition to assure
Denied October 5, 1998, Reported at: 1998        that      individual     student-athletes      and
U.S. LEXIS 4921.                                 institutions will not be prevented unfairly
                                                 from achieving the benefits inherent in
PRIOR HISTORY: Appeal from the United            participation in intercollegiate athletics.”
States District Court for the District of
Kansas.    (D.C.    No.    94-2053-KHV).           The NCAA classifies sports programs into
KATHRYN H. VRATIL.                               separate divisions to reflect differences in
                                                 program size and scope. NCAA Division I
DISPOSITION: AFFIRMED.                           basketball programs are generally of a higher
                                                 stature and have more visibility than Division
JUDGES: Before EBEL,           LOGAN,     and    II and III basketball programs. Over 300
KELLY, Circuit Judges.                           schools play in Division I, and each Division I
                                                 member hires and employs its own basketball
OPINIONBY: EBEL                                  coaches.

OPINION:
[*1012] EBEL, Circuit Judge.
                                                 1
                                                   Because this appeal stems from the grant of a
  Defendant-Appellant       the      National    motion for summary judgment, we review the facts
Collegiate Athletic Association (“NCAA”)         taken in the light most favorable to the NCAA, the
promulgated a rule limiting annual               non-moving party. See Kaul v. Stephan, 83 F.3d
compensation of[**2] certain Division I entry-   1208, 1212 (10th Cir. 1996).



                                                                                        773
  During the 1980s, the NCAA became                institution    and    could    only    receive
concerned over the steadily rising costs of        compensation equal to the value of the cost of
maintaining competitive athletic programs,         the educational experience (grant-in-aid)
especially in light of the requirements            [**5]depending on the coach's residential
imposed by Title IX of the 1972 Education          status (i.e. a non-resident graduate assistant
Amendments Act to increase support for             coach could receive greater compensation to
women's athletic programs. The NCAA                reflect the higher cost of out-of-state tuition
observed that some college presidents had to       than could an in-state student). The NCAA
close academic departments, fire tenured           limited compensation to part-time assistants to
faculty, and reduce the number of sports           the value of full grant-in-aid compensation
offered to students due to economic                based on the value of out-of-state graduate
constraints. At the same time, many                studies.
institutions felt pressure to “keep up with the
Joneses” by increasing spending on recruiting        Despite the salary caps, many of these part-
talented players and coaches and on other          time coaches earned $60,000 or $70,000 per
aspects of their sports programs in order to       year. Athletic departments circumvented the
remain competitive with rival schools. In          compensation limits by employing these part-
addition, a report commissioned by the NCAA        time coaches in lucrative summer jobs at
known as the “Raiborn Report” found that in        profitable sports camps run by the school or
1985 42% of NCAA Division I schools                by hiring them for part-time jobs in the
reported deficits [**4]in their overall athletic   physical education department in addition to
program budgets, with the deficit averaging        the coaching position. Further, many of these
$824,000 per school. The Raiborn Report            positions were filled with seasoned and
noted that athletic expenses at all                experienced coaches, not the type of student
[*1013]Division I institutions rose more than      assistant envisioned by the rule.
100% over the eight-year period from 1978 to
1985. Finally, the Report stated that 51% of         In January of 1989, the NCAA established a
Division I schools responding to NCAA              Cost Reduction Committee (the “Committee”)
inquiries on the subject suffered a net loss in    to consider means and strategies for reducing
their basketball programs alone that averaged      the costs of intercollegiate athletics “without
$145,000 per school.                               disturbing the competitive balance” among
                                                   NCAA member institutions. The Committee
   Part of the problem identified by the NCAA      included financial aid personnel, inter-
involved the costs associated with part-time       collegiate athletic[**6] administrators, college
assistant coaches. The NCAA allowed                presidents, university faculty members, and a
Division I basketball teams to employ three        university chancellor. In his initial letter to
full-time coaches, including one head coach        Committee members, the Chairman of the
and two assistant coaches, and two part-time       Committee thanked participants for joining
coaches. The part-time positions could be          “this gigantic attempt to save intercollegiate
filled by part-time assistants, graduate           athletics from itself.” It was felt that only a
assistants, or volunteer coaches. The NCAA         collaborative effort could reduce costs
imposed salary restrictions on all of the part-    effectively while maintaining a level playing
time positions. A volunteer coach could not        field because individual schools could not
receive any compensation from a member             afford to make unilateral spending cuts in
institution's athletic department. A graduate      sports programs for fear that doing so would
assistant coach was required to be enrolled in     unduly hamstring that school's ability to
a graduate studies program of a member             compete against other institutions that spent



                                                                                         774
more money on athletics. In January of 1990,            months (the “REC Rule” for restricted-
the Chairman told NCAA members that the                 earnings coaches).4  The Committee
goal of the Committee was to “cut costs and
save money.” It became the consensus of the
Committee that reducing the total number of             4
                                                            Bylaw 11.02.3 provided:
coaching positions would reduce the cost of
intercollegiate athletic programs.                        Restricted-Earnings Coach. A restricted-earnings
                                                        coach is any coach who is designated by the
  The Committee proposed an array of                    institution's athletics department to perform coaching
recommendations to amend the NCAA's                     duties and who serves in that capacity on a volunteer
                                                        or paid basis with the following limitations on
bylaws, including proposed Bylaw 11.6.4 that            earnings derived from the member institution:
would limit Division I basketball coaching
staffs to four members--one head coach, two                (a) During the academic year, a restricted-earnings
assistant coaches, and one entry-level coach            coach may receive compensation or remuneration
called a “restricted-earnings coach”.2 The              from the institution's athletics department that is not
restricted-earnings[**7] coach category was             in excess of either $12,000 or the actual cost of
                                                        educational expenses incurred as a graduate student.
created to replace the positions of part-time
assistant, graduate assistant, and volunteer              (b) During the summer, a restricted-earnings coach
coach.3 n3 The Committee believed that doing            may receive compensation or remuneration (total
so would resolve the inequity that existed              remuneration shall not exceed $4,000) from:
between those schools with graduate programs
that could hire graduate assistant coaches and                 (1) The institution's athletics department or any
those who could not while reducing the                        organization funded in whole or in part by the
                                                              athletics department or that is involved primarily
overall amount spent on coaching salaries.                    in the promotion of the institution's athletics
                                                              program (e.g., booster club, athletics foundation
  [*1014] A second proposed rule, Bylaw                       association);
11.02.3, restricted compensation of restricted-
earnings coaches in all Division[**8] I sports                (2) The institution's camp or clinic,
other than football to a total of $12,000 for the
                                                              (3) Camps or clinics owned or operated by
academic year and $4,000 for the summer
                                                              institutional employees, or

                                                              (4) Another member institution's summer camp.
2
    Bylaw 11.6.4 provided in pertinent part:              (c) During the summer or the academic year, the
                                                        restricted-earnings coach may receive compensation
       Number Limits. There shall be a limit on the     for performing duties for another department or office
     number of coaches that may be employed by          of the institution, provided:
     an institution in each sport (other than
     football) as follows: Sport: Basketball, Men;            (1) The compensation received for those duties
     Head or Assistant Coach: 3; Restricted-                  outside the athletic department is commensurate
     Earnings Coach: 1.                                       with that received by others performing those
                                                              same or similar assignments,
3
  The proposed rule included a “grandfather clause”
exempting schools from the staffing limitations where         (2) The ratio of compensation received for
academic tenure, enforceable written contracts, or            coaching duties and any other duties is directly
formal security-of-employment commitments would               proportionate to the amount of time devoted to
make it impossible to comply with such limits.                the two areas of assignment, and

                                                              (3) The individual is qualified for and is
                                                              performing the duties outside the athletic


                                                                                                      775
determined that the $16,000 per year total             been effective in reducing the number of full-
figure approximated the cost of out-of-state           time paid employees associated with the sport.
tuition for graduate schools at public                 In addition, the committee recognizes the
institutions and the average graduate school           recent proliferation of part-time personnel
tuition at private institutions, and was thus          associated with many Division I sports.
roughly equivalent to the salaries previously
paid to part-time graduate assistant coaches.            Proposed limitations reflect an effort to (1)
The REC Rule did allow restricted-earnings             reduce the number of coaches associated with
coaches to receive additional compensation             each sport by at least one full-time-equivalent
for performing duties for another department           position; (2) establish an “unrestricted” head
of the institution provided that (1) such              or assistant coach category that will
compensation is commensurate with that                 accommodate any type of volunteer, paid,
received by others performing the same or              full-time or part-time coach; and (3) establish
similar assignments, (2) the ratio of                  a “restricted earnings” category that will
compensation received for coaching duties              encourage the development of new coaches
and any other duties is directly proportional to       while more effectively limiting compensation
the amount of time devoted to the two areas of         to such coaches.
assignment, and (3) the individual is qualified
for and actually performs the duties outside           “Report of the NCAA Special Committee on
the athletic department for which the                  Cost Reduction,” Part Two, P 1.
individual is compensated. The REC Rule did
not prevent member institutions from using               [*1015] The NCAA adopted the proposed
savings gained by reducing the number and              rules, including the REC Rule, by majority
salary of basketball coaches[**9] to increase          vote in January of 1991, and the rules
expenditures on other aspects of their athletic        became[**11] effective on August 1, 1992.5
programs.                                              The rules bind all Division I members of the
                                                       NCAA that employ basketball coaches. The
 Supporting adoption of the REC Rule, the              schools normally compete with each other in
Committee stated:                                      the labor market for coaching services.

  The largest expense item in the athletics
budget is personnel. Currently, only football
and basketball have limits on the number of
                                                       5
coaches who may be employed, and the                     Other cost-saving measures were adopted that, inter
existing categorical designations of part-time         alia, limited:
graduate student and volunteer coach have not
                                                              * the number of coaches who could recruit off
                                                           campus.
    (Continued)                                               *off-campus contacts with prospective student-
                                                           athletes.
    department for     which   the   individual   is          * visits by prospective student-athletes.
    compensated.                                              * printed recruiting materials.
                                                              *the number of practices before the first
  (d) Compensation for employment from a source            scheduled game.
outside the institution during the academic year or           * the number of games and duration of seasons.
from sources other than those specified under                 * team travel and training table meals.
11.02.3-(b) and 11.02.3-(c) above during the summer           * financial aid grants to student-athletes.
shall be excluded from the individual's limit on
remuneration.



                                                                                                 776
  In this case, plaintiffs-appellees were                     The district court addressed the issue of
restricted-earnings men's basketball coaches at             liability before addressing issues of class
NCAA Division I institutions in the academic                certification and damages. Ruling on cross-
year 1992-93. They challenged the REC                       motions for summary judgment, the court
Rule's limitation on compensation under                     found the NCAA liable for violating section 1.
section 1 of the Sherman Antitrust Act, 15                  Following the ruling, an administrative
U.S.C. § 1 (1990), as an unlawful “contract,                committee of the NCAA rescinded the
combination . . . or conspiracy, in restraint               compensation limits. However, the rescission
of[**12] trade.” They did not challenge other               was subject to ratification by NCAA members
rules promulgated by the NCAA, including                    at their January 1996 meeting, and the
the restriction on the number of coaches. The               appellate record does not reflect that such
district court exercised jurisdiction pursuant to           ratification ever occurred. Prior to the
28 U.S.C. § 1337 (1993)6 and 15 U.S.C. §§ 15                meeting, a new rule was proposed that would
and 26 (1982). 7                                            have eliminated the restricted-earnings coach
[**13]                                                      position and replaced it with a position having
                                                            similar compensation restrictions. On January
                                                            5, 1996, the district court, pursuant to 15
                                                            U.S.C. § 26, permanently enjoined the NCAA
                                                            from enforcing or attempting to enforce any
      6
          28 U.S.C. § 1337 provides in relevant part:       restricted-earnings coach salary limitations
                                                            against the named plaintiffs, and it further
        (a) The district courts shall have original
                                                            enjoined the NCAA from “reenacting the
      jurisdiction of any civil action or proceeding
      arising under any Act of Congress regulating          compensation limitations embodied in [the
      commerce or protecting trade and commerce             REC Rule].” The NCAA appeals the
      against restraints and monopolies.                    permanent injunction.

                                                                                ***
      15 U.S.C. § 26 provides in relevant part:

  Any person, firm, corporation, or association shall
                                                            III. Rule of Reason Analysis
be entitled to sue for and have injunctive relief, in any
court of the United States having jurisdiction over the        Section 1 of the Sherman Act provides,
parties, against threatened loss or damage by a             “Every contract, combination in the form of
violation of the antitrust laws.                            trust or otherwise, or conspiracy, in restraint
                                                            of trade or commerce among the several
                                                            States, or with foreign nations, is hereby
7                                                           declared to be illegal.” 15 U.S.C. § 1.[**17]
    15 U.S.C. § 15 provides in relevant part:
                                                            Because nearly every contract that binds the
     (a) Except as provided in subsection (b) of this       parties to an agreed course of conduct “is a
     section [regarding foreign states], any person         restraint of trade” of some sort, the Supreme
     who shall be injured in his business or                Court has limited the restrictions contained in
     property by reason of anything forbidden in            section 1 to bar only “unreasonable restraints
     the antitrust laws may sue therefor in any             of trade.” NCAA v. Board of Regents, 468
     district court of the United States in the district
                                                            U.S. 85, 98, 82 L. Ed. 2d 70, 104 S. Ct. 2948
     in which the defendant resides or is found or
     has an agent, without respect to the amount in         (1984); see also Standard Oil Co. v. United
     controversy, and shall recover threefold the           States, 221 U.S. 1, 52-60, 55 L. Ed. 619, 31 S.
     damages by him sustained, and the cost of suit,        Ct. 502 (1911). To prevail on a section 1
     including a reasonable attorney's fee.                 claim under the Sherman Act, the coaches



                                                                                                 777
needed to prove that the NCAA (1)                   493 U.S. 411, 436 n.19, 107 L. Ed. 2d 851,
participated in an agreement that (2)               110 S. Ct. 768 (1990) (“horizontal price-fixing
unreasonably restrained trade in the relevant       . . . has been consistently analyzed as a per se
market. See Reazin v. Blue Cross & Blue             violation for many decades”); United States v.
Shield of Kan., Inc., 899 F.2d 951, 959 (10th       Socony-Vacuum Oil Co., 310 U.S. 150, 223,
Cir. 1990). The NCAA does not dispute that          84 L. Ed. 1129, 60 S. Ct. 811 (1940). By
the REC Rule resulted from an agreement             agreeing to limit the price which NCAA
among its members. However, the NCAA                members may pay for the services of
does contest the district court's finding that on   restricted-earnings coaches, the REC Rule
the record before it, there was no genuine          fixes the cost of one of the component items
dispute of fact that the REC Rule is an             used by NCAA members to produce the
unreasonable restraint of trade.                    product of Division I basketball. As a result,
                                                    the REC Rule constitutes the type of naked
  Two analytical approaches are used to             horizontal agreement among competitive
determine whether a defendant's conduct             purchasers to fix prices usually found to be
unreasonably restrains trade: the per se rule       illegal per se. See, e.g., Mandeville Island
and the rule of reason. See SCFC ILC, Inc. v.       Farms, Inc. v. American Crystal Sugar Co.,
Visa USA, Inc., 36 F.3d 958, [**18] 963 (10th       334 U.S. 219, 235, 92 L. Ed. 1328, 68 S. Ct.
Cir. 1994). The per se rule condemns practices      996 (1948) (complaint alleging conspiracy
that “are entirely void of redeeming                among sugar refiners to purchase sugar-beets
competitive rationales.” Id. Once a practice is     at agreed-upon prices sufficient to survive a
identified as illegal per se, a court need not      motion for dismissal because the challenged
examine the practice's impact on the market or      conduct is precisely the type of activity
the procompetitive justifications for the           condemned by section 1 of the Sherman Act);
practice advanced by a defendant before             National Macaroni Mfrs. Ass'n v. FTC, 345
finding a violation of antitrust law. Rule of       F.2d 421, 426-27 (7th Cir. 1965) (agreement
reason analysis, on the other hand, requires an     among macaroni producers to limit
analysis of the restraint's effect on               amount[**20] of premium priced durum
competition. [*1017] See National Soc'y of          wheat purchased and to substitute specified
Prof'l Engineers v. United States, 435 U.S.         percentage of inferior wheat in finished
679, 695, 98 S. Ct. 1355, 55 L. Ed. 2d 637          macaroni per se illegal because effect of
(1978). A rule of reason analysis first requires    restriction was effectively to reduce price of
a determination of whether the challenged           durum wheat that had risen as a result of a
restraint has a substantially adverse effect on     recent shortage).
competition. See SCFC, 36 F.3d at 965;
United States v. Brown Univ., 5 F.3d 658, 668         However, the Supreme Court recognized in
(3d Cir. 1993). The inquiry then shifts to an       Broadcast Music, Inc. v. Columbia
evaluation of whether the procompetitive            Broadcasting Sys., Inc., 441 U.S. 1, 23, 60 L.
virtues of the alleged wrongful conduct             Ed. 2d 1, 99 S. Ct. 1551 (1979), that certain
justifies the otherwise anticompetitive             products require horizontal restraints,
impacts. See Brown Univ., 5 F.3d at 669. The        including horizontal price-fixing, in order to
district court applied the rule of reason           exist at all. Faced with such a product--the
standard to its analysis of the REC Rule.           ASCAP blanket music license which could
                                                    not exist absent an agreement among artists to
  Horizontal price-fixing is normally a             sell their rights at uniform prices--the Court
practice condemned as illegal per se. See FTC       held that a rule of reason analysis should be
v. Superior Court Trial [**19] Lawyers Ass'n,       applied to the restraint. Id. at 24.



                                                                                          778
  Subsequently, the Supreme Court in NCAA            itself . . . . Of course, this would be completely
v. Board of Regents departed from the general        ineffective if there were no rules . . . to create
treatment given to horizontal price-fixing           and define the competition to be marketed.”).
agreements by refusing to apply a per se rule        Because some horizontal restraints serve the
and instead adopting a rule of reason approach       procompetitive purpose of making college
in reviewing an NCAA plan for televising             sports available, the Supreme Court subjected
college football that involved both limits on        even the price and output restrictions at issue
output and price-fixing. See 468 U.S. at 99-         in Board of Regents to a rule of reason
103. The Court explained:                            analysis. See id. at 103; see also Hairston v.
                                                     Pacific 10 Conference, 101 F.3d 1315, 1318-
  Horizontal price[**21] fixing and output           19 (9th Cir. 1996) (employing rule of reason
limitation are ordinarily condemned as a             analysis and finding that imposing sanctions
matter of law under an “illegal per se”              for violations of NCAA rules did not violate
approach because the probability that these          section 1 of the Sherman Act); Banks v.
practices are anticompetitive is so high; a per      NCAA, 977 F.2d 1081, 1088-94 (7th Cir.
se rule is applied “when the practice facially       1992) (upholding no- draft and no-agent
appears to be one that would always or almost        eligibility rules for student athletes under rule
always tend to restrict competition and              of reason analysis); Justice v. NCAA, 577 F.
decrease output.” In such circumstances a            Supp. 356, 379-82 (D. Ariz. 1983) (NCAA
restraint is presumed unreasonable without           sanctions against member institution imposed
inquiry into the particular market context in        for[**23] violations of NCAA rule barring
which it is found. Nevertheless, we have             compensation of student athletes did not
decided that it would be inappropriate to apply      violate antitrust laws under rule of reason
a per se rule to this case. This decision is not     analysis).
based on a lack of judicial experience with
this type of arrangement, on the fact that the          Other courts also have applied a rule of
NCAA is organized as a nonprofit entity, or          reason analysis to sports league rules, see I
on our respect for the NCAA's historic role in       ABA Section of Antitrust Law, Antitrust Law
the preservation and encouragement of                Developments 115-16 (4th ed. 1997) (citing
intercollegiate amateur athletics. Rather, what      cases), including restraints otherwise given
is critical is that this case involves an industry   per se treatment, see, e.g., M&H Tire Co., Inc.
in which horizontal restraints on competition        v. Hoosier Racing Tire Corp., 733 F.2d 973,
are essential if the product is to be available at   980 (1st Cir. 1984) (applying rule of reason
all.                                                 standard to a rule requiring all auto racing
                                                     competitors to use the same tire and stating
468 U.S. at 100-101 (quoting Broadcast               that “in the sports area various agreed-upon
Music, 441 U.S. at 19-20) (footnotes omitted         procedures may be essential to survival”). See
and emphasis added).                                 also Phillip E. Areeda, Antitrust Law P 1478d,
                                                     at 359 (1986) (noting that courts “have not
  [*1018] The “product” made available by            woodenly applied the per se prohibitions
the NCAA in this case[**22] is college               developed for ordinary business situations” to
basketball; the horizontal restraints necessary      sports leagues).
for the product to exist include rules such as
those forbidding payments to athletes and              Plaintiff coaches cite the Supreme Court's
those requiring that athletes attend class, etc.     refusal to create exceptions to the per se
See 468 U.S. at 101-02 (what a sports league         treatment of price-fixing schemes in cases
and its members “market . . . is competition         such as Superior Court Trial Lawyers and



                                                                                            779
Arizona v. Maricopa County Medical Soc'y,                  unpersuasive. Board of Regents does
457 U.S. 332, 342, 73 L. Ed. 2d 48, 102 S. Ct.             [**25]not turn on whether the agreement in
2466 (1982), and urge us to apply a[**24] per              question is based on input components or
se analysis to the NCAA rule at issue in this              output products. Rather, Board of Regents
case. Since neither case dealt with a “product”            more generally concluded that because
such as college sports that requires horizontal            horizontal agreements [*1019] are necessary
restraints to exist, the cases are not persuasive          for sports competition, all horizontal
here in light of the Supreme Court's analysis              agreements among NCAA members, even
of NCAA price-fixing under a rule of reason                those as egregious as price-fixing, should be
in Board of Regents.                                       subject to a rule of reason analysis.11 See 468
                                                           U.S. at 101-03.
  The coaches also argue that Board of
Regents is distinguishable because the                       Finally, the Supreme Court has made it clear
agreement in that case went to marketing the               that the per se rule is a “demanding” standard
product itself--college sports--and because                that should be applied only in clear cut cases.
that agreement was closer to a joint venture               See Continental T.V., Inc. v. GTE Sylvania
because it involved a “joint selling                       Inc., 433 U.S. 36, 50, 53 L. Ed. 2d 568, 97 S.
arrangement.” By contrast, they contend (1)                Ct. 2549 (1977); accord Walker Process
that the hiring of coaches involves the market             Equip., Inc. v. Food Mach. & Chem. Corp.,
for coaching services, an input, rather than               382 U.S. 172, 178, 15 L. Ed. 2d 247, 86 S. Ct.
college sports, the output, and (2) that the               347 (1965) (“The area of per se illegality is
price-fixing at issue in this case does not                carefully limited.”). As a result, courts
involve “joint buying” because each school                 consistently have analyzed challenged conduct
independently hires its own coaches. The                   under the rule of reason when dealing with an
second point does not distinguish this case                industry in which some horizontal restraints
from Board of Regents. In Board of Regents,                are necessary for the availability of a product,
like the present case, each school negotiated              even if such restraints involve horizontal
individually with television networks within               price-fixing agreements. See I ABA Section of
the constraints of price agreements. See 468               Antitrust Law, supra, at 49 (citing cases).
U.S. at 93.10 The first point is similarly                 Thus, we apply the rule of reason approach in
                                                           this case.
10
   In several instances, the NCAA tries to style itself      Courts have imposed a consistent structure
as a joint venture, arguing that joint ventures are        on rule of reason analysis by casting it in
entitled to more favorable treatment under the
                                                           terms of shifting burdens of proof. See I ABA
antitrust laws. However, the Supreme Court rejected
categorizing the NCAA as a joint venture with respect      Section of Antitrust Law, supra, at 53
to the television rights plan challenged in Board of       (citing[**27] cases). Under this approach, the
Regents because the plan did not “eliminate                plaintiff bears the initial burden of showing
individual sales of broadcasts, since these still occur,   that an agreement had a substantially adverse
albeit subject to fixed prices and output limitations.”    effect on competition. See Clorox Co. v.
468 U.S. at 113. Here, the NCAA does not hire              Sterling Winthrop, Inc., 117 F.3d 50, 56 (2d
coaches for the teams. Rather the teams hire coaches
                                                           Cir. 1997); Hairston, 101 F.3d at 1319; Orson,
individually, “albeit subject to fixed prices.” Thus,
the NCAA does not operate as a joint venture for the       Inc. v. Miramax Film Corp., 79 F.3d 1358,
purposes of hiring assistant basketball coaches. As a
result, we do not consider the question of how joint
ventures should be treated under the antitrust laws.       11
                                                              Albeit often an abbreviated rule of reason analysis,
                                                           as discussed below.



                                                                                                      780
1367 (3d Cir. 1996); Brown Univ., 5 F.3d at       F.2d 667, 674 (7th Cir. 1992) (approving
668; see also I ABA Section of Antitrust Law,     application of [**29]”quick look” rule of
supra, at 53, 55 (citing cases); Areeda, supra,   reason analysis that dispensed with market
P 1502, at 371-72. If the plaintiff meets this    definition and assessment of market power in
burden, the burden shifts to the defendant to     a case involving an output restriction
come forward with evidence of the                 established by the National Basketball
procompetitive virtues of the alleged wrongful    Association).
conduct. See Clorox, 117 F.3d at 56; Hairston,
101 F.3d at 1319; Orson, 79 F.3d at 1367-68;        The NCAA argues that the district court
Brown Univ., 5 F.3d at 669; see also I ABA        erred by failing to define the relevant market
Section of Antitrust Law, supra, at 53, 66        and by failing to find that the NCAA
(citing cases); Areeda, supra, P 1502, at 372.    possesses power in that market. The NCAA
If the defendant is able to demonstrate           urges that the relevant market in this case is
procompetitive effects, the plaintiff then must   the entire market for men's basketball
prove that the challenged conduct is not          coaching services,12 and it presented evidence
reasonably necessary to achieve the legitimate    [*1020]demonstrating that positions as
objectives or that those objectives can be        restricted-earnings basketball coaches make
achieved in a substantially less restrictive      up, at most, 8% of that market. Thus, the
manner. See Clorox, 117 F.3d at 56; [**28]        NCAA argues it has at least created a genuine
Hairston, 101 F.3d at 1319; Orson, 79 F.3d at     issue of material fact about whether it
1368; Brown Univ., 5 F.3d at 669; I ABA           possesses market power and that summary
Section of Antitrust Law, supra, at 53, 66.       judgment was therefore inappropriate.
Ultimately, if these steps are met, the harms
and benefits must be weighed against each           The NCAA misapprehends[**30] the
other in order to judge whether the challenged    purpose in antitrust law of market definition,
behavior is, on balance, reasonable. See          which is not an end unto itself but rather exists
Areeda, supra, P 1502, at 372.                    to illuminate a practice's effect on
                                                  competition. In Board of Regents, the Court
A. Anticompetitive Effect                         rejected a nearly identical argument from the
                                                  NCAA that a plan to sell television rights
  We first review whether the coaches in this     could not be condemned under the antitrust
case demonstrated anticompetitive effect so       laws absent proof that the NCAA had power
conclusively that summary judgment on the         in the market for television programming. See
issue was appropriate. A plaintiff may            468 U.S. at 109. “As a matter of law, the
establish anticompetitive effect indirectly by    absence of proof of market power does not
proving that the defendant possessed the          justify a naked restriction on price or output.
requisite market power within a defined           To the contrary, when there is an agreement
market or directly by showing actual              not to compete in terms of price or output, 'no
anticompetitive effects, such as control over     elaborate industry analysis is required to
output or price. See Orson, 79 F.3d at 1367;      demonstrate the anticompetitive character of
Brown Univ., 5 F.3d at 668-69; Bhan v. NME
Hosp., Inc., 929 F.2d 1404, 1413 (9th Cir.
1991). A naked, effective restraint on market     12
                                                    According to the NCAA, the relevant market would
price or volume can establish anticompetitive     include, in addition to coaching positions in Division
effect under a truncated rule of reason           I schools, coaching positions in Division II and III
analysis. See Chicago Prof'l Sports Ltd.          schools, junior colleges, high schools, and
Partnership v. National Basketball Ass'n, 961     professional teams.



                                                                                            781
such an agreement.'“ Id. (quoting National           market in order to support its decision on
Soc'y of Prof'l Engineers, 435 U.S. at 692). No      summary judgment that the REC Rule is a
“proof of market power” is required where the        naked price restraint.
very purpose and effect of a horizontal
agreement is to fix prices so as to make them          The NCAA contends that the district court
unresponsive to a competitive marketplace.           misapplied Board of Regents, a case in which
See 468 U.S. at 110. Thus, where a practice          the Court had before it detailed factual
has obvious anticompetitive effects--as does         findings that resulted from a trial. The NCAA
price-fixing--there is no need to prove that the     is right about the procedural posture of Board
defendant possesses market power. Rather, the        of Regents, but wrong about its significance.
court is justified in [**31]proceeding directly      In Board of Regents the Supreme Court relied
to the question of whether the procompetitive        on the district court's findings that the
justifications advanced for the restraint            television plan in fact resulted in horizontal
outweigh the anticompetitive effects under a         price restraints. See 468 U.S. at 99-100.
“quick look” rule of reason. See Chicago             Because the REC Rule is a horizontal price
Prof'l Sports, 961 F.2d at 674.                      restraint on its face, similar factual findings
                                                     are not required in this case. Further, although
  We find it appropriate to adopt such a quick       in Board of Regents the Court found that the
look rule of reason in this case. Under a quick      parties had proven factually that the NCAA
look rule of reason analysis, anticompetitive        had market power in the defined market[**33]
effect is established, even without a                of college football, the Court said that as a
determination of the relevant market, where          matter of law it did not need to analyze market
the plaintiff shows that a horizontal agreement      power because horizontal price restraints are
to fix prices exists, that the agreement is          so obviously anticompetitive. 468 U.S. at 109-
effective, and that the price set by such an         10.
agreement is more favorable to the defendant
than otherwise would have resulted from the            Finally, the NCAA cites Hennessey v.
operation of market forces. See Gary R.              NCAA, 564 F.2d 1136 (5th Cir. 1977) (per
Roberts, The NCAA, Antitrust, and Consumer           curiam). In Hennessey, assistant football
Welfare , 70 Tul. L. Rev. 2631, 2636-39              [*1021] and basketball coaches challenged a
(1996) (citing Board of Regents, 468 U.S. at         NCAA bylaw limiting the number of assistant
109-10). Under this standard, the undisputed         coaches member institutions could employ at
evidence supports a finding of anticompetitive       any one time. See id. at 1141-42. The Fifth
effect. The NCAA adopted the REC Rule to             Circuit upheld the rule, concluding that the
reduce the high cost of part-time coaches'           plaintiff failed to show that the rule was an
salaries, over $60,000 annually in some cases,       unreasonable restraint of trade after weighing
by limiting       compensation to entry-level        the anticompetitive effects with the
coaches to $16,000 per year. The NCAA does           procompetitive benefits of the restriction. See
not dispute that the cost-reduction[**32] has        id. at 1153-54.
effectively      reduced      restricted-earnings
coaches' salaries. Because the REC Rule was            Hennessey is not controlling for a variety of
successful in artificially lowering the price of     reasons. First, the REC Rule is distinguishable
coaching services, no further evidence or            from the agreement at issue in Hennessey.
analysis is required to find market power to         Hennessey addresses a restriction on the
set prices. Thus, in the case at bar, the district   number of assistant coaches that a Division I
court did not need to resolve issues of fact         school could employ whereas the REC Rule
pertaining to the definition of the relevant         limits salary of a certain category of coaches.



                                                                                           782
Therefore, the analysis of the reasonableness              Under a rule of reason analysis, an
of the restraint in Hennessey, which did not             agreement to restrain trade may still survive
involve a naked restriction on price, will               scrutiny under section 1 if the procompetitive
not[**34] control the analysis of the                    benefits of the restraint justify the
reasonableness of the REC Rule.13                        anticompetitive effects. See Clorox, 117 F.3d
                                                         at 56; Hairston, 101 F.3d at 1319; Orson, 79
  Second, the Hennessey court placed the                 F.3d at 1368; Brown Univ., 5 F.3d at 669; see
burden of showing the unreasonableness of                also I ABA Section of Antitrust Law, supra, at
the coaching restriction in that case on the             53, 66; Areeda, supra, P 1502, at 371-72.
plaintiff and then found that the plaintiff could        Justifications offered under the rule of reason
not make such a showing because the rule had             may be considered only to the extent that they
only recently been implemented. See id. In               tend to show that, on balance, “the challenged
our analysis, the plaintiff only has the burden          restraint enhances competition.” [**36] Board
of establishing the anticompetitive effect of            of Regents, 468 U.S. at 104.
the restraint at issue. Once the plaintiff meets
that burden, which the coaches have done in                In Board of Regents the Supreme Court
this case by showing the naked and effective             recognized that certain horizontal restraints,
price-fixing character of the agreement, the             such as the conditions of the contest and the
burden shifts to the defendant to justify the            eligibility of participants, are justifiable under
restraint as a “reasonable” one. See I ABA               the antitrust laws because they are necessary
Section of Antitrust Law, supra, at 66 (citing           to create the product of competitive college
cases). It is on this step that the defendant            sports. Id. at 117. Thus, the only legitimate
NCAA stumbles. Thus, we disagree with the                rationales that we will recognize in support of
Fifth Circuit's allocation of the burden of              the REC Rule are those necessary to produce
proof in Hennessey,[**35] and we note that               competitive intercollegiate sports. The NCAA
this shift in the burden of proof could explain          advanced three justifications for the salary
the difference in outcome between our case               limits:     retaining    entry-level     coaching
and Hennessey.                                           positions; reducing costs; and maintaining
                                                         competitive equity. We address each of them
  Third, Hennessey predates the Supreme                  in turn.
Court's opinion in Board of Regents. The Fifth
Circuit very well may have reached a different           1. Retention of Entry-Level Positions
result in Hennessey if it had the benefit of that
precedent, because Board of Regents suggests               The NCAA argues that the plan serves the
a less deferential approach to the NCAA than             procompetitive goal of retaining an entry-level
the approach taken in Hennessey. Finally, of             coaching position. The NCAA asserts that the
course, Hennessey is not Tenth Circuit                   plan will allow younger, less experienced
precedent, and accordingly is not binding                coaches entry into Division I coaching
authority on us.                                         positions. While opening up coaching
                                                         positions for younger people may have social
B. Procompetitive Rationales                             value apart from its affect on competition, we
                                                         may not consider such values unless they
                                                         [*1022] impact upon competition. See
                                                         Superior Court Trial Lawyers, 493 U.S. at
13
  Indeed, plaintiffs do not challenge the restrictions   423-24[**37] (rejecting argument by trial
on the number of coaches included in the NCAA's          lawyers that boycott of court-appointed work
bylaws.                                                  was justified to promote the social value of



                                                                                                783
increasing the quality of representation); FTC            schools designated persons with many years of
v. Indiana Fed'n of Dentists, 476 U.S. 447,               experience as the restricted-earnings coach.
462-64, 90 L. Ed. 2d 445, 106 S. Ct. 2009                 The NCAA did not present any evidence
(1986) (refusing to consider ethical policy of            showing that restricted-earnings positions
insuring proper dental care as a valid                    have been filled by entry-level applicants or
procompetitive end); Board of Regents, 468                that the rules will be effective over time in
U.S. at 117 (rejecting justifications offered to          accomplishing this goal. Nothing in the record
support a challenged restraint that do not                suggests that the salary limits for restricted-
promote competition as “inconsistent with the             earnings coaches will be effective at creating
basic policy of the Sherman Act”); National               entry-level positions. Thus, the NCAA failed
Soc'y of Prof'l Engineers, 435 U.S. at 695-96             to present a triable issue of fact as to
(holding that policy goals such as protecting             whether[**39]       preserving     entry-level
public safety and promoting ethical behavior              positions served a legitimate procompetitive
do not qualify as legitimate procompetitive               end of balancing competition.
objectives unless they serve to “regulate and
promote” competition); see also Areeda,                   2. Cost Reduction
supra, P 1504, at 381 (courts should “not
inquire whether the restraint promotes the                  The NCAA next advances the justification
'public interest' but only whether it increases           that the plan will cut costs. However, cost-
competition.”).14                                         cutting by itself is not a valid procompetitive
                                                          justification. If it were, any group of
  The NCAA also contends that limiting one                competing buyers could agree on maximum
of the four available coaching positions on a             prices. Lower prices cannot justify a cartel's
Division I basketball team to an entry level              control of prices charged by suppliers, because
position will create more balanced                        the cartel ultimately robs the suppliers of the
competition by barring some teams from                    normal fruits of their enterprises. See Areeda,
hiring four experienced coaches instead of                supra, P 1504, at 379. Further, setting
three. However, the REC Rule contained no                 maximum prices reduces the incentive among
restrictions other than salary designed to                suppliers to improve their products. Likewise,
insure that the position would be filled by               in our case, coaches have less incentive to
entry-level applicants; it could be filled with           improve their performance if their salaries are
experienced applicants. In addition, under the            capped. As the Supreme Court reiterated in
REC Rule, schools can still pay restricted-               Superior Court Trial Lawyers, 493 U.S. at
earnings coaches more than $16,000 per year               423, “the Sherman Act reflects a legislative
by hiring them for physical education or other            judgment that ultimately competition will
teaching positions. In fact, the evidence in the          produce not only lower prices, but also better
record tends to demonstrate that at least some            goods and services. . . This judgment
                                                          recognizes that all elements of a bargain--
                                                          quality, service, safety, and durability--and not
14
   Similarly, the NCAA cannot be heard to argue that      just the immediate cost, are favorably affected
the REC Rule fosters the amateurism that serves as        by the free opportunity to select among[**40]
the hallmark of NCAA competition. While courts            alternative offers.” (internal quotations
should afford the NCAA plenty of room under the
                                                          omitted).
antitrust laws to preserve the amateur character of
intercollegiate athletics, see Banks, 977 F.2d at 1089-
93, courts have only legitimized rules designed to          The NCAA adopted the REC Rule because
ensure the amateur status of student athletes, not        without it competition would lead to higher
coaches.                                                  prices. The REC Rule was proposed as a way



                                                                                                784
to prevent Division I schools from engaging in      programs faced prior to the adoption of the
behavior the association termed “keeping up         REC Rule, the NCAA quotes with approval
with the Joneses,” i.e., competing. However,        language from the opinion in Hennessey to
the NCAA cannot argue that competition for          support its claim that reducing costs serves as
coaches is an evil because the Sherman Act          a procompetitive benefit:
“precludes inquiry into the question whether
competition is good or [*1023] bad.” National            Colleges with more successful
Soc'y of Prof'l Engineers, 435 U.S. at 695.            programs, both competitively and
                                                       economically, were seen as taking
  While increasing output, creating operating          advantage of their success by expanding
efficiencies, making a new product available,          their programs, to the ultimate
enhancing product or service quality, and              detriment of the whole system[**42] of
widening consumer choice have been                     intercollegiate   athletics.   Financial
accepted by courts as justifications for               pressures upon many members, not
otherwise anticompetitive agreements, mere             merely to “catch up”, but to “keep up,”
profitability or cost savings have not qualified       were beginning to threaten both the
as a defense under the antitrust laws. See I           competitive, and the amateur, nature of
ABA Section of Antitrust Law, supra, at 66-67          the programs, leading quite possibly to
(citing cases). The NCAA's cost containment            abandonment by many. “Minor” and
justification is illegitimate because the              “minority” sports were viewed as
NCAA:                                                  imperiled by concentration upon the
                                                       “money makers,” such as varsity
  Improperly assumes that antitrust law should         football and basketball.
not apply to condemn the creation of market
power in an input market. The exercise of           Bylaw 12-1 [the rule at issue in Hennessey]
market power by a group of buyers                   was, with other rules adopted at the same
virtually[**41] always results in lower costs       time, intended to be an “economy measure”.
to the buyers--a consequence which arguably         In this sense it was both in design and effect
is beneficial to the members of the industry        one having commercial impact. But the
and ultimately their consumers. If holding          fundamental objective in mind was to preserve
down costs by the exercise of market power          and foster competition in intercollegiate
over suppliers, rather than just by increased       athletics-by curtailing, as it were, potentially
efficiency, is a procompetitive effect justifying   monopolistic practices by the more powerful-
joint conduct, then section 1 can never apply       and to reorient the programs into their
to input markets or buyer cartels. That is not      traditional role as amateur sports operating as
and cannot be the law.                              part of the educational process.

Roberts, 70 Tul. L. Rev., at 2643. Reducing         564 F.2d at 1153.
costs for member institutions, without more,
does not justify the anticompetitive effects of        We are dubious that the goal of cost
the REC Rule.                                       reductions can serve as a legally sufficient
                                                    justification for a buyers' agreement to fix
  The NCAA argues that reducing costs can           prices even if such cost reductions are
be considered a procompetitive justification        necessary to save inefficient or unsuccessful
because doing so is necessary to maintain the       competitors from failure. Nevertheless, we
existence of competitive intercollegiate sports.    need[**43] not consider whether cost
Emphasizing the deficits many college sports        reductions may have been required to “save”



                                                                                          785
intercollegiate athletics and whether such an        While the REC Rule will equalize the
objective     served      as    a    legitimate    salaries paid to entry-level coaches in Division
procompetitive end because the NCAA                I schools, it is not clear that the REC Rule will
presents no evidence that limits on restricted-    equalize the experience level of such
earning coaches' salaries would be successful      coaches.15 Nowhere does the NCAA prove
in reducing deficits, let alone that such          that the salary restrictions enhance
reductions were necessary to save college          competition, level an uneven playing field, or
basketball. Moreover, the REC Rule does not        reduce coaching inequities. Rather, the NCAA
equalize the overall amount of money               only presented evidence that the cost
Division I schools are permitted to spend on       reductions would be achieved in such a way
their basketball programs. There is no reason      so as to maintain without “significantly
to think that the money saved by a school on       altering,” “adversely affecting,” [**45] or
the salary of a restricted-earnings coach will     “disturbing” the existing competitive balance.
not be put into another aspect of the school's     The undisputed record reveals that the REC
basketball program, such as equipment or           Rule is nothing more than a cost-cutting
even another coach's salary, thereby               measure and shows that the only consideration
increasing inequity in that area. Accord Board     the NCAA gave to competitive balance was
of Regents, 468 U.S. at 118-19 (rejecting          simply to structure the rule so as not to
NCAA's argument that television rights plan        exacerbate competitive imbalance. Thus, on
would increase competitive equity among            its face, the REC Rule is not directed towards
NCAA teams where the plan did not “regulate        competitive balance nor is the nexus between
the amount of money that any college may           the rule and a compelling need to maintain
spend on its football program”).                   competitive balance sufficiently clear on this
                                                   record to withstand a motion for summary
3. Maintaining Competitiveness                     judgment.16

  We note that the NCAA must be able to
ensure some competitive equity between             15
[*1024] member institutions in order to               For example, some more-experienced coaches may
                                                   take restricted- earnings coach positions with
produce[**44] a marketable product: a “team
                                                   programs such as those at Duke or North Carolina,
must try to establish itself as a winner, but it   despite the lower salary, because of the national
must not win so often and so convincingly that     prominence of those programs. In fact, absent the
the outcome will never be in doubt, or else        REC Rule, the market might produce greater equity in
there will be no marketable 'competition.'“        coaching talent, because a school with a less-
Michael Jay Kaplan, Annotation, Application        prominent basketball program might be able to entice
of Federal Antitrust Laws to Professional          a more-experienced coach away from a prominent
                                                   program by offering a higher salary.
Sports, 18 A.L.R. Fed. 489 § 2(a) (1974). The
NCAA asserts that the REC Rule will help to
maintain competitive equity by preventing
                                                   16
wealthier schools from placing a more                Because we hold that the NCAA did not establish
experienced, higher-priced coach in the            evidence of sufficient procompetitive benefits, we
position of restricted-earnings coach. The         need not address question of whether the plaintiffs
                                                   were able to show that comparable procompetitive
NCAA again cites Hennessey to support its
                                                   benefits could be achieved through viable, less
position, and again we find Hennessey to be        anticompetitive means. See I ABA Section of
unpersuasive for the reasons previously            Antitrust Law, supra, at 66 (collecting cases); Areeda,
articulated.                                       supra, P 1502, at 372 (if the defendant proves
                                                   procompetitive justifications, the plaintiff must
                                                   demonstrate that less restrictive means could have


                                                                                              786
4. Wait and See

  In the alternative, the NCAA argues that
even if evidence of the procompetitive
benefits of the REC Rule are not forthcoming
at the moment, we should follow the advice of
the court in Hennessey and adopt a “wait and
see” approach to give the rule time to succeed.
See 564 F.2d at 1153-54 (refusing to place the
burden on the NCAA to prove that the
procompetitive benefits of the challenged
restraint in that case outweighed its negative
effects because doing so would “foreclose . . .
any opportunity to build up experience on
which the issue ultimately could be judged”).
However, we believe that the court in
Hennessey erred as a matter of law to the
extent that the court tried to free the NCAA as
the defendant from its burden of showing that
the procompetitive justifications for a restraint
on trade outweigh its anticompetitive effects.
The Supreme Court in Board of Regents made
it clear that the NCAA still shoulders that
burden, see 468 U.S. at 104, and we hold that
the NCAA failed to provide sufficient
evidence to carry its burden in this case.
IV. Conclusion

  For the reasons discussed above, we
AFFIRM         the   district court's   order
[**47]granting a permanent injunction barring
the NCAA from reenacting compensation
limits such as those contained in the REC
Rule based on its order granting summary
judgment to the plaintiffs on the issue of
antitrust liability.




    (Continued)

been used to achieve the same results to prevail under
the rule of reason analysis).



                                                         787
         METROPOLITAN                           JUDGES:   MIRIAM                 GOLDMAN
 INTERCOLLEGIATE BASKETBALL                     CEDARBAUM, United             States District
   ASSOCIATION, Plaintiff, -against-            Judge.
NATIONAL COLLEGIATE ATHLETIC
     ASSOCIATION and CEDRIC                     OPINIONBY:          MIRIAM        GOLDMAN
  DEMPSEY on behalf of NATIONAL                 CEDARBAUM
      COLLEGIATE ATHLETIC
     ASSOCIATION, Defendants.                   OPINION: [*565] CEDARBAUM, J.
                                                    The      Metropolitan        Intercollegiate
        01 Civ. 0071 (MGC)
                                                Basketball Association ("MIBA") sues the
 UNITED STATES DISTRICT COURT
                                                National Collegiate Athletic Association and
 FOR THE SOUTHERN DISTRICT OF
                                                Cedric Dempsey, on behalf of the NCAA
           NEW YORK
                                                (collectively "NCAA"), to challenge certain
  337 F. Supp. 2d 563; 2004 U.S. Dist.          NCAA rules that the MIBA argues are
 LEXIS 19502; 2004-2 Trade Cas. (CCH)           anticompetitive. The complaint alleges that
                P74,585                         several of the NCAA rules, which affect
                                                Division I men's college basketball, reduce
       September 29, 2004, Decided              competition from preseason and postseason
        September 30, 2004, Filed               non-NCAA sponsored tournaments and are
                                                unreasonable restraints of trade in violation
SUBSEQUENT HISTORY: Summary                     of Section 1 of the Sherman [**2] Act, 15
judgment denied by Metro. Intercollegiate       U.S.C. § 1. The MIBA also claims that the
Basketball Ass'n v. NCAA, 339 F. Supp. 2d       NCAA uses the rules affecting postseason
545, 2004 U.S. Dist. LEXIS 20418                competition to achieve or attempt to gain
(S.D.N.Y., Oct. 13, 2004)                       monopoly power in the market for Division I
                                                men's college basketball tournaments, in
DISPOSITION: Plaintiff's        motion    for   violation of Section 2 of the Sherman Act,
summary judgment denied.                        15 U.S.C. § 2. The complaint also asserts a
                                                common law claim of tortious interference
CASE SUMMARY:                                   with contract. The MIBA has moved for
                                                summary judgment, on the issue of liability,
PROCEDURAL POSTURE: Plaintiff sued              on claims two and three, which challenge
defendants, a collegiate athletic association   the rules affecting postseason play under
and an individual, to challenge certain rules   Sections 1 and 2 of the Sherman Act, 15
of the association that plaintiff argued were   U.S.C. § § 1 & 2.1 For the following
anticompetitive. Plaintiff moved for            reasons, plaintiff's motion is denied.
summary judgment on the issue of liability
under 15 U.S.C.S. § § 1 and 2 of the
Sherman Act on two claims which                 1
                                                  The NCAA has also moved for summary
challenged the rules affecting postseason
                                                judgment on these two claims. That motion
play.
                                                will be considered separately. The NCAA's
                                                alternative motion for summary judgment on
                   ***
                                                statute of limitations grounds on these two
                                                claims was denied at oral argument.



                                                                                      788
   BACKGROUND                                     and      [*566]      universities: Fordham
                                                  University, Manhattan College, New York
    The NCAA is a non-profit, voluntary,
                                                  University, St. John's University and
unincorporated association of over 1,200
                                                  Wagner College. The MIBA is an affiliated
[**3]       colleges, universities, playing
                                                  member of the NCAA and all five of the
conferences       and     other      affiliated
                                                  MIBA institutions are members of the
organizations for the regulation of
                                                  NCAA. Since the late 1930's, the MIBA has
intercollegiate athletics. NCAA member
                                                  conducted      the   Postseason      National
institutions are divided into three divisions
                                                  Invitational Tournament ("Postseason NIT"),
which reflect differences in philosophy,
                                                  which is a Division I men's basketball
level of athletic competition, and size and
                                                  tournament held after the end of the NCAA's
scope of the institution's athletic programs.
                                                  regular season. As the tournament's name
Within each division a member institution
                                                  suggests, teams are invited to participate in
may also be a member of a conference.
                                                  the Postseason NIT. Currently, forty teams
Conferences are voluntary associations of
                                                  compete in the Postseason NIT.2 The
colleges and universities that organize intra-
                                                  Postseason NIT is the only postseason
conference schedules, operate end-of-season
                                                  Division I men's basketball tournament other
conference championship tournaments and
                                                  than the NCAA Tournament.
buy and sell media time. Division I member
institutions and conferences compete at the
                                                  [**5]
highest level of intercollegiate athletics. In
the 23 sports the NCAA regulates, it
conducts 89 postseason championships. This
includes championships in all Division I
sports with the exception of Division IA
                                                  2
football, where a series of bowl games               The MIBA has also conducted the
determines the champion or champions. At          Preseason National Invitational Tournament
the end of every season, the NCAA hosts the       ("Preseason NIT") every year since 1985. It
NCAA Division I Men's Basketball                  is another annual event for Division I men's
Championship        Tournament       ("NCAA       basketball teams. The NCAA adopted
Tournament").      Currently,     65     teams    special legislation to exempt the games
participate in the NCAA Tournament.               played at the Preseason NIT from being
Thirty-one of these teams apply to the            counted toward the member institution's
NCAA and qualify automatically for the            maximum games limitation. The exemption
[**4] NCAA Tournament because they win            also allows the tournament to be held prior
their conference's championship ("automatic       to the start of the regular season. The
qualifiers"). The other 34 teams receive          MIBA's first and fourth claims challenge
invitations or "at-large" bids to compete in      certain proposed rules which would
the championship.                                 eliminate these exemptions. The MIBA
                                                  argues that without the exemption from the
    The MIBA is an unincorporated                 maximum games limitation, the Preseason
association of five New York area colleges        NIT and other similar events could not
                                                  attract any teams to play and would not
   (Continued)                                    exist.




                                                                                     789
    The parties have a long and somewhat         stated that all NCAA member institution
tortured relationship. The Postseason NIT        teams who received invitations were
began in 1938 as a six-team tournament. The      "expected" to participate in NCAA
NCAA Tournament began the following              championship tournaments (the "Expected
year and eight teams participated. Until         Participation Rule"). Despite this rule, in
1953, NCAA members who received an               1961, Dayton University, and in 1962,
invitation to both tournaments could choose      Loyola University (Chicago), Mississippi
to participate in both. For instance, in 1950,   State, University of Houston, Dayton and St.
City College of New York and Bradley             John's University, declined invitations to
University participated in both the NCAA         participate in the NCAA Tournament and
Tournament and the Postseason NIT, and           instead participated in the Postseason NIT.
City College won both tournaments.               In 1970, Marquette University, which was
                                                 one of [*567] the top men's basketball
    However, the MIBA argues that
                                                 teams that year, declined to participate in the
beginning in the mid-1940's, the NCAA was
                                                 NCAA Tournament in favor of competing in
looking to "curb" competition from the
                                                 the Postseason NIT.
Postseason NIT. The MIBA argues that
several statements by NCAA officials found            In 1975, the NCAA changed [**7] its
in NCAA meeting minutes from the 1940's,         rule that only one team from each
50's and 60's, support its theory that the       conference was eligible to be selected for the
NCAA adopted the challenged rules and            NCAA Tournament. The change allowed
expanded its Tournament in order to              second-place teams in conferences whose
disadvantage the Postseason NIT. The             first-place team had automatically qualified
NCAA disputes the MIBA's interpretation of       for the Tournament to be considered for "at
these statements and argues that the MIBA's      large" invitations to the NCAA Tournament.
attempt to link these unrelated statements to    Thirty-two teams participated in the 1975
rules and expansions instituted years, and       NCAA Tournament. The field was expanded
sometimes decades, after the statements          to 40 teams in 1979 and again to 48 teams in
were made should not be credited. The            1980. Also in 1980, the restriction as to the
NCAA adds that the statements show               number of teams invited from any one
nothing other than that the NCAA wanted          conference was eliminated altogether. The
the teams [**6] it selected to participate in    MIBA asserts that these expansions were
its Tournament. For the purposes of this         made to keep additional teams from
motion it is unnecessary to determine the        competing in the Postseason NIT. The
significance of these statements. Only the       NCAA disputes this and maintains that the
undisputed chronology relevant to the            decision was made in response to the
challenged rules need be examined.               addition of 26 Division I men's basketball
                                                 teams between 1975 and 1980 and increased
    In 1953, the NCAA adopted a rule which
                                                 consumer demand for Division I men's
prohibited NCAA member institutions from
                                                 basketball beginning in the 1970's.
participating in more than one postseason
tournament      (the   "One      Postseason          In 1981, the NCAA was considering an
Tournament Rule"). In addition, the NCAA's       expansion to a 64-team bracket. The MIBA
Tournament field was expanded to 16 teams        wrote to the NCAA and expressed its
in 1951, and to 22 teams in 1953. In 1961,       concern over such a change and noted that if
the NCAA adopted a new regulation which          it were implemented, the size of the bracket



                                                                                      790
would severely injure the Postseason NIT         these rules, it risks fines and playing
and likely destroy the MIBA's postseason         sanctions. A witness for the NCAA agreed
tournament. Although [**8] no expansions         that a failure to comply with the
were made that year, the NCAA expanded           Commitment to Participate Rule might be
its Tournament to 52 teams in 1982, 53           considered a "major" violation. However,
teams in 1984 and eventually to 64 teams in      the NCAA maintains that this deposition
1985. The NCAA disputes that any of the          testimony is immaterial since no team has
expansions were motivated by anything            ever asked to be relieved of its obligation
other than legitimate business reasons, such     under the rule or deliberately flouted the
as increasing consumer demand, an increase       rule.
in the number of Division I men's basketball         In 2000, the NCAA's Division I
teams and playing conferences, and the           Management Council appointed an "antitrust
increasing    success    of    the   NCAA        subcommitte" to review the NCAA's rules
Tournament.                                      for potential antitrust problems. The
    The NCAA's Executive Committee               subcommittee made a recommendation that
revised the Expected Participation Rule in       several NCAA rules, including the
1981. First effective during the 1982-83         Commitment to Participate Rule, be
season, this new version required an invited     eliminated and the recommendation was
team to participate in the NCAA                  discussed at the [*568] Council's July 2000
championship of its sport or in no               meeting. Several conference commissioners
postseason competition whatsoever (the           expressed concern that some teams might
"Commitment to Participate Rule"). This          elect not to compete if the [**10] rule were
ended any uncertainty about a team's             repealed,     which     would     lead    to
obligation to participate in the NCAA            disorganization. The Management Council
championship if invited. The Commitment          never moved to vote on the subcommittee's
to Participate Rule has been in effect for       recommendation, and the Commitment to
every NCAA Tournament since 1982, with           Participate Rule remained in effect. In July
the exception of the 1991 Tournament. In         2001, a 65th team was added to the NCAA
May of 1990, the Commitment to Participate       Tournament bracket.
Rule was eliminated from the NCAA                    In 2002 and 2003, after this lawsuit was
Division I Manual and, due to some timing        filed, the MIBA extended Postseason NIT
issues with the Manual's publication dates, a    invitations to several teams prior to the
revised version was not replaced until           announcement of the NCAA Tournament
August of 1991. Thus, [**9] the rule was         bids. All of the teams, with three exceptions,
next in effect for the 1992 NCAA                 subsequently also received invitations to the
Tournament.
                                                 NCAA Tournament and participated in that
    The Commitment to Participate Rule           Tournament. The three teams that did not
was revised in 1991, 1999 and 2000, but the      receive bids to the NCAA Tournament did
essence of the rule remained unchanged. All      participate in the Postseason NIT. The
NCAA rules are republished in a new              MIBA asserts that the Commitment to
manual each year and every NCAA member           Participate Rule caused this result. The
institution must annually attest that it is in   NCAA disputes this and argues that there is
compliance with all of these rules. If a         no record evidence to show that the rule,
member institution does not comply with          rather than the teams' desire to compete for



                                                                                     791
"the national championship," influenced the     NCAA relies on the fact that some of the
decisions of these institutions.                teams in the NCAA Tournament actually are
                                                ranked lower than those teams in the NIT by
    The MIBA filed this action to challenge
                                                virtue of conference championship upsets,
several of the NCAA's rules and NCAA
                                                there is no material dispute that the vast
Tournament bracket expansions. The MIBA
                                                majority of the NCAA teams rank above the
seeks declaratory and injunctive relief as
                                                best NIT teams.
well as treble damages. It challenges the
Commitment to Participate Rule, the [**11]          The MIBA seeks summary judgment
One Postseason Tournament Rule, and the         only on the Commitment to Participate Rule.
"End of Playing Season Rule," which states      However, its broader claim is that the
that an NCAA member institution's               combined effect of several rules prevents it
basketball team cannot play any additional      from postponing the Postseason NIT until
games against another team after the NCAA       after the NCAA Tournament or competing
Tournament's championship game. Thus, the       for the teams who participate in that
End of Playing Season Rule requires that the    Tournament.
Postseason NIT conclude prior to the end of        DISCUSSION
the NCAA Tournament. The One
Postseason Tournament Rule prevents a                               ***
team selected for the NCAA Tournament               The MIBA argues that the Commitment
from participating in both tournaments.         to Participate Rule effectively requires any
Morever, the parties made clear at oral         NCAA institution invited to the NCAA
argument that even if the One Postseason        Tournament to boycott the Postseason NIT,
Tournament Rule were abolished, a team          and should be struck down as a violation of
could not compete in both tournaments           Sections 1 and 2 of the Sherman Act without
under the current system because it is not      any detailed market analysis. The NCAA
logistically possible. The NCAA's season        argues [**14] that a boycott analysis is
ends on a Sunday and its Tournament begins      improper and that the MIBA is not entitled
on the following Thursday. Thus, the MIBA       to summary judgment because the rule has
has only three days in which to conduct a       no obvious anticompetitive effects.
postseason tournament which neither
conflicts with the NCAA Tournament nor              The Commitment to Participate Rule
asks teams to run afoul of the End of Playing   states: "Eligible members in a sport who are
Season Rule. The MIBA asserts that it is        not also members of the National
impossible to have an entire tournament in      Association of Intercollegiate Athletics will
those three days. The MIBA also challenges      participate (if selected) in the NCAA
the automatic qualification procedure under     championship or in no postseason
which the champions of all 31 conferences       competition in that sport." The parties do not
automatically qualify [**12] for the NCAA       dispute that the effect of the Commitment to
Tournament and must participate. Lastly, the    Participate Rule is that an NCAA member
MIBA challenges the NCAA's bracket              institution who is selected to compete in the
expansions. It argues that because 65 of the    NCAA Tournament is required to do so or
best teams are required to participate in the   that team must forego postseason
NCAA Tournament, any other postseason           competition.
tournament is prevented from competing for
a competitive field of teams. Although the


                                                                                    792
I. The MIBA's Motion for Summary                  F.2d 55, 70 (2d Cir. 1988) [**16] (quoting
Judgment: Sherman Act § 1                         Modern Home Inst. v. Hartford Accident &
                                                  Indem. Co., 513 F.2d 102, 108 (2d Cir.
     [HN2] Section 1 of the Sherman Act, 15
                                                  1975)). "An agreement between two or more
U.S.C. § 1 (1982), forbids "every contract,
                                                  persons is fundamental to any § 1 claim."
combination ... or conspiracy, in restraint of
                                                  Id. It follows that a single-entity's behavior
trade or commerce among the several
                                                  cannot be a § 1 violation. See Copperweld
States." However, since nearly every
                                                  Corp. v. Indep. Tube Corp., 467 U.S. 752,
contract that binds parties to act according to
                                                  771, 81 L. Ed. 2d 628, 104 S. Ct. 2731
its terms restrains trade to a certain extent,
                                                  (1984) (holding that § 1 scrutiny did not
the Supreme Court has limited § 1 of the
                                                  apply to the coordinated activity of a parent
Sherman Act "to prohibit only unreasonable
                                                  and its wholly owned subsidiary because
restraints of trade." NCAA v. Board of
                                                  their "complete unity of interest" made them
Regents, 468 U.S. 85, 98, 82 L. Ed. 2d 70,
                                                  a single enterprise). However, "courts have
104 S. Ct. 2948 (1984) [**15] (citing
                                                  consistently held that, since joint ventures--
Arizona v. Maricopa County Medical
                                                  including sports leagues and other such
Society, 457 U.S. 332, 342-43, 73 L. Ed. 2d
                                                  associations--consist of multiple entities,
48, 102 S. Ct. 2466 (1982)). Thus, in order
                                                  they can violate § 1 of the Sherman Act.
to prevail on its § 1 claim, the MIBA must
                                                  Volvo, 857 F.2d at 71 (citing NCAA v.
show that there was an agreement,
                                                  Board of Regents, 468 U.S. 85, 99, 82 L. Ed.
conspiracy, or combination between two or
                                                  2d 70, 104 S. Ct. 2948 & n. 18, 468 U.S. 85,
more entities and that the agreement was an
                                                  82 L. Ed. 2d 70, 104 S. Ct. 2948 (1984)
unreasonable restraint of trade under a per se
                                                  (additional citations omitted)).
or rule of reason analysis. Capital Imaging
Assocs. v. Mohawk Valley Medical Assocs.,             The NCAA members are separate
996 F.2d 537, 542 (2d Cir. 1993).                 entities who clearly exist as independent
                                                  institutions of higher education. These
A. Section 1 Scrutiny                             institutions each agree to abide by the rules
                                                  of the NCAA on an annual basis. If a
    The MIBA asserts that the Commitment
                                                  member institution violates a rule, it is faced
to Participate Rule undoubtedly constitutes
                                                  with the prospect of NCAA sanctions. The
an agreement among the NCAA and its
                                                  fact that [**17] these individual members
member institutions because the institutions
                                                  participate in the NCAA Tournament does
are required, each year, to agree in writing to
                                                  not turn the membership into a single actor.
adhere to all of the NCAA's rules. The
                                                  Therefore, the NCAA's argument that it
NCAA disputes this characterization and
                                                  should be treated as a single entity under a
argues that because the NCAA membership
                                                  Copperweld analysis is unpersuasive. The
has a unified interest in the success of the
                                                  Commitment to Participate Rule constitutes
NCAA Tournament, it is a single actor when
                                                  an agreement among the NCAA member
it regulates the Tournament and should be
                                                  institutions and subjects the NCAA to § 1
exempt from § 1 scrutiny.
                                                  scrutiny.
     [*570] "As we have noted previously,
[HN3] § 1 is directed only at joint action,       B. Unreasonable Restraint of Trade
and 'does not prohibit independent business
actions and decisions.'" Volvo N. Am. Corp.          Because the Commitment to Participate
                                                  Rule is subject to § 1 scrutiny, it must be
v. Men's Int'l Prof'l Tennis Council, 857


                                                                                       793
examined to determine whether it is an                 What the NCAA and its
unreasonable restraint of trade. The MIBA              member institutions market in
argues that the Commitment to Participate              this case is competition itself--
Rule should be condemned as illegal per se             contests between competing
because it is an agreement among the NCAA              institutions. [**19] [*571] Of
and its competing member schools to                    course,      this    would    be
boycott     any     competing    postseason            completely ineffective if there
tournament whenever a team is invited to the           were no rules on which the
NCAA Tournament. The NCAA argues that                  competitors agreed to create and
the application of the per se rule is not              define the competition to be
appropriate.                                           marketed. A myriad of rules
                                                       affecting such matters as the
    [HN4] Courts have found certain types
                                                       size of the field, the number of
of restraints of trade to be so inherently
                                                       players on a team, and the
anticompetitive that they are per se invalid
                                                       extent to which physical
under § 1 of the Sherman Act, 15 U.S.C. §
                                                       violence is to be encouraged or
1. Restraints such as price fixing, market
                                                       proscribed, all must be agreed
divisions, tying arrangements and group
                                                       upon, and all restrain the
boycotts have all been [**18] found to be
                                                       manner in which institutions
unreasonable in and of themselves. Northern
                                                       compete. Id.
P. R. Co. v. United States, 356 U.S. 1, 5, 2 L.
Ed. 2d 545, 78 S. Ct. 514 (1958) (citing
                                                   The court also noted that the NCAA was
cases).
                                                  marketing a particular brand of football,
    However, in National Collegiate Athletic      namely college football as opposed to a
Association v. Board of Regents, 468 U.S.         professional sport. Id. at 101-02.
85, 100, 82 L. Ed. 2d 70, 104 S. Ct. 2948
(1984), the Supreme Court declined to apply            In order to preserve the
the per se rule to the NCAA's television               character and quality of the
broadcast plan which restricted the total              "product," athletes must not be
number of college football games which                 paid, must be required to attend
could be televised and the number of games             class, and the like. And the
any single college could broadcast. This               integrity of the "product" cannot
decision was made despite the fact that the            be preserved except by mutual
plan clearly limited output by restraining the         agreement; if an institution
quantity of television rights available for            adopted       such     restrictions
sale and fixed the price at which institutions         unilaterally, its effectiveness as
could sell the rights, restrictions which are          a competitor on the playing
usually      considered      hallmarks       of        field might soon be destroyed.
unreasonable restraints of trade. Id. at 99-           Thus, the NCAA plays a vital
100. The court explained that the case                 role in enabling college football
involved "an industry in which horizontal              to preserve its character, and as
restraints on competition are essential if the         a result enables a product to be
product is to be available at all." Id. at 101.        marketed         which       might
The court further explained:                           otherwise be unavailable. In
                                                       performing this role, its actions


                                                                                      794
      widen consumer [**20] choice-               initial burden of showing that the challenged
      -not only the choices available             action has had an actual adverse effect on
      to sports fans but also those               competition as a whole in the relevant
      available to athletes--and hence            market...." Id. (citations omitted). If the
      can      be       viewed      as            plaintiff carries its burden, the burden shifts
      procompetitive. Id. at 102.                 to the defendant to establish the
                                                  procompetitive "redeeming virtues" of the
    Even assuming for the moment that the
                                                  action. Id. Should the defendant carry this
MIBA is correct to characterize the
                                                  burden, the plaintiff must then show that the
Commitment to Participate Rule as a facially
                                                  same procompetitive effect could be
unreasonable restraint of trade such as a
                                                  achieved through an alternative means that
group boycott, the Supreme Court made
                                                  is less restrictive of competition. Id.
clear in Board of Regents that a per se
                                                  (citations omitted). Ultimately, the goal is to
analysis would not be appropriate. Because
                                                  determine whether restrictions in an
sports activities can only be carried out
                                                  agreement among competitors potentially
jointly and the NCAA must create certain
                                                  harm consumers. [**22] Virgin Atlantic, 69
horizontal restraints in order to function, the
                                                  F. Supp. 2d at 582 (citations omitted).
rule is not invalid in and of itself. At a
minimum, the rule's possible procompetitive            [*572] Under a "quick look" analysis, a
effects must be examined. See, e.g., id. at       plaintiff is relieved of its initial burden of
103. The case on which the MIBA relies is         showing that the challenged restraints have
inapposite. See Full Draw Prods. v. Easton        an adverse effect on competition because the
Sports, Inc., 182 F.3d 745, 750 (10th Cir.        anticompetitive effects of the restraint are
1999) (affirming the denial of a motion to        obvious. See, e.g., California Dental Assoc.
dismiss based on the sufficient pleading of       v. Federal Trade Comm'n, 526 U.S. 756,
an alleged group boycott in violation of § 1      770, 143 L. Ed. 2d 935, 119 S. Ct. 1604
of the Sherman Act).                              (1999). In Board of Regents, the Supreme
                                                  Court     endorsed     the    "quick     look"
    Because a per se rule should not be
                                                  intermediate approach because it found that
applied, the summary judgment evidence
                                                  the NCAA's naked restraint of the price and
must be examined in accordance with "rule
                                                  output of televised college football games
of reason" analysis. Virgin Atlantic Airways
                                                  "required some competitive justification
Ltd. v. British Airways PLC, 69 F. Supp. 2d
                                                  even in the absence of a detailed market
571, 582 (S.D.N.Y. 1999) [**21] (citations
                                                  analysis." 468 U.S. at 110. See also NCAA v.
omitted). Under the rule of reason, whether
                                                  Law, 134 F.3d 1010, 1020 (10th Cir. 1998)
the Commitment to Participate Rule is
                                                  (affirming the condemnation of an NCAA
reasonable depends on its actual effects on
                                                  rule which expressly restricted the
the market and its procompetitive
                                                  compensation of certain Division I coaches
justifications. Id. (citing Chicago Bd. of
                                                  by the use of "quick look" analysis). The
Trade v. United States, 246 U.S. 231, 238,
                                                  Supreme Court has clarified that [HN6] the
62 L. Ed. 683, 38 S. Ct. 242 (1918); K.M.B.
                                                  use of the "quick look" approach is only
Warehouse Distribs., Inc. v. Walker Mfg.
                                                  appropriate when, "an observer with even a
Co., 61 F.3d 123, 127 (2d Cir. 1995)).
                                                  rudimentary understanding of economics
    [HN5] "Establishing a violation of the        could conclude that the arrangements in
rule of reason involves three steps." K.M.B.,     question would have an anticompetitive
61 F.3d at 127. First, the "plaintiff bears the


                                                                                       795
[**23] effect on customers and markets."           number of games a team actually plays, it is
California Dental Assoc., 526 U.S. at 770.         only charged with having played one game
                                                   for the purposes of calculating the total
    The MIBA argues that the Commitment
                                                   number of games played during that season.
to Participate Rule should be examined
                                                   Id. The plaintiffs in that case were promoters
using the "quick look" approach used in
                                                   of basketball tournaments who urged the
Board of Regents and Law. In its view, the
                                                   court to consider the "Two in Four" rule
Commitment to Participate Rule obviously
                                                   under a "quick look" analysis because the
suppresses competition by prohibiting
                                                   rule prevented the promoters from securing
NCAA members who are invited to the
                                                   the participation of "major" NCAA
NCAA Tournament from participating in
                                                   institutions on an annual basis. Id. The
competing postseason tournaments like the
                                                   plaintiffs argued that the rule made the
Postseason NIT. The NCAA objects and
                                                   exempt tournaments less attractive to those
argues that only a full rule of reason analysis
                                                   teams who could participate that year and
in which the MIBA must prove the
                                                   caused the tournaments to be less financially
anticompetitive effects of the rule is
                                                   successful on the whole. Id. at *6. However,
appropriate.
                                                   the court found that because there were 25
    In Worldwide Basketball & Sports               certified events and 319 teams in Division I
Tours, Inc. v. NCAA, No. 2:00 Civ. 1439,           at that time, [**25] the total number of
2002 WL 32137511, *6 (S.D. Ohio July 19,           available teams, as opposed to only the
2002)3, the court acknowledged that the            "major" teams, negated the plaintiffs'
challenged NCAA rule fell somewhere                argument [*573] that output suffered, and
between those rules which amount to an             the court declined to apply "quick look." Id.
obvious horizontal restraint of output found       at *6-7.
in Board of Regents and Law and those the
                                                       Similarly, under the Commitment to
Supreme Court stated in Board of Regents
                                                   Participate Rule, the MIBA may choose
were clearly permissible, such as those that
                                                   from any of the 260 teams which are not
define the size of the playing field. In
                                                   invited to the NCAA Tournament and invite
Worldwide Basketball, the court examined
                                                   those teams to the Postseason NIT. The
the NCAA's "Two in Four" rule. Id. at *1.
                                                   Postseason NIT has expanded from a six-
The rule [**24]          prohibits a member
                                                   team tournament to a 40-team tournament
institution's Division I men's basketball team
                                                   and the MIBA has not presented any
from participating in more than one
                                                   evidence that it has been unable to fill its
"certified event" in a given academic year
                                                   Postseason NIT bracket each year. It cannot
and in no more than two "certified events"
                                                   be said that "an observer with even a
every four years. Id. The NCAA places a
                                                   rudimentary understanding of economics"
limit on the number of regular season games
                                                   would find the Commitment to Participate
in which a member team is permitted to
                                                   Rule's adverse effect on competition so
compete. Id. The benefit of participating in a
                                                   obvious. Therefore, a "quick look" analysis
certified tournament is that no matter the
                                                   is not appropriate and the MIBA is required
                                                   to meet its burden under the full rule of
                                                   reason analysis to show the anticompetitive
3
    This case is on appeal to the Sixth Circuit.   effects of the rule. The MIBA does not argue
                                                   that it [**26] is entitled to summary
                                                   judgment under the rule of reason.


                                                                                       796
II. The MIBA's Motion for Summary                   CONCLUSION
Judgment: Sherman Act § 2
                                                   For the foregoing reasons, plaintiff's
    The MIBA's second argument is that it is    motion for summary judgment is denied.4
entitled to summary judgment on the
Commitment to Participate Rule because the      SO ORDERED.
rule is a conspiracy to monopolize under § 2
of the Sherman Act. [HN7] Section Two of        Dated: New York, New York
the Sherman Act makes it unlawful to            September 29, 2004
"monopolize, or attempt to monopolize, or
combine or conspire with any other person           MIRIAM GOLDMAN CEDARBAUM
or persons, to monopolize any part of the           United States District Judge
trade or commerce among the several States,
or with foreign nations." 15 U.S.C. § 2. The
offense of conspiracy to monopolize
requires proof of (1) concerted action, (2)
overt acts in furtherance of the conspiracy,
and (3) specific intent to monopolize. E.g.,
Volvo, 857 F.2d at 74.
    Even assuming that the MIBA has
provided sufficient proof of the first two
elements, there remains a material question
of fact as to whether the Commitment to
Participate Rule was enacted with the
specific intent of suppressing competition
from the NCAA Tournament's competitor.
The MIBA has come forward with evidence
of statements made during the 1940's, 50's
and 60's by NCAA committee [**27]
persons and argues that these prove the
illegal motivation behind the adoption of the
Rule. However, the NCAA responds that
these statements are unrelated and show
nothing about the reason for the
implementation of the Commitment to
Participate Rule. Considering this evidence
in a light most favorable to the NCAA, the
MIBA has not established specific intent to
monopolize as a matter of law on its § 2        4
                                                  The NCAA's motion to strike sections of
Sherman Act claim, 15 U.S.C. § 2.               the November 18, 2003 affidavit of George
                                                Bisacca is denied. Any legal conclusions
                                                contained therein were disregarded.




                                                                                   797
         METROPOLITAN                                             ***
 INTERCOLLEGIATE BASKETBALL
   ASSOCIATION, Plaintiff, -against-           OPINION: [*547] CEDARBAUM, J.
NATIONAL COLLEGIATE ATHLETIC                       National Collegiate Athletic Association
     ASSOCIATION and CEDRIC                    and Cedric Dempsey, on behalf of NCAA
  DEMPSEY on behalf of NATIONAL                (collectively "NCAA"), have moved for
      COLLEGIATE ATHLETIC                      summary judgment on Metropolitan
     ASSOCIATION, Defendants.                  Intercollegiate Basketball Association's
                                               ("MIBA") two claims which challenge
           01 Civ. 0071 (MGC)                  NCAA rules affecting Division I men's
                                               college basketball postseason tournaments
 UNITED STATES DISTRICT COURT                  under Sections 1 and 2 of the Sherman Act,
 FOR THE SOUTHERN DISTRICT OF                  15 U.S.C. § § 1 & 2. MIBA's motion for
           NEW YORK                            summary judgment on these same two
  339 F. Supp. 2d 545; 2004 U.S. Dist.         claims was denied. Metro. Intercollegiate
 LEXIS 20418; 2004-2 Trade Cas. (CCH)          Basketball Ass'n v. Nat'l Collegiate Athletic
                P74,586                        Ass'n, 337 F. Supp. 2d 563, 2004 U.S. Dist.
                                               LEXIS 19502, No. 01 Civ. 0071, -- F. Supp.
        October 13, 2004, Decided              2d --, 2004 WL 2202582 (S.D.N.Y. Sept. 29,
                                               2004). For the reasons that follow, NCAA's
SUBSEQUENT HISTORY: Application                [**2] motion is also denied. This opinion
granted by Metro. Intercollegiate Basketball   assumes familiarity with my earlier
Ass'n v. NCAA, 2005 U.S. Dist. LEXIS           summary judgment opinion and applies the
15023 (S.D.N.Y., July 22, 2005)                same legal standard. Unless otherwise
                                               indicated below, the material facts are the
PRIOR HISTORY: Metro. Intercollegiate          same as those set out in the prior opinion.
Basketball Ass'n v. NCAA, 337 F. Supp. 2d
563, 2004 U.S. Dist. LEXIS 19502               I. NCAA's Motion for Summary Judgment:
(S.D.N.Y., 2004)                               Sherman Act § 1
                                                   Unlike MIBA, which sought summary
DISPOSITION: Defendants' motion for
                                               judgment only on the Commitment to
summary judgment denied.
                                               Participate Rule, NCAA seeks summary
                                               judgment on all five "Postseason Rules"
CASE SUMMARY:                                  which MIBA challenges in its complaint.
                                               The five Postseason Rules are: the
PROCEDURAL POSTURE: Plaintiff
                                               Commitment to Participate Rule, the One
intercollegiate basketball association sued    Postseason Rule, the End of Playing Season
defendant National Collegiate Athletic         Rule, the automatic qualification procedure
Association (NCAA) and challenged NCAA         and the bracket expansions.
rules affecting Division I men's college
basketball postseason tournaments under § §    A. § 1 Scrutiny
1 and 2 of the Sherman Act, 15 U.S.C.S. § §
1, 2. The NCAA moved for summary                   NCAA's first argument is that the
judgment.                                      Postseason Rules are not subject to § 1
                                               scrutiny. First, NCAA argues that § 1


                                                                                  798
scrutiny is inappropriate because the rules         as an independent antitrust violation. Rather,
are "noncommercial." NCAA asserts that the          that rule is only challenged in conjunction
Postseason Rules do not regulate or restrain        with the Commitment to Participate Rule.
"trade or commerce." 15 U.S.C. § 1. Rather,         The only "noncommercial" justification
the rules help to protect the connection            NCAA proffers for the Commitment to
between athletics and academics. NCAA               Participate Rule and the bracket expansions
asserts that while the rules may have an            is that they were enacted in response to the
incidental effect on commerce, the                  "membership's changing characteristics and
regulations themselves [**3]             are        the growth in the number of Division I
noncommercial in nature and thus, fall              basketball teams." NCAA Brief at 8. That
outside of the Sherman Act.                         explanation has little to do with whether the
                                                    rule is noncommercial. Moreover, one of
     [*548] NCAA relies heavily on Smith
                                                    NCAA's procompetitive justifications for the
v. NCAA, 139 F.3d 180 (3d Cir. 1998), in
                                                    rule is that it ensures the best teams will
which the Third Circuit affirmed the
                                                    participate in the NCAA Tournament which
dismissal of a challenge to NCAA's post-
                                                    makes it more attractive to broadcasters,
baccalaureate eligibility rule, which
                                                    advertisers and fans. Thus, the rule cannot
prohibits an athlete from competing at a
                                                    be said to be noncommercial.
postgraduate institution other than the
institution from which he received his                  Secondly, NCAA argues that the
undergraduate degree. Although the court            Postseason Rules fall into the category of
noted that, "eligibility rules are not related to   rules sanctioned by the Supreme Court in
the NCAA's commercial or business                   NCAA v. Board of Regents, 468 U.S. 85,
activities," id. at 185-86, the court further       101, 82 L. Ed. 2d 70, 104 S. Ct. 2948
explained that this was because "rather than        (1984), such as those which determine [**5]
intending to provide the NCAA with a                the size of the field, the number of players
commercial advantage, the eligibility rules         on a team and those which regulate physical
primarily seek to ensure fair competition in        violence. NCAA points out that all sports
intercollegiate athletics." Id. The court made      leagues      structure     their    postseason
an alternative finding that even if the rule        championships, and require their member
were subject to Sherman Act scrutiny it             teams to participate in the final
would be upheld under the rule of reason. Id.       championship games, if selected. NCAA
at 186-87 (noting that the rule discouraged         argues that it is reasonable as a matter of law
students from foregoing participation in            for a league to require its member
athletics at their undergraduate institutions       institutions to share the responsibility of
in order to preserve their eligibility at the       enhancing their joint product by requiring
postgraduate level and prevented graduate           that all selected teams participate in the
schools from inducing such behavior).               league's final championship game, especially
[**4]                                               since the member institutions benefit from
                                                    consumer interest in the championship. Even
    NCAA argues that the End of Playing
                                                    assuming that NCAA is a sports league and
Season Rule protects the welfare of student
                                                    that the above statements have merit, MIBA
athletes because it prevents coaches from
                                                    is not challenging only the Commitment to
forcing their teams to play and practice all
                                                    Participate Rule. MIBA argues that the
year long. However, MIBA is not
                                                    combination of the Commitment to
challenging the End of Playing Season Rule
                                                    Participate Rule and the One Postseason


                                                                                         799
Tournament Rule make it impossible for            market. In order to determine whether the
them to host a postseason tournament in           Postseason Rules have a substantially
which invitees of the NCAA Tournament             adverse effect on competition, the relevant
participate. In combination, the rules do not     market must be defined. [HN1] For antitrust
simply require teams to participate in the        purposes the relevant market comprises
NCAA Tournament if invited. They also             products that consumers view as "reasonably
prevent teams from competing in both              interchangeable" with the product which the
tournaments. Therefore, the challenged rules      defendant sells. See, e.g., United States v.
and expansions [**6] are not so obviously         E.I. du Pont de Nemours & Co., 351 U.S.
reasonable as to fall into the group of           377, 395, 100 L. Ed. 1264, 76 S. Ct. 994
restrictions sanctioned by Board of Regents.      (1956); Eastman Kodak Co. v. Image
                                                  Technical Servs., Inc., 504 U.S. 451, 119 L.
     [*549]    As explained in the prior
                                                  Ed. 2d 265, 112 S. Ct. 2072 (1992). The
opinion, MIBA has adequately shown an
                                                  definition of the relevant market is an issue
agreement among the 1,200 institutions
                                                  of fact for trial. See, e.g., Jennings Oil Co. v.
which are NCAA members. Metro.
                                                  Mobil Oil Corp., 539 F. Supp. 1349, 1352
Intercollegiate Basketball Ass'n, -- F. Supp.
                                                  (S.D.N.Y. 1982).
2d --, 2004 U.S. Dist. LEXIS 19502, 2004
WL 2202582, at *6. MIBA has also shown                MIBA alleges that the relevant market is
that NCAA should not be treated as a single       Division I men's college basketball, which
entity under a Copperweld Corp. v.                includes submarkets of the business of
Independent Tube Corp., 467 U.S. 752, 771,        operating Division I men's college basketball
81 L. Ed. 2d 628, 104 S. Ct. 2731 (1984),         tournaments and the business of operating
analysis. Id. Thus, NCAA's third argument         postseason tournaments in particular. The
to avoid § 1 scrutiny is without merit.           Postseason NIT is currently the only
                                                  postseason Division I men's basketball event
B. Rule of Reason                                 other than the NCAA Tournament. MIBA's
                                                  expert, Professor [**8] Noll, has provided a
    It has already been determined that the
                                                  compelling argument that the relevant
Commitment to Participate Rule must be
                                                  market is Division I men's college basketball
examined under a full rule of reason
                                                  postseason tournaments.
analysis. Metro. Intercollegiate Basketball
Ass'n, -- F. Supp. 2d --, 2004 U.S. Dist.             NCAA argues that this is not the relevant
LEXIS 19502, 2004 WL 2202582, at *9               market because the two tournaments cannot
(declining to apply a per se rule or quick        be    considered       "interchangeable"   or
look analysis). Because the challenged rules      "similar." According to NCAA, its
are subject to § 1 scrutiny, it is necessary to   tournament is the culmination of the
examine the Commitment to Participate             Division I men's basketball season and is
Rule, as well as the other four Postseason        held annually to determine one champion. In
Rules, under the rule of reason.                  contrast, it argues that the Postseason NIT is
                                                  an invitational tournament which provides
1. Relevant Markets                               playing opportunities for teams not selected
                                                  for the NCAA Tournament and is geared
    In order to meet its initial burden under
                                                  toward drawing local audiences to Madison
the rule of reason, MIBA [**7] must be
able to show an actual adverse effect on          Square Garden, as opposed to the nation-
                                                  wide attraction of the NCAA Tournament.
competition as a whole in the relevant


                                                                                        800
NCAA's expert, Professor Willig, has               market power as the "power to control prices
concluded that the NCAA Tournament                 or exclude competition." United States v.
belongs in a market defined as "marquee            Visa U.S.A., Inc., 344 F.3d 229, 239 (2d Cir.
sports     programming,"    along     with         2003) (citing E.I. du Pont, 351 U.S. at 391;
professional sporting events such as the           Board of Regents, 468 U.S. at 109 n. 38).
National Hockey League's Stanley Cup,              "Such power may be proven through
baseball's World Series, football's Super          evidence of specific conduct undertaken by
Bowl, the National Basketball Association's        the defendant that indicates he has the power
Tournament, golf's Masters Tournament and          to affect price or exclude competition.
the Olympic Games.                                 Alternatively, market power may be
                                                   presumed if the defendant controls a large
    MIBA and NCAA are marketing
                                                   enough share of the relevant market." Id.
reasonably interchangeable products in that
                                                   (citing KMB Warehouse Distribs., Inc. v.
each of their tournaments features
                                                   Walker Mfg. Co., 61 F.3d 123, 129 (2d Cir.
competition between Division [**9] I men's
                                                   1995)). Professor Noll has calculated that in
college basketball teams after the conclusion
                                                   2002, NCAA had over 70 percent of
of [*550] the regular season and these
                                                   attendance, over 90 percent of game
games are played around the country and are
                                                   revenues, over 98 percent of total revenues
nationally televised. Although NCAA tries
                                                   and over 99 percent of television revenues in
to place itself in the market of "marquee
                                                   the market of Division I men's college
sporting events," MIBA has produced
                                                   basketball postseason tournaments. This
sufficient evidence to show that college
                                                   evidence suggests that NCAA earns
basketball is a very different product from
                                                   monopoly profits and has the power to
professional basketball or other professional
                                                   exclude competing tournaments, such as the
championships and that it appeals to fans in
                                                   Postseason NIT, from the market through its
a different way. As the Supreme Court noted
                                                   control over the athletic participation of its
in Board of Regents, college athletics is a
                                                   member universities [**11]                and
unique product, whose amateur rules
                                                   conferences.
distinguish it from professional sports and
widen consumer choice. Id. at 102. In that             The genuine dispute the parties have
case, the Supreme Court went on to affirm          over the relevant markets is not the only
the district court's determination at trial that   issue for trial. Even assuming that MIBA's
the relevant market was "live college              proposed markets are appropriate, other
football"     rather     than    the      broad    outstanding issues preclude summary
"entertainment market" advocated by                judgment.
NCAA. Id. at 111. Despite NCAA's urging
to the contrary, MIBA has made a sufficient        2. Analysis
showing that it will be able to prove at trial         Under the rule of reason, whether the
that the relevant market is Division I men's       restraints affecting postseason competition
college basketball postseason tournaments.         are reasonable depends upon their actual
   MIBA has also made a sufficient                 effect    on the market and their
showing that NCAA has power in the                 procompetitive justifications. In order to
market for Division I men's college                meet its initial burden under the rule of
basketball postseason tournaments. [**10]          reason, MIBA must demonstrate that within
[HN2] The Supreme Court has defined                the relevant market, NCAA's actions have



                                                                                       801
had substantial adverse effects on               NCAA Tournament is the Postseason NIT.
competition, such as increases in price, or      Second, as the Supreme Court noted [**13]
decreases in output or quality. See, e.g.,       in Board of Regents, each of the parties is
Visa, 344 F.3d at 238. The antitrust laws        marketing competition itself. It is clear that
were enacted to protect competition and not      output has increased since the number of
competitors. See, e.g., Brown Shoe Co. v.        teams participating in both tournaments,
United States, 370 U.S. 294, 320, 8 L. Ed. 2d    average attendance per game and overall
510, 82 S. Ct. 1502 (1962). Thus, MIBA           viewership have all increased over time.
must do more than show harm to itself. It        But, what is also clear is that the rules
must show harm to competition. Once that         require an invitee to the NCAA Tournament
initial burden is met, the burden of             to attend to the exclusion of the Postseason
production shifts to NCAA, which must            NIT. The rules limit to one the number of
provide a procompetitive justification for the   postseason contests a team may enter.
challenged restraints. Capital Imaging           Professor Noll has concluded that this
Assocs., P.C. v. Mohawk Valley Medical           injures competition because even a low-
Assocs., 996 F.2d 537, 543 (2d Cir. 1993).       seeded team, which has little chance of
[**12] If NCAA does so, [*551] MIBA              advancing in the NCAA Tournament, must
must prove either that the challenged            participate even though it might have a good
restraints are not reasonably necessary to       chance of doing quite well in the Postseason
achieve the defendants' procompetitive           NIT. If these lower-seeded teams had a
justifications, or that those objectives may     choice about which tournament to attend,
be achieved in a manner less restrictive of      they might well choose to attend the
free competition. N. Am. Soccer League v.        Postseason NIT, where the chance to
Nat'l Football League, 670 F.2d 1249, 1259       advance deep into the Tournament is greater.
(2d Cir. 1982).                                  These facts tend to show that the Postseason
                                                 Rules adversely affect competition by
     NCAA argues that it is entitled to
                                                 depriving colleges and fans of a potentially
summary judgment because MIBA cannot
                                                 attractive postseason tournament choice and
show that the Postseason Rules have injured
                                                 possible participation in an additional
competition itself. In NCAA's view, the
                                                 tournament. The quality of the competition
evidence that MIBA presents shows only
                                                 the Postseason NIT produces would [**14]
harm to the Postseason NIT, as opposed to
                                                 then be better, without any real detriment to
harm to competition. NCAA argues that
                                                 the NCAA Tournament, because low-seeded
MIBA has failed to produce evidence of
                                                 teams do not advance much past the first
reduced output or monopoly prices. It further
                                                 round. Although NCAA relies on the fact
asserts that quality has not been harmed
                                                 that a few of the teams in the NCAA
since there is great consumer satisfaction
                                                 Tournament actually are ranked lower than
with the NCAA Tournament and quality is
                                                 some teams in the NIT by virtue of
at its highest because the best teams compete
                                                 conference championship upsets, there is no
in a single tournament and a "legitimate
                                                 dispute that the vast majority of NCAA
National Champion" is determined.
                                                 teams rank above the best NIT teams. MIBA
   The difficulties in separating harm to        has submitted the declarations of two
MIBA from harm to competition itself are         coaches and the athletic administrators of
two-fold. First, the parties agree that the      MIBA's member schools who state that if
only postseason tournament other than the        the Postseason Rules were different and the


                                                                                     802
NIT became a more competitive tournament,         on NCAA's product by swooping in at the
their schools would seriously consider an         last minute and offering [**16] incentives
invitation from both tournaments. While it        for the best teams to compete in its
remains to be seen whether MIBA will be           tournament instead of the NCAA
able to meet its burden to prove                  Tournament. On the other hand, NCAA
anticompetitive effects at trial, the             takes the position that the rule is
combination of the anticompetitive nature of      unnecessary because every Division I men's
requiring invitees to participate in the          basketball team's goal is to qualify for or be
NCAA Tournament to the exclusion of any           invited to the NCAA Tournament. It stresses
other postseason tournament and a sufficient      that no team since 1970 has ever chosen to
showing of market power raises a genuine          participate in the Postseason NIT in
issue of disputed fact as to the challenged       preference to the NCAA Tournament and
rules' effect on competition.                     that no team since the institution of the
                                                  Commitment to Participate Rule has asked
    Moreover, NCAA's argument that the
                                                  for a waiver of the rule in order to
Postseason Rules are reasonable as a matter
                                                  participate in the Postseason NIT. If all of
of law is not persuasive. [**15] The
                                                  the teams selected for the NCAA
Postseason Rules are horizontal restraints
                                                  Tournament would participate in that
because they affect the way in which the
                                                  Tournament regardless of this rule, then it is
[*552] member institutions compete with
                                                  difficult to see its procompetitive
one another. See Board of Regents, 468 U.S.
                                                  justifications. Therefore, it seems that there
at 99; see also Visa, 344 F.3d at 242-43 .
                                                  is at least a question of fact as to whether the
Therefore, NCAA's arguments that the
                                                  Commitment to Participate Rule has real
Postseason Rules create a "presumptively
                                                  procompetitive justifications.
legal" exclusive dealing arrangement or
form permissible vertical restraints are              There are also questions of fact about
without merit.                                    whether the Postseason Rules are the least
                                                  restrictive means of accomplishing NCAA's
    Next, NCAA argues that even if MIBA
                                                  goals. For instance, if the Tournaments were
can meet its burden to show the
                                                  scheduled so as not to conflict and the One
anticompetitive effects of the Postseason
                                                  Postseason      Tournament      Rule    were
Rules, NCAA can meet its burden to show
                                                  abolished, participation in both Tournaments
the procompetitive justifications of the rules.
                                                  might be a reasonable [**17] possibility.
On the one hand, NCAA argues that the
Commitment to Participate Rule is necessary
                                                  II. NCAA's Motion for Summary Judgment:
because there is a chance that without it
                                                  Sherman Act § 2
schools might choose not to attend the
NCAA        Tournament,      which      would         MIBA has raised a genuine issue of fact
jeopardize the legitimacy of the National         in support of its claim that NCAA possesses
Champion. NCAA also argues that the               monopoly power in the market of Division I
Commitment to Participate Rule contributes        men's college basketball postseason
to efficient scheduling because NCAA can          tournaments and maintains this monopoly
count on the attendance of all the teams          through exclusionary means.
which it invites. In its view, it is also
necessary "in theory" because it prevents an
independent tournament from "free-riding"



                                                                                        803
    CONCLUSION
   For the foregoing reasons, defendants'
motion for summary judgment is denied.1
SO ORDERED.

Dated: New York, New York
    October, 2004
    MIRIAM GOLDMAN CEDARBAUM
    United States District Judge




1
  NCAA's motion to strike sections of the
March 18, 2004 affidavit of George Bisacca is
denied. Any legal conclusions contained
therein were disregarded.

           NCAA's motion to supplement the record is
granted.




                                                       804
Worldwide Basketball and Sport Tours,          tournaments. The association appealed after
   Inc., et al., Plaintiffs-Appellees, v.      the United States District Court for the
National Collegiate Athletic Association,      Southern District of Ohio, at Columbus,
          Defendant-Appellant.                 found the regulation to be illegal and entered
                                               a permanent injunction barring its
               No. 03-4024                     enforcement.

   UNITED STATES COURT OF                                           ***
APPEALS FOR THE SIXTH CIRCUIT
                                               JUDGES:        Before: BATCHELDER,
               04a0395p.06;                    GIBBONS, and COOK, Circuit Judges.
  388 F.3d 955; 2004 U.S. App. LEXIS           BATCHELDER, J., delivered the opinion of
 23817; 2004 FED App. 0395P (6th Cir.);        the court, in which COOK, J., joined.
    2004-2 Trade Cas. (CCH) P74,612            GIBBONS, J., delivered a separate
                                               concurring opinion.
        February 3, 2004, Argued
       November 15, 2004, Decided              OPINION:
        November 15, 2004, Filed                    [*957]         [***1]      ALICE M.
                                               BATCHELDER, Circuit Judge. The
SUBSEQUENT HISTORY: Rehearing, en              National Collegiate Athletic Association,
banc, denied by Worldwide Basketball &         (the "NCAA"), appeals the district court's
Sport Tours, Inc. v. NCAA, 2005 U.S. App.      order declaring that the NCAA's "Two in
LEXIS 1753 (6th Cir., Jan. 18, 2005)           Four Rule" violates Section I of the Sherman
US Supreme Court certiorari denied by          Antitrust Act, 15 U.S.C. §            1, and
Worldwide Basketball Sport Tours v. Ncaa,      permanently enjoining the enforcement of
2005 U.S. LEXIS 5528 (U.S., Oct. 3, 2005)      that rule. [**2] Because we conclude that
                                               the district court erred in applying an
PRIOR HISTORY: [**1] Appeal from               abbreviated or "quick-look" analysis and in
the United States District Court for the       its definition of the market for purposes of
Southern District of Ohio at Columbus. No.     antitrust analysis, and because the record
00-01439. Edmund A. Sargus, Jr., District      does not contain evidence to support a
Judge. Worldwide Basketball & Sports           proper market definition, we REVERSE the
Tours, Inc. v. NCAA, 2003 U.S. Dist. LEXIS     judgment of the district court.
20222 (S.D. Ohio, July 29, 2003)
                                                   [***2] I.
DISPOSITION: Reversed.                             The NCAA is a voluntary organization
                                               of over 1200 colleges and universities that
CASE SUMMARY:                                  promulgates rules and regulations designed
                                               to, in its own words, "maintain
PROCEDURAL POSTURE: Plaintiff                  intercollegiate athletics as an integral part of
sports promoters filed an action against       the educational program and the athlete as
defendant, a national college athletic         an integral part of the student body." To
association, after the association adopted a   accomplish this goal, the NCAA adopts
regulation that limited its members'           bylaws formulated by a legislative body
participation in outside men's basketball      drawn from the Association's membership.

                                                                                     805
The NCAA members agree to follow those                 address competitive equity
by-laws. Of concern in this case is a portion          concerns by giving many
of the NCAA Division I men's basketball                Division I institutions an
regulations, specifically because of a                 opportunity to compete in
restriction on the type and number of games            certified events, particularly
individual schools are permitted to play.              those outside the continental
                                                       United States, so that the
    Men's Division I basketball is divided
                                                       inherent       recruiting       and
into conferences; within each conference the
                                                       competitive advantages are
member schools individually play each
                                                       distributed      equally     among
other. Each school, however, makes its own
                                                       Division I institutions. This
schedule and may seek several non-
                                                       proposal will provide Division I
conference [**3] games. The NCAA sets the
                                                       men's and women's basketball
maximum number of games that each team
                                                       programs greater flexibility in
may play per year. Throughout the year,
                                                       the scheduling of basketball
there are various tournaments in which a
                                                       contests.     It    will     permit
school's team may participate, some of
                                                       institutions the opportunity to
which are "certified" and some of which are
                                                       participate in certified contests
not. Certified tournament events are
                                                       in     accordance      with     the
multiple-game early season tournaments.
                                                       legislation or to add additional
These events were originally introduced as a
                                                       contests to the institution's
means of encouraging scheduled games with
                                                       regular-season schedules during
schools in Alaska and Hawaii that
                                                       those years in which the
traditionally had difficulty scheduling games
                                                       institution     either    is    not
because of their inconvenient locations. In
                                                       permitted to engage in a
recent years, the NCAA has become
                                                       certified contest or chooses not
concerned that the more "powerful"
                                                       to participate in such an event.
basketball schools (i.e., members of the "Big
Six" conferences) were disproportionately            The plaintiffs in this case are promoters
taking advantage of the certified events. To     of outside certified tournament events (the
address this concern, the NCAA adopted           [*958] "Promoters"). They allege that the
Proposal 98- 92 ("98-92"), which increases       NCAA is less concerned with the
to 28 the number of allowed games per            disproportionate advantage to the Big Six
season for each team, provides that a team's     Conferences than it is with the monies that
participation in a certified event, regardless   the outside promoters of certified events are
of how many games the team actually plays        able to make in connection with these [**5]
as part of that event, counts as one game        events. The Promoters contend that the Two
toward the NCAA regular season maximum,          in Four Rule, the prong of 98- 92 that limits
and permits each team to participate in "not     teams to two certified events every four
more than one certified basketball event in      years, was adopted purely to deny outside
one academic year, and not more than two         promoters the opportunity to make money
certified basketball [**4] events every four     from the certified events.
years." As stated in the text of 98-92, the          Complaining that the application of this
rationale of the rule is to:                     rule limited their ability to schedule events
                                                 with schools having the most powerful and

                                                                                      806
famous basketball programs, which in turn            reviewed de novo, and the
hampered their ability to sell tickets and           scope of injunctive relief is
make broadcast contracts, the Promoters              reviewed for an abuse of
initiated this suit on December 21, 2000,            discretion.
alleging that the Two in Four rule is a             Secretary of Labor, U.S. Dept. of Labor
violation of the Sherman Antitrust Act. On     v. 3RE.COM, Inc., 317 F.3d 534, 537 (6th
August 6, 2001, they filed a motion for        Cir. 2003) (citing S. Cent. Power Co. v. Int'l
preliminary injunction under § 16 of the       Bhd. of Elec. Workers, Local Union 2359,
Clayton Act; that motion was then              186 F.3d 733, 737 (6th Cir. 1999) (internal
consolidated with a motion for permanent       quotations omitted)).
injunction. The district court issued an
Opinion and Order on July 19, 2002, holding       [HN2] Section One of the Sherman Act
that because the rule had not been in effect   provides that:
long enough to permit its effect to be
accurately evaluated, the motion for                 Every contract, combination
preliminary injunction was denied and the            [**7] in the form of trust or
motion for permanent injunction would be             otherwise, or conspiracy, in
held in abeyance. The plaintiffs renewed             restraint of trade or commerce
their request for a permanent injunction on          among the several States, or
February 29, 2003, asserting that there was          with foreign nations, is declared
by then [**6] enough evidence to justify the         to be illegal. Every person who
injunction. The district court granted the           shall make any contract or
permanent [***3] injunction on July 28,              engage in any combination or
2003. Worldwide Basketball and Sports                conspiracy hereby declared to
Tours, Inc. v. NCAA, 273 F. Supp. 2d 933,            be illegal shall be deemed guilty
954-55 (S.D. Ohio 2003). The NCAA timely             of a felony, and, on conviction
appealed, and because of the nature of the           thereof, shall be punished by
injunction, the NCAA sought and obtained             fine not exceeding $ 10,000,000
from this court a stay and order for                 if a corporation, or, if any other
expedited appeal.                                    person, $ 350,000, or by
                                                     imprisonment not exceeding
                    II.                              three years, or by both said
   Our standard of review for the granting           punishments, in the discretion
or denial of a permanent injunction is               of the court.
mixed:
                                               15 U.S.C. § 1. [HN3] By its plain language,
      [HN1] When reviewing the                 this section applies to the Two in Four rule
      decision of a district court to          only if the rule is commercial in nature. The
      grant or to deny a request for           NCAA maintains that the rule is
      issuance of a permanent                  academically directed and motivated and its
      injunction, we employ several            commercial impact is negligible. The
      different standards of review.           Promoters and the district court, on the other
      Factual findings are reviewed            hand, assume that the Two in Four rule
      under the clearly erroneous              [*959] involves a "restraint of trade or
      standard, legal conclusions are          commerce." Id.

                                                                                   807
    [HN4] The dispositive inquiry in this        an agreement in which the NCAA
regard is whether the rule itself is             participated. The NCAA vigorously contests
commercial, not whether the entity               the district court's conclusion that the Two
promulgating the rule is commercial. See,        in Four agreement unreasonably restrains
e.g., Virginia Vermiculite, Ltd. v. W.R.         trade in the relevant market.
Grace & Co.-Connecticut, 156 F.3d 535,
                                                     [***4] A.
540 (4th Cir. 1998). [**8] At least some
NCAA rules have been held to be                       [HN7]      Whether       an     agreement
commercial and hence subject to antitrust        unreasonably restrains trade is determined
scrutiny. See National Collegiate Athletic       under one of two approaches: the per se rule
Ass'n v. Board of Regents, 468 U.S. 85, 98,      and the rule of reason. It is well-established
82 L. Ed. 2d 70, 104 S. Ct. 2948 (1984)          that cases involving industries "in which
("Bd. of Regents") (finding NCAA rules           horizontal restraints on competition are
limiting live broadcasting of college football   essential if the product is to be available at
games subject to scrutiny under Sherman          all" should be analyzed using the rule of
Act). One of our sister circuits has held that   reason. See Bd. of Regents, 468 U.S. at 100-
NCAA rules governing eligibility for             01; see also Nat'l Hockey League, 325 F.3d
participating in collegiate sports are not       at 719 (finding that the district court erred in
commercial, see Smith v. NCAA, 139 F.3d          failing to apply the rule of reason analysis to
180, 184-85 (3rd Cir. 1998), vacated on          a challenge concerning hockey league
other grounds by NCAA v. Smith, 525 U.S.         eligibility rules). Because there is no doubt
459, 142 L. Ed. 2d 929, 119 S. Ct. 924           that horizontal restraints are necessary to
(1999), but this circuit has not yet addressed   make the kind [**10] of league competition
the commercial or non-commercial nature of       at issue available, the rule of reason applies.
particular NCAA rules.                               Under the rule of reason analysis, the
    [HN5] We think it apparent that the Two      plaintiff bears the burden of establishing that
in Four rule has some commercial impact          the conduct complained of "produces
insofar as it regulates games that constitute    significant anticompetitive effects within the
sources of revenue for both the member           relevant product and geographic markets."
schools and the Promoters. We therefore          Nat'l Hockey League, 325 F.3d at 718. If the
assume that the district court's implicit        plaintiff is able to meet that burden, the
finding that the Two in Four rule is             defendant must provide evidence to establish
commercial is supported by the evidence and      that the restraint complained of has
we proceed on that basis.                        procompetitive effects sufficient to justify
                                                 the injury resulting from the anticompetitive
    [HN6] In order to establish their claim
                                                 effects of the restraint. Id. The plaintiff is
under Section 1 of the Sherman Act, the
                                                 then left to prove that the legitimate
Promoters must prove that the NCAA [**9]
                                                 procompetitive objectives can be achieved in
"(1) participated in an agreement that (2)
                                                 a substantially less restrictive manner. Id.
unreasonably restrained trade in the relevant
market." Nat'l Hockey League Players'                This court has held that [HN8] "the
Assoc. v. Plymouth Whalers Hockey Club,          determination of a relevant market is
325 F.3d 712, 718 (6th Cir. 2003). The           composed of the articulation of a legal test
NCAA does not dispute the Promoters'             which is then applied to the factual
claim that the Two in Four Rule represents       circumstances of each case." White &
                                                 White, Inc. v. Amer. Hosp. Supply Corp.,
                                                                                       808
723 F.2d 495, 499 [*960] (6th Cir. 1983)                rather, is an enquiry meet for
(citations omitted) (emphasis in original).             the case, looking to the
Accordingly, while a district court's                   circumstances, details, and logic
conclusion concerning what constitutes the              of a restraint. The object is to
relevant market is subject to the clearly               see whether the experience of
erroneous [**11] standard of review, "the               the market has been so clear, or
district court's formulation of the market              necessarily will be, that a
tests may be freely reviewed on appeal as a             confident conclusion about the
matter of law[.]" Id. at 500.                           principal     tendency    of    a
                                                        restriction will follow from a
    [HN9] When applying the rule of reason,
                                                        quick (or at least quicker) look,
the courts have occasionally applied what
                                                        in place of a more sedulous one.
has come to be called an abbreviated or
"quick-look" analysis. Accordingly, in
                                                   Id. at 780-81. In analyzing cases such as Bd
analyzing a restriction on the number of
                                                  of Regents, Indiana Fed'n of Dentists, and
NCAA football games which could be
                                                  Nat'l Soc. of Prof'l Eng'rs in which an
televised in Bd. of Regents, the Supreme
                                                  abbreviated or quick-look analysis was
Court held that a "naked restraint on price
                                                  applied, the Court found that [HN10] "in
and output requires some competitive
                                                  each of these cases . . . an observer with
justification even in the absence of a detailed
                                                  even a rudimentary understanding of
market analysis." Bd. of Regents, 468 U.S.
                                                  economics could conclude that the
at 110. Similarly, in FTC v. Indiana Fed'n
                                                  arrangements in question would have an
of Dentists, 476 U.S. 447, 90 L. Ed. 2d 445,
                                                  anticompetitive effect on customers and
106 S. Ct. 2009 (1986), the Court found that
                                                  markets." Id. at 770. [**13]
"no elaborate industry analysis is required to
demonstrate the anticompetitive character"            In its 2002 decision denying a
of a horizontal agreement among dentists to       preliminary injunction, the district court
withhold X-Rays from insurers for use in          found application of the quick-look rule of
benefit determinations. Id. at 459 (quoting       reason inappropriate, stating that "the two in
National Soc. of Professional Engineers v.        four rule simply does not have the 'obvious
United States, 435 U.S. 679, 692, 55 L. Ed.       anti-competitive effects' as the rule at issue
2d 637, 98 S. Ct. 1355 (1978)). Recently, in      in Board of Regents [did,] so as to dispense
California Dental Assoc. v. FTC, 526 U.S.         with the full rule of reason analysis." In its
756, 143 L. Ed. 2d 935, 119 S. Ct. 1604           2003 decision granting a preliminary
(1999), the Supreme [**12] Court granted          injunction, the court again [***5] suggested
certiorari to address when abbreviated or         that it was applying the full rule of reason
quick-look rule of reason is appropriate. Id.     analysis. See Worldwide Basketball & Sports
at 764-65. The Court reasoned that:               Tours, 273 F. Supp. 2d at 948. After
                                                  accurately announcing the requirements of
      there is generally no categorical           the full rule of reason, however, the district
      line to be drawn between                    court [HN11] stated that "if a Plaintiff can
      restraints that give rise to an             show that the restraint has actually produced
      intuitively obvious inference of            significant anti-competitive effects, such as
      anticompetitive effect and those            a reduction in output, a formal market
      that call for more detailed                 analysis is unnecessary." Id. at 949-50
      treatment. What is required,                (quoting Metro Industries, Inc. v. Sammi

                                                                                      809
Corp., 82 F.3d 839, 847-48 (9th Cir. 1996)         competition. Under the "quick-look"
(quoting Bhan v. NME Hosp., Inc., 929              approach, extensive market and cross-
F.2d 1404, 1413 (9th Cir. 1991)) (internal         elasticity analysis is not necessarily required,
quotation marks omitted)). This is, in fact,       but where, as here, the precise product
an able exposition of the quick-look               market is neither obvious nor undisputed,
standard. Indeed, the [**14]       authority       the failure to account for market alternatives
ultimately quoted by the district court-the        and to analyze the dynamics of consumer
Ninth Circuit's opinion in Bhan-itself relies      choice simply will not suffice. The district
upon Indiana Fed'n of Dentists, which the          court therefore erred in applying a quick-
Supreme Court referred to as          [*961]       look analysis.
forming the basis for the abbreviated or
                                                                         B.
quick-look analysis. See Bhan, 929 F.2d at
1413 (citing Indiana Fed'n of Dentists, 476            [HN13] "In considering what is the
U.S. at 460-61); see also California Dental        relevant market for determining the control
Assoc., 526 U.S. at 770 (characterizing            of price and competition, no more definite
Indiana Fed'n of Dentists as forming the           rule can be declared than that commodities
basis for "quick look").                           reasonably interchangeable by consumers for
                                                   the same purposes make up that 'part of the
    We believe that the district court was         trade or commerce', monopolization of
correct the first time: this is not a case which   which may be illegal." United States v. E.I.
is suitable for quick-look analysis. Far from      du Pont De Nemours & Co., 351 U.S. 377,
being a case in which "an observer with            395, 100 L. Ed. 1264, 76 S. Ct. 994 (1954).
even a rudimentary understanding of                [**16] The "relevant market encompasses
economics could conclude that the                  notions of geography as well as product use,
arrangements in question would have an
                                                   quality, and description." Nat'l Hockey
anticompetitive effect on customers and            League, 325 F.3d at 719 (quoting Tanaka v.
markets," id. (emphasis added), here the           Univ. of S. Cal., 252 F.3d 1059, 1063 (9th
relevant market is not readily apparent and        Cir. 2001) (internal quotation marks
the Plaintiffs have failed to adequately           omitted)). Relying on du Pont, this court has
define a relevant market, thereby making it        found the "reasonable interchangeability"
impossible to assess the effect of 98-92 on        standard to be the essential test for
customers      rather     than     merely     on   ascertaining the relevant product market test.
competitors. [HN12] While it is true that          White & White, Inc., 723 F.2d at 500.
"the rule of reason can sometimes be applied       Reasonable interchangeability "may be
in the twinkling of an eye, [**15] " Bd. of        gauged by (1) the product uses, i.e., whether
Regents, 468 U.S. at 109 n.39 (quoting P.          the substitute products or services can
Areeda, The "Rule of Reason" in Antitrust
                                                   perform the same function, and/or (2)
Analysis: General Issues 37-38 (Federal            consumer response (cross-elasticity); that is,
Judicial Center, June 1981) (parenthetical         consumer sensitivity to price levels at which
omitted)), this abbreviated or "quick-look"        they elect substitutes for the defendant's
analysis may only be done where the                product or service." Id. (citation omitted).
contours of the market and, where relevant,
submarket, are sufficiently well-known or              The Supreme Court has long recognized
defined to permit the court to ascertain           that [HN14] within a product market, "well-
without the aid of extensive market analysis       defined submarkets may exist which, in
whether the challenged practice impairs            themselves, constitute product markets for

                                                                                         810
antitrust purposes." Brown Shoe Co. v.           Although the NCAA does not appear to have
United States, 370 U.S. 294, 325, 8 L. Ed. 2d    disputed the Promoters' view that the
510, 82 S. Ct. 1502 (1962) (citing United        relevant market is Division I Men's
States v. E. I. du Pont de Nemours & Co.,        Basketball as a whole, the basis for that view
353 U.S. 586 at 593-595, 1 L. Ed. 2d 1057,       is not developed in the record. Indeed, the
77 S. Ct. 872). "The [**17] boundaries of        district court had no factual circumstances to
such a submarket may be determined by            which it could apply the legal test, since the
examining such practical indicia as industry     Promoters presented no evidence of
or public recognition of the submarket as a      "products or services that are either (1)
separate economic entity, the product's          identical to or (2) available substitutes for
peculiar characteristics and uses, unique        the defendant's product or service." White
production facilities, distinct customers,       and White, 723 F.2d at 500. Dr. Tollison,
distinct [*962] prices, sensitivity to price     the Promoters' expert witness, admitted that
changes, and specialized vendors." Id.           he did not look at those in competition with
                                                 the Promoters (their "competitors"), the
    A submarket "merely provides several
                                                 competitors' output, or their output relative
new factors, in addition to [the existing ones
                                                 to the Promoters. And he did no [**19] test
of] selling price, uses, and physical
                                                 to determine which events are in
characteristics, which the court may use in
                                                 competition with others. Finally, Dr.
determining interchangeability between
                                                 Tollison, when pressed, admitted that his
[***6] different products." White & White,
                                                 testimony regarding the Big Six market was
Inc., 723 F.2d at 500 (quotation, citation,
                                                 instead derived from "common sense."
and emphasis omitted). However, "a
submarket analysis incorporates, but does            Furthermore, the district court concedes
not replace, the standard market test. It        that Dr. Tollison "did not perform a study on
merely adds new factors to that test so as to    the effect of the Two in Four Rule on
more precisely define the market affected by     consumers of Division I mens' games.
the defendant's actions." Id. [HN15] The         According to Tollison, the loss of games
burden is on the antitrust plaintiff to define   necessarily constitutes a loss to consumers
the relevant market within which the alleged     in the relevant market because college
anticompetitive effects of the defendant's       basketball events are not fungible." However
actions occur. See Tanaka, 252 F.3d at           [HN16] products need not be fungible to be
1063. "Failure to identify a relevant market     market competitors for the purposes of
is a proper ground for dismissing a Sherman      antitrust analysis. The Supreme Court has
Act claim. [**18] " Nat'l Hockey League,         repeatedly held that "it is improper 'to
325 F.3d at 719-20 (quoting Tanaka, 252          require that products be fungible to be
F.3d at 1063 (citing Big Bear Lodging            considered in the relevant market.'" United
Ass'n v. Snow Summit, Inc., 182 F.3d 1096,       States v. Continental Can Co., 378 U.S. 441,
1105 (9th Cir. 1999))).                          449, 12 L. Ed. 2d 953, 84 S. Ct. 1738 (1964)
                                                 (quoting E. I. du Pont De Nemours & Co.,
    The district court found the relevant
                                                 351 U.S. at 394). Rather than fungibility, the
market in this case to be Division I mens'
                                                 proper analysis "is an appraisal of the 'cross-
college basketball, and noted that both the
                                                 elasticity' of demand in the trade." E. I. du
Promoters and the NCAA agreed with this
                                                 Pont De Nemours & Co., 351 U.S. at 394.
definition of the relevant market.
                                                 Indeed, Dr. Tollison admitted that a cross-
Worldwide, 273 F. Supp. 2d at 949.
                                                 elasticity study is necessary to determine

                                                                                      811
[**20] the relevant market, yet he concedes      For example, Mr. Guth stated that "in my
that he failed to perform such an analysis.      view, the relevant market appears to be
                                                 overall men's Division I basketball, and in
    The district court, however, did not base
                                                 particular, where the close substitution takes
its decision that the Two in Four Rule is
                                                 place in school-scheduled games and not
anticompetitive simply on the Division I
                                                 solely in terms of the impact on the plaintiff
Mens' College Basketball market taken as a
                                                 promoter group." He also produced [***7] a
whole. Instead, the court held that "it is
                                                 report in which he stated that "the most
undisputed that the relevant market in this
                                                 important product, for purposes of this
case is Division I mens' college basketball
                                                 litigation, should be defined as school-
together with the appropriate submarket
                                                 scheduled games." At trial, however, when
consisting of school-scheduled games,"
                                                 he was pointedly asked by counsel whether
where school-scheduled games are defined
                                                 by this he was saying that [**22] the
as games that a team is not required to play
                                                 relevant market is school-scheduled games,
but rather are selected by a school's [*963]
                                                 Guth responded: "Neither in words nor in
scheduling coach. Id. at 951. Contrary to
                                                 intent." Mr. Guth then clarified that while he
the district court's findings, however, the
                                                 believed that "the most important product,
record suggests that the submarket is not
                                                 that is the close substitutes, in this litigation
undisputed.
                                                 should be defined as school-scheduled
    Dr. Tollison did not testify that school-    games[,]" he nonetheless was "not saying
scheduled games are the relevant submarket,      that there is a school-scheduled game
nor did he provide any basis for arriving at     relevant market as that term is used by
that conclusion. Rather, he opined that the      economists with antitrust matters." Given
relevant submarket is pre- and post-season       this record, it would be difficult to conclude
tournaments, but because Tollison failed to      that Mr. Guth named school-scheduled
provide any basis for that opinion, the          games as the relevant submarket.
district court correctly found it unreliable.    Accordingly, we decline to relieve the
[HN17] Because the Promoters' failed to          Promoters of their burden based on such a
define the relevant market, and with it the      dubious stipulation by the defendant's
submarket, the district court had ample basis    expert.
to [**21] dismiss their claim. See Nat'l
                                                     Because the Promoters [HN18] failed to
Hockey League, 325 F.3d at 719-20
                                                 define the relevant market within which the
(quoting Tanaka, 252 F.3d at 1063 (citing
                                                 significance of the allegedly anti-
Big Bear Lodging Ass'n v. Snow Summit,
                                                 competitive effects can be gauged, and the
Inc., 182 F.3d 1096, 1105 (9th Cir. 1999))).
                                                 record is not sufficient to support the district
Instead, however, the district court relied on
                                                 court's holding with respect to the relevant
what it found to be the opinion of the
                                                 market, the Promoters cannot prevail on
defendant's expert, Mr. Guth-that the
                                                 their claim that the Two in Four Rule
relevant submarket is school-scheduled
                                                 violates Section 1 of the Sherman Act. Nat'l
games-an opinion with which the court said
                                                 Hockey League, 325 F.3d at 719-20.
Dr. Tollison had agreed. However, it is less
                                                 Accordingly, we need not reach the question
than clear that Mr. Guth defines school-
                                                 of whether the NCAA's Two in Four rule is
scheduled games as the relevant submarket.
                                                 anticompetitive [**23] or satisfies the rule
Admittedly, there is some evidence in the
                                                 of reason test. Nor do we reach the question
record which would support this proposition.
                                                 of whether the Promoters have suffered the

                                                                                       812
antitrust injury requisite to a showing of
standing, see Phototron Corp. v. Eastman
Kodak Co., 842 F.2d 95, 99 (5th Cir. 1988);
see also Brunswick Corp. v. Pueblo Bowl-
O-Mat, Inc., 429 U.S. 477, 489, 50 L. Ed. 2d
701, 97 S. Ct. 690 (1977) ("Plaintiffs must
prove antitrust injury, which is to say injury
of the type the antitrust laws were intended
to prevent and that flows from that which
makes the defendants' acts unlawful.").
Because the Promoters failed to meet their
duty to define the relevant market and
submarket, this court has insufficient
information to reach the question of whether
the Promoters suffered an antitrust injury-
that is, an injury resulting from interference
with "the economic freedom of participants
in [*964] the relevant market." Associated
Gen. Contractors of Cal., Inc. v. Cal. State
Council of Carpenters, 459 U.S. 519, 538,
74 L. Ed. 2d 723, 103 S. Ct. 897 (1983)
(citing United States v. Topco Assoc., 405
U.S. 596, 610, 31 L. Ed. 2d 515, 92 S. Ct.
1126 (1972)) (emphasis added).


CONCLUSION
    For the foregoing reasons, we
REVERSE [**24] the judgment of the
district court.

                    ***




                                                 813
    STEPHEN A. JONES, Plaintiff                       The     defendant    N.C.A.A.     is    an
               v.                                 unincorporated association of over 600
 NATIONAL COLLEGIATE ATHLETIC                     colleges and universities, half of which are
  ASSOCIATION, ET AL., Defendants                 state institutions.     The N.C.A.A. sets
                                                  eligibility rules for student-athletes at its
     CIVIL ACTION NO. 74-5519-T                   member institutions and also sponsors the
  UNITED STATES DISTRICT COURT                    N.C.A.A. hockey tournament for the
   DISTRICT OF MASSACHUSETTS                      championship of college hockey in the United
392 F. Supp. 295; 1975-2 Trade Cas. (CCH)         States. See Buckton v. N.C.A.A. 366 F. Supp.
                  P60,492                         1152, 1155 (D. Mass. 1972). It conducts its
              March 21, 1975                      affairs in close cooperation with the Eastern
                                                  Collegiate Athletic Conference (E.C.A.C.), an
                                                  unincorporated association of approximately
   OPINION AND ORDER                              200 four-year colleges and universities in the
                                                  Eastern United States.
   TAURO, D. J.
                                                       In April 1974, the plaintiff enrolled in
    This is an action brought by a                Northeastern's      College      of    Business
Northeastern      University    (Northeastern)    Administration. Upon matriculation, the
hockey player against the National Collegiate     plaintiff informed Northeastern officials of his
Athletic    Association (N.C.A.A.), The           desire to participate in the school's
N.C.A.A. Executive Director Walter Byers          intercollegiate ice hockey program. Plaintiff
(Byers), Northeastern, and Northeastern's         was then asked to complete both an
Director of Athletics, Herbert H. Gallagher       “Intercollegiate Ice [*297] Hockey Affidavit”
(Gallagher). The plaintiff seeks to enjoin the    prepared by the E.C.A.C. and an “Ice Hockey
defendants from declaring him ineligible to       Questionnaire” from the N.C.A.A.             The
play intercollegiate ice hockey. He also asks     completed documents revealed that during the
this court to restrain the N.C.A.A. and Byers     last three years of high school, and for the two
from imposing sanctions upon Northeastern         hockey seasons between his high school
for either permitting him to participate in       graduation and admission to college, the
intercollegiate hockey, or for providing him      plaintiff had played for a succession of
with financial assistance on the same basis       Canadian and American “amateur” hockey
that it provides such aid to other                teams. Plaintiff received compensation from
student-athletes with demonstrable financial      these teams not only while he was attending
need.                                             school, but also during the two years that he
                                                  was not pursuing his education.
                     ***
                                                      In order to complete his high school
                       I                          education, the plaintiff transferred to the
                                                  Verdun Catholic High School while he was
    The plaintiff is an American citizen and a    playing in Canada.
resident of Melrose, Massachusetts. He is
currently a full-time student at Northeastern's      The plaintiff graduated from the Melrose
Boston campus, and receives no financial aid      (Massachusetts) High School in June, 1972.
from the University. He is in good academic
standing.                                            On the basis of this information,
                                                  Gallagher, concluded that plaintiff was in



                                                                                        814
violation of the N.C.A.A. and E.C.A.A. rules         in restraint of trade falls within its ambit.
of amateurism and therefore [*298] ineligible        Standard Oil Co. v. United States, 221 U.S. 1,
for intercollegiate hockey.         Nevertheless,    59-60 (1911); Marjorie Webster Jr. College v.
Gallagher sought “waivers” from both                 Middle States Ass'n of Colleges & Secondary
organizations. If granted, these waivers would       Schools, 432 F.2d 650, 653 (D.C. Cir.), cert.
have allowed Northeastern to permit plaintiff        denied, 400 U.S. 965 (1970). As the Court
to represent the school in intercollegiate           noted in Apex Hosiery v. Leader, 310 U.S.
competition without fear of sanctions by either      469, 492-93 (1940):
association. On September 11, 1974, the
E.C.A.C. granted such a “waiver,” but on                 [The Sherman Act] was enacted in an era
November 18, 1974, the N.C.A.A. denied               of “trusts” and of “combinations” of
Northeastern's request.          Following the       businesses and of capital organized and
N.C.A.A.'s decision, Northeastern declared           directed to control of the market by
that the plaintiff was ineligible to represent the   suppression of competition in the marketing of
University in intercollegiate hockey games for       goods and services, the monopolistic tendency
the 1974-75 season.          The plaintiff then      of which had become a matter of public
brought this action.                                 concern.

                      ***                                In Apex the Court went on to recognize
                                                     that antitrust regulation is aimed primarily at
                       III                           combinations with commercial objectives, and
                                                     is applied only to a very limited degree to
    Count II of the complaint alleges that the       other types of organizations. Klors, Inc. v.
action of the N.C.A.A. in effectively barring        Broadway-Hale Stores, Inc., 359 U.S. 207,
plaintiff    from    intercollegiate    hockey       213 n.7 (1959). The proscriptions of the Act
constitutes a combination in restraint of trade      were “tailored for the business world,” not as
in violation of @ 1 of the Sherman Act and a         a mechanism for the resolution of the liberal
conspiracy to monopolize and attempt to              arts of the learned professions. Eastern R.R.
monopolize in violation of @ 2. Alleging that        Presidents Conference v. Noerr Motor Freight,
the action of the N.C.A.A. has injured the           Inc., 365 U.S. 127 (1961); See Goldfarb v.
plaintiff “in his business and property as an        Virginia State Bar, 497 F.2d 1, 15 (4th Cir.),
undergraduate college student, as a                  cert. granted 95 S. Ct. 223 (1974); cf. Nankin
student-athlete and as a hockey player,”             Hospital v. Michigan Hospital Service, 361 F.
plaintiff seeks an injunction and treble             Supp. 1199, 1201 (E.D. Mich. 1973).
damages pursuant to the remedial provisions
of the Clayton Act. (15 U.S.C. @@ 15, 26).               Accordingly, the instant case is
                                                     particularly inappropriate for application of
    A threshold question is whether the              the Sherman Act. The plaintiff is currently a
Sherman Act reaches the actions of N.C.A.A.          student, not a businessman in the traditional
members in setting eligibility standards for         sense, and certainly not a “competitor” within
intercollegiate athletics. On the basis of the       the contemplation of the antitrust laws. The
existing record, this court concludes that it        “competition” which the plaintiff seeks to
does not.                                            protect does not originate in the marketplace
                                                     or as a sector of the economy but in the
    Despite the broad wording of the Sherman         hockey rink as part of the educational program
Act, it has long been settled that not every         of a major university.        And, of equal
form of combination of conspiracy allegedly          significance, plaintiff has so far not shown



                                                                                          815
how the action of the N.C.A.A. in setting           from participation in the marketplace. “The
eligibility guidelines has any nexus to             principle of the group boycott cases--that it is
commercial or business activities in which the      prima facie unreasonable for a dominant
defendant might engage.                             group to combine to coerce--is not [otherwise]
                                                    applicable.” Barber, Refusals to Deal Under
    Even assuming, however, that the                the Federal Anti-Trust Laws, 103 U. of Pa. L.
activities of the defendant at issue in this        Rev. 847, 876-77 (1955).
lawsuit are governed by the antitrust laws, it is
unlikely that the plaintiff will be able to show        In the instant case, it is unlikely that the
a violation of either section 1 or section 2.       plaintiff will be able to show that such
                                                    scienter is present.       The N.C.A.A. was
     Plaintiff's primary contention is that the     originally established to promote amateurism
action of the N.C.A.A. denying him [*304]           in college sports and to integrate
access to intercollegiate hockey competition        intercollegiate athletics into the educational
amounts to a group boycott, a classic per se        programs of its member institutions. The
violation of Section 1.        Klors, Inc. v.       N.C.A.A. eligibility rules were not designed to
Broadway-Hale Stores, Inc. 359 U.S. 207             coerce students into staying away from
(1959); Kiefer-Stewart Co. v. Seagram &             intercollegiate athletics, but to implement the
Sons, 340 U.S. 211 (1951). See Whitten v.           N.C.A.A. basic principles of amateurism,
Paddock Pool Builders, Inc., 508 F.2d 547,          principles which have been at the heart of the
559 (1st Cir. 1974). In essence, the plaintiff is   Association since its founding. Any limitation
arguing that the actions of the N.C.A.A.            on access to intercollegiate sports is merely
member institutions amount to a “secondary          the incidental result of the organization's
boycott” since the association's pressure           pursuit of its legitimate goals. Its conduct
initially falls upon Northeastern. Cf. College      does not, therefore, rise to the level of a
Athletic Placement Service, Inc. v. N.C.A.A.,       violation of section 1. See College Athletic
Civil No. 74-1144 (D. N.J. August 22, 1974),        Placement Service, Inc. v. N.C.A.A., Civil No.
aff'd No. 74-1144 (3rd Cir. Nov. 25, 1974).         74-1144 (D. N.J. Aug. 22, 1974).
See generally, Turner, The Definition of
Agreement under the Sherman Act: Conscious              Finally, the plaintiff alleges that the
Parallelism & Refusals to Deal, 75 Harv. L.         actions of the association amount to an
Rev. 665 (1962).                                    attempt or conspiracy to monopolize in
                                                    violation of section 2. So far, however, there
    In order to make out a group boycott claim      is no evidence in this case which would allow
the plaintiff must allege that the defendant's      this court to conclude that there is a
purpose was to exclude a person or group            substantial likelihood of the plaintiff's
from the market or accomplish some other            showing that the N.C.A.A.'s eligibility
anti-competitive objective.       Joseph E.         decisions were made for the purpose of
Seagram & Sons, Inc. v. Hawaiian Oke &              forming a monopoly. Indeed, there is no
Liquors Ltd. 416 F.2d 71, 76 (9th Cir. 1969),       evidence presently on the record that the
cert. denied, 296 U.S. 1062 (1970). See also        Association's current pre-eminence in the field
Ford Motor Co. v. Webster's Auto Sales, Inc.,       is the result of anything other than its own
361 F.2d 874 (1st Cir. 1966). The issue in          skill, foresight and industry. See United
group boycott cases then is not merely the          States v. Aluminum Co. of America, 148 F.2d
existence or nonexistence of a concerted            416 (2d Cir. 1945) (L. Hand, J.). Accordingly,
refusal to deal, but rather whether the             plaintiff's claim of a violation of Section 2
association was designed to exclude outsiders       cannot serve as a basis for preliminary relief at



                                                                                          816
this time.

    This court concludes, therefore, that the
plaintiff has not demonstrated a substantial
likelihood of success with respect to either
count of his complaint. And so plaintiff's
request for a preliminary injunction is
DENIED. The temporary restraining order
issued on December 9, 1975, is hereby
vacated except insofar as it enjoins the
defendants from sanctioning or disciplining
Northeastern for having permitted the plaintiff
to play ice hockey.

    So ORDERED.




                                                  817
STEVE JUSTICE, DAVID WOOD, IVAN                              The plaintiffs bring both constitutional
   LESNIK AND CRAIG VESLING,                             and antitrust claims.       The constitutional
            Plaintiffs                                   claims are brought pursuant to 42 U.S.C. @
                v.                                       1983, with jurisdiction invoked under 28
NATIONAL COLLEGIATE ATHLETIC                             U.S.C. @ 1343. The antitrust claim alleges
     ASSOCIATION, Defendant                              violation of Section 1 of the Sherman Act, and
                                                         jurisdiction is invoked under 28 U.S.C. @@
          No. 83-552 TUC ACM.                            1331 and 1337 and Section 16 of the Clayton
   United States District Court, District                Act, 15 U.S.C. @ 26.
                 Arizona.
577 F. Supp. 356; 1984-1 Trade Cas. (CCH)                    The defendant filed a motion to dismiss,
                  P65,934                                or in the alternative, a motion for summary
           November 18, 1983.                            judgment pursuant to Rules 12 and 56 of the
                                                         Federal Rules of Civil Procedure, respectively.
                                                         This Court held a hearing on the motions for
OPINION: [*360] MEMORANDUM OF                            preliminary relief and for dismissal or
DECISION AND ORDER                                       summary judgment on October 18, 1983.
                                                         From the testimony presented [*361] and
    KELLEHER, District Judge.*                           memoranda and exhibits received, the Court
                                                         finds as follows:
    The     plaintiffs   in    this     action,
student-athlete players at the University of             I. FACTS
Arizona, request that a preliminary injunction
be issued against the National Collegiate                    The pertinent facts on this record are
Athletic Association (NCAA) to prevent                   without significant dispute. The four plaintiffs
enforcement of NCAA sanctions which render               in this action are members of the University of
the University of Arizona football team                  Arizona varsity football team. Plaintiff Lesnik
ineligible to participate in post-season                 is a senior undergraduate in his last year of
competition in the 1983 and 1984 seasons or              eligibility.    Plaintiff Wood is a junior
to make television appearances in the 1984               undergraduate. Plaintiffs Vesling and Justice
and 1985 seasons.1                                       and sophomore undergraduates, although
                                                         Justice is classified as a “freshman red shirt”
                                                         for purposes of athletic eligibility. Plaintiffs
* Honorable Robert J. Kelleher, Senior United            Lesnik, Wood, and Vesling are members of
States District Judge for the Central District of        the first-string football team. All four of the
California, sitting by designation.                      plaintiffs were awarded an athletic scholarship
1 The penalty imposed on the University of
                                                         to play football at the University of Arizona
Arizona provided that the television ban was to occur    and were recruited by the University prior to
in the 1983 and 1984 seasons, but contained a caveat     the imposition and announcement of the
adjusting the television sanction to affect the 1984
and 1985 seasons if the university had already entered
into a “binding commitment” to appear on a football          (Continued)
telecast during the 1983 season.          The caveat
concerning non-interference with existing television     while on probation. Because the University of
contracts is in accordance with Section 7-(c) of the     Arizona had entered into a contract for a television
NCAA Enforcement Procedures, which provides that         appearance during the 1983 season prior to the
“the penalty [banning television appearances] shall      imposition of the sanctions, the television sanction
specify that the institution may not enter into any      was adjusted to apply to the 1984 and 1985 seasons.
contracts or agreements” for television appearances


                                                                                                  818
sanctions.                                          taken pay, or has accepted the promise of pay,
                                                    in any form, for participation in that sport....”
    The NCAA is an unincorporated                   Id. Section 3-1-(g) of the constitution details
association that regulates a substantial part of    the types of practices that constitute “pay” for
the nation's intercollegiate athletics. It is       participation in intercollegiate athletics, 2 and
composed of approximately 960 four-year             the NCAA bylaws contain numerous
colleges and universities located throughout        provisions concerning recruitment of and
the United States.        Approximately fifty       financial aid to student athletes by member
percent of its members are private institutions     universities.
and fifty percent are funded by the federal or
state governments. The policies of the NCAA             On May 17, 1983, the Committee on
are established by its member universities and      Infractions of the NCAA issued Confidential
colleges at annual conventions and are carried      [*362] Report No. 183(107). The report
out by the NCAA Council. The Council is             contained the results of the NCAA's
composed of 46 persons who are elected by           investigation of the University of Arizona's
the membership at the annual conventions.           football program, and detailed numerous
1983-84 NCAA Manual, NCAA Constitution,             violations of the NCAA constitution and
Article 5, Section 1. The University of             bylaws by the University during the years
Arizona is a public institution and at all
pertinent times has been a member of the
NCAA.
                                                    2 Section 3-1-(g)(-(6) of the NCAA constitution
                                                    provides in pertinent part:
    The NCAA publishes annually a manual
which contains the NCAA constitution,               “(g) The following practices shall constitute 'pay' for
bylaws, executive regulations, enforcement          participation in intercollegiate athletics and are
procedures, recommended policies, and rules         expressly prohibited:        * * * * (6) Special
of order. The NCAA constitution states in           arrangements designed for a student-athlete, his
Article 2, Section 2, that “[a] basic purpose of    relatives or other friends with extra benefits not made
the Association is to maintain intercollegiate      available to members of the student body in general
                                                    or their relatives or other friends.             Special
athletics as an integral part of the educational
                                                    arrangements specifically prohibited include, but are
program and the athlete as an integral part of      not limited to:        special discounts or payment
the student body and, by so doing, retain a         arrangements on purchases; loans without interest;
clear line of demarcation between college           guarantees of bond; regular or periodic use of an
athletics and professional sports.”          The    automobile without (or at a reduced) charge;
constitution also sets forth certain principles     transportation to or from the site of a summer job
for the conduct of intercollegiate athletics.       without (or at a reduced) charge. * * *” Section
                                                    3-4-(a) of the NCAA constitution provides in
The section entitled the “Principle of              pertinent part: “(a) Any student-athlete who receives
Amateurism and Student Participation”               financial assistance other than that administered by
defines an amateur student-athlete as “one          his institution shall not be eligible for intercollegiate
who engages in a particular sport for the           competition, except as provided in Constitution
educational, physical, mental and social            3-1-(b), and except where: * * * (2) Assistance is
benefits derived therefrom and to whom              awarded solely on bases having no relationship to
                                                    athlete ability[.]”
participation in that sport is an avocation.” Id.
at Article 3, Section 1. This section also               Section 3(1)(g)(5) defines another prohibited
provides that a student-athlete shall not be        practice: “Payment of expenses of any student-athlete
eligible for participation in an intercollegiate    returning home to receive an award for his athletic
sport if the individual: “(1) Takes or has          accomplishments or for other personal purposes.”



                                                                                                 819
1975 through 1979. The Committee on                      Committee notified the University of its right
Infractions proposed that disciplinary action            to appeal any of the findings or penalties to
be imposed upon the University of Arizona,               the NCAA Council.4 No appeal was taken.
including loss to the University football
program of its eligibility both to participate in            The Infractions Committee's report
post-season competition following the 1983               documented numerous occasions on which
and 1984 seasons and to appear on television             staff members and representatives of the
during the 1984 and 1985 seasons.                        University football program -- including the
Ineligibility for post-season competition and
for television appearances are among the                     (Continued)
disciplinary measures which Section 7-(b) of
the NCAA Enforcement Procedure Program                       (9) Prohibition against the recruitment of
allows the Infractions Committee or Council              prospective student-athletes for a sport or sports for a
to impose against member institutions.3 The              specified period;

                                                              (10) A reduction in the number of either initial or
                                                         total financial aid awards (as defined by 0.1.600)
                                                         which may be awarded during a specified period;
3 Section 7-(b) of the NCAA Enforcement
Procedure Program states in part:                             (11) Requirement that an institution which has
                                                         been represented in an NCAA championship by a
     (b) Among the disciplinary measures, singly or      student-athlete who was recruited or received
in combination, which may be adopted by the              improper benefits (which would not necessarily
committee or Council and imposed against an              render the student-athlete ineligible) in violation of
institution are:                                         NCAA legislation shall return its share of net receipts
                                                         from such competition in excess of the regular
    (1) Reprimand and censure;                           expense reimbursement, or if said funds have not
                                                         been distributed, they shall be withheld by the NCAA
    (2) Probation for one year;                          executive director; or individual or team records and
                                                         performances shall be vacated or stricken; or
    (3) Probation for more than one year;                individual or team awards shall be returned to the
                                                         Association, or any combination of the preceding
    (4) Ineligibility for   one   or   more   NCAA       penalties.
championship events;
                                                             NCAA Manual: NCAA Enforcement Procedure
    (5) Ineligibility for invitational and post-season   Program, Section 7-(b).
meets and tournaments;
                                                         4 The NCAA Enforcement Program regulations
     (6) Ineligibility for any television programs       provide that a member university has 15 days from
subject to the Association's control or administration   the time it receives the Infraction Committee's report
or any other television programs involving live          to give the NCAA Council written notice of appeal of
coverage of the institution's intercollegiate athletic   the Committee's findings, the proposed penalty, or
team or teams in the sport or sports in which the        both. See NCAA Enforcement Procedure, Section
violations occurred;                                     5(b). The member university may submit a written
                                                         appeal and be represented before the Council at the
    (7) Ineligibility of the member to vote or its       time the appeal is heard. The letter containing the
personnel to serve on committees of the Association,     Committee's findings stated that should the University
or both;                                                 of Arizona appeal either the findings or the proposed
                                                         penalties, the Committee would submit an “expanded
    (8) Prohibition against an intercollegiate sports    confidential report” to the Council that would include
team or teams participating against outside              additional information in accordance with Section 6
competition for a specified period;                      of the Enforcement Program.



                                                                                                     820
then head coach of the football team --              the Enforcement Procedure Program -- which
provided compensation or extra benefits to           allows the Infractions Committee to impose
student athletes who are either in the               sanctions -- and the Infractions Committee
University's football program or being               vote were agreements among representatives
recruited for the program. Specifically, the         of member institutions in competition with the
football staff was found to have provided the        University of Arizona to exclude it from the
student athletes with benefits such as free          market for televised and post-season
airline transportation between school and their      competition.As such, the plaintiffs contend,
homes, free lodging, and cash and bank loans         this “concerted action” constitutes an illegal
for the athletes' car payments, rental               group boycott which should be deemed a per
payments, and personal use. The University           se violation of Section 1 of the Sherman Act.
of Arizona has at no time denied that these
violations occurred. Neither do the plaintiffs           The defendant makes the following
in this action dispute the fact that the             arguments in response: (a) the plaintiffs have
violations did occur.                                not suffered an “antitrust injury” sufficient to
                                                     entitle them to equitable relief under the
                      ***                            antitrust laws; (b) because the sanctions do not
                                                     affect “trade” or “commerce,” the Sherman
    The plaintiffs . . . allege that the sanctions   Act is not applicable; (c) the NCAA
by an association of colleges and universities       procedure, assuming it constitutes a boycott,
in competition with the University of Arizona        does not have an anti-competitive purpose but
constitute a group boycott in violation of           rather promotes the salutary goals of a private
Section 1 of the Sherman Act.                        sports association; thus, it is properly treated
                                                     under the rule a reason; and (d) the sanctions
    The plaintiffs allege further that by            are a reasonable restraint under the rule of
precluding them from competing with other            reason.
highly rated college football teams in
post-season play and denying them the                    a. Standing
exposure necessary to compete for contracts
and bonuses with professional football teams             Section 1 of the Sherman Act prohibits
upon graduation, the sanctions will cause            “every contract, combination... or conspiracy,
them immediate and irreparable harm if not           in restraint of trade or commerce among the
corrected before post-season bowl game               several states.” 15 U.S.C. @ 1. The Clayton
invitations are extended in November of 1983.        Act provides standing to sue for both treble
The plaintiffs thus seek a preliminary               damages under section 4, 15 U.S.C. @ 15, and
injunction prohibiting the NCAA from                 for injunctive relief under section 16, 15
implementing the sanctions.                          U.S.C. @ 26 for violations of the Sherman
                                                     Act. The plaintiffs here seek only injunctive
                      ***                            relief. Section 16 of the Clayton Act provides
                                                     in pertinent part:
    The Merits -- Antitrust Claim
                                                             “Any person, firm, corporation, or
    The plaintiffs allege that the NCAA's                association shall be entitled to sue for
imposition of the sanctions constitutes an               and have injunctive relief, in any court
unreasonable restraint of trade under Section 1          of the United States having
of the Sherman Act. The plaintiffs allege                jurisdiction over the parties, against
further that both the enactment of Section 7 of          threatened loss or damage by a



                                                                                           821
    violation of the antitrust laws... when           and (6) that plaintiffs will be drafted and sign
    and under the same conditions and                 contracts with professional teams based at
    principles as injunctive relief against           least in part on their post-season or televised
    threatened conduct that will cause loss           performance.
    or damage is granted by courts of
    equity, under the rules governing such                The plaintiffs have completely ignored the
    proceedings....” 15 U.S.C. @ 26.                  defendant's contention that the alleged injury
                                                      is too speculative to provide plaintiffs with
    Under section 16, the plaintiffs are not          standing under section 16. They set forth no
required to show an injury to their “business         discussion or authority to support their
or property” as they would be in an action for        conclusory allegation that their “injury” is
treble damages under section 4. See In re             cognizable in equity; virtually their entire
Multidistrict Air Pollution M.D.L. No. 31, 481        standing argument consists of quotations
F.2d 122 (9th Cir.1973), cert. denied, 414 U.S.       which distinguish between the standing
1045, 94 S.Ct. 551, 38 L.Ed.2d 336 (1973).            requirements of section 4 and section 16.
Instead, in order to have standing under
section 16, the plaintiffs must show: “(1) a              This Court is well aware that a plaintiff
threatened loss or injury cognizable in equity        need only show threatened rather than actual
(2) proximately resulting from the alleged            injury under section 16, but it does not share
antitrust violations.” City of Rohnert Park v.        plaintiffs' apparent belief that section 16
Harris, 601 F.2d 1040 (9th Cir.1979), cert.           provides standing for any threatened injury, no
denied, 445 U.S. 961, 100 S.Ct. 1647, 64              matter how insignificant the threat or
L.Ed.2d 236 (1980).                                   attenuated the causal nexus between the
                                                      alleged injury and violation. Under section
    [*376] The threatened injury alleged by           16, a plaintiff must demonstrate a significant
the plaintiffs in their complaint is the loss of      threat of injury from a violation of antitrust
potential professional contracts or bonuses           laws likely to continue or recur, see Zenith
that would result from the plaintiffs'                Radio v. Hazeltine Research, Inc., 395 U.S.
participation in post-season or televised             100, 130, 89 S.Ct. 1562, 1580, 23 L.Ed.2d 129
football games. The defendant argues that             (1969), and that it is “reasonably likely” that
such an injury is so speculative that it fails to     the contingencies upon which the injury is
meet even the lower threshold standing                dependent will occur. See Los Angeles
requirement of section 16, and points out that        Memorial Coliseum Commission v. National
the plaintiffs' threatened injury is based on the     Football League, 468 F.Supp. 154, 159
occurrence of the following contingencies:            (C.D.Cal.1979). Although it is likely or even
(1) that the University of Arizona will compile       certain that the plaintiffs will not be able to
a good record despite the “vagaries and upsets        play in a bowl game in 1983 if the sanctions
inherent in college football”; (2) that bowl          remain intact, it is a much different and more
game committees will select the University of         speculative proposition whether the plaintiffs
Arizona based on its record; (3) that the             will lose professional bonus contracts. See
plaintiffs will continue to play for the team,        Parish v. NCAA, 361 F.Supp. 1220, 1229
avoiding injury or displacement by other              (W.D.La.1973), aff'd, 506 F.2d 1028 (5th
athletes; (4) that the plaintiffs will play well in   Cir.1975).      In addition to having the
post-season competition or on television; (5)         opportunity to participate in the University of
that the plaintiffs' post-season performance          Arizona football team's entire regular season
will cause professional scouts to notice talent       schedule, the plaintiffs have also had the
that they would have otherwise overlooked;            opportunity by virtue of the postponement of



                                                                                            822
the television sanction to play in games in        plaintiff alleged that if a regional shopping
which the University of Arizona football team      center were constructed in Santa Rosa, this
has been featured on regional television. The      would discourage the development of a
speculative nature of the threatened injury        similar shopping center in Rohnert Park. The
alleged by the plaintiffs in this case stands in   Ninth Circuit rejected the plaintiff's claim that
direct contrast to the positions of the athletes   the development threatened injury cognizable
in two cases cited by the plaintiffs in their      in equity under In Re Multistrict, 481 F.2d at
argument on the merits of the antitrust claim.     130-31, stating that it was not clear from the
See Linseman v. World Hockey Association,          record whether the plaintiff's commercially
439 F.Supp. 1315 (D.Conn.1977) and Denver          zoned land would be available for commercial
Rockets v. All-Pro Management, Inc., 325           use or whether its value would be affected by
F.Supp. 1049 (C.D.Cal.1971). In Linseman           the location of the Santa Rosa center. As to
and Denver Rockets, the plaintiff had already      the proximate cause requirement, the court
signed a professional contract, but the league     stated similarly: “Rohnert Park has not made
bylaws of a professional association rendered      a sufficient showing that, absent the alleged
him ineligible to play because of his age or       antitrust violations by appellees, its
college status.The plaintiff in each of those      commercial area would have been selected as
cases had clearly suffered an injury in terms of   a site for shopping center development....
the loss of salary and impeded career              [T]he question whether the appellants would
advancement that was not speculative; there        have benefited but for appellees' actions is
was no question as to the athlete's ability or     entirely speculative.” Id. at 1045.
readiness to obtain a professional contract.
                                                        In Los Angeles Memorial Coliseum
     The plaintiffs have also failed to address    Commission v. National Football League, 468
the second requirement of the standing test        F.Supp. 164, the Coliseum Commission
under section 16, which provides that              alleged that the National Football League
proximate cause must be shown between the          regulation which required an affirmative vote
antitrust violation and the threatened injury.     of three-fourths of the league's members
This part of the test is closely related to the    before a member team could transfer its
inquiry whether the injury is too speculative to   franchise from one city to another threatened
be cognizable in equity, and [*377] involves       to deprive it of revenue that it would receive if
an assessment of some of the “contingencies”       another team were to transfer to its standium.
mentioned above.        The proximate cause        The court made a similar inquiry to that of the
inquiry has been employed by courts to ensure      Ninth Circuit in Rohnert Park, stating that in
that the court's injunctive relief, if granted,    order to show the requisite “significant threat”
would actually prevent the injury from             of injury under Zenith Radio, 395 U.S. 100, 89
occurring. In Rohnert Park v. Harris, 601 F.2d     S.Ct. 1562, 23 L.Ed.2d 129, the plaintiff
1040 (9th Cir.1979), the City of Rohnert Park      needed to allege a “reasonable likelihood” that
sought to enjoin the City of Santa Rosa and        an affirmative vote by club owners would
the Department of Housing and Urban                actually bring a professional team to the
Development from developing a regional             Coliseum. The court stated: “If, for example,
shopping center on the grounds that they           it is likely that the only team that wants to
conspired to monopolize retail merchandise         move to Los Angeles decides to play in
space in the regional area. The plaintiff had      [another stadium], then there is no significant
itself designated nearby areas as a commercial     threat of injury to the Coliseum resulting from
zone, and the facilities proposed for the zone     [the challenged regulation].” Id. at 161
included a regional shopping center. The           (emphasis in original).



                                                                                         823
     The essential question in applying the               Cir.1979), with Denver Rockets v. All-Pro
proximate cause requirement of the standing               Management, Inc., 325 F.Supp. 1049
test in this case is whether there is a                   (C.D.Cal.1971) (but for regulation preventing
“reasonable likelihood” that the preconditions            basketball association from signing athletes
to the alleged injury will occur, or in the               until four years after the graduation of their
alternative, whether the plaintiffs have shown            high school class, plaintiff would have
a threatened injury that is likely to be                  received contract to play professional
redressed by injuctive relief. If, for example,           basketball). Based on the affidavits and
it were likely that the plaintiffs would be               memoranda considered, the Court concludes
offered professional contracts based on                   that there is little more than a remote
professional scouts' observations of their                possibility that the plaintiffs' “value” in the
performance in practice sessions, in regular              professional football trade would be
season or post-season all-star games or on                substantially different but for the sanctions, or
game films, the plaintiffs would not meet the             would improve were this Court to grant the
proximate cause requirement of the standing               injunctive relief. See City of Rohnert Park v.
test. A similar result would obtain if the                Harris, 601 F.2d at 1045, Citing Warth v.
University of Arizona football team's regular             Seldin, 422 U.S. 490, 495, 95 S.Ct. 2197,
season performance was not good enough to                 2203, 45 L.Ed.2d 343 (1975).
prompt one of the bowl game committees to
issue an invitation to the team.15 Assuming                   Although the Court is of the opinion that
that the team's performance did warrant a                 the plaintiffs' allegation of threatened injury to
bowl invitation and that it was selected to play          their ability to compete for professional
in post-season competition, a less, than                  contracts is too remote to meet the standing
outstanding performance in the post-season                requirement of section 16 of the Clayton Act,
[*378] game or simply a perceived lack of                 its disposition of the plaintiffs' group boycott
ability to play professional football could also          claim on the merits precludes the necessity to
cause the plaintiffs not to be offered a                  dismiss the claim for lack of standing.
professional contract.                                    Assuming, arguendo, that the plaintiffs have
                                                          demonstrated an injury cognizable in equity
    In sum, there are simply too many factors             which is proximately related to the alleged
other than the NCAA sanctions and the                     antitrust violation, the Court will proceed to
alleged injury for this Court to find that a              evaluate the justiciability and merits of the
proximate relationship exists.      Compare               plaintiffs' claim.
Rohnert Park v. Harris, 601 F.2d 1040 (9th
                                                              b. Justiciability

15 Given the University of Arizona football team's
                                                              Section 1 of the Sherman Act proscribes
current record of six wins, three losses and one tie,     only a “restraint of trade or commerce among
and the fact that it is not ranked among the top twenty   the several states.” Although the NCAA does
teams in the nation, it is questionable whether it        not claim that it is entitled to a wholesale
would be selected to play in a bowl game if the Court     exemption from the Sherman Act as a
were to grant the plaintiffs' motion for a preliminary    non-profit association, it does argue that the
injunction. Rather than base its holding on a
                                                          NCAA sanctions at issue here are not a
prediction which it is not qualified to make, however,
the Court will assume for purposes of the standing        restraint of “trade” or “commerce” and thus
inquiry that it is “reasonably likely” that the           are not subject to the Sherman Act. The
University of Arizona would be extended an                plaintiffs correctly point out, however, that
invitation to a post-season bowl game.                    under the Supreme Court's decision in McLain



                                                                                                 824
v. Real Estate Board, 444 U.S. 232, 242-43,          competition, and that the sanctions in this case
100 S.Ct. 502, 509, 62 L.Ed.2d 441 (1980),           are not unreasonable restraints under the rule
subject matter jurisdiction is established over      of reason.
an antitrust claim if the defendant's overall
business activity -- not merely the particular           Section 1 of the Sherman Act does not
conduct in question -- has a substantial effect      prohibit all concerted actions or agreements,
on interstate commerce. See Turf Paradise,           but only those which unreasonably restrain
Inc. v. Arizona Downs, 670 F.2d 813, 818-19          trade. See Chicago Board of Trade v. United
(9th Cir.1982), cert. denied, 456 U.S. 1011,         States, 246 U.S. 231, 38 S.Ct. 242, 62 L.Ed.
102 S.Ct. 2308, 73 L.Ed.2d 1308 (1982);              683 (1918); Standard Oil Co. v. United States,
Western Waste Service v. Universal Waste             221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911).
Control, 616 F.2d 1094, 1097 (9th Cir.1980),         In situations involving concerted action, the
cert. denied, 449 U.S. 869, 101 S.Ct. 205, 66        pertinent inquiry is whether the refusal to deal
L.Ed.2d 88 (1980).                                   is so anticompetitive in purpose or effect as to
                                                     be an unreasonably restraint of trade.See
    The national scope of the NCAA's                 Neeld v. National Hockey League, 594 F.2d
regulatory activity is sufficient to establish the   1297, 1298 (9th Cir.1979). Courts have
requisite interstate involvement here. The           recognized that certain agreements or
NCAA schedules games and tournaments that            practices, because of their pernicious effect on
call for the transportation of teams across state    competition and “lack of any redeeming
lines, and regulates recruiting that takes place     quality,” are conclusively presumed to be
on a nationwide basis.            See generally      unreasonable and thus per se illegal.See
Hennessey v. NCAA, 564 F.2d 1136, 1150               Northern Pacific v. United States, 356 U.S. 1,
(5th Cir. 1977). In addition, the NCAA               5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958).
controls bids involving hundreds of millions         Group boycotts are often included in the per
of dollars for the interstate television             se category.      See, e.g., Klor's, Inc. v.
broadcasting of intercollegiate sports events.       Broadway-Hale Stores, Inc., 359 U.S. 207, 79
See Board of Regents of the University of            S.Ct. 705, 3 L.Ed.2d 741 (1959); Fashion
Oklahoma v. NCAA, 546 F.Supp. 1276,                  Originators Guild of America, Inc. v. FTC,
1291-92 (W.D.Okl.1982), aff'd in part, 707           312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949
F.2d 1147 (10th Cir.1983), cert. granted, U.S.,      (1941).
104 S.Ct. 272, 78 L.Ed.2d 253 (983).
                                                         The group boycott cases have typically
    c. Group Boycott Claim                           involved a concerted attempt by a group of
                                                     competitors at one level to protect itself from
    The plaintiffs contend that the sanctions        competition from non-group members who
which exclude the University of Arizona's            are attempting to compete at that, same level.
football team from post-season and televised         See, Smith v. Pro Football, Inc., 593 F.2d
competition constitute an agreement by an            1173, 1178 (D.C.Cir. 1978). The per se rule is
association of its competitors to prevent the        applicable when the exclusionary or coercive
University      from     reaching    consumers;      conduct is a direct affront to competition, or
accordingly, plaintiffs contend, the sanctions       “naked restraint,” rather than action that
are a per se illegal group boycott under section     merely has an incidental effect on
1 of the Sherman Act.            The defendant       competition. See Neeld v. National Hockey
responds that a boycott by the members of an         League, 594 F.2d at 1300.
association is not illegal under the Sherman
Act unless it is [*379] intended to stifle               In this case, the attributes of a per se



                                                                                           825
illeged boycott simply do not exist. There is            (D.Neb.1981), aff'd, 665 F.2d 222 (8th
concerted activity only in the sense that the            Cir.1981) (tennis association rule prohibiting
NCAA is a membership organization                        use of certain tennis rackets was not subject to
enforcing rules contained in its constitution            per se rule where it served to protect fair
and regulations. The regulations at issue here,          competition in sport and did not involve
as distinguished from the rules government               agreement between business competitors in
television contracts in Board of Regents of              traditional sense). Because neither section 7
Oklahoma v. NCAA, 707 F.2d 1147 (10th                    of the NCAA Enforcement Procedure
Cir.1983), pertain solely to the NCAA's stated           Program nor the sanctions imposed on the
goal of preserving amateurism. There has                 [*380] University of Arizona are “naked
been no showing by the plaintiffs that the               restraints” or “manifestly anticompetitive,”
NCAA, its member institutions, or the                    the NCAA sanctions are not subject to the per
Infractions Committee had any purpose to                 se rule but are rather to be reviewed under the
insulate themselves from competition by                  rule of reason. See United States Trotting
imposing sanctions on the University of                  Association v. Chicago Downs Association,
Arizona or any of the other universities                 Inc., 665 F.2d 781, 789 (7th Cir. 1981) (per se
currently on probation.16 To the contrary, the           rule inapplicable to trotting association's
purpose of the sanction is not only to preserve          prohibition against members' participation in
amateurism but to enhance fair competition               races on non-member tracks, where rule's
among         the     association's     member           purpose was not to exclude competition and
institutions.In addition, the imposition of              there was no showing that groups of drivers
sanctions pursuant to NCAA rules is simply               used association as a means to eliminate other
not “an agreement with business competitors              drivers from competition); Neeld v. National
in the traditional sense,” nor can it be said to         Hockey League, 594 F.2d 1297, 1299-1300
be without “any redeeming virtue.” See                   (9th Cir.1979) (bylaw of professional hockey
Gunter Harz Sports v. United States Tennis               league which precluded player with one eye
Association, 511 F.Supp. 1103, 1116                      from participating properly reviewed under
                                                         rule of reason where rule had safety purpose
                                                         and at most an incidental anticompetitive
                                                         effect); Bridge Corporation of America v. The
16 In stating that the sanctions were imposed
pursuant to an agreement by member universities that     American Contract Bridge League, Inc., 428
compete with the University of Arizona for television    F.2d 1365, 1370 (9th Cir.1970), cert. denied,
appearances and post-season bowl invitations, the        401 U.S. 940, 91 S.Ct. 940, 28 L.Ed.2d 220
plaintiffs imply that its fellow member universities     (1971) (refusal of bridge league to sanction
would wish to exclude it in order to increase their      local tournament if plaintiffs' computer was
chances of reaping such benefits. Thankfully, the        used, where motivated by desire to preserve
plaintiffs do not level this absured charge expressly;
rather, they admit that they “cannot specify the
                                                         integrity of scoring system, did not warrant
NCAA motives in imposing the sanctions.” See             application of per se rule); Cooney v.
Plaintiffs' Reply Memorandum in support of Motion        American Horse Shows Association, Inc., 495
for Preliminary Injunction, at p. 17 n. 2.               F.Supp. 424, 430 (S.D.N.Y.1980) (suspension
Accordingly, the Court will not address the initial      of horse trainer under association drug rule
suggestion except to point out that the entire           creating rebuttable presumption of trainer
Convention of the NCAA, presumably including the
                                                         responsibility for horse's condition could not
University of Arizona, adopted the regulation under
which the sanctions were imposed, and that the actual    be characterized as group boycott per se
decision to impose the sanctions were made by the six    illegal, given rule's purpose to foster fair
members of the Infractions Committee, not the entire     competition); Jones v. NCAA, 392 F.Supp.
membership.                                              295, 304 (D.Mass.1975) (per se rule not



                                                                                               826
applicable to NCAA rule barring student who        560 F.Supp. 591, 604 (D.Mass.1983); Blalock
had previously received compensation for           v. Ladies Professional Golf Association, 359
playing hockey from playing intercollegiate        F.Supp. 1260, 1264-68 (N.D. Ga.1973), or
hockey, where NCAA's purpose was not to            when the regulation does not satisfy the basic
exclude plaintiff from market but to promote       tenets of procedural fairness.      See, e.g.,
principles of amateurism).                         Linseman v. World Hockey Association, 439
                                                   F.Supp. 1315, 1321 (D.Conn.1977); Denver
    In addition to the fact that the NCAA          Rockets v. All-ProManagement, Inc., 325
sanctions are not a traditional group boycott in   F.Supp. 1049, 1064-65 (C.D.Cal.1971). In
the sense that they lack an anticompetitive        Denver Rockets, the court held that in order to
purpose, there is an independent reason why        come within the Silver exception to per se
they should be treated under the rule of           treatment for group boycotts, a regulation
reason. A clear trend has emerged in recent        must meet a three-pronged test:
years under which courts have been extremely
reluctant to subject the rules and regulations          [*381] “(1) There is a legislative mandate
of sports organizations to the group boycott       'or otherwise'
per se analysis. This trend is “[b]ased in part
upon the realization that “in some sporting            (2) The collective action is intended to
enterprises a few rules are essential to           accomplish (a) an end consistent with the
survival.”' Brenner v. World Boxing Council,       policy    justifying    self-regulation,    (b)
675 F.2d 445, 454-55 (2d Cir. 1982), quoting       reasonably related to that goal, and (c) is no
Hatley v. America Quarter Horse Association,       more extensive than necessary.
552 F.2d 646, 652-53 (5th Cir.1977). The
Supreme Court set the foundation for the               (3) The association provides procedural
treatment of sports association regulations        safeguards which assure that the restraint is
under the rule of reason in Silver v. New York     not arbitrary and which furnishes a basis for
Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246,       judicial review. Id.
10 L.Ed.2d 389 (1963).           In Silver, the
Supreme Court recognized a narrow exception            The plaintiffs in this case cite the Denver
to the per se invalidity of group boycotts when    Rockets case at length in arguing that the
a “justification derived from the policy of        NCAA sanctions constitute a group boycott
another statute or otherwise” mandates             that is per se unlawful. In Denver Rockets, a
application of the rule of reason. Id. at          National Basketball Association (NBA)
348-49, 83 S.Ct. at 1252. Courts have              regulation prohibited any member team from
extended the reasoning of Silver to situations     drafting a player until four years after his high
in which there is a need for self-regulation       school class had graduated. Under this rule,
inherent in an industry, and professional and      the plaintiff was barred from playing in the
amateur sports organizations have been             NBA even though he left college after two
included in this exception.                        years and had already played professional
                                                   basketball in a rival league for one year. The
    Sports organizations have not been given       court struck down the rule on grounds that the
unlimited discretion in adopting rules and         rule provided no opportunity for a hearing and
regulations. They have been subjected to           was overbroad, noting that the rule prohibited
treatment under the per se rule when the           the signing of not only college players but also
purpose of a regulation is to eliminate            those athletes who either did not desire to
business competition, see, e.g., M & H Tire        attend college or lacked the mental and
Company, Inc. v. Hoosier Racing Tire Corp.,        financial ability to do so. See id. at 1066.



                                                                                         827
    The plaintiffs argue that the sanctions        to its passage of the bylaw, the court stated:
imposed in this case fail the “fair procedure”     “[t]o avoid such an attack, a state would be
and “least restrictive means” aspects of the       required to notify and give the privilege of
Denver Rockets test.          This Court has       debate to all persons who might be so
previously examined and rejected the               affected. A statement of the problem in this
plaintiffs' contention that the NCAA could         context is sufficient to indicate the lack of
have employed less restrictive means under         merit in the plaintiffs' position.” Id. at
the circumstances of this case. Further, their     1146-47. The court went on to evaluate the
argument that they hould have been notified        bylaw under the rule of reason rather than the
and permitted to appear in the NCAA                per se rule, even though the plaintiffs had not
proceeding is not supported by the case law.       been afforded a hearing. As in Hennessey and
The Silver requirement that “some form of          Gunter Harz, providing notice and an
notice and, if timely requested, a hearing,”       opportunity for hearing to each individual who
373 U.S. at 361, 83 S.Ct. at 1259, was             is adversely affected by the NCAA sanctions
satisfied in this case by the notice and           would be so burdensome that it would
opportunity for hearing given to the member        undermine the very authority of the NCAA to
institution upon which the sanctions were          impose sanctions.       As noted previously,
imposed. Although both Silver and Denver           providing notice and a hearing to [*382] the
Rockets held that notice and a hearing were to     plaintiffs under the circumstances in this case
be afforded the non-member of the                  would be illogical as well as burdensome,
organization affected by the rule in question,     because the conduct of the plaintiffs is not at
such a procedure was not overly burdensome         issue.
in those cases.Silver does not require,
however, that an association provide for               The sanctions imposed by the NCAA in
hearings to any party affected adversely by a      this case are reasonably related to the
regulatory action when such a procedure            legitimate goals of preserving amateurism and
would be so burdensome administratively as         promoting fair competition in intercollegiate
to effectively preclude it from acting at all to   athletics. Moreover, they do not lack
promote the association's objectives. See          procedural safeguards.       Accordingly, the
Gunter Harz Sports v. United States Tennis         sanctions meet the tripartite test enunciated in
Association, 511 F.Supp. 1103, 1122                Denver Rockets and thus fall within the Silver
(D.Neb.1981), aff'd, 665 F.2d 222 (8th Cir.        exception providing for rule of reason analysis
1981) (tennis association not required to          for group boycotts that have legitimate
provide individual notice and hearing to           self-regulatory ends.
producer of type of tennis racket banned under
regulation where it would be overly                     NCAA regulations designed to preserve
burdensome to afford a hearing to all such         amateurism and fair competition have
parties adversely affected). In Hennessey v.       previously been upheld as reasonable
NCAA, 564 F.2d 1136 (5th Cir.1977), college        restraints under the rule of reason. See, e.g.,
athletic coaches who lost their jobs as a result   Hennessey v. NCAA, 564 F.2d at 1153-54;
of a NCAA bylaw limiting the number of             Jones v. NCAA, 392 F.Supp. at 304; College
coaches each school could retain challenged        Athletic Placement Service, Inc. v. NCAA,
the regulation on both constitutional and          1975-1 Trade Cases P60,117 (D.N.J.1974),
antitrust grounds.       Responding to the         aff'd, 506 F.2d 1050 (3d Cir.1974). In
plaintiffs' procedural due process argument        Hennessey, the court noted that the record was
that they should have been allowed an              “devoid of any evidence” that adoption of the
opportunity to address the enacting body prior     bylaw limiting the number of coaches at a



                                                                                         828
given institution was intended to injure the          amateur nature of the programs....” 564 F.2d
plaintiff coaches individually or as a group.         at 1153. The fact that the sanctions might
The court added that an awareness on the part         have an incidental anticompetitive effect on
of the members of the association enacting the        coaches or athletes does not in itself render
bylaw that there would be some individuals            them unreasonable restraints under the rule of
adversely affected could in no way be equated         reason.17 See Neeld v. National Hockey
with an anticompetitive intent. The court             League, 594 F.2d at 1300.
upheld the bylaw as a reasonable restraint,
stating that the bylaw had a rational
relationship to the objectives of the NCAA.
The court noted that pressures on member              17 The plaintiffs argue that the rationale of
universities to maintain ever-increasing staff        Hennessey and Jones is no longer applicable in light
size in order to remain competitive was               of National Society of Professional Engineers v.
threatening both the competitive and the              United States, 435 U.S. 679, 696, 98 S.Ct. 1355,
amateur nature of intercollegiate sports, and         1368, 55 L.Ed.2d 637 (1978) (“the Rule of Reason
found that the fundamental purpose of the             does not support a defense based on the assumption
                                                      that competition itself is unreasonable.”) and that the
bylaw was “to preserve and foster competition
                                                      NCAA cannot justify actions which exclude a
in intercollegiate athletics... and to reorient the   competition by assessing a “social” purpose such as
programs into their traditional role as amateur       promoting amateurism or “fair competition” under the
sports operating as part of the educational           rule of reason.” The plaintiffs' contention is belied by
processes.” Id. at 1153.                              a number of cases decided subsequent to Professional
                                                      Engineers      which have        upheld comparable
    In Jones v. NCAA, 392 F.Supp. 295, a              self-regulatory actions of sports organizations under
                                                      the rule of reason. See, e.g., Brenner v. World
NCAA rule prohibiting a player who had                Boxing Council, 675 F.2d 445, 455-56 (2d Cir.1982)
previously been compensated for playing ice           (boxing council's suspension of promoter for failing
hockey from participating in intercollegiate          to honor agreements with council or obey its rules did
hockey was similarly upheld as reasonably             not constitute group boycott that was either per se
related to the legitimate goal of preserving          illegal or unreasonable restraint); Gunter Harz Sports,
amateurism and promoting fair competition.            Inc. v. United States Tennis Association, 665 F.2d
                                                      222, 223 (8th Cir.1981) (tennis association regulation
The Jones court noted that “the N.C.A.A.
                                                      banning certain type of tennis racket from use in
eligibility rules were not designed to coerce         sanctioned tournaments upheld under rule of reason
students into staying away from intercollegiate       where purpose of regulation was to preserve
athletics, but to implement the N.C.A.A. basic        “essential character” of sport); Neeld v. National
principles of amateurism.” Id. at 304.                Hockey League, 594 F.2d 1297, 1300 (9th Cir.1979)
                                                      (enforcement by league bylaw prohibiting one-eyed
    The sanctions at issue in this case, like the     player from playing in league did not constitute
                                                      unreasonable restraint given safety purpose and “de
regulations uphled under the rule of reason in        minimis” anticompetitive effect); Cooney v.
Hennessey and Jones, have been shown to               American Horse Shows Association, Inc., 495
lack an anticompetitive purpose and to be             F.Supp. 424, 431 (D.Neb.1980) (suspension of horse
directly related to the NCAA objectives of            trainer for violation of drug rule designed to foster
preserving amateurism and promoting fair              fair competition and preserve integrity of sport held
competition. Like the bylaw in Hennessey,             reasonable where procompetitive benefits of the rule
                                                      were predominant). These cases demonstrate that
the NCAA sanction program was designed to
                                                      actions by sports organizations in preserving the
prevent intercollegiate athletic programs from        integrity of the sport and fair competition are
being driven by the pressures to “remain              reasonable restraints under the rule of reason, even if
competitive” into committing practices that           they operate to exclude some competitors and thus
“threaten both the competitive and the                have an incidental anticompetitive effect.



                                                                                                  829
     [*383] In sum, it is clear that the NCAA
is now engaged in two distinct kinds of
rulemaking activity. One type, exemplified by
the rules in Hennessey and Jones, is rooted in
the NCAA's concern for the protection of
amateurism; the other type is increasingly
accompanied by a discernible economic
purpose. See Board of Regents v. NCAA, 546
F.Supp. 1276, 1288-89 (W.D.Okl.1982), aff'd
in part, 707 F.2d 1147 (10th Cir.1983), cert.
granted, U.S., 104 S.Ct. 272, 77 L.Ed.2d
(1983) (price fixing in television contracts
held violative of antitrust laws). The NCAA
sanctions at issue here are clearly of the
former variety. Because the sanctions evince
no anticompetitive purpose, are reasonably
related to the association's central objectives,
and are not overbroad, the NCAA's action
does not constitute an unreasonable restraint
under the Sherman Act.

                     ***




                                                   830
       BRADFORD L. GAINES                          player for Vanderbilt during the 1986-89
                v.                                 football seasons. He is currently enrolled at
 NATIONAL COLLEGIATE ATHLETIC                      Vanderbilt to complete the thirteen additional
   ASSOCIATION, SOUTHEASTERN                       semester hours he needs to graduate. Gaines
  CONFERENCE, and VANDERBILT                       has attended Vanderbilt on a full athletic
          UNIVERSITY                               scholarship.

               No. 3:90-0773                           In late March of 1990, Gaines submitted a
United States District Court for the Middle        Petition For Special Eligibility and
 District of Tennessee, Nashville Division         Renunciation of College Eligibility to the
 746 F. Supp. 738; 1990 U.S. Dist. LEXIS           National Football League (“NFL”) declaring
               12460; 1990-2                       himself eligible for the NFL draft to be
        Trade Cas. (CCH) P69,238                   conducted on April 22-23, 1990.          The
       September 20, 1990, Entered                 paragraph     immediately    preceding    his
                                                   signature on the Petition contained the
                                                   following    language:        “I    HEREBY
JUDGES: Thomas A. Wiseman, Jr., Chief              IRREVOCABLY RENOUNCE ANY AND
United States District Judge.                      ALL REMAINING COLLEGE FOOTBALL
                                                   ELIGIBILITY I MAY HAVE. I WISH TO
OPINION: [*739] MEMORANDUM                         BE ELIGIBLE FOR THE NFL DRAFT
                                                   SCHEDULED FOR APRIL 22-23, 1990.”
  THOMAS A. WISEMAN, JR., CHIEF
UNITED STATES DISTRICT JUDGE                           On April 7-8, 1990, Gaines attended a
                                                   scouting combine in Indianapolis, Indiana.
    This cause of action came before the           The combine gave Gaines and other college
Court on August 31, 1990, on Gaines'               football players a chance to try out before the
Application for Temporary Restraining Order        scouts for various pro football teams. Gaines
[*740] and Preliminary Injunction. This            had no other contact with any NFL team prior
Court denied the Motion for a Temporary            to the draft, and he was not selected by any
Restraining Order on that date.       In the       team during any round of the draft.
September 13 hearing on Gaines' Motion for a
Preliminary Injunction, Gaines urged this              Shortly after [**3] the draft, Gaines was
Court to enjoin the Defendants from enforcing      contacted by a representative of one NFL team
certain rules (“Rules”) promulgated by the         regarding a possible free agency contract with
National Collegiate Athletic Association           that team. Mr. Tim Greer, who serves as the
(“NCAA”) which deem Gaines ineligible to           agent for Gaines' older brother, a football
compete in the 1990-91 college football            player in the Canadian Football League
season      for      Vanderbilt    University      (“CFL”), briefly discussed this possible free
(“Vanderbilt”).     This Court denied the          agency contract with the NFL team.
preliminary injunction from the bench and          However, the next day the team let Gaines
now issues this Opinion setting forth the          know that they were no longer interested in
reasons [**2] for the denial.                      signing him to a free agency contract.
                                                   Subsequently, Mr. Greer phoned numerous
                       I.                          teams in the NFL and the CFL on Gaines'
                                                   behalf, but Gaines has never entered into any
    The facts leading to this lawsuit are not in   contract with any professional team. Nor has
dispute. Bradford L. Gaines was a football         Greer received any compensation of any kind



                                                                                        831
from Gaines. Additionally, Greer has never               “no-agent” rule, makes any player ineligible
compensated Gaines in any way.                           for participation in any future intercollegiate
                                                         sport in which the player agrees, orally or in
     As a result of NCAA Rules 12.1.1(f),                writing, to be represented by an agent for the
12.2.4.2, and 12.3.1, Gaines is now ineligible           purposes of marketing the player's abilities in
to complete his fourth year of eligibility as a          the sport. This Rule applies even if the player
football player at Vanderbilt. Rule 12.1.1(f)1           receives no money or financial benefit of any
provides that an athlete loses his amateur               kind from the agent, even if the agent is a
status when he enters a professional draft or            family member or a close family friend, and
enters into an agreement with an agent to                even if the agent has not charged and agrees
negotiate a professional contract.         Rule          not to charge the player any fee.
12.2.4.2,2 commonly known as the “no-draft”
rule, makes a player ineligible for                                                II.
participation     in   a    particular    [**4]
intercollegiate sport when he or she asks to be              In his Memorandum of Law in support of
placed on the draft list or supplemental draft           his application for a preliminary injunction,
list of a professional league in that sport.             Gaines argues that the Defendants, by
[*741] Rule 12.3.1,3 commonly known as the               preventing college football players like
                                                         himself from returning to college play for
                                                         which they are otherwise eligible after an
1   Rule 12.1.1(f) provides as follows:                  unsuccessful bid in the NFL draft, have
                                                         engaged in an unlawful exercise of monopoly
    12.1.1 Amateur Status. An individual loses           power in violation of 15 U.S.C. @ 2.4 Gaines
    amateur status and thus shall not be eligible
    for intercollegiate competition in a particular
                                                         cites 15 U.S.C. @ 26, which provides that any
    sport if the individual:                             party threatened with loss or damage by a

                        ***
                                                             (Continued)
    (f) Enters into a professional draft or an
agreement with an agent or other entity to negotiate a       123.1 General Rule. An individual shall be
professional contract.                                       ineligible     for    participation     in   an
                                                             intercollegiate sport if he or she ever has
2   Rule 12.2.4.2 provides as follows:                       agreed (orally or in writing) to be
                                                             represented by an agent for the purpose of
    12.2.4.2 Draft List. An individual loses                 marketing his or her athletics ability or
    amateur status in a particular sport when the            reputation in that sport. Further, an agency
    individual asks to be placed on the draft list           contract not specifically limited in writing to
    or supplemental draft list of a professional             a sport or particular sports shall be deemed
    league in that sport, even though: (a) The               applicable to all sports and the individual
    individual asks that his or her name be                  shall be ineligible to participate in any sport.
    withdrawn from the draft list prior to the
    actual draft, (b) The individual's name              4   15 U.S.C. @ 2 provides the following:
    remains on the list but he or she is not
    drafted, or (c) The individual is drafted but            “Every person who shall monopolize, or
    does not sign an agreement with any                      attempt to monopolize, or combine or
    professional athletics team.                             conspire with any other person or persons, to
                                                             monopolize any part of the trade or
[**5]                                                        commerce among the several States, or with
                                                             foreign nations, shall be deemed guilty of a
3   Rule 12.3.1 provides as follows:                         felony. . . .”



                                                                                                      832
violation of the antitrust laws may seek         U.S. 469, 493, 60 S. Ct. 982, 992, 84 L. Ed.
injunctive relief against the threatened         1311 (1940)). The Defendants argue that the
conduct, as the basis for his injunction suit    NCAA Rules are not subject to antitrust
[**6] against the Defendants.                    analysis because they are not designed to
                                                 generate profits in a commercial activity but
                    ***                          to preserve amateurism by assuring that the
                                                 recruitment of student athletes does not
    As detailed below, this Court has            become a commercial activity.             See
concluded that Gaines has not met his burden     Vanderbilt University's Brief [**12] In
of proving the likelihood of success on his @    Support Of Motion To Dismiss And Response
2 claim.                                         In Opposition To Application For Preliminary
                                                 Injunction, p. 4. This Court agrees with the
                     III.                        Defendants on this point.

    In evaluating Gaines' proof of a @ 2             There is no dispute that “while organized
violation, this Court must determine whether     as a non-profit organization, the NCAA -- and
he has shown that enforcement of the NCAA        its member institutions -- are, when presenting
Rules constitutes an unlawful exercise of        amateur athletics to a ticket-paying,
monopoly power by the NCAA. The courts           television-buying public, engaged in a
are clear on what [**11] an unlawful             business venture of far greater magnitude than
monopoly under @ 2 consists of:                  the vast majority of 'profit-making'
                                                 enterprises.” Hennessey, 564 F.2d at 1149 n.
(1) the possession of monopoly power in the      14. The United States Supreme Court has
relevant market and                              recognized that the NCAA's television
                                                 restrictions are subject to antitrust scrutiny
(2) the willful acquisition or maintenance of    because those regulations are commercial in
that power as distinguished from growth or       nature. See NCAA v. Board of Regents of the
development as a consequence of a superior       University of Oklahoma, 468 U.S. 85, 104 S.
product, business acumen, or historic            Ct. 2948, 82 L. Ed. 2d 70 (1984) (holding
accident.                                        NCAA's television restrictions violated @ 1 of
Beard v. Parkview, 912 F.2d 138 (6th Cir.        the Sherman Act).
1990) (quoting United States v. Grinnell, 384
U.S. 563, 570-71, 16 L. Ed. 2d 778, 86 S. Ct.        However, there is a clear difference
1698 (1966)).                                    between the NCAA's efforts to restrict the
                                                 televising of college football games and the
    However, before focusing on the              NCAA's efforts to maintain a discernible line
two-prong test, the Court must determine         between amateurism and professionalism and
whether the eligibility Rules implemented by     protect the amateur objectives of NCAA
Vanderbilt and other NCAA schools are            college football by enforcing the eligibility
subject to federal antitrust law.                Rules. The U.S. Supreme Court [**13]
                    [*743]A.                     recognized as much in the Board of Regents
                                                 case:
    The federal antitrust laws seek to prevent
restraints on “free competition in businesses    The specific restraints on football telecasts
and commercial transactions.” Hennessey v.       that are challenged in this case do not,
NCAA, 564 F.2d 1136 (5th Cir. 1977)              however, fit into the same mold as do rules
(quoting Apex Hosiery Co. v. Lender, 310         defining the conditions of the contest, the



                                                                                      833
eligibility of participants, or the manner in        increasingly accompanied by a discernible
which members of a joint enterprise shall            economic purpose [citing Board of Regents].”
share the responsibilities and the benefits of       Id. at 383. The court upheld the rules at issue
the total venture.                                   (NCAA sanctions rendering the University of
                                                     Arizona football team ineligible to participate
Board of Regents, 468 U.S. at 117 (emphasis          in postseason [*744] competition) as being of
added). Although the U.S. Supreme Court did          the former type. Id. [**15]
not state that eligibility rules were not subject
to antitrust scrutiny, it cited a case with               The United States Court of Appeals for
approval, Jones v. NCAA, 392 F. Supp. 295            the Fifth Circuit also has indicated that the
(D.Mass. 1975), which stated exactly that.           NCAA has “some support in the caselaw”
See Board of Regents, 468 U.S. at 102 n. 24.         (citing to Jones and Justice) for its argument
                                                     that the eligibility Rules are not subject to the
    In Jones a college hockey player sought          antitrust laws because these Rules have
restoration of his eligibility for intercollegiate   “purely      or     primarily    noncommercial
competition after it was discovered that he had      objectives.” McCormack v. NCAA, 845 F.2d
received compensation for playing hockey             1338, 1343 (5th Cir. 1988). The Fifth Circuit
before his college enrollment. The court             decided the case by assuming that the antitrust
upheld the eligibility Rules under @@ 1 and 2        laws apply to eligibility rules, and by then
of the Sherman Act, reasoning that the               finding that the NCAA rules restricting
antitrust laws are aimed primarily at                benefits to be awarded to student athletes were
combinations with commercial objectives and          reasonable and thus did not violate @ 1 of the
have limited application to other types of           Sherman Act.5
organizations. The court concluded that the          [**16]
plaintiff [**14] had “not shown how the                   This Court agrees with the Fifth Circuit in
action of the N.C.A.A. in setting eligibility        Hennessey that the NCAA, with its
guidelines had any nexus to commercial or            multimillion dollar annual budget, is engaged
business activities in which the defendant           in a business venture and is not entitled to a
might engage,” Id. at 303, and that “the             total exemption from antitrust regulation on
N.C.A.A. eligibility rules were not designed to      the ground that its activities and objectives are
coerce students into staying away from               educational and are carried on for the benefit
intercollegiate athletics, but to implement the      of amateurism. See Hennessey, 564 F.2d at
N.C.A.A. basic principles of amateurism.” Id.        1148-49. However, by holding that the
at 304.                                              eligibility Rules challenged by Gaines are not

    This distinction between commercial
NCAA rules and primarily noncommercial               5 The D.C. Circuit also has cited Jones with
rules was clearly set forth in Justice v. NCAA,      approval. In Ass'n For Intercollegiate Ath. For
577 F. Supp. 356 (D.Ariz. 1983). The court           Women v. NCAA, 236 App. D.C. 311, 735 F.2d 577
pointed out that the NCAA now engages in             (D.C. Cir. 1984), the court, qualifying somewhat its
two types of rule-making -- “one type,               position on the applicability of antitrust law to
exemplified by the rules in Hennessey [rule          eligibility and similar rules, stated: “We do not assert
                                                     that regulations governing noncommercial activity are
limiting number of assistant coaches
                                                     exempt from the Sherman Act. Rather, we assert only
employable at any one time by certain                that such regulations carry less potential of
member institutions] and Jones [eligibility          significantly restraining commerce than do
rule] is rooted in the NCAA's concern for the        regulations governing commercial activity.” Id. at
protection of amateurism; the other type is          588 n. 19.



                                                                                                 834
subject to antitrust analysis, this Court is by no   commercializing [**18] influences from
means creating a total exemption, but rather a       destroying the unique “product” of NCAA
very narrow one. Justice White's dissenting          college football. Even in the increasingly
opinion in Board of Regents provides support         commercial modern world, this Court believes
for this position: “Although the NCAA does           there is still validity to the Athenian concept
not enjoy blanket immunity from the antitrust        of a complete education derived from
laws, [citations omitted] it is important to         fostering full growth of both mind and body.
remember that the Sherman Act `is aimed              The overriding purpose behind the NCAA
primarily at combinations having commercial          Rules at issue in this case is to preserve the
objectives and is applied only to a very limited     unique atmosphere of competition between
extent to organizations . . . which normally         “student-athletes.”      This Court, therefore,
have other objectives.”' Board of Regents,           rejects the notion that such Rules may be
468 U.S. at 133 (White, J., dissenting)              judged or struck down by federal antitrust law.
(quoting Klor's, Inc. v. Broadway-Hale Stores,
Inc., 359 U.S. 207, 213 n. 7, 79 S. Ct. 705, 3           For the foregoing reasons this Court
L. Ed. 2d 741 (1959)).                               concludes that denial of Gaines' Application
                                                     [*745] For a Preliminary Injunction is proper
    The United States District Court for the         because the eligibility Rules at issue are not
Northern [**17] District of Indiana very             subject to scrutiny under @ 2 of the Sherman
recently ruled, in a case with facts strikingly      Act.
similar to those presently before this Court,
that it was “unwilling to rely on a single                                 B.
district court opinion [Jones v. NCAA] for the
conclusion, sought by the NCAA, that the                 Notwithstanding the above conclusion,
antitrust laws have no application to NCAA           this Court, adopting an approach similar to the
regulations concerning eligibility.” Banks v.        Fifth Circuit's in McCormack v. NCAA, 845
NCAA, 746 F. Supp. 850 (N.D.Ind. 1990). As           F.2d 1338 (5th Cir. 1988), will assume that
detailed above, this Court has found more than       the antitrust laws apply to the NCAA
a single opinion on which to base its                eligibility Rules and explain why Gaines has
conclusion.                                          not shown a substantial likelihood of
                                                     succeeding on the merits of his @ 2 claim. As
    According to the NCAA Constitution, the          discussed above, Gaines must show both that
purposes of the NCAA eligibility Rules are to        the NCAA possesses monopoly power in the
maintain amateur intercollegiate athletics “as       relevant market and [**19] that the NCAA
an integral part of the educational program          has willfully acquired or maintained that
and the athlete as an integral part of the           power.
student body and by so doing, retain a clear
line of demarcation between intercollegiate              Monopoly power consists of “the power to
athletics and professional sports.” Defendant        control prices or exclude competition.” United
NCAA's Memorandum In Opposition To                   States v. Grinnell, 384 U.S. 563, 571, 86 S. Ct.
Plaintiff's Request For Preliminary Injunction,      1698, 16 L. Ed. 2d 778 (1966); Smith v.
p. 23 (quoting Purposes and Fundamental              Northern Michigan Hospitals, 703 F.2d 942,
Policy of the NCAA, Article One of NCAA              954 (6th Cir. 1983). The parties dispute the
Constitution). The overriding purpose of the         proper definition of the relevant market in
eligibility Rules, thus, is not to provide the       which to measure the NCAA's alleged
NCAA with commercial advantage, but rather           monopoly power. Gaines posits that the
the opposite extreme -- to prevent                   product market is one for “major college



                                                                                           835
football player services,” consisting of             challenged conduct is fairly characterized as
football players at schools in Division I-A of       'exclusionary' [**21] or 'anticompetitive' or
the NCAA. Plaintiff's Brief, p. 13. Assuming         'predatory'. . . .” Aspen Skiing Co. v. Aspen
this is the relevant market, Gaines argues that      Highlands Skiing Corp., 472 U.S. 585, 602,
the NCAA controls 100% of the market.                105 S. Ct. 2847, 2857, 86 L. Ed. 2d 467
                                                     (1985) (emphasis added).
    In contrast, the NCAA contends that the
heart of Gaines' antitrust claim focuses on a            Thus, the critical question becomes
different and broader market -- the                  whether the NCAA eligibility Rules are
professional football recruitment market -- by       “unreasonably          exclusionary”         or
asserting that the Rules hamper competition          “anticompetitive.” Gaines argues that the
between the NCAA and the NFL for the top             Rules are unreasonably exclusionary because
college football players. Consequently, the          they permanently exclude him and others
NCAA argues that it does not have monopoly           similarly situated from competing in major
power over this broader market because it is         college football, because the Rules effectively
not capable of controlling prices or excluding       discourage all major college football players
competition when the “buys” in the market are        from even attempting to see whether they
not only [**20] the NFL and the NCAA, but            could make it in the NFL, and because
also the Canadian Football League, the World         enforcement of the Rules consequently results
League of American Football, and the Arena           in the NCAA keeping to itself the most
Football League. See NCAA's Memorandum,              talented of major college football players and
pp. 16-19.                                           enhancing its power with the great economic
                                                     benefits derived from having the top athletes.
    This Court is hard-pressed to see any
validity to the parties' interpretation of college       Gaines analogizes the NCAA practices at
football players like Brad Gaines as “sellers”       issue to refusals to deal and argues that,
and NCAA schools and professional football           because the U.S. Supreme Court has
leagues or teams as “buyers” in an economic          repeatedly struck down arrangements in
market. However, this Court sees no need to          [*746] which a firm with monopoly power
elaborate on the proper, if any, market              refuses to deal with other firms in order to
definition because Gaines' proof is clearly          exclude them from business, this Court
insufficient as to the second element necessary      similarly should find that the NCAA is
to a @ 2 claim.                                      unlawfully excluding Gaines because [**22]
                                                     he had contact with a “competitor,” the NFL.
    After showing that a party possesses             Gaines also places emphasis on the fact that
monopoly power in the relevant market, the           several NCAA committees and officials have
plaintiff must show that the party has willfully     recognized the Rules are restrictive and
acquired or maintained its monopoly power.           sometimes unfair and have proposed that
Grinnell, 384 U.S. at 570-71. The United             college football players should be allowed to
States Supreme Court has summarized what a           enter the professional draft without losing
plaintiff must show to establish “willfulness”       eligibility. See Supplemental Affidavit of
under @ 2. Although in the case of an                Paul A. Alexis.
attempted monopolization the plaintiff must
prove a specific intent to accomplish the                The Defendants, on the other hand,
“forbidden objective,” in the case of an actual      forcefully argue that they have a complete
monopolization “evidence of intent is merely         defense to any allegation of the exercise of
relevant to the question whether the                 monopoly power by the NCAA. The U.S.



                                                                                          836
Supreme Court has stated that an entity with        element of a @ 2 claim -- willful maintenance
monopoly power does not violate @ 2 by              of monopoly power. Consequently, regardless
refusing to deal with a competitor if there are     of whether the [**24] NCAA justifications are
valid business reasons for the refusal. Aspen       viewed as a defense to a @ 2 challenge or
Skiing Co. v. Aspen Highlands Skiing Corp.,         rather as proof contradicting an assertion of
472 U.S. 585, 597, 605, 105 S. Ct. 2847, 86 L.      willful monopolization, they necessitate a
Ed. 2d 467, 477, 482 (1985). The Supreme            ruling by this Court in favor of the Defendants
Court approved the district judge's jury            at this preliminary injunction stage of the
instruction on this issue, which said, in           proceeding.
pertinent part, the following:
                                                         The NCAA eligibility Rules have recently
    `In other words, if there were legitimate       been upheld under @ 1 of the Sherman Act.
business reasons for the refusal, then the          Banks v. NCAA, 746 F. Supp. 850 (N.D. Ind.
defendant, even if he is found to possess           1990). This Court realizes that the test for a
monopoly power in a relevant market, has not        @ 1 violation is somewhat different than the
violated the law. We are concerned with             two-prong test for a @ 2 violation. In Banks
conduct which unnecessarily excludes [**23]         the court upheld the Rules under the Rule of
or handicaps competitors. This is conduct           Reason, which requires the court to balance
which does not benefit consumers by making          the procompetitive and anticompetitive effects
a better product or service available -- or in      of an alleged restraint and strike down the
other ways -- and instead has the effect of         restraint if the anticompetitive effects
impairing competition.'                             predominate. See Banks, slip op. at 17.
                                                    Although the Rule of Reason was developed
Id. at 597, 86 L. Ed. 2d at 477 (emphasis           specifically in @ 2 cases, its focus on the
added).                                             reasonableness of a restraint on competition
                                                    overlaps with the @ 1 test for “willfulness”
    This Court is convinced that the NCAA           because in a @ 2 case the court must also
Rules benefit both players and the public by        decide whether the regulation at issue is
regulating college football so as to preserve its   unreasonably anticompetitive.      Thus, this
amateur appeal. Moreover, this regulation by        Court agrees with the findings of the Banks
the NCAA in fact makes a better “product”           court that the “no-agent” and “no-draft” Rules
available by maintaining the educational            have [**25] primarily procompetitive effects
underpinnings of college football and               in that they promote the integrity and quality
preserving the stability and integrity of college   of college football and preserve the distinct
football programs. Therefore, Gaines cannot         “product” of major college football as an
succeed on the merits of his @ 2 claim              amateur sport. Gaines would have us hold that
because the NCAA has shown legitimate               a finding of any anticompetitive effect
business justifications for the Rules at issue.     requires finding a @ 2 violation. Gaines
                                                    argues that such an effect is evident from the
    It seems obvious to this Court that rules       proposition that [*747] the Rules deter many
which are justified by legitimate business          college players from even testing the
reasons necessarily cannot be deemed                professional waters. However, the proper
“unreasonably        exclusionary”         or       inquiry is whether the Rules are unreasonably
“anticompetitive.”    Thus, the legitimate          anticompetitive. This Court has concluded
business reasons of the NCAA justifying             that    the Rules are overwhelmingly
enforcement of the eligibility Rules negate         procompetitive, are justified by legitimate
any attempt by Gaines to show the second            business reasons, and consequently cannot be



                                                                                         837
viewed as having any unreasonably                   Rules challenged by Gaines             are   not
exclusionary or anticompetitive effect.             unreasonably anticompetitive.

    The United States Supreme Court has                                  ***
expressly    recognized       the     legitimate
procompetitive effects of the eligibility Rules:                          IV.

The NCAA seeks to market a particular brand             Despite the compelling situation which
of football -- college football.             The    has befallen Mr. [**29] Gaines, he has failed
identification of this “product” with an            to show a substantial likelihood of success on
academic tradition differentiates college           the merits of his @ 2 claim. From the outset
football from and makes it more popular than        he shouldered a heavier burden because of the
professional sports to which it might               mandatory nature of the relief sought.
otherwise be comparable, such as, for               However, this Court is convinced that Gaines
example, minor league baseball. In order            has not carried even the lighter burden of
[**26] to preserve the character and quality of     establishing any fair ground for litigation of
the “product,” athletes must not be paid, must      his claim. There is substantial support in the
be required to attend class, and the like. And      caselaw for this Court's conclusion that the
the integrity of the “product” cannot be            NCAA eligibility Rules are not subject to
preserved except by mutual agreement; if an         antitrust scrutiny. Nonetheless, upon such
institution     adopted     such     restrictions   scrutiny, it is clear to this Court that the
unilaterally, its effectiveness as a competitor     NCAA has demonstrated strong business
on the playing field might soon be destroyed.       justifications for enforcing the current
Thus, the NCAA plays a vital role in enabling       eligibility Rules, leading to the conclusion that
college football to preserve its character, and     the Rules cannot be deemed unreasonably
as a result enables a product to be marketed        anticompetitive or exclusionary.
which might otherwise be unavailable. In
performing this role, its actions widen                For the foregoing reasons Gaines'
consumer choice -- not only the choices             Application For a Preliminary Injunction is
available to sports fans but also those             denied.
available to athletes -- and hence can be
viewed as procompetitive.                               ORDER - September 20, 1990, Entered

NCAA v. Board of Regents of Univ. of Olka.,             In accordance with the accompanying
468 U.S. 85, 101-02, 104 S. Ct. 2948, 82 L.         Memorandum, plaintiff's application for a
Ed. 2d 70, 84 (1984). The Supreme Court             preliminary injunction is denied.
distinguished     the     NCAA        television
restrictions, which it invalidated under @ 1,
from “most of the regulatory controls of the
NCAA [which] are justifiable means of
fostering competition among amateur teams
and therefore procompetitive because they
enhance public interest in intercollegiate
athletics.” Id, 468 U.S. at 117, 82 L. Ed. 2d at
94. The [**27] only conclusion which this
Court can reach in light of the Supreme
Court's language quoted above is that the



                                                                                          838
   BRAXSTON LEE BANKS, Plaintiff,                                          ***
                v.
 NATIONAL COLLEGIATE ATHLETIC                            The NCAA Bylaws constitute rules
  ASSOCIATION and UNIVERSITY OF                      regarding all inter-collegiate athletics,
      NOTRE DAME, Defendants                         including football, [**3] to which all members
                                                     are required to adhere and which the NCAA
           Cause No. S90-394                         enforces. Among those rules is Bylaw 12.2.4.2
   United States District Court for the              (the “no draft” rule), which makes an athlete
 Northern District of Indiana, South Bend            ineligible for further intercollegiate play in
                 Division                            any sport in which he or she has placed his
                                                     name in the professional draft, even if the
  746 F. Supp. 850; 1990 U.S. Dist. LEXIS            athlete asks that his or her name be withdrawn
               12255; 1990-2                         from the draft list, or the athlete is not drafted,
         Trade Cas. (CCH) P69,226                    or the athlete does not sign an agreement with
          August 17, 1990, Decided                   a professional team.

OPINION:      [*851] MEMORANDUM AND                      Another provision, Bylaw 12.3 (the “no
ORDER                                                agent” rule), makes an individual [**4] who
                                                     agrees to be represented by an agent
ROBERT L. MILLER, JR. UNITED STATES                  (including an attorney) to market the player's
DISTRICT JUDGE                                       services ineligible for further intercollegiate
                                                     play in the sport, even if the player accepts no
This cause came before the court on August           money or other thing of value from the agent.
16, 1990 for hearing on the motion of plaintiff      [**5]
Braxston Banks for a temporary injunction.
Mr. Banks seeks injunctive relief against the            NCAA officials are giving serious
National Collegiate Athletic Association             consideration to modification of the “no draft”
(“NCAA”) and the University of Notre Dame            rule, but no modification of the rule could
to restore his eligibility to play intercollegiate   occur before the NCAA's annual convention
football for Notre Dame during the 1990              in 1991. No proposals to amend the “no
season. Without injunctive relief, he will be        draft” rule at that convention have been filed
ineligible to play because he entered the            to date. Nothing in the record suggests that
National Football League (“NFL”) draft and           NCAA officials are considering modification
was represented by an attorney in his dealings       of the “no agent” rule.
with NFL teams; NCAA rules deem a person
who has done such things a professional and              The NCAA Bylaws also contain a
ineligible to play amateur intercollegiate           provision, 14.14, which sets out a procedure
football. For the reasons that follow, the court     by which a member institution such a Notre
concludes that Mr. Banks has not shown any           Dame (but not the student-athlete) can petition
likelihood [**2] of success on his contention        the NCAA to restore a student-athlete's
that the NCAA rules violate @ 1 of the               eligibility. [**6]
Sherman Antitrust Act. Without such a
showing, no preliminary injunction can be                                [*853]A.
issued.
                                                        The facts are not in substantial dispute.
                      ***                            Braxston Lee Banks entered the University of
                       I.                            Notre Dame as a student-athlete in September,



                                                                                             839
1986 on a full grant-in-aid, which is worth        NFL teams in evaluating players.4 He was
approximately $ 16,000.00 per year. He             told that he was a “rated” player (meaning that
played football for Notre Dame during the          had he completed his college eligibility, he
1986-88 seasons.                                   would have been invited to be scouted) and
                                                   that he should be drafted.
    Mr. Banks played all eleven games for          [**8]
Notre Dame during his freshman year, starting
four or five. In his sophomore year, he injured        Still, Mr. Banks had doubts about whether
his knee in the opening game and played in         he would be drafted. His classmate, Anthony
only seven games. Largely because of his           Johnson, was expected to be chosen early in
knee injury, he again played in only seven         the NFL draft. While he had started ahead of
games during his junior year. He started four      Mr. Johnson in some games before his injury,
games in each of those seasons. Although the       Mr. Banks knew his knee injury might make
Notre Dame football trainer released him to        NFL teams chary of drafting him.
full activity in June, 1989, Mr. Banks sat out
the 1989 college football season -- his senior         In February, 1990, still uncertain, Mr.
year -- in the hopes of assuring his knee's full   Banks applied to Notre Dame to continue his
recovery.                                          education for a fifth year and to renew his
                                                   grant-in-aid. Notre Dame orally approved his
    Having played three seasons and missed         application, which would have enabled him to
one season due to injury, Mr. Banks was            play football for Notre Dame during the 1990
eligible to play one more year of                  season.
inter-collegiate   football,   but     because
eligibility lasts for only five years after            In March, 1990, however, Mr. Banks
enrollment, that year would have to be 1990.       decided to enter the 1990 National Football
Because his class would graduate in 1990,          League draft and signed the form required by
however, Mr. Banks also had, under                 the NFL for draft eligibility. Indeed, he
then-existing NFL rules, the option of entering    actually signed the form twice. His signature
the NFL [**7] selection process, or “draft.”       was not notarized on the first form, which the
The NCAA's “no draft” rule would not allow         NFL received on or about March 13, 1990.
him to do both. In December, 1989, Mr.             The NFL received a second, properly
Banks began what obviously was a time of           notarized, form on or about March 20, 1990.
hesitation and indecision.                         He reports that at some point he changed his
                                                   mind about entering the draft and called the
    Mr. Banks discussed his options with his       NFL to ask that his petition be disregarded.
family and friends, including several former       He was told to send a letter. He changed his
Notre Dame football coaches who were then
coaching in the professional ranks. He also
discussed the matter with Everett Glenn, a         4 This contact would not appear to have rendered
family friend and sports attorney, who had         Mr. Banks ineligible for further intercollegiate
once advised Mr. Banks on another sports           football participation.
matter when Mr. Banks was in high school.
                                                   NCAA Bylaw 12.2.4.1 provides:
At Mr. Glenn's suggestion, he contacted the
“scouting combines” that work directly for             Inquiry. An individual may inquire about
                                                       eligibility for a professional-league player
                                                       draft without affecting his or her amateur
                                                       status.



                                                                                            840
mind again and left his petition on file.          the player rated by many observers as the top
                                                   fullback prospect in the draft.
    Both forms required Mr. Banks to [**9]
sign immediately below a paragraph that read,          According to Mr. Butler of BLESTO,
“I HEREBY IRREVOCABLY RENOUNCE                     Braxston will be invited to participate in the
ANY AND ALL REMAINING COLLEGE                      April 6-7 workouts. We trust that you will
ELIGIBILITY I MAY HAVE. I WISH TO                  take the time to visit with Braxston to satisfy
BE ELIGIBLE FOR THE NFL DRAFT                      yourself about Braxston's physical condition
SCHEDULED FOR APRIL 22-23, 1990.”                  and to otherwise update his file.

    By placing his name in the 1990 NFL                Thanks in advance for your consideration.
draft, Mr. Banks lost his amateur status for       Mr. Banks received no compensation or other
football and, hence, became ineligible to play     thing of value from Mr. Glenn or any other
intercollegiate football by virtue of NCAA         agent or attorney. Nonetheless, by agreeing to
Bylaw 12.2.4, the “no draft” rule. The             have Mr. Glenn market his athletic ability in
language on the NFL form did not [*854]            football, the NCAA “no agent” rule, Bylaw
make him ineligible; the NCAA Bylaw did.           12.3, rendered him ineligible, on a second
The parties agree that principles of contract      basis, to play intercollegiate football.
law are not at issue in this case.
                                                        After he placed his name in the draft, Mr.
                       B.                          Banks was contacted and tested at Notre
                                                   Dame by representatives of virtually all NFL
    After deciding to enter the draft, Mr.         teams, and he attended an NFL tryout in
Banks contacted NFL teams through Mr.              Indianapolis with other college players [**11]
Glenn. Although he had no oral or written          who had entered the draft before completing
contract with Mr. Glenn or any other agent or      their college eligibility. At that trial he did
attorney to represent him in marketing his         not perform as well as he had in the past,
athletic ability or reputation before entering     especially in the 40 yard dash. Mr. Banks
the 1990 NFL draft, he entered an oral             attributes this to the cold weather, lack of
argument with Mr. Glenn after deciding to          adequate warm-up, and his decision (because
enter the draft, and Mr. Glenn tried to market     the tryout was conducted on artificial turf) to
Mr. Banks' services. Mr. Glenn sent the            wear a knee brace that ran from his thigh to
following letter to all twenty-eight NFL           his ankle and that apparently concerned the
teams:                                             professional scouts. Only two NFL teams
                                                   contacted him after the Indianapolis tryout.
    Please be advised that this office will
represent Braxston Banks in the upcoming              Mr. Banks was not chosen in the draft.
NFL draft. As a fifth-year senior who will         That misfortune rendered him a “rookie free
receive his bachelor's degree in [**10] May,       agent” in the eyes of the NFL, meaning that he
Braxston has petitioned the NFL and been           was free to contract with any of the
cleared to be included in the upcoming draft.      twenty-eight NFL teams.5 No professional

    For the record, Braxston is 6'3”, 235 lbs.
(not 215 lbs. per 1989 info of BLESTO [a           5 The record also reflects the existence of the
scouting service]) and recently ran a 4.5 for an   Canadian Football League (“CFL”), which is
                                                   comprised of nine teams. Whether Mr. Banks could
NFL scout. It is also noted that Braxston
                                                   have applied for employment with a CFL team is not
started for two years at Notre Dame ahead of       apparent from the record. [**12]



                                                                                          841
team offered him a free agent contract,                     The NCAA has taken no steps to
although he travelled to Pittsburgh for a               discipline Mr. Banks; other than declining to
post-draft tryout. He thought he did well in            consider his application for restoration of his
Pittsburgh, but the coaches told him they               eligibility, the NCAA has taken no action
already had the maximum permissible number              toward Mr. Banks whatsoever. Notre Dame,
of players under contract.6           Mr. Banks         however, as a member of the NCAA, is
received nothing from the Pittsburgh team               expected to enforce the NCAA's eligibility
other than his airplane ticket to fly to and from       requirements.
Pittsburgh.
                                                             Mr. Banks wants to return to Notre Dame
    Mr. Banks completed the requirements for            to continue his education, to play football
his degree at Notre Dame during the summer              again for Notre Dame, and to prove to the
semester of 1990 and graduated from Notre               NFL teams that his knee is well enough to
Dame with a Bachelor of Arts degree in                  play professional football.      But for his
English in August 1990.                                 ineligibility based on Bylaws 12.2.4 and 12.3,
                                                        Notre Dame would admit Mr. Banks for a fifth
                         C.                             year of academic study, renew his full
                                                        grant-in-aid, and permit him to play football
    As of today, Mr. Banks has never signed a           again. Notre Dame will not renew his full
contract with any professional football team            grant-in-aid unless he is eligible to play
and has never received any compensation                 football. Football practice begins at Notre
from any professional team, although he                 Dame on August 17, 1990, and the first game
received travel reimbursement for the tryout in         is scheduled for September 15, 1990.
Indianapolis and a round trip [*855] plane
ticket to fly to Pittsburgh for his tryout.                                   II.

    As a result of Bylaws 12.2.4 and 12.3, the              On August 9, 1990, Mr. Banks filed this
NCAA considers Mr. Banks to be ineligible to            action against the NCAA and Notre Dame.
play football for any NCAA institution. Any             Count I of the complaint, which is brought
NCAA institution that allowed him to play               solely on Mr. Banks' behalf, alleges that
would be subject to serious penalties by the            [**14] NCAA Bylaws 12.2.4 and 12.3 violate
NCAA. Despite the procedure made available              @ 1 of the Sherman Act, 15 U.S.C. @ 1.
by NCAA Bylaw 14.14, Notre Dame has                     Pursuant to Count I of the complaint, Mr.
declined to seek restoration of Mr. Banks'              Banks seeks to preliminarily enjoin the
eligibility. Mr. Banks attempted in June and            defendant NCAA from taking any action to
July to request [**13] the NCAA to restore his          enforce, or to encourage any of its members to
eligibility, but the NCAA indicated it would            enforce, NCAA Bylaws 12.2.4 and 12.3 with
consider only a request from Notre Dame, the            respect to him. The court has jurisdiction
member institution.                                     pursuant to 28 U.S.C. @ 1331 and 15 U.S.C.
                                                        @ 26.      Mr. Banks seeks a preliminary
                                                        injunction with respect to Count I of his
                                                        complaint.
6 An NFL team may have as many as eighty
players under contract at any one time during the                           ***
off-season. Each team must reduce its roster to sixty
players by August 28, 1990 and to forty-seven players
by September 3, 1990.



                                                                                             842
                      B.                          restrain the manner in which institutions
                                                  compete. Moreover, the NCAA seeks to
    The NCAA argues that Mr. Banks has not        market a particular brand of football -- college
shown a likelihood of success on the merits of    football. The identification of this “product”
his antitrust claim. If the court finds no        with an academic tradition differentiates
likelihood of success on the merits, the court    college football from and makes it more
should deny the preliminary injunction.           popular than professional sports to which it
Kowalski v. Chicago Tribune Co., 854 F.2d         might otherwise be comparable, such as, for
168 (7th Cir. 1988); Illinois Psychological       example, minor league baseball. In order to
Ass'n v. Falk, 818 F.2d 1337 (7th Cir. 1987).     preserve the character and quality of the
                                                  “product,” athletes must not be paid, must be
                      1.                          required to attend class, and the like. And the
                                                  integrity of the “product” cannot be preserved
    In its memorandum, the NCAA first             except by mutual agreement; its effectiveness
argues that because the NCAA Bylaws               as a competitor on the playing field might
challenged here regulate the non-commercial       soon be destroyed. Thus, the NCAA plays a
activities of an organization dedicated to        vital [**19] role in enabling college football
fostering amateurism in college sports, the       to preserve its character, and as a result
challenged regulations are not subject to the     enables a product to be marketed which might
Sherman Act.                                      otherwise be unavailable. In performing this
                                                  role, its actions widen consumer choice -- not
    Mr. Banks cites a single case in support of   only the choices available to sports fans but
his contention that the NCAA is subject to        also those available to athletes -- and hence
antitrust laws; the NCAA argues that that case    can be viewed as procompetitive.
may not support so broad a statement of law.
In NCAA v. Board of Regents of the                [*857] 468 U.S. at 101-102, 104 S. Ct. at
University of Oklahoma, 468 U.S. 85, 82 L.        2960. It does not appear, however, that this
Ed. 2d 70, 104 S. Ct. 2948 (1984), the United     language was intended to mean that such
States Supreme Court held that the NCAA's         activities are not subject to the Sherman Act.
efforts to restrict the televising of college     Instead, it appears that the Court was
football games was subject to, and violated,      explaining its decision to apply the Rule of
the Sherman Act. The Court only found an          Reason to the television plan rather than
anticompetitive effect in the NCAA television     finding it to be a per se violation of the
plan. The Court noted that much of the            Sherman Act.        For example, the Court
NCAA's activities have a pro-competitive          explained at a later point in the opinion:
effect: [**18] What the NCAA and its
member institutions market in this case is        Our decision not to apply a per se rule to this
competition itself -- contests between            case rests in large part on our recognition that
competing institutions. Of course, this would     a certain degree of cooperation is necessary if
be completely ineffective if there were no        the type of competition that petitioner and its
rules on which the competitors agreed to          member institutions seek to market is to be
create and define the competition to be           preserved. It is reasonable to assume that
marketed. A myriad of rules affecting such        most of the regulatory controls of the NCAA
matters as the size of the field, the number of   are justifiable means of fostering competition
players on a team, and the extent to which        among amateur athletic teams and therefore
physical violence is to be encouraged or          procompetitive because they enhance public
proscribed, all must be agreed on, and all        [**20] interest in intercollegiate athletics.



                                                                                        843
The specific restraints on football telecasts        organizations. The student hockey player was
that are challenged in this case do not,             not a “competitor” within the contemplation
however, fit into the same mold as do rules          of the antitrust laws and had “not shown how
defining the conditions of the contest, the          the action of N.C.A.A. in setting eligibility
eligibility of participants, or the manner in        guidelines had any nexus to commercial or
which members of a joint enterprise shall            business activities in which the defendant
share the responsibilities and the benefits of       might engage.”8 [**22]
the total venture.
                                                         The Supreme Court cited Jones with
468 U.S. at 117, 104 S. Ct. at 2968. Finally,        apparent approval in NCAA v. Board of
the Court concluded:                                 Regents, 468 U.S. at 102 n. 24, 104 S. Ct. at
                                                     2960. Nonetheless, after a careful reading of
    The NCAA plays a critical role in the            NCAA v. Board of Regents, this court is
maintenance of a revered tradition of                unwilling to rely on a single district court
amateurism in college sports. There can be no        opinion for the conclusion, sought by the
question but that it needs ample latitude to         NCAA, that the antitrust laws have no
play that role, or that the preservation of the      application to NCAA regulations concerning
student-athlete in higher eduction adds              eligibility.
richness and diversity to intercollegiate
athletics and is entirely consistent with the                                2.
goals of the Sherman Act. But consistent with
the Sherman Act, the role of the NCAA must              The NCAA next argues that its “no draft”
be to preserve a tradition that might otherwise      and “no agent” rules do not violate @ 1 of the
die; rules that restrict output are hardly           Sherman Act.
consistent with this role. Today we hold only
that the record supports the District Court's            Mr. Banks contends that the Bylaws
conclusion that by curtailing output and             produce three different and identifiable
blunting the ability of member institutions to       restraints of trade. First, the NCAA and its
respond to consumer preference, the NCAA             members have agreed not to allow Mr. Banks
has restricted rather than enhanced [**21] the       and those like him ever again to play
place of intercollegiate athletics in the            intercollegiate football for a member
Nation's life.                                       institution. [*858] Second, the Bylaws require
                                                     all NCAA members to exclude Mr. Banks and
468 U.S. at 120, 104 S. Ct. at 2970.                 those like him from playing football, thus
                                                     directly restraining Notre Dame and indirectly
    The NCAA cites Jones v. NCAA, 392 F.             restraining Mr. Banks. Third, the Bylaws
Supp. 295 (D. Mass. 1975), in which a                interfere with Mr. Banks' ability (and the
Northeastern University hockey player sought         ability of those like him) to make himself
restoration of his eligibility for intercollegiate   available for the NFL draft.
competition after it was discovered that he had
been paid for playing hockey during five
seasons before his enrollment at Northeastern.
                                                     8 Mr. Banks has pointed to a commercial activity
The plaintiff claimed the NCAA violated @@
                                                     in which he wishes to engage: he believes that
1 and 2 of the Sherman Act. The court held           another season of football at Notre Dame would
that the antitrust laws are aimed primarily at       render him draft-worthy in the eyes of NFL teams in
combinations with commercial objectives and          1991. Professional football, however, is not an
have limited application to other types of           activity in which the NCAA purports to engage.



                                                                                             844
    Section 1 of the Sherman Act makes it         given case often is a challenging intellectual
unlawful for anyone to contract, combine in       exercise, see, e.g., United States v. Rockford
the form of trust or otherwise, or conspire, in   Memorial Corp., 898 F.2d 1278, 1285 (7th
restraint of trade or [**23] commerce among       Cir. 1990) (“It is always possible to take pot
the several states. 15 U.S.C. @ 1. Whether a      shots at a market definition”), and the
particular arrangement violates the Sherman       challenge is no less here. Mr. Banks' brief in
Act depends upon the arrangement's effect         support of his motion attempted no such
upon competition in the relevant market place.    definition. In its responding brief, the NCAA
Collins v. Associated Pathologists, Ltd., 844     hypothesized a few definitions that might
F.2d 473, 478 (7th Cir.), cert. denied, 488 U.    apply. At oral argument, counsel for Mr.
S. 852, 109 S. Ct. 137, 102 L. Ed. 2d 109         Banks stated that the market from which Mr.
(1988). The parties agree that under NCAA v.      Banks is excluded consists of all NCAA
Board of Regents, the court must apply the        schools: the challenged Bylaws prevent his
Rule of Reason to determine whether the           participation in intercollegiate football at any
Bylaws at issue offend the Sherman Act.           NCAA member institution.

    The Rule of Reason requires the court to          In additional proposed findings of facts
inquire whether the agreement or action           tendered at the conclusion of the argument,
challenged as a restraint is one that promotes    Mr. Banks identified other markets, each
competition or one that suppresses                peculiar to the [**25] three restraints
competition. National Society of Professional     identified above:
Engineers v. United States, 435 U.S. 679, 691,
55 L. Ed. 2d 637, 98 S. Ct. 1355, 1365 (1978).        With respect to the first claimed restraint,
The plaintiff must show that the restraint has    that imposed by the NCAA and its member
an adverse impact on the competition in the       institutions, prohibiting Mr. Banks and those
relevant market. Monsanto Co. v. Spray-Rite       like him from playing for any NCAA member,
Service Corp., 465 U.S. 752, 762, 79 L. Ed. 2d    the relevant market is identified as “all those
775, 104 S. Ct. 1464, 1470 (1984). The court      players who wish to play football for major
must determine “whether the restraint             college football teams, a market which is
imposed is such as merely regulates and           dominated by the NCAA.”
perhaps thereby promotes competition or
whether it is such as may suppress or even            With respect to the second claimed
destroy competition.” Chicago Board of            restraint, which operates on NCAA member
Trade v. United States, 246 U.S. 231, 238, 62     institutions by requiring them to abide by
L. Ed. 683, 38 S. Ct. 242 (1918).                 NCAA rules, Mr. Banks posits a market
    In any Rule of [**24] Reason case, the        consisting of “all major college football
threshold issue is market power, which is the     institutions since all NCAA member
ability to raise prices above the competitive     institutions    are   subject  to   similar
level by restricting output. Wilk v. American     restrictions.”9
Medical Ass'n, 895 F.2d 352, 359 (7th Cir.),
cert. denied, 110 S. Ct. 2621, 110 L. Ed. 2d
642 (1990); Valley Liquors, Inc. v. Renfield
                                                  9 The NCAA contended at oral argument that Mr.
Importers, Ltd., 822 F.2d 656, 666 (7th Cir.),
                                                  Banks would lack standing to raise an antitrust claim
cert. denied, 484 U.S. 977, 98 L. Ed. 2d 486,     with respect to a restraint on Notre Dame. Although
108 S. Ct. 488 (1987).                            the pressures of time did not permit full briefing and
                                                  consideration of this argument, the NCAA's position
   Definition of the relevant market in a         on the standing issue appears to be well-taken.
                                                  Associated General Contractors of California v.


                                                                                            845
    [*859] [**26] With respect to the third                 whether the NCAA exercises market power.
claimed restraint, which limits to a single                 Unquestionably, the NCAA exercises
occasion a collegiate athlete's opportunity to              authority over its member institutions (the
make himself available for the NFL draft, Mr.               relevant market) by requiring their adherence
Banks identifies a market “composed of                      to the Bylaws. As noted above, however,
players like Banks who are considering                      market power, for antitrust purposes, is the
entering the NFL draft while they still have                ability to raise prices above the competitive
college eligibility remaining.”10                           level by restricting output. See Parts and
                                                            Electric Motors, Inc. v. Sterling Electric, Inc.,
   Assuming Mr. Banks' market definition is                 866 F.2d 228, 236 (7th Cir. 1988) (Posner, J.,
appropriate,11 [**27] the inquiry turns to                  dissenting) (market power is “the power to
                                                            raise the price of its parts above the price that
                                                            a competitive market would charge, without
    (Continued)                                             losing so many sales as to make the price
                                                            increase unprofitable”).        Identifying the
California State Council of Carpenters, 459 U.S. 537,       concept of “price” in intercollegiate football is
538-545, 103 S.Ct. 897, 908-912, 74 L. Ed. 2d 723
(1983); McCormick v. NCAA, 845 F.2d 1338,
                                                            no easy matter.
1342-1343 (5th Cir. 1988). In any event, however,
Mr. Banks has standing to raise his antitrust claims            Mr. Banks estimates the value of his
based on the other two asserted restraints.                 grant-in-aid at Notre Dame at $ 16,000.00 per
                                                            year; Notre Dame has presented nothing in
10 Since Mr. Banks did not propose this market              opposition to that estimate. The record
definition until after the hearing, little argument was
                                                            contains no suggestion that Mr. Banks'
directed to it. In its brief, the NCAA addressed a
variation on this market definition: the market in          exclusion from the relevant market will have
which amateur football players compete for openings         any impact on the value of a grant-in-aid at
on NFL teams. As so defined, the market would               Notre Dame. Similarly, the record contains
include those collegiate athletes whose eligibility has     no suggestion that Mr. Banks' participation in,
expired, as well as those with remaining eligibility.       or exclusion from, intercollegiate athletics
The NCAA argued that Mr. Banks was not restrained           will have any impact on the value of such
from competing on this modified market; he
competed, and was not drafted, and now seeks an
                                                            scholarships at other member institutions.
opportunity to return to the college football market        The value of a grant-in-aid at any NCAA
for to make another run at the NFL market.                  college or university will continue to depend
                                                            upon the school's tuition, room and board
11 Still other markets might be proposed. The               charges, and other related costs, not upon
relevant market might consist of all institutions that in   whether unsuccessful aspirants to professional
any sense compensate athletes (whether through              football remain eligible for intercollegiate
salary or grants-in-aid) for playing football. That
market would consist of the NCAA and member
                                                            football.
institutions, the NFL and its twenty-eight teams, and
the CFL and its nine teams. Or the market might be              The record does not indicate that the price
defined even more broadly as a segment of the               the NFL pays for incoming athletes is affected
entertainment industry; such a definition of the            by the restraint. According to documents
market would encompass minor league professional            included within Mr. Banks' evidentiary
baseball, which the Supreme Court suggested might
                                                            submission, thirty-eight football players with
be comparable to college football. NCAA v. Board
of Regents, 468 U.S. at 101-102, 104 S. Ct. at 2960.        remaining NCAA eligibility entered the NFL
                                                            draft, and eighteen were drafted. Of all 335
     In any event, Mr. Banks has not proposed such          players drafted by NFL teams in 1989, only
definitions.                                                sixty percent actually played in a league game



                                                                                                  846
during the 1989 [**29] season. It does not               activities of individuals like him (and
appear that the flow of players to the NFL has           institutions such as Notre Dame), since they
been so restricted as to raise prices. A less            are overbroad and sweep within their ambit
direct impact can be hypothesized: a drafted             many players who are still amateurs in every
player with an option to return to college               meaningful sense of the word, because they
football might have heightened bargaining                have not signed a professional athletic
power in contract negotiations with the NFL              contract and have received nothing of value
team that drafted him.                                   from any team, agent, or other person, except
                                                         reimbursement for travel expenses to attend
    Certainly, the Bylaws impact upon Mr.                tryouts. He further argues that application of
Banks; the collegiate market for his skills is           the “no agent” rule (Bylaw 12.3) [**31] to
closed to him. But the Sherman Act “protects             him is particularly unreasonable, since he did
competition, not competitors.”         Indiana           not retain an agent until after he had entered
Grocery, Inc. v. Super Valu [*860] Stores,               the 1990 draft.
Inc., 864 F.2d 1409, 1413 (7th Cir. 1989).
The record contains little to support the                    Analysis under the Rule of Reason does
proposition that the “no agent” and “no draft”           not consider directly whether the challenged
rules injure competition within the market.              restraint is reasonable in the sense of being
                                                         rationally related to a legitimate purpose.
    In any event, if “pricing” is translated into        Quinn v. Kent General Hospital, 617 F. Supp.
the terms of the supply of college football              1226, 1244 (D. Del. 1985). An inquiry so
players as defined by eligibility, the NCAA              defined would be appropriate under a
and its member institutions have near-total              constitutional analysis, but NCAA v.
control of the market of college players; such           Tarkanian, 488 U.S. 179, 102 L. Ed. 2d 469,
control might be deemed to provide more than             109 S. Ct. 454 (1988), seems to foreclose a
adequate market share to constitute market               constitutional challenge, and Mr. Banks
power. See generally Valley Liquors, Inc. v.             makes no constitutional claim. The antitrust
Renfield Importers, Ltd., 822 F.2d 656, 666              inquiry is whether the restraint is
(7th Cir. 1987). Even if it is assumed,                  anticompetitive in light of its surrounding
however, that Mr. Banks has made or could                circumstances. NCAA v. Board of Regents of
make a showing that [**30] the NCAA has                  Oklahoma University, 468 U.S. at 104, 104 S.
market power within the meaning of antitrust             Ct. at 2961; Lektro-Vend Corp. v. Vendo Co.,
analysis (or that he would not be required to            660 F.2d 255, 268 (7th Cir. 1981), cert.
do so),12 the Rule of Reason still would                 denied, 455 U.S. 921, 71 L. Ed. 2d 461
require Mr. Banks to prove that the challenged           (1982). Nonetheless, the rules' relationship to
Bylaws' harmful effects on competition                   their purpose is not wholly immaterial.
outweigh any beneficial effect on competition.           Analysis of the effect on competition entails
                                                         examination of, among other things,
   Mr. Banks argues that the Bylaws at issue             circumstances peculiar to the business or
constitute unreasonable restraints upon the              industry and the reason for the restraint.
                                                         Chicago Board of Trade v. United States, 246
                                                         U.S. 231, 238, 62 L. Ed. 683, 38 S. Ct. 242
                                                         (1918). Where, as here, [**32] a defendant
12 Under some circumstances (not necessarily
present here), an antitrust plaintiff may prevail even   claims to have acted with a procompetitive
absent a showing of market power. NCAA v. Board          purpose, the challenged restraint must bear
of Regents, 468 U.S. at 109-110 and n. 42, 104 S. Ct.    some nexus to that purpose for the claim to be
at 2964-65.                                              credible. See generally Wilk v. American



                                                                                              847
Medical Ass'n, 895 F.2d at 361 (“the district          demarcation         between       amateur      and
court found that the AMA was not motivated             professional athletic pursuits, they advance the
by such altruistic concerns”).                         goal of focusing student-athletes' attention and
                                                       energies on collegiate endeavors, both
    Mr. Banks has posited a credible                   academic and athletic, and so have the
anticompetitive effect of Bylaw 12.2.4.2, the          procompetitive effect of promoting the
“no-draft” rule. College football, he suggests,        integrity and quality [**34] of college
is a substantial moneymaker. The “no-draft”            football. The NCAA contends, with some
rule will deter better college football players        hyperbole, that without the restraints of
from testing the waters of professional                eligibility rules, the distinct “product,” college
football for fear of finding themselves in the         football, would not survive as an amateur
no-man's land in which Mr. Banks has placed            sport.
himself. Accordingly, better players will
remain in school and out of the NFL draft,                 Courts applying the Rule of Reason have
enhancing the NCAA's already profitable                consistently noted the procompetitive effects
product.                                               of NCAA eligibility regulations.           The
                                                       segments of the NCAA v. Board of Regents
    In turn, the NCAA has articulated                  opinion quoted above, although dicta, speak
procompetitive effects of its “no-draft” rule.         powerfully to the procompetitive nature of
NCAA regulations are designed to preserve              NCAA regulations concerning eligibility.
amateurism       and     to    prevent     the         Further, the sentiments expressed in that dicta
professionalization of college sports to the           are in harmony with cases decided before and
extent educational objectives would be                 after NCAA v. Board of Regents.
overshadowed. If college football players
could shuttle between the professional [*861]              In Justice v. NCAA, 577 F. Supp. 356 (D.
draft and their college teams, the NCAA                Ariz. 1983), varsity football players for the
argues, the players' profit-making objectives          University of Arizona sought to enjoin
[**33] soon would overshadow educational               enforcement of NCAA sanctions that
objectives, blur the line between college and          prohibited their school from post-season
professional football, and create a number of          competition and television appearances. The
potential problems for the effective                   players claimed the sanctions constituted a
management of teams engaged in college                 group boycott in violation of @ 1 of the
football.13                                            Sherman Act. Relying in part upon the
                                                       NCAA's control of television bids, the court
   The NCAA argues that because the                    held that the Sherman Act applied to the
Bylaws at issue preserve a clear line of               NCAA. The court went on, however, to hold
                                                       that the sanctions at issue did not violate the
                                                       Sherman Act:
13 Newspaper articles submitted with the plaintiff's
submission, to which the defendants made no                    The sanctions at issue [**35] in
objection, suggest that the NFL would face even more       this case . . . have been shown to lack
problems. According to those articles, NFL teams           an anticompetitive purpose and to be
worry that if a player could return to college after
                                                           directly related to the NCAA
being drafted, NFL teams would risk wasting their
draft choices. It might also be assumed that such an       objectives of preserving amateurism
option for drafted players would bring to contract         and promoting fair competition. . . .
negotiations a new development that NFL teams              [T]he NCAA sanction program was
would find unwelcome.                                      designed to prevent intercollegiate



                                                                                              848
    athletic programs from being drive by          Cas. (CCH) para. 60,117 (D.N.J. 1974).
    the pressures to “remain competitive”
    into committing practices that                     The court agrees with the holdings of
    “threaten both the competitive and the         these cases and with the dicta in NCAA v.
    amateur nature of the programs . . . “         Board of Regents and finds that reasoning
    [Hennessey v. NCAA, 564 F.2d 1136,             equally applicable to the Bylaws at issue here.
    1153 (5th Cir. 1977)]. The fact that           The NCAA's “no draft” and “no agent” rules
    the sanctions might have an incidental         are intended to preserve the intercollegiate
    anticompetitive effect on coaches or           [**37] football's amateur nature. The concept
    athletes does not in itself render them        of amateurism is no less central to the concept
    unreasonable restraints under the rule         of amateur college football than are the
    of reason. . . .                               modest propositions that an athlete must
                                                   enroll in the college for which he wishes to
    In sum, it is clear that the NCAA is not       play, attend classes, and maintain a minimal
engaged in two distinct kinds of rulemaking        academic standing. Each of those limitations
activity. One type . . . is rooted in the NCAA's   constitute restraints with some anticompetitive
concern for the protection of amateurism; the      nature: an NCAA member institution will be
other type is increasingly accompanied by a        reluctant to recruit athletes it is not willing to
discernible economic purpose. . . . The            enroll and may not allow participation by
NCAA sanctions at issue here are clearly of        athletes to whom it is not willing to award
the former variety. Because the sanctions          adequate grades. Similarly, limitations upon
evince no anti-competitive purpose, are            the number of assistant coaches, Hennessey v.
reasonably related to the association's central    NCAA, 564 F.2d 1136, 1154 (5th Cir. 1977),
objectives, and are not overbroad, the NCAA's      have some degree of harm to competition.
action does not constitute an unreasonable         The procompetitive nature of the regulations,
[**36] restraint under the Sherman Act. 577        however, outweighs the anticompetitive
F. Supp. at 382-383.                               effects.

    In McCormack v. NCAA, 845 F.2d 1338                It may be, as Mr. Banks argues, that the
(5th Cir. 1988), football players for Southern     NCAA's “no draft” and “no agent” rules
Methodist University sought to enjoin, as          protect a flawed concept of amateurism.
violative of @ 1 of the Sherman Act, NCAA          Whether an athlete who has received nothing
sanctions against their school; those sanctions    more than two payments of expenses, or who
entailed a temporary cessation of the football     asked a family friend to attempt to interest
program. After quoting liberally from NCAA         NFL teams in his services, would be perceived
v. Board of Regents, the court stated its          as a professional by the average citizen is
conclusion succinctly: “The NCAA markets           debatable; whether the average citizen would
college football as a product distinct from        consider [**38] a professional baseball player
professional football. The eligibility rules       to be an amateur college basketball player
create the product and allow its survival in the   may be less debatable. Nonetheless, the
face of commercializing [*862] pressures.          Bylaws at issue seek to define amateurism for
The goal of the NCAA is to integrate athletics     purposes of intercollegiate athletic eligibility,
with academics. Its requirements reasonably        and the need for such a definition is central to
further this goal.” 845 F. 2d at 1345. Accord,     a procompetitive purpose. “That the NCAA
United States v. Walters, 711 F. Supp. 1435,       has not distilled amateurism to its purest form
1441-1442 (N.D. Ill. 1989); College Athletic       does not mean its attempts to maintain a
Placement Service, Inc. v. NCAA, 1975 Trade        mixture containing some amateur elements



                                                                                          849
are unreasonable.”    McCormack v. NCAA,          would risk the end of his competitive football
845 F.2d at 1345.                                 career.

    The NCAA has demonstrated significant             But while the court sympathizes with Mr.
procompetitive effects and purpose of the         Banks, the NCAA regulations at issue [*863]
Bylaws at issue. Mr. Banks has not shown a        here, whatever their wisdom or soundness as
reasonable likelihood of demonstrating a          intercollegiate [**40] athletic policy, do not
greater anticompetitive effect. He has not        offend the federal antitrust laws. The court
demonstrated an ability to show a distortion of   cannot rescue Mr. Banks' career hopes by
pricing, because a substantial number of          holding otherwise.       He has shown no
players seeking positions on NFL rosters fail     likelihood of success on the merits of his
in their quest; the supply of players is more     federal antitrust claim, so his motion for
than adequate. He has demonstrated no             preliminary injunction must be, and hereby is,
ability to show substantial reduction in the      DENIED.
supply of amateur players as a result of the
NCAA regulations (according to his                   SO ORDERED.
submission, twenty players with remaining
collegiate eligibility made themselves               ENTERED: August 17, 1990
available for the draft but were not drafted).
He has demonstrated no harm to [**39]
consumer welfare apart from the consumers'
inability to see him play football this fall, a
harm for which he must bear significant
responsibility.    Accordingly, he has not
demonstrated a reasonable likelihood of
success on his claim that the NCAA's
regulations restrain trade in violation of @ 1
of the Sherman Act.

                     III.

    At a comparatively young age, Braxston
Banks was called upon to make a decision that
would determine his chosen career. To
remain an amateur would have required him
to forego a possible lucrative year's salary
(and a substantial portion of his career
earnings as a professional football player,
whose careers last only a few years) and
subjected him to the risk of further, perhaps
disabling injury in exchange for another year's
grant-in-aid. To enter the draft would require
him to surrender a grant-in-aid worth $
16,000.00 and perhaps defer his postgraduate
education, but an NFL running back can
probably pay his own way through school.
More importantly, a decision to enter the draft



                                                                                      850
      BRAXSTON L. BANKS,                                IV. RULE 12(b)(6) DISMISSAL OF A
        Plaintiff-Appellant,                          RULE-OF-REASON CASE
                  v.
 NATIONAL COLLEGIATE ATHLETIC                             Banks' primary contention on appeal [*15]
  ASSOCIATION, Defendant-Appellee                     is that because the record is not thoroughly
                                                      developed, it was inappropriate for the district
                No. 91-1666                           court to decide that the NCAA no-draft and
   United States Court of Appeals for the             no-agent rules were pro-competitive in ruling
              Seventh Circuit                         on a Rule 12(b)(6) motion to dismiss.7 Banks
       1992 U.S. App. LEXIS 25790                     asserts that “without any evidence, the district
        December 6, 1991, Argued                      court agreed with the NCAA that its no-draft
        October 13, 1992, Decided                     and no-agent Rules were reasonable and
                                                      dismissed the complaint under Rule 12(b)(6)
                                                      for failure to state a claim.”         We are
SUBSEQUENT HISTORY:                As Corrected       unconvinced that the record in this case
October 19, 1992.                                     requires further development in order to
                                                      determine whether the NCAA rules have a
PRIOR HISTORY: [*1] Appeal from the                   pro-competitive effect, but it is immaterial to
United States District Court for the Northern         evaluating Banks' argument that the district
District of Indiana, South Bend Division. No.         court improperly decided that the rules were
90 C 394. Robert L. Miller, Jr., Judge.               reasonable. The district court decided the
                                                      case not on the basis of the relative
JUDGES: Before COFFEY and FLAUM,                      anti-competitive effect of the rules versus the
Circuit Judges, and GRANT, Senior District            pro-competitive impact, but on the ground of
Judge.*                                               Banks' absolute failure to allege an
                                                      anti-competitive effect: “Mr. Banks does not
OPINION:          COFFEY, Circuit Judge.              suggest what anti-competitive effects result
Braxston Lee Banks appeals the district               from either restraints in the football labor
court's dismissal of his claim that the National      market or the group boycott; nor does he
Collegiate Athletic Association (“NCAA”)              challenge the purported pro-competitive
rules withdrawing athletes' eligibility to            impact of the NCAA's no draft rules.” The
participate in collegiate sports in the event the     court went on to hold that [*16] “while Mr.
athlete chooses to enter a professional draft or      Banks claims that the NCAA rules in question
engages an agent to help him secure a position        accomplish a group boycott by way of
with a professional team are an illegal               restricting the football labor market, he ties
restraint on trade or commerce in violation of        those allegations to no competitive impact on
15 U.S.C. @ 1. We affirm the judgment of              any identifiable market. Mr. Banks has no
the district court holding that Banks failed to       antitrust injury that can be gleamed [sic] from
state a claim upon which relief can be granted.       the amended complaint.” (Emphasis added).
                                                      Since the district judge's decision was based
                      ***                             on Banks' failure to allege an anti-competitive
                                                      effect on an identifiable market, the argument


* The Honorable Robert A. Grant, Senior Judge         7 The mootness of Banks' first cause of action does
for the Northern District of Indiana, is sitting by   not affect his claim under the second cause of action
designation.                                          for damages from his alleged injury.



                                                                                                851
that the court improperly determined that the        without assigning error to its holding.8
rules were reasonable on a motion to dismiss
is without merit.                                         The dissent claims, on the other hand, that
                                                     Banks'       complaint     did      allege     an
  V. THE    VALIDITY                OF      THE      anti-competitive impact on an identifiable
ANTITRUST CLAIM                                      market. Dissent at 27 n. * . We disagree, but
                                                     we do not dispute the fact that the plaintiff
    The district court dismissed Banks' claim        could have alleged an anti-competitive
because he failed to allege that the NCAA            impact. However, this court is not able to
rules had an anti-competitive impact on any          review what Banks could have alleged, but is
identifiable market. Banks chose to appeal           called upon to review only what he actually
the judgment of the court rather than request        alleged. Our review of Banks' argument
leave to amend and reinstate his complaint.          shows that the plaintiff cited only examples of
On appeal, Banks [*17] ignores the holding of        anti-trust law violations (group boycotts, price
the district court and asserts that the court        fixing, control of output, refusal to deal) but
found an anti-competitive impact on a                failed to delineate [*19] much less explain
relevant market. Referring to the trial court's      which, if any, of these restraints of trade apply
holding, Banks states:                               to the NCAA rules at issue.9

“In ruling on plaintiff's motion for a                   This court has previously addressed the
preliminary injunction, the district court found     requirement of alleging anti-competitive
that plaintiff had standing to raise his antitrust   effects on a market in order to make out a
claim and that he had identified a relevant          claim for a violation of the Sherman Act:
market and shown an anticompetitive restraint
on that market ('no-draft rule will deter better
college football players from testing the
waters of professional football' so that they
'will remain in school and out of the NFL            8 Although we could hold that Banks' failure to
draft, enhancing the NCAA's already                  argue that the district court erred in holding that his
                                                     complaint did not allege an anti-competitive impact
profitable product.') Nevertheless, it ended its
                                                     on a discernible market waived any such argument,
subsequent opinion dismissing the case with a        we choose to review the complaint. Alternatively, we
statement that plaintiff 'has no antitrust injury    review the complaint because the NCAA for some
that can be gleamed [sic] from the amended           reason failed to raise the defense of waiver.
complaint'--but with no elaboration for this
conclusion. Accordingly, our response is             9 Contrary to the dissent's view, Banks was not
based on the argument raised by the NCAA             “compelled to address the arguments presented in the
                                                     NCAA's brief . . .” to allege an anti-competitive
below.”                                              effect. Dissent at 27 n. * . Banks was required to
                                                     allege and explain how the challenged NCAA rules
The district court's conclusion that Banks “has      have an anti-competitive impact on the markets he
no antitrust injury” was obviously based upon        describes as (1) NCAA member institutions and (2)
its holding that Banks failed to allege an           NCAA football players who enter the draft and/or
anti-competitive impact on a relevant market.        employ an agent. Absent the plaintiff's explaining
                                                     how the no-draft and no-agent NCAA rules are
We confess that we are somewhat perplexed
                                                     “classic” examples of restraints of trade in his
as to how Banks expects [*18] to get a               amended complaint mmm( para. 22(b)), we agree
reversal of the district court's judgment            with the trial court that Banks has failed to
                                                     sufficiently allege an anti-competitive impact upon an
                                                     identifiable market to survive the 12(b)(6) motion.



                                                                                                852
“The fundamental [*20] requirement at issue          that restraint is imposed is all those players
in this dispute is that of a sufficient allegation   who wish to play football for major college
of anticompetitive effects that would result or      football teams, a market which is dominated
have resulted from the defendants' actions; the      by the NCAA.
absence of such allegations is ordinarily fatal
to the existence of a cause of action. The               “(b)     Second, the Rules operate as a
purpose of the Sherman Act is to rectify the         restraint on all members of the NCAA
injury to consumers caused by diminished             requiring them to abide by the Rules, and not
competition; it is for this reason that Congress     to change them or grant waivers from them.
provided a treble damage recovery for private        This restraint operates directly on member
parties willing to initiate an enforcement           institutions such as Notre Dame and
action. Thus, the plaintiff must allege, not         indirectly, although intentionally, on players
only an injury to himself, but an injury to the      such as Banks. The relevant market is all
market as well. . . .                                major college [*22] football institutions since
                                                     all NCA [sic] member institutions are subject
    “It is only when the plaintiff adequately        to similar restrictions, and hence players like
states a per se violation of @ 1 of the Sherman      Banks are foreclosed from choosing a major
Act that an allegation of anticompetitive            college football team based on the willingness
effects is not required.”                            of the institution to waive or change its rules,
                                                     or consider doing so.
Car Carriers, Inc. v. Ford Motor Company,
745 F.2d 1101, 1107-08 (7th Cir. 1984)                   “(c)     The Rules also operate to restrain
(footnote and citations omitted) (emphasis           the ability of a player such as Banks from
added). Under the Supreme Court's ruling in          marketing his services to the NFL, by
National Collegiate Athletic Association v.          effectively giving him one and only one
Board of Regents, 468 U.S. 85, 104 S. Ct.            realistic chance to be drafted by the NFL. The
2948 (1984), allegations that the NCAA rules         relevant market being restrained is composed
restrain trade or commerce may not be viewed         of players like Banks who are considering
as per se violations [*21] of the Sherman Act,       entering the NFL draft while they still have
but must be addressed under the “Rule of             college football eligibility remaining.”
Reason.” Thus, in order for Banks' complaint
to state a claim upon which relief can be            These allegations identify two markets: (1)
granted, it must allege anti-competitive effects     NCAA football players who enter the draft
on a discernible market.         See Hennessy        and/or employ an agent and (2) college
Industries, Inc. v. FMC Corp., 779 F.2d 402,         institutions that are members of the NCAA.
404 (7th Cir. 1985).                                 Another reading of the complaint might even
                                                     have deduced a third market, the NFL player
   Banks' complaint alleged that the NCAA            recruitment market. But regardless of how
no-draft and no-agent rules restrained trade or      charitably the complaint is read, it has failed
commerce in three ways:                              to define an anti-competitive effect of the
                                                     alleged restraints on the markets.
    “(a)     First, there is the restraint imposed
by the NCAA on all of its member institutions            The dissent reasons that Banks has alleged
that restricts them from offering a player such      that the NCAA no-draft rule has an
as Banks, who enters the draft and/or retains        anti-competitive effect in the [*23] market for
an agent, an opportunity to play college             college football players. Dissent at 27. The
football again. The relevant market on which         dissent claims this anti-competitive effect is



                                                                                           853
the no-draft rule “foreclosing players 'from              prevent commercialism. According to the
choosing a major college football team based              constitution of the National Collegiate
on the willingness of the institution to waive            Athletic Association, the purposes of the
or change [the no-draft] rule[ ].”' Dissent at            NCAA Eligibility Rules are to maintain
27 (quoting Amended Complaint P 22(b)).                   amateur intercollegiate athletics “as an
This allegation can at best be described as               integral part of the educational program and
inaccurate and further fails to allege an                 the athlete as an integral part of the student
anti-competitive impact. First, as Banks states           body and by doing so, retain a clear line of
in PP 5-7 of his amended complaint, the                   demarcation between intercollegiate athletics
NCAA has adopted the no-draft, no-agent, and              and professional sports. . . . The overriding
other substantive rules to which all NCAA                 purpose of the Eligibility Rules, thus, is not to
member institutions “have agreed, and do in               provide the NCAA with commercial
fact, adhere.” Amended Complaint P 6.                     advantage, but rather the opposite extreme--to
Contrary to Banks' erroneous allegation (para.            prevent commercializing influences from
22(b)), an NCAA member institution may not                destroying the unique 'product' of NCAA
waive or change the no-draft rule at its                  college football.”       Gaines v. National
discretion for it is rather obvious that only the         Collegiate Athletic Ass'n, 746 F. Supp. 738,
National Collegiate Athletic Association can              744 (M.D.Tenn.1990).
waive or change one of its substantive rules.
1992-93 NCAA Division I Operating Manual                      As the Supreme Court in Board of
@ 14.01.5 (Compliance With Other NCAA                     Regents stated: “most of the regulatory
and Conference Legislation). Any school that              controls of the NCAA [are] a justifiable
sought to waive or change the rules would                 means of fostering competition among the
forfeit its ability to participate in NCAA                amateur athletic teams and therefore are
sanctioned events. [*24]                                  procompetitive because they enhance public
                                                          interest in intercollegiate athletics.” Board of
    Second, as the district court held, the               Regents, 468 U.S. at 104, 104 S. Ct. at 2961.
complaint has failed to allege an                         The Court further explained:
anti-competitive impact.10 The failure results
from Banks' inability to explain how the                  “The NCAA seeks to market a particular
no-draft rule restrains trade in the college              brand of football--college football.         The
football labor market. The NCAA Rules seek                identification of this 'product' with an
to promote fair competition, encourage the                academic tradition differentiates college
educational pursuits of student-athletes and              football from and makes it more popular than
                                                          professional sports to which it might
                                                          otherwise be comparable, such as, for
10 The dissent argues the no-draft rule is
                                                          example, minor league baseball. In order to
anti-competitive for Banks by stating: “if the no-draft   preserve the character and quality of the
rule were scuttled, colleges that promised their          'product,' athletes must not be paid, must be
athletes the opportunity to test the waters in the NFL    required to attend class, and the like. And the
draft before their eligibility expired, and returned if   integrity of the 'product' cannot be preserved
things didn't work out, would be more attractive to       except by mutual agreement; if an institution
athletes than colleges that decline to offer the same
                                                          adopted      such    restrictions    unilaterally
opportunity.” Dissent at 27-28. Unlike the dissent,
we choose not to create arguments not stated in the       [restrictions on eligibility rules], its
complaint, rather, we analyze the complaint to            effectiveness as a competitor on the playing
determine whether the complaint itself has alleged an     field might soon be destroyed. Thus, the
anticompetitive impact.                                   NCAA plays a vital role in enabling college



                                                                                                854
football to [*26] preserve its character, and as         represents a desirable and legitimate attempt
a result enables a product to be marketed                “to keep university athletics from becoming
which might otherwise be unavailable. In                 professionalized to the extent that profit
performing this role, its actions widen                  making objectives would overshadow
consumer choice--not only the choices                    educational objectives,” the no-draft rule and
available to sports fans but also those                  other like NCAA regulations preserve the
available to athletes--and hence can be viewed           bright line of demarcation between college
as procompetitive.”                                      and “play for pay” football. Id. at 123, 104 S.
                                                         Ct. at 2972 (White, J. dissenting) (citation
Id. at 102, 104 S. Ct. at 2960-61 (emphasis              omitted).     We consider college football
added, footnote omitted). The no-draft rule              players as student-athletes simultaneously
has no more impact on the market for college             pursuing academic degrees that will prepare
football players than other NCAA eligibility             them to enter the employment market in
requirements such as grades, semester hours              non-athletic occupations, and hold that the
carried, or requiring a high school diploma.             regulations of the NCAA are designed to
They all constitute eligibility requirements             preserve the honesty and integrity of
essential to participation in NCAA sponsored             intercollegiate athletics and foster fair
amateur athletic competition.11 Banks might              competition among the participating amateur
just as well have alleged that only permitting a         college students. Justice v. NCAA, 577 F.
student five calendar years in which to                  Supp. 356, 382 (D. Ariz. 1983).
participate in four seasons of intercollegiate
athletics restrains trade. Banks' allegation that             In order for the NCAA Rules to be
the no-draft rule restrains trade is absurd.             considered a restraint of trade in violation of
None of the NCAA rules affecting college                 @ 1 of the Sherman Act, Banks must allege
football eligibility restrain trade in the market        that the no-draft and no-agent rules, as the
for college players because the NCAA does                dissent explains, are terms of employment that
not exist as a minor league training ground for          diminish competition in the employment
future NFL players but rather to provide [*27]           market (i.e., college football). Dissent at 28
an opportunity for competition among                     (citing Radovich v. National Football League,
amateur students pursuing a collegiate                   352 U.S. 445 (1957); Nichols v. Spencer Int'l
education.12 Because the no-draft rule                   Press, 371 F.2d 332, 335-36 (7th Cir. 1967);
                                                         Phillip Areeda and Donald F. Turner II,
                                                         Anti-trust Law, P 338(c) at 199-200 (1978)).
11 “The NCAA is a private, voluntary membership          The dissent refers to NCAA member colleges
organization, and, as such, any athletes participating   as “purchasers of labor” in the [*29] college
in intercollegiate competition at its member             football player market and the players as
institutions must abide by its rules to compete.”
Gregory J. Tarone, Amateur Athletes and Eligibility,
                                                         “suppliers” in this market.13 Dissent at 27.
93 Case & Comment 3, 4 (May 1988). [*28]

12 This conclusion is buttressed by the fact that a      13 We disagree with Banks' allegation in paragraph
very small number of college athletes go on to           22(c) of his Amended Complaint that the NCAA
participate in professional athletics. Of the over       no-draft and no-agent Rules give the college player
12,000 Division 1-A college football players, less       only one realistic chance of being drafted in the NFL
than 300 go on to the NFL each year. NCAA                because the college player (1) can enter the draft any
Participation Study (1990-91). In fact, it has been      time during his college career (Tommy Maddox of
calculated that of the elite 336 players drafted each    UCLA was just drafted by Denver although he had
year, only 49 percent make NFL teams and after 5         two more years of eligibility); (2) enter the draft, then
years only 35 percent are still with an NFL team.        play for another league like the CFL, WFL, or
                                                         ARENA or even sit out for a year and then reenter the


                                                                                                      855
After likening colleges to “purchasers of               no-draft rule merely serves as an NCAA
labor,” the dissent extends the analogy to              eligibility requirement and precludes the
conclude that colleges offer material terms of          existence of a college football [*31] labor
employment to their college players and that            market for athletes who are ineligible by
the no-draft rule is a “material term of                NCAA standards.
employment” that harms competition in the
college football labor market. Dissent at                    Secondly, we disagree with the dissent's
28-30.                                                  allegation that NCAA member schools are
                                                        “purchasers of labor” as the operation of the
    Initially, we restate that the no-draft rule        NCAA eligibility and recruiting requirements
and similar NCAA rules serve to maintain the            prohibits member colleges from engaging in
clear line of demarcation between college and           price competition for players. Dissent at
professional football. Board of Regents, 468            28-29. We fail to understand how the dissent
U.S. at 104, 104 S. Ct. at 2960-61; 1991-92             can allege that NCAA colleges purchase labor
NCAA Manual @ 1.3.1 Basic purpose (                     through the grant-in-aid athletic scholarships
NCAA Fundamental Policy @ 1.3).               In        offered to college players when the value of
contrast to professional football, NCAA                 the scholarship is based upon the school's
student-athletes are required to attend class,          tuition and room and board, not by the supply
maintain a minimum grade point average, and             and demand for players. Elimination of the
enroll and complete a required number of                no-draft and no-agent rules would fly in the
courses to obtain a degree. See 1992-93                 face of the NCAA's amateurism requirements.
NCAA Division I Operating Manual @@                     Member schools might very well be exposed
14.01.1, 14.01.02, 14.01.5, 14.1.6.2.2. The             to agents offering the services of their football
no-draft rule is evidence of the academic               playing clients to the highest bidder. In
priority of the NCAA because it forecloses a            representing their “pro athlete” clients, the
student-athlete from hiring an agent or                 agents would in all probability attempt to
entering the NFL draft and after failing to             bargain with the NCAA school and might very
meet the professional standards, returning to           well expect the school to offer their client an
play college football to improve his football           attractive    contract     possibly    involving
skills in hopes of entering an upcoming draft.          automobiles, condominiums, and cash as
In denying a college football player the right          compensation in contravention of the NCAA
to play professional football (entering the NFL         amateurism rules. Such arrangements might
draft) and then return to college football, the         [*32] involve cash compensation payable only
                                                        in the future after the player has completed his
                                                        college eligibility and continues with an NFL
    (Continued)
                                                        club.14    The involvement of professional
draft (Bo Jackson was a first round draft choice of
                                                        sports agents in NCAA football would turn
Tampa Bay, but he chose to play baseball instead, the   amateur intercollegiate athletics into a sham
next year he was drafted by the Los Angeles Raiders     because the focus of college football would
with whom he signed); or (3) complete his eligibility   shift from educating the student-athlete to
before entering the draft.                              creating a “minor-league” farm system out of
                                                        college football that would operate solely to
     Recently 97 of the 107 NCAA Division 1-A
football programs imposed strict guidelines on NFL
scouts to prevent plucking student-athletes from
colleges. Dennis Chaptman, Coaches take a hard line     14 Of course the agents usually do not donate their
on NFL Scouts, Milwaukee Journal, Sept. 10, 1992 at     services, they take a sizable percentage of the
C1.                                                     package as their own compensation.



                                                                                                856
improve players' skills for professional                      the no-draft and no-agent rules have an
football in the NFL. We should not permit the                 anti-competitive impact on a relevant market.
entry of professional athletes and their agents               Our review of Banks' amended complaint
into NCAA sports because the cold                             reveals that he has not alleged that college
commercial nature of professional sports                      football players are regulated under “terms of
would not only destroy the amateur status of                  employment” or that players are “selling their
college athletics but more importantly would                  services” to their colleges. See Phillip Areeda
interfere with the athletes proper focus on                   and Donald F. Turner II Anti-Trust Law, P
their educational pursuits and direct their                   338(c) at 199-200 (1978). Despite the failure
attention to the quick buck in pro sports.15                  of Banks to allege an anti-competitive impact,
                                                              the dissent again goes out of its way to read
    The no-agent and no-draft rules are vital                 into the complaint and makes an argument for
and must work in conjunction with other                       Banks by contending that college football
eligibility requirements to preserve the                      players are really selling their services to
amateur status of college athletics, and                      NCAA member colleges. It is true that some
prevent the sports agents from further                        colleges have been justifiably sanctioned by
intruding into the collegiate educational                     the NCAA for their violations of NCAA Rules
system.                                                       regarding cash compensation and free airline
                                                              transportation [*34] between the athlete's
    Although we disagree with it, the dissent's               school and home. Justice, 577 F. Supp. at 362
“term of employment” argument reveals how                     (University of Arizona); NCAA v. Board of
Banks could have alleged the manner in which                  Regents of Univ. of Okl., 468 U.S. 85, 104 S.
                                                              Ct. at 2947 (University of Oklahoma);
                                                              McCormack v. National Collegiate Athletic
15 See Ex-agent Bloom Gets Probation, Chic. Trib.,            Ass'n, 845 F.2d 1338, 1340-41 (5th Cir. 1988)
Aug. 28, 1992, at 7, Zone C (Agents Lloyd Bloom               (Southern Methodist University); Rodney K.
and Norby Walters represented 42 athletes in                  Smith, The National Collegiate Athletic
violation of NCAA rules). Walters received an                 Association's Death Penalty: How Educators
18-month prison sentence and a $ 25,000 fine for his          Punish Themselves and Others, 62 Ind. L. J.
role in enticing college players to sign secret
                                                              985 (1987); Note, Sherman Act Invalidation
contracts before their eligibility expired.            Matt
O'Connor, Walters' sentence: 1 1/2 years, Chic.               of the NCAA Amateurism Rules, 105 Harv. L.
Trib., Sept. 18, 1992, Sec. 4 at 1, 6. (The U.S.              Rev. 1299, 1312-13 (1992).
District Judge commented that “there is so much
money involved in the sports business, there is strong            The dissent takes a surprisingly cynical
incentive to bend and break the rules . . . . [Walters        view of college athletics and contends that
had] total disregard for ethics and the law . . . and         “colleges squeeze out of their players one or
didn't care what he did to represent top college
football stars.”). See, e.g., Division I-AAA Fails at
                                                              two more years of service” because the
NCAA Convention, United Press Int'l, Jan. 9, 1992,            no-draft rule forces the player to choose
@ Sports News (Proposition 47, which now permits              between continued collegiate eligibility and
an underclassman to use the university to inquire as to       entering the draft. Dissent at 29.         This
his market value in the NFL or NBA, “is dangerous . .         description of players “selling their services”
. [because] it increases . . . the sports agents' intrusion   to NCAA colleges stands in stark contrast to
into the players' lives); NCAA lays off Michigan
                                                              the academic and amateurism requirements of
State, USA Today, Oct. 4, 1991 at 3, Zone C
(Michigan State asked sports agent Charles Tucker to          the vast majority of college athletic [*35]
stay away from its athletes after discovering Tucker          programs that, in compliance with the NCAA
permitted athletes to charge sporting goods in his
store at no cost).



                                                                                                   857
rules and regulations,16 are foreclosed from                  Specifically, the NCAA requires: “to be
offering       cash       compensation       or           eligible to represent an institution in
“non-permissible awards, extra benefits, or               inter-collegiate athletics competition, a
excessive or improper expenses not authorized             student-athlete shall be enrolled in at least a
by NCAA legislation . . . .” 1992-93 NCAA                 minimum full-time program of studies, be in
Division I Operating Manual @@ 14.01.5.1                  good academic standing and maintain
and 14.01.5.2. The fact that a minority of                satisfactory progress toward a baccalaureate
schools (such as the University of Houston)17             or equivalent degree.”         1992-93 NCAA
“use” athletes rather than encourage and foster           Division I Operating Manual @ 14.01.1. The
their student's academic pursuits, does not               term a “full-time program of studies” in @
negate the fact that all NCAA member                      14.01.1 of the NCAA Bylaws is defined to
colleges encourage and require their                      mean: “the student-athlete shall be enrolled in
student-athletes to carry a minimum number                not less than 12 semester or quarter hours,
of semester credits and maintain a minimum                regardless of the institution's definition of a
grade point average equivalent to the                     minimum full-time program of studies.” Id. at
academic       program      the    university's           @ 14.1.6.2.2. The NCAA's definition of good
non-athletic students follow.18                           academic standing in @ 14.01.1 is
                                                          “determined by the academic authorities [of
                                                          the NCAA institution] who determine the
16 The NCAA Bylaws requires student-athletes to           meaning of such phrases for all students of the
be “in compliance with all applicable provisions of       institution . . . .” Id. at @ 14.4.1. Lastly, the
the constitution and bylaws of the association [          NCAA defines the “satisfactory completion”
NCAA] and all rules and regulations of the institution
                                                          requirement in @ 14.01.1 as “a student-athlete
. . . of which the institution is a member” to preserve
their eligibility and thereby “represent an institution   shall maintain satisfactory progress [*38]
in intercollegiate athletic[ ] competition.” 1992-93      toward a baccalaureate or equivalent degree at
NCAA Division I Operating Manual @ 14.01.5 at 74.         that institution as determined by the
[*36]                                                     regulations of that institution.”19    Id. at @

17 Recently, the NCAA released the graduation
rates of Division I NCAA member schools. These                (Continued)
statistics reveal that only 14 percent of scholarship
athletes in football graduated from the University of     Limited Property Interest in Eligibility, 62 Ind. L. J.
Houston within six years of their matriculation in        1151, 1178 (1987) (citing 1985-86 Manual of the
1983-84 or 1984-85. At First: NCAA discloses date         National Collegiate Athletic Association, NCAA
of athletes by school, USA Today, Aug. 13, 1992, at       Const. art. 5 @ 1(c) at 89; art. 5 @ 1(j)(6)(ii) at
11C [hereinafter NCAA Graduation Rates]. In               94-95)).
addition, the NCAA reported that zero percent of
black football athletes at the University of Houston      19 In addition to requiring satisfactory progress
graduated within six years of their enrollment in         toward a baccalaureate degree, the NCAA Bylaws
1983-84 or 1984-85, whereas 33 percent of white           have a “percent of degree” minimum requirement for
football players at Houston graduated within six years    all studentathletes to be eligible for competition: “[1]
of their enrollment in 1983-84 or 1984-85. Ben            [a] studentathlete who is entering his or her third year
Brown, Black Athletes lag behind whites in getting        of collegiate enrollment shall have completed
degrees, USA Today, Aug. 13, 1992, at 10C.                successfully at least 25 percent of the course
                                                          requirements in the student's specific degree program
18 The NCAA study revealed that 52 percent of all         . . . [; 2] a student-athlete who is entering his or her
students and 51 percent of student-athletes graduated     fourth year of collegiate enrollment shall have
within six years of entering college. See NCAA            completed successfully at least 50 percent of the
Graduation Rates at 11C; see also Brian L. Porto,         course requirements in the student's specific degree
Balancing Due Process and Academic Integrity in           program . . . [; and 3] a student-athlete who is
Intercollegiate Athletics: The Scholarship Athlete's      entering his or her fifth year of collegiate enrollment


                                                                                                      858
    We acknowledge that some schools                    may not evade these requirements by merely
adhere more faithfully to the NCAA Rules                alleging a bare legal conclusion; if the facts
than others, but we need not reach the merits           'do not at least outline or adumbrate' a
of whether the no-draft rule is a “material             violation of the Sherman Act, the plaintiffs
term of employment” as the dissent argues               'will get nowhere merely by dressing them up
because Banks has failed to allege how the              in the language of antitrust.”'
no-draft and no-agent rules are restraints of
trade under @ 1 of the Sherman Act. The                 Id. (citation omitted).
most Banks alleges is that the relevant market
is (1) NCAA football players who enter the                  We agree with the district court's finding
draft (or employ an agent) or (2) NCAA                  that the plaintiff has failed to allege an
member college institutions, and arguably a             anti-competitive effect on a relevant market;
third market as the NFL player recruitment              at best Banks has merely attempted to frame
market. Beyond establishing these markets,              his complaint in antitrust language.20 While
Banks fails to illustrate how the NCAA                  Banks alleges a restraint on the market of
no-draft and no-agent rule diminishes                   college football players, college institutions
competition in those markets. We recognize              who are members of the [*41] NCAA, and
that the dissent makes an anti-competitive              perhaps an NFL player recruitment market,
argument, in lieu of Banks’ omission in his             the complaint fails to explain how these
pleadings, but in evaluating the district court's       alleged restraints diminish competition in or
Rule 12(b)(6) dismissal, “we limit our review,          among the markets. In our review of Banks'
as we must, to the well-pleaded allegations of          arguments in his appellate briefs as well as our
the complaint.” Car Carriers, 745 F.2d at               review of the oral argument, we have been
1107.     Thus, any additional markets or               unable to discern a cogent argument
anti-competitive effects upon them alleged
outside the amended complaint are immaterial
to our consideration of the district court's
judgment. [*40] Although on review of a                 20 The dissent's generous and expansive reading of
Rule 12(b)(6) dismissal we accept all                   Banks' complaint makes the argument for him that his
                                                        injury is “of the type the antitrust laws were intended
allegations in the complaint as true, “`a
                                                        to prevent and that flow from that which makes [the
complaint . . . must contain either direct or           NCAA rules] unlawful,” Brunswick Corp. v. Pueblo
inferential allegations respecting all the              BowlO-Mat, Inc., 429 U.S. 477 (1980), or in other
material elements necessary to sustain a                words, that Banks' injury is “attributable to the
recovery under some viable legal theory.”' Id.          allegedly anticompetitive aspect of those rules.”
at 1106 (citation omitted). The questions in            Dissent at 30 (citing Cargill, Inc. v. Monfort of
regard to Banks' allegations of restraints on           Colorado, Inc., 479 U.S. 104, 109-10 (1986)). To the
                                                        contrary, Banks' alleged injury, namely the revocation
trade is whether “the plaintiffs have                   of his eligibility and loss of his athletic scholarship at
successfully pleaded a contract, combination,           Notre Dame, does not “flow from” his complaint
or conspiracy in restraint of trade within the          wherein he states the NCAA rules “foreclos[e
meaning of the Sherman Act. The pleader                 players] from choosing a major college football team
                                                        based on the willingness of the institution to waive or
                                                        change [the NCAA rules at issue] . . . .” Amended
    (Continued)                                         Complaint P 22(b). Nowhere in Banks' complaint
                                                        does he tie his alleged antitrust injury with the
shall have completed successfully at least 75 percent   no-draft or noagent rules' allegedly anti-competitive
of the course requirements in the student's specific    impact, rather he broadly concludes “the Rules
degree program.” 1992-93 NCAA Manual @@                 operate as a restraint on all members of the NCAA . .
14.5.2-14.5.2.1.                                        . .” Amended Complaint P 22(b).



                                                                                                      859
articulated even on appeal that the alleged        complaint, only one of which it is necessary to
restraints impose an anti-competitive effect on    address here: the nationwide labor market for
the alleged markets. The appellant merely          college football players. See Amended
claims that there is an anti-competitive effect,   Complaint P 22(a)-(b).          NCAA member
but he fails to explain what it is. While Banks    colleges are the purchasers of labor in this
might possibly have been able to allege an         market, and the players are the suppliers. The
anti-competitive impact on a relevant market       players agree to compete in football games
through a more carefully drafted complaint or      sponsored by the colleges, games that
an amendment to his complaint, he failed to        typically garner the colleges a profit, in
do so. It is not for us, as appellate judges, to   exchange for tuition, room, board and other
re-structure his complaint for him.                benefits.
                                                       Banks also alleges how the NCAA rules at
                     ***                           issue--I will focus upon the no-draft
                                                   rule--harm competition in that market: they
DISSENT:          FLAUM, Circuit Judge,            foreclose players “from choosing a major
concurring in part and dissenting in part. This    college football team based on the willingness
is a “rule of reason” case brought under @ 1       of the institution to waive or change [the] rule[
of the Sherman Antitrust Act, National             ].” Id. P 22(b). It is hardly a revelation that
Collegiate Athletic Ass'n v. Board of Regents,     colleges fiercely compete for the most
468 U.S. 85 (1984), [*43] and as such the          promising high school football players--the
panel correctly states that Braxton Banks must     players who, incidentally, are most likely to
allege that the NCAA rules at issue harm           feel constrained by the challenged rules two or
competition in some relevant market to get his     three years down the line. If the no-draft rule
foot in the door. Great Escape, Inc. v. Union      were scuttled, colleges that promised their
City Body Co., Inc., 791 F.2d 532, 539 (7th        athletes the opportunity to test the waters in
Cir. 1986); Car Carriers, Inc. v. Ford Motor       the NFL draft before their eligibility expired,
Co., 745 F.2d 1101, 1106-07 (7th Cir. 1984),       and return if things didn't work out, would be
cert. denied, 470 U.S. 1054 (1985). After          more attractive to athletes than colleges that
quoting liberally from Banks' complaint, the       declined to offer the same opportunity. The
panel concludes that he failed to meet his         no-draft rule eliminates this potential element
burden. Granted, the complaint was drafted         of competition among colleges, the purchasers
somewhat inelegantly, but I nonetheless            of labor in the college football labor market.
believe that it defines a market and describes     It categorically rules out a term of
how the NCAA rules harm competition in that        employment that players, the suppliers of
market. Accordingly, I respectfully dissent        labor in that market, would find advantageous.
from the panel's affirmance of the district        Cf. FTC v. Indiana Fed'n of Dentists, 476 U.S.
court's dismissal of Banks' second cause of        447, 459 (1986) (considering “a horizontal
action.                                            agreement among . . . dentists to withhold
                                                   from their customers a particular service that
    The parties agree that Banks, to survive       they desire”).
the NCAA's motion to dismiss, must define a
relevant market and allege how the challenged         It is well settled that an agreement among
rules adversely affect competition in that         employers to control a material term of
market. Lektro-Vend Corp. v. Vendo Co., 660        employment harms competition in the labor
F.2d 255, 268 (7th Cir. 1981), cert. denied,       market at issue.        Radovich v. National
455 U.S. 921 (1982).         As the NCAA           Football League, 352 U.S. 445 (1957);
concedes, Banks defined two markets in his         Nichols v. Spencer Int'l Press, Inc., 371 F.2d



                                                                                         860
332, 335-36 (7th Cir. 1967); Phillip Areeda         argument is the contention that “there is no
and Donald F. Turner, II Antitrust Law P            price competition as such among colleges for
338c, at 199-200 (1978); Annotation, Validity,      players because the 'price,' the value of
Under the Federal Antitrust Laws (15 USC @          grant-in-aid, is determined by the school's
1 et seq.) of Agreements Between Employers          tuition, room, and board, not by the supply of
or     Employer        Associations     Imposing    and demand for players.” Def.'s Br. at 20.
Restrictions on Employment, 2 A.L.R. Fed.           This analysis of the college football labor
839 (1969 and 1991 Supp.) (citing cases); cf.       market is partially correct; in that market,
Ball Memorial Hosp., Inc. v. Mutual Hosp.           players exchange their labor for in-kind
Ins., Inc., 784 F.2d 1325, 1338 (7th Cir. 1986)     benefits, not cash. At least ideally. But see
(conspiracy among buyers to depress prices          Johnson, Defense Against the NCAA, U.S.
harmful to competition). It should come as no       News & World Rep., Jan. 13, 1992, at 25
surprise that the no-draft rule operates to the     (improper cash payments made to football
detriment of the players, and that colleges         players at Auburn University); Johnson,
benefit from the fact that their athletes feel      Playing for Pay in Texas, Newsweek, Mar. 16,
tied to the institution for four years. Consider,   1987, at 32 (same at Southern Methodist
for example, athletes who are known in the          University).
vernacular as “bubble” players.            These
athletes are excellent competitors at the               It is unrealistic, however, to suggest that
collegiate level, but for various reasons are       the value of those in-kind benefits is limited
considered less than certain NFL prospects.         solely to tuition, room and board. If this were
Bubble players who wish to market their             true, the best football players would attend the
wares in the professional market after their        most expensive private universities that would
sophomore or junior year will forego entry          admit them, for these universities would offer,
into the NFL draft because, if they are not         under the NCAA's analysis, the most
selected (or fail to join a team after being        “valuable” compensation for their services.
selected), the rule will prevent them from          Assuming some regional loyalties, private
returning to college to hone their skills and try   colleges such as Syracuse University, the
again in subsequent years. See Note, Sherman        University of Southern California, and Notre
Act Invalidation of the NCAA Amateurism             Dame would consistently outrecruit public
Rules, 105 Harv. L. Rev. 1299, 1311 (1992).         colleges such as Penn State, UCLA and the
The rule permits colleges to squeeze out of         University of Michigan. As anyone familiar
their players one or two more years of service,     with college football well knows, this is not
years the colleges might have lost had the          the case. The reason is simple. Athletes look
ability to enter the draft without consequence      to more than tuition, room and board when
to eligibility been the subject of bargaining       determining which college has offered them
between athletes and colleges. See Rhoden,          the most attractive package of in-kind
Smoke, Mirrors and Doubletalk From the              benefits. Some athletes look primarily to the
N.C.A.A., N.Y. Times, Jan. 11, 1992, at 29.         reputation of a particular program or coach as
The rule thereby distorts the “price” of labor      a “feeder” into the NFL; others believe that
in the college football labor market to the         the quality of a university's academic program
detriment of players.                               and the commitment of the coaching staff to
                                                    scholarly pursuits is more important. Some
    The NCAA disputes this characterization,        athletes look to whether a college will offer
maintaining that the no-draft rule is not           them a cushy, high-paying job during the
“anticompetitive” as the term is employed           summer or school year; others might be
under the Sherman Act. At the heart of its          attracted by state-of-the-art training facilities.



                                                                                           861
And some athletes, if given the chance, would        were intended to prevent and that flows from
look to whether a college would allow them to        that which makes [the NCAA rules]
enter the NFL draft and return if they did not       unlawful,” Brunswick, 429 U.S. at 489, or, put
join a professional team.                            another way, that his injury is attributable to
                                                     the allegedly anticompetitive aspect of those
    All of these things--with the exception of       rules. Cargill, 479 U.S. at 109-110. The
the last item--are “terms of employment” that        requirement, in short, compels him “to
currently sweeten the pot for athletes choosing      connect the injury claimed to the purposes of
among college football programs.          They       the antitrust laws.” Areeda and Turner, VIII
provide, apart from tuition, room and board,         Antitrust Law, supra, P 1640c, at 444.
the means by which colleges, as purchasers of
labor, attract and compensate their players, the         Banks easily clears this threshold. The
suppliers of labor. That the medium of               no-draft rule, as noted, is anticompetitive
exchange is non-monetary does not alter the          because it constitutes an agreement among
fact that these benefits constitute the “price”      colleges to eliminate an element of
of labor in the college football market, or that     competition in the college football labor
the categorical elimination of one of those          market. The purposes of the antitrust laws are
benefits harms competition in that market.           served when employers are prevented from
The NCAA's protestations notwithstanding,            tampering with the employment market in this
there can be no doubt that Banks has alleged         precise way. “Just as antitrust law seeks to
an anticompetitive effect in a relevant market.      preserve the free market opportunities of
                                                     buyers and sellers of goods, so also it seeks to
    A couple of other matters regarding the          do the same for buyers and sellers of
confusing and often confused issue of                employment services . . . .” Areeda and
“antitrust injury” warrant brief attention. The      Turner, II Id. P 338c, at 199-200; see also
panel, as well as the district court, alludes to     Quinonez v. National Ass'n of Sec. Dealers,
Banks' supposed failure to allege that the           Inc., 540 F.2d 824, 828 (5th Cir. 1976).
NCAA rules have caused him to suffer                 Banks' injury--namely, the revocation of his
antitrust injury. See Op. at 10; Banks II, slip      eligibility and consequent loss of his athletic
op. at 11. I respectfully suggest that Banks         scholarship during his final year at Notre
has satisfied this burden. Section 4 of the          Dame--“flows          from”      the     precise
Clayton Act requires private plaintiffs seeking      anticompetitive aspects of the NCAA rules
relief under the antitrust laws to demonstrate       that he set out in his complaint.
antitrust injury, Brunswick Corp. v. Pueblo
Bowl-O-Mat, Inc., 429 U.S. 477 (1977); Local             Our discussion of antitrust injury in
Beauty Supply, Inc. v. Lamaur, Inc., 787 F.2d        Bicham v. Chemetron Corp. (In re Industrial
1197, 1200-02 (7th Cir. 1986), something             Gas Antitrust Litigation), 681 F.2d 514 (7th
necessary, though not sufficient, to establish       Cir. 1982), cert. denied, 460 U.S. 1016 (1983),
antitrust standing. Cargill, Inc. v. Monfort of      confirms this conclusion. There, an executive
Colorado, Inc., 479 U.S. 104, 110 n.5 (1986);        terminated by a corporation charged that the
Southwest Suburban Bd. of Realtors, Inc. v.          corporation had participated in a horizontal
Beverly Area Planning Ass'n, 830 F.2d 1374,          conspiracy to fix prices, and that he had been
1377 (7th Cir. 1987). Banks cannot clear this        fired and blacklisted for refusing to adhere to
threshold merely by showing that his injury is       the conspiracy. We held that the executive
causally linked to the NCAA's alleged                had failed to demonstrate antitrust injury
antitrust violation. Rather, he must also show       because the harm inflicted upon him by the
that his injury is “of the type the antitrust laws   corporation was not “inextricably related to,



                                                                                           862
and caused by” the anticompetitive effect of       of the antitrust laws “does not depend in each
the alleged price fixing activities in the         particular     case    upon     the   ultimate
product market. Id. at 515. In so holding, we      demonstrable consumer effect.” Fishman v.
distinguished Radovich v. National Football        Estate of Wirtz, 807 F.2d 520, 536 (7th Cir.
League, supra, and Nichols v. Spencer Int'l        1986); see also Chicago Professional Sports,
Press, Inc., supra. Both of those cases, like      961 F.2d at 677 (Cudahy, J., concurring).
Bicham, involved antitrust suits brought by
employees against their employers, but, unlike          One can dispense with the NCAA's
Bicham, both considered alleged Sherman Act        contention without choosing sides in this
violations involving anticompetitive activities    dispute. To see why, it is important first to
among employers in the labor market, not the       identify the consumers and the market at issue
product market. It follows, we observed, that      in this case. By “consumers,” the NCAA
the plaintiffs in Nichols and Radovich had         apparently means people who watch college
demonstrated antitrust injury because “the         football.    These individuals certainly are
conspiracies in both cases were intended to        consumers in the college football product
restrict competitive conditions in the labor       market, but the market at issue here is the
market, [and] the injuries complained of,          college football labor market, and the NCAA
restriction of employment alternatives, were       member colleges are consumers in that
directly related to the anticompetitive            market.     It would be counterintuitive to
restraints.” Bicham, 681 F.2d at 517. Banks'       require Banks to demonstrate that the no-draft
complaint,     which     alleges    restrictive    and no-agent rules harm the colleges, the very
competitive conditions in the relevant labor       entities that established those rules. I doubt
market, falls squarely within the rubric of        very strongly that the rule laid out in Chicago
Nichols and Radovich.          See generally       Professional Sports, to the extent it is valid
Frederick Woodbridge, Jr., Employee                elsewhere, was intended to apply in this
Standing in Private Antitrust Suits: A New         context. Concerted action among consumers
Element in the Balance, 51 U. Cin. L. Rev.         that lowers prices harms competition as much
878 (1982).                                        as concerted action among producers that
                                                   raises prices. The distinction should be
    The NCAA also raises the issue of harm to      irrelevant to any discussion of antitrust injury.
consumers; it contends that Banks' complaint       See Ball Memorial Hosp., 784 F.2d at 1338.
is deficient because it does not “reasonably       Professors Areeda and Turner, when
support the inference that consumers are           discussing the right of laborers to challenge
harmed by the operation of the no-draft and        antitrust violations in the labor market, put
no-agent rules.” Def.'s Br. at 23. Whether         things nicely:
harm to consumers is the sine qua non of
antitrust injury is an issue over which there is   It would be perverse . . . to hold that the very
currently a split in this circuit. Some of our     object of the law's solicitude and the persons
cases hold that a plaintiff, to satisfy the        most directly concerned--perhaps the only
antitrust injury requirement, must demonstrate     persons concerned--could not challenge the
that the challenged practice causing him harm      restraint. . . . The standing of such plaintiffs is
also harms consumers by reducing output or         undoubted and seldom challenged. Areeda &
raising prices. Stamatakis Indus., Inc. v. King,   Turner, II Antitrust Law, supra, P 338c, at
965 F.2d 469, 471 (7th Cir. 1992); Chicago         200; see also Phillip Areeda & Louis Kaplow,
Professional Sports Ltd. Partnership v.            Antitrust Analysis P 148(c), at 90 (4th ed.
National Basketball Ass'n, 961 F.2d 667, 670       1988). Banks has alleged that the NCAA
(7th Cir. 1992). Others hold that application      rules harm competition to the detriment of



                                                                                           863
producers in the college football labor market,      anticompetitive in the first instance, deprives
and that his injuries are directly related to that   him of the opportunity to join this issue on
harm. This is sufficient to establish “antitrust     remand. As I have discussed, it is difficult to
injury” in this context. See Bicham, 681 F.2d        reconcile this holding with a sound reading of
at 517 (discussing Radovich and Nichols).            Banks' complaint. On a broader level, I am
                                                     also        concerned        that        today's
    I add here a caveat to avert any potential       decision--unintentionally, to be sure, for it
misunderstandings. My point is only that             suggests that a “more artfully drafted
Banks has properly alleged an anticompetitive        complaint”      could    have     alleged     an
effect in a relevant market and has                  anticompetitive effect in this market--will
demonstrated antitrust injury, and hence that        provide comfort to the NCAA's incredulous
his damages action should survive the                assertion that its eligibility rules are
NCAA's motion to dismiss. But this is, of            “noncommercial.” See Def.'s Br. at 20 n.10.
course, only the first step. To ultimately           The NCAA would have us believe that
prevail, Banks also must demonstrate, under          intercollegiate athletic contests are about
the rule of reason, that the no-agent and            spirit,       competition,         camaraderie,
no-draft rules, despite their anticompetitive        sportsmanship, hard work (which they
effects, are not “justifiable means of fostering     certainly are) . . . and nothing else. See
competition among amateur athletic teams             NCAA Constitution, art. 3, @ 1 (1986)
and therefore procompetitive” on the whole.          (student-athlete is one “who engages in a
Board of Regents, 468 U.S. at 117. It may            particular sport for the educational, physical,
very well be that the no-draft and no-agent          mental and social benefits he derives
rules are essential to the survival of college       therefrom and to whom participation in that
football as a distinct and viable product, in        sport is an avocation”). Players play for the
which case Banks would lose. A lively debate         fun of it, colleges get a kick out of
has arisen among those who have already              entertaining the student body and alumni, but
considered this matter. Compare Gaines v.            the relationship between players and colleges
National Collegiate Athletic Ass'n, 746 F.           is positively noncommercial. See Sharon
Supp. 738, 746-47 (M.D. Tenn. 1990) (                Elizabeth Rush, Touchdowns, Toddlers, and
NCAA rules survive rule of reason analysis)          Taboos: On Paying College Athletes and
and Banks I, 746 F. Supp. at 860-62 (same)           Surrogate Contract Mothers, 31 Ariz. L. Rev.
with Note, NCAA Amateurism Rules, supra,             549, 576-77, 581-82, 587-88 (1989)
at 1309-12 (would find NCAA rules invalid            (discussing images of intercollegiate sports);
under rule of reason). I opt not to join the fray    Arthur D. Austin, Book Review, 58 N. Car. L.
here, for I think it unwise to weigh pro- and        Rev.     660,     663    (1980)      (discussing
anticompetitive effects under the rule of            contemporary       myth      which      portrays
reason on a motion to dismiss. See Wilk v.           student-athletes “as students, who, in the off
American Medical Ass'n, 895 F.2d 352, 358            hours away from dedication to the books,
(7th Cir.), cert. denied, 496 U.S. 927 (1990)        happen to participate in organized sports”). It
(rule of reason considers “agreements whose          is consoling to buy into these myths, for they
competitive effect can only be evaluated by          remind us of a more innocent era--an era
analyzing the facts peculiar to the business         where recruiting scandals were virtually
involved, the particular restraint's history, and    unknown, where amateurism was more a
the reasons it was imposed”).                        reality than an ideal, and where post-season
                                                     bowl games were named for commodities, not
      Today's decision, by holding that Banks        corporations. See House: Don't Tax Bowls'
has     not alleged that the rules are               Sponsors, Chi. Daily L. Bull., July 29, 1992,



                                                                                           864
at 1 (House of Representatives votes to block      display and develop their strength, skills and
Internal Revenue Service from taxing Mobil         character, but they are saleable products
Cotton Bowl on the approximately $ 1.5             nonetheless. Board of Regents, supra. An
million a year it receives from Mobil). On the     athlete's participation offers all of the rewards
flip side, it is disquieting to think of college   that attend vigorous competition in organized
football as a business, of colleges as the         sport, but it is also labor, labor for which the
purchasers of labor, and of athletes as the        athlete is recompensed. The no-draft and
suppliers.                                         no-agent rules may, ultimately, pass muster
                                                   under the rule of reason. But, putting the
    The NCAA continues to purvey, even in          adequacy of Banks' complaint to the side,
this case, an outmoded image of                    contending that they have no commercial
intercollegiate sports that no longer jibes with   effect on competition in the college football
reality. The times have changed. College           labor market, or that there is no market of that
football is a terrific American institution that   type at all, is chimerical:
generates abundant nonpecuniary benefits for
players and fans, but it is also a vast            The true stake is this decades-long
commercial venture that yields substantial         gentleman's agreement between the NFL and
profits for colleges, see, e.g., Board of          the college powers-that-be that has kept all but
Regents, 468 U.S. at 92-94; National               a handful of football playing collegians from
Collegiate Athletic Association, Revenues and      turning pro before their four-year use to their
Expenses of Intercollegiate Athletic Programs      schools is exhausted. The pros get a free farm
15 (1990) (estimating that sports revenues at      system that supplies them with well-trained,
Division IA schools exceeds one billion            much publicized employees. The colleges get
dollars per year); D. Devenzio, Rip Off U:         to keep their players the equivalent of barefoot
The Annual Theft and Exploitation of Major         and pregnant.
College Revenue-Producing Athletes 106-08
(1986) (University of Michigan football            Klein, College Football:          Keeping 'em
program posted a $ 2 million profit in 1984);      Barefoot, Wall St. J., Sept. 4, 1987, at 15.
Arthur D. Austin, The Legality of Ticket
Tie-Ins in Intercollegiate Athletics, 15 U.            When confronted with the clash between
Rich. L. Rev. 1, 1 (1980), both on and off the     soothing nostalgia and distressing reality, it is
field. See, e.g., Lee Goldman, Sports and          oftentimes difficult to resist the call of tennis
Antitrust: Should College Students Be Paid to      champion Andre Agassi, who when hawking
Play?, 65 Notre Dame L. Rev. 206, 206              cameras off the court tells us that “image is
(1990); Rush, Touchdowns, Toddlers, and            everything.” But we must remember that
Taboos, supra, at 553, 570; It Pays to Win . . .   Agassi's domain, at least in this instance, is
Or to Lose, N.Y. Times, June 8, 1986, @ 5, at      television.   What may be true there is
8 (during time Heisman Trophy winner Bo            decidedly not under the lens of the antitrust
Jackson played football for Auburn                 laws. See National Soc'y of Professional
University, annual applications increased from     Eng'rs v. United States, 435 U.S. 679, 696
4500 to 6200); Clark, The Business of              (1978); Goldfarb v. Virginia State Bar, 421
Education: Does Athletics Help or Hurt?,           U.S. 773, 786-88 (1975). Having found that
Wall St. J., Aug. 26, 1985, at 25 (athletic        Banks has cleared the threshold of alleging an
success of Clemson University increased            anticompetitive effect in a relevant market, I
average amount of alumni donations). The           would reverse the district court's dismissal of
games provide fans with entertaining contests      his damages action and remand for further
to watch, and athletes with an opportunity to      proceedings.



                                                                                         865
    RUSSELL HAIRSTON; FRANK                      HALL, Circuit Judge:
  GARCIA; JAIME WEINDL; JOVAN
      MCCOY; KYLE ROBERTS;                           Plaintiffs-appellants Russell Hairston,
  SCOREBOARD, INC., a Washington                 Frank Garcia, Jovan McCoy and Kyle Roberts
  Corporation; TEAM SPIRIT, INC., a              appeal the district court’s order granting
  Washington corporation; GRAHAM S.              summary judgment in favor of defendant-
   ANDERSON, Plaintiffs-Appellants,              appellee, the Pacific-10 Conference (“Pac-
                     v.                          10”). The district court had jurisdiction over
     PACIFIC 10 CONFERENCE, an                   this matter pursuant to 15 U.S.C. @@ 15 and
 unincorporated association; NATIONAL            26, and 28 U.S.C. @ 1367. We have
       COLLEGIATE ATHLETIC                       jurisdiction over this timely appeal pursuant to
   ASSOCIATION, an unincorporated                28 U.S.C. @ 1291. We affirm.
    association, Defendants-Appellees.
                                                                          I.
               No. 95-35309
UNITED STATES COURT OF APPEALS                       Appellants are former and current
      FOR THE NINTH CIRCUIT                      University of Washington (“UW”) football
  101 F.3d 1315; 1996 U.S. App. LEXIS            players.    [**2]    Appellee, the Pacific-10
         33158; 96 Cal. Daily Op.                Conference (“Pac-10”), is an unincorporated
Service 8710; 96 Daily Journal DAR 14419         association of ten universities situated in
  February 6, 1996, Argued, Submitted,           California, Arizona, Oregon and Washington,1
           Seattle, Washington                   formed for the purpose of “establishing an
         December 3, 1996, Filed                 athletic program to be participated in by the
                                                 members.”

SUBSEQUENT HISTORY:              [**1]     As        On November 5, 1992, the Seattle Times
Amended December 19, 1996.                       reported that UW’s star quarterback, Billy Joe
                                                 Hobert, had received three loans totalling $
PRIOR HISTORY: Appeal from the United            50,000 from an Idaho businessman. After
States District Court for the Western District   investigating the allegations, UW officials
of Washington. D.C. No. CV-93-01763-BJR.         suspended Hobert and declared him
Barbara J. Rothstein, District Judge,            permanently ineligible to play amateur
Presiding.                                       football. One month later, the Los Angeles
                                                 Times published a series of articles alleging
Original Opinion Previously Reported at:         that UW’s football program had violated
1996 U.S. App. LEXIS 30997.                      several NCAA rules. At [**3] this time,
                                                 UW, in conjunction with Pac-10 officials,
DISPOSITION: Affirmed

JUDGES: Before: Eugene A. Wright, Cynthia
Holcomb Hall and Stephen S. Trott, Circuit
Judges. Opinion by Judge Hall; Separate          1 The Pac-10 includes: the University of
                                                 Washington, Washington State University, University
Concurrence by Judge Trott.
                                                 of Oregon, Oregon State University, University of
                                                 California, Berkeley, Stanford University, University
OPINION BY: HALL                                 of California, Los Angeles, University of Southern
                                                 California, Arizona State University and the
OPINION: [*1317] OPINION                         University of Arizona.



                                                                                           866
began       investigating         these       alleged     10’s motion was granted in part as to certain
irregularities.                                           plaintiffs not included in this appeal, but
                                                          denied as to the issue of the players’ standing.
    After    conducting      an    eight-month            Hairston v. Pacific-10 Conference, 893 F.
investigation into the allegations of recruiting          Supp. 1485 (W.D. Wash. 1994) (“Hairston I”).
improprieties, the Pac-10 placed the UW                   The district court found that because [*1318]
football team on probation for recruiting                 the players had demonstrated direct antitrust
violations. The levied sanctions included: (1)            injury, they could pursue their antitrust claims.
a two-year bowl ban covering the 1993 and                 Id. at 1491-92. However, the court dismissed
1994 seasons; (2) a one-year television                   the players’ breach of contract claim because
revenue ban; (3) a limit of 15 football                   it found that the players were [**5] not
scholarships each for the 1994-95 and the                 intended third-party beneficiaries of the
1995-96 academic years; (4) a reduction in the            contract between and among Pac-10 member
number of permissible football recruiting                 schools. Id. at 1494.
visits from 70 to 35 in 1993-94 and to 40 in
1994-95; and (5) a two-year probationary                      The Pac-10 then filed a motion for
period.                                                   summary judgment alleging that appellants
                                                          had failed to present any evidence of
    The imposition of penalties on the UW                 anticompetitive conspiracy among Pac-10
Huskies devastated both the players and their             members or between the Pac-10 and the
fans. In an effort to have the sanctions                  NCAA. The court agreed and granted the Pac-
rescinded, appellants filed a complaint against           10’s motion. Hairston v. Pacific-10
the Pac-10. In their complaint, appellants                Conference, 893 F. Supp. 1495, 1496 (W.D.
alleged antitrust violations under Section One            Wash. 1995) (“Hairston II”).
of the Sherman Act, 15 U.S.C. @ 1, and
breach of contract. They argued that the                      This appeal then followed.3
penalties were “grossly disproportionate to the
University’s violations” and evidence of a                                         II.
conspiracy engineered by UW’s Pac-10
competitors to sideline UW’s football                         A district court opinion granting summary
program and thereby improve [**4] their                   judgment is reviewed de novo. Warren v. City
own records and odds of winning a post-                   of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995),
season bowl game berth. Besides injunctive                cert. denied, 134 L. Ed. 2d 209, 116 S. Ct.
relief appellants also sought damages, which              1261 (1996).
would include the cost of air fare, lodging,
meals and expenses related to a trip to play in                                  ***
a post-season bowl game.2
                                                                                  IV.
    The Pac-10 responded by filing a motion
to dismiss all claims. In its motion, the Pac-10             Section 1 of the Sherman Act prohibits
contended      that    the     players    lacked          “every contract, combination . . . or
constitutional and antitrust standing. The Pac-           conspiracy, in restraint of trade or commerce


2 Because the penalty period imposed on UW has            3 Prior to filing this appeal, the players stipulated
ended, the appellants’ claims for injunctive relief are   to the dismissal of the NCAA as a defendant. Thus,
moot.                                                     only the Pac-10 remains as a defendant-appellee.



                                                                                                    867
among the several States[.] . . .” 15 U.S.C. @           Here, the plaintiffs met their initial burden
1. In order to establish a claim under Section       by showing that the Pac-10 members banned
1, the players must demonstrate: “(1) that           UW from participating in bowl games for two
there was a contract, combination, or [**8]          years. The Pac-10 replied with evidence
conspiracy;     (2)    that   the    agreement       showing      that    there     are    significant
unreasonably restrained trade under either a         procompetitive effects of punishing football
per se rule of illegality or a rule of reason        programs that violate the Pac-10’s amateurism
analysis; and (3) that the restraint affected        rules.4 The burden then returned to the
interstate commerce.” Bhan v. NME                    athletes to show that the Pac-10’s
Hospitals, Inc., 929 F.2d 1404, 1410 (9th            procompetitive objectives could be achieved
Cir.), cert. [*1319] denied, 502 U.S. 994,           in a substantially less restrictive manner. The
112 S. Ct. 617, 116 L. Ed. 2d 639 (1991)             players’ burden of proof at the summary
(citation omitted).                                  judgment stage of the proceedings was not
                                                     high, all they had to do was present more than
     The first and third elements of this test are   a “mere scintilla of evidence to support its
not at issue. The Pac-10 members’ agreement          case.” City of Vernon v. Southern Cal. Edison
to sanction UW fulfills the “contract,               Co., 955 F.2d 1361, 1369 (9th Cir.), cert.
combination, or conspiracy” prong. See               denied, 506 U.S. 908, 121 L. Ed. 2d 228, 113
NCAA v. Board of Regents of Univ. of Okla.,          S. Ct. 305 (1992). This they failed to do.
468 U.S. 85, 99, 104 S. Ct. 2948, 82 L. Ed. 2d
70 (1984) (“NCAA member institutions have
created a horizontal restraint - an agreement        4   As the Supreme Court explained in NCAA,
among competitors on the way in which they
                                                         The NCAA seeks to market a particular
will compete against each other.”). The parties
                                                         brand of football - college football. The
do not dispute that the agreement affects                identification of this “product” with an
interstate commerce. Thus, the only issue is             academic tradition differentiates college
whether the sanctions constituted an                     football and makes it more popular than
unreasonable restraint of trade. We analyze              professional sports to which it might
this question using the rule of reason analysis.         otherwise be comparable, such as, for
Id. at 103.                                              example, minor league baseball. In order to
                                                         preserve the character and quality of the
                                                         “product,” athletes must not be paid, must be
    Under the rule of reason, the fact-finder            required to attend classes, and the like. And
examines the restraint at issue and determines           the integrity of the “product” cannot be
whether the restraint’s harm to competition              preserved except by mutual agreement; if an
outweighs the restraint’s procompetitive                 institution     adopted     such     restrictions
effects. Bhan, 929 F.2d at 1413. The plaintiff           unilaterally, its effectiveness as a competitor
bears the initial [**9] burden of showing that           on the playing field might soon be
                                                         destroyed. Thus, the NCAA plays a vital role
the       restraint    produces      significant         in enabling college football to preserve its
anticompetitive effects within the relevant              character, and as a result enables a product
product and geographic markets. If the                   to be marketed which might otherwise be
plaintiff meets this burden, the defendant must          unavailable. In performing this role, its
come forward with evidence of the restraint’s            actions widen consumer choice - not only
procompetitive effects. The plaintiff must then          the choices available to sports fans but also
                                                         those available to athletes - and hence can be
show that “any legitimate objectives can be
                                                         viewed as procompetitive.
achieved in a substantially less restrictive
manner.” Id.
                                                     NCAA, 468 U.S. at 101-02.



                                                                                                  868
    The athletes claim that the Pac-10’s           “The test of intent is an objective one; the key
penalties were grossly disproportionate to         is not whether the contracting parties had an
UW’s violations. However, they do not offer        altruistic motive or desire to benefit the third
even the thinnest reed of support for this         party, but rather whether performance under
proposition. They point to the testimony of        the contract would necessarily and directly
Robert Aronson, a law professor at the             benefit that party.” 720 P.2d at 806-07. To
University of Washington, who analyzed the         determine the contracting parties’ intent, the
sanctions imposed against the UW compared          court should construe the contract as a whole,
to sanctions imposed against similar               in light of the circumstances under which it
institutions. Aronson, however, testified that     was made. Id. at 807.
the penalties were within the range of
appropriate penalties. The players also claim          To support their claim, appellants point to
that the NCAA’s report on the Pac-10’s             the language of the Pac-10 Constitution.
sanctions concludes that the penalties were        Under its “Statement of Purpose,” the
disproportionate. It does not. The report          conference notes that its goal is “to enrich
actually states that the Pac-10’s penalties were   [**12]      and balance the athletic and
too lenient, not that they were too harsh. In      educational experiences of student-athletes at
short, the athletes have presented no evidence     its member institutions, [and] to enhance
that would allow a jury to find in their favor,    athletic and academic integrity among its
hence summary judgment was proper.                 members.”

                      V.                               By joining the Pac-10, members are
                                                   obligated to “administer [an] athletic program
    Appellants also argue that the district        in accordance with the Constitution, Bylaws,
court erred in dismissing their breach of          and other legislation of the Conference,”
contract claim. A dismissal for failure to state   “conduct [their] intercollegiate athletic
a claim pursuant to Rule 12(b)(6) is reviewed      program in keeping with the highest
de novo. Stone v. Travelers Corp., 58 F.3d         recognized standards and in a manner which
434, 436-37 (9th Cir. 1995).                       will enhance the reputation for integrity of the
                                                   Pacific-10      Conference,”     “assure     the
    [*1320] In their complaint, the players        intercollegiate athletic program is maintained
alleged that the Pac-10’s Constitution, Bylaws     as an integral part of the educational
and [**11]        Articles created a contract      objectives and programs on the campus of
between the conference and its members, and        each      Pacific-10    Conference     member
that the players were third-party beneficiaries    institution,” and “participate in the sports of
of this contract. The players further contend      football and basketball.”
that the Pac-10 breached this contract when it
levied unreasonable sanctions against UW,              The ultimate goal of the conference is
thereby injuring the players as beneficiaries.     realization of certain values including:
                                                   “academic and athletic achievement of
    Under Washington law, to create a third-       student-athletes,” “increased educational
party beneficiary contract, the parties must       opportunities for young people,” “quality
intend that the promisor assume a direct           competitive opportunities for student-
obligation to the intended beneficiary at the      athletes,” and “amateurism in intercollegiate
time they enter into the contract. Postlewait      athletics.”
Constr. Inc. v. Great American Ins., 106               In dismissing appellants’ contract claim,
Wash. 2d 96, 720 P.2d 805, 806 (Wash. 1986).       the district court found that this language



                                                                                         869
largely consisted of “vague,            [**13]
hortatory pronouncements in the contract” and
that “by themselves, these pronouncements
are not sufficient to support the players’
claims that the Pac-10 intended to assume a
direct contractual obligation to every football
player on a Pac-10 team.” Hairston I, 893 F.
Supp. at 1494. We agree.

     The key here is that appellants have not
demonstrated that the parties intended to
create direct legal obligations between
themselves and the students. Other than the
statements from the Pac-10’s Constitution,
By-laws and other legislation, appellants have
failed to provide any evidence that the parties
intended to create a contractual obligation;
accordingly, we find their claim without merit.

                      VI.

    Appellants have failed to show that the
penalties the Pac-10 imposed constituted an
unreasonable restraint of trade. As a result, no
antitrust violation occurred. Appellants also
have failed to allege a breach-of-contract
claim since no language in the contract shows
the Pac-10 and its members intended to
assume a direct obligation to the students. For
these reasons, we AFFIRM.

CONCUR BY: TROTT [omitted]




                                                   870
             R. M. SMITH                               Renee M. Smith, a pro se litigant, appeals
                   v.                                from the district court's order of May 21,
      NATIONAL COLLEGIATE                            1997, dismissing her complaint for failure to
    ATHLETIC ASSOCIATION,Renee                       state a claim, and from the district court's
         M. Smith, Appellant                         order of June 5, 1997, denying her motion for
       Nos. 97-3346 and 97-3347                      leave to amend her complaint. Smith's
                                                     complaint alleges violations of section 1 of the
UNITED STATES COURT OF APPEALS                       Sherman Act, 15 U.S.C. § 1, and Title IX of
     FOR THE THIRD CIRCUIT                           the Educational Amendments of 1972, 20
                                                     U.S.C. § 1681, as well as a state law
139 F.3d 180; 1998 U.S. App. LEXIS 4694;             breach[**3] of contract claim against the
1998-1 Trade Cas.(CCH) P72,084; 40 Fed.              National Collegiate Athletic Association
       R. Serv. 3d (Callaghan) 489                   (“NCAA”). Smith's allegations arise from the
                                                     NCAA's promulgation and enforcement of a
         February 12, 1998, Argued                   bylaw prohibiting a student-athlete from
           March 16, 1998, Filed                     participating in intercollegiate athletics while
                                                     enrolled in a graduate program at an
                                                     institution other than the student-athlete's
 Certiorari Granted September 29, 1998,              undergraduate institution.
Reported at: 1998 U.S. LEXIS 4651.
                                                       The district court had jurisdiction over the
PRIOR HISTORY: On Appeal from the                    federal claims in this matter pursuant to 28
United States District Court for the Western         U.S.C. §§ 1331 and 1337 and 15 [*183]
District of Pennsylvania. (D.C. Civ. No. 96-         U.S.C. § 15, and over the state law claim
01604).                                              pursuant to 28 U.S.C. § 1367. This court has
                                                     jurisdiction to review the final orders of the
DISPOSITION: Affirmed the district court's           district court pursuant to 28 U.S.C. § 1291.1
dismissal of appellant's Sherman Act claim,
vacated its dismissal of the Title IX claim, and
reversed the district court's denial of her          1
                                                       According to the NCAA rules, a student-athlete is
motion for leave to amend her complaint with         eligible to participate in intercollegiate athletics for a
respect to her Title IX claim. Remanded to the       total of four seasons within a five-year period.
district court for further proceedings               Because Smith's five year-period of eligibility has
consistent with this opinion and direct the          expired and, according to the NCAA her complaint
district court to reinstate her state law contract   seeks only declaratory relief, the NCAA concludes
claim, over which the district court declined to     that her Title IX claim is moot. We disagree.
exercise jurisdiction pursuant to 28 U.S.C. §          Smith's Title IX claim is not moot although her
1367(c).                                             period of eligibility has expired because she retains a
                                                     claim for damages. See Ellis Bhd. of Ry., Airline &
JUDGES:   BEFORE:      GREENBERG,                    S.S. Clerks, 466 U.S. 435, 442, 104 S. Ct. 1883,
NYGAARD and MCKEE, Circuit Judges.                   1889, 80 L. Ed. 2d 428 (1984) (holding that a claim
                                                     is not moot where there is a viable damages claim);
                                                     National Iranian Oil Co. v. MAPCO Int'l, Inc., 983
GREENBERG, Circuit Judge.
                                                     F.2d 485, 489 (3d Cir. 1992); Jersey Cent. Power &
                                                     Light Co. v. New Jersey, 772 F.2d 35, 41 (3d Cir.
  I. INTRODUCTION                                    1985). Although count II of Smith's complaint, which
                                                     asserts a Title IX claim, states that “this action is a
                                                     request for a declaratory relief challenging sex
                                                     discriminatory practices and policies of the NCAA . .


                                                                                                   871
  We exercise plenary review over the district             postbaccalaureate programs. The NCAA is an
court's dismissal of Smith's complaint for                 unincorporated association comprised of
failure to state a claim. See Lake v. Arnold,              public and private colleges and universities
112 F.3d 682, 684 (3d Cir. 1997). We accept                and is responsible for promulgating rules
all of her allegations as true, view them in the           governing all aspects of intercollegiate
light most favorable to her, and will affirm the           athletics, including recruiting, eligibility of
dismissal only if she can prove no set of facts            student-athletes, and academic standards. The
entitling her to relief. See Nami v. Fauver, 82            member institutions agree to abide by and
F.3d 63, 65 (3d Cir. 1996); ALA, Inc. v.                   enforce these rules. The NCAA denied Smith
CCAir, Inc., 29 F.3d 855, 859 (3d Cir. 1994).              eligibility to compete for Hofstra and the
We review the district court's denial of her               University of Pittsburgh in the 1994-95 and
motion for leave to amend her complaint for                1995-96 athletic seasons, respectively, based
abuse of discretion. See In re Burlington Coat             upon Bylaw 14.1.8.2 in the NCAA Manual
Factory Sec. Litig., 114 F.3d 1410, 1434 (3d               (the “Postbaccalaureate Bylaw”). The
Cir. 1997).                                                Postbaccalaureate Bylaw provides that a
                                                           student-athlete may not participate in
 II.  FACTS             AND         PROCEDURAL             intercollegiate athletics at a postgraduate
HISTORY                                                    institution other than the institution from
                                                           which the student earned her undergraduate
  Smith graduated from high school in the                  degree.2 Both Hofstra and the University of
spring of 1991 and enrolled in St.                         Pittsburgh applied to the NCAA for a waiver
Bonaventure University the following fall,                 of the bylaw with respect to Smith, but the
where she participated in Division I athletics.            NCAA denied both requests. [*184] Smith
Smith played intercollegiate volleyball for St.            was, however, in good academic standing and
Bonaventure during the 1991-92 and 1992-93                 in compliance[**6] with all other NCAA
athletic seasons. By her choice, Smith did not             eligibility requirements for the 1994-95 and
participate in intercollegiate volleyball for St.          1995-96 athletic seasons.
Bonaventure during the 1993-94 season.                         Rule 14.1.8.2 of NCAA Manual.

  Smith graduated from St. Bonaventure in
two and one half years. Thereafter, she
enrolled in a postbaccalaureate[**5] program                  2
                                                                  The bylaw at issue provides that
at Hofstra University, and then in 1995 she
enrolled in a second postbaccalaureate                         [a] student-athlete who is enrolled in a graduate or
program at the University of Pittsburgh. St.               professional school of the institution he or she
Bonaventure did not offer either of these                  previously attended as an undergraduate (regardless
                                                           of whether the individual has received a United States
                                                           baccalaureate degree or its equivalent), a student-
    (Continued)                                            athlete who is enrolled and seeking a second
                                                           baccalaureate or equivalent degree at the same
. in violation of Title IX,” her complaint also includes   institution, or a student-athlete who has graduated and
a clause which prays for additional relief including       is continuing as a full-time student at the same
damages and any further relief which the court finds       institution while taking course work that would lead
appropriate. App. at 5. In our view, a fair reading of     to the equivalent of another major or degree as
the complaint establishes that it asserts an action for    defined and documented by the institution, may
damages under Title IX. See Franklin v. Gwinnett           participate in intercollegiate athletics, provided the
County Pub. Schs. , 503 U.S. 60, 112 S. Ct. 1028,          student has eligibility remaining and such
117 L. Ed. 2d 208 (1992) (holding that a claim for         participation occurs within the applicable five-year or
damages exists in an action to enforce Title IX).          10-semester period . . . .



                                                                                                       872
  In August 1996, Smith instituted this suit       relief could be granted, holding that “the
challenging the NCAA's[**7] enforcement of         actions of the NCAA in refusing to waive the
the bylaw as well as the NCAA's refusal to         Postbaccalaureate Bylaw and allow the
waive the bylaw in her case. More                  Plaintiff to participate in intercollegiate
particularly, Smith alleged that the               athletics is not the type of action to which the
Postbaccalaureate Bylaw is an unreasonable         Sherman Act was meant to be applied.” See
restraint of trade in violation of section 1 of    Smith, 978 F. Supp. at 218. Smith argues that
the Sherman Act and the NCAA's refusal to          the district court erred in limiting the
waive the bylaw excluded her from                  application of the Sherman Act to the NCAA's
intercollegiate competition based upon her sex     commercial and business           activities. We
in violation of Title IX. Smith also asserted a    disagree.
state law breach of contract claim based upon
the NCAA's denial of eligibility. On May 21,          Section 1 of the Sherman Act provides, in
1997, the district court dismissed Smith's         relevant     part,    that    “every contract,
federal claims for failure to state a claim upon   combination in the form of trust or otherwise,
which relief could be granted. The court held      or conspiracy, in restraint of trade or
that the NCAA's refusal to waive the bylaw         commerce among the several States, or with
was not the type of action to which the            foreign nations, [**9] is declared to be
Sherman Act applied. It also held that Smith's     illegal.” 15 U.S.C. § 1. Although the section
complaint did not allege adequately that the       literally prohibits “every” contract, section 1
NCAA was a recipient of federal funding so         does not preclude all restraints on trade, but
as to be subject to Title IX. By the same order,   only those that are unreasonable. See National
the district court exercised its discretion to     Collegiate Athletic Ass'n v. Board of Regents
dismiss Smith's state law contract claim           of the Univ. of Okla., 468 U.S. 85, 98 & n.17,
pursuant to 28 U.S.C. § 1367(c). See Smith v.      104 S. Ct. 2948, 2959 & n.17, 82 L. Ed. 2d 70
National Collegiate Athletic Ass'n, 978 F.         (1984); Arizona v. Maricopa County Med.
Supp. 213 (W.D. Pa. 1997).                         Soc'y, 457 U.S. 332, 342-44, 102 S. Ct. 2466,
                                                   2472-73, 73 L. Ed. 2d 48 (1982). The Clayton
  Thereafter, Smith submitted a proposed           Act, 15 U.S.C. §§ 15, 26, grants a private right
amended complaint and moved the district           of action to, inter alia, a person “injured in his
court for leave to amend[**8] her complaint,       business or property” by a violation of section
which the district court denied “as moot” on       1 of the Sherman Act.3 Smith misconstrues the
June 5, 1997. Smith filed timely appeals from      law in arguing that the Supreme Court has
these orders, which we have consolidated.          refused to limit antitrust remedies to

 III. DISCUSSION
                                                   3
                                                       Section 4 of the Clayton Act provides:
 A. SHERMAN ACT CLAIM
                                                        Any person who shall be injured in his
  Count I of Smith's complaint alleges that the         business or property by reason of anything
NCAA, in promulgating and enforcing the                 forbidden in the antitrust laws may sue
Postbaccalaureate Bylaw, violated section 1 of          therefor in any district court of the United
                                                        States . . . without respect to the amount in
the Sherman Act because the bylaw
                                                        controversy, and shall recover threefold the
unreasonably restrains trade and has an                 damages by him sustained, and the cost of suit,
adverse anticompetitive effect. As we have              including a reasonable attorney's fee.
indicated, the district court dismissed this
claim for failure to state a claim upon which      15 U.S.C. § 15.



                                                                                                873
commercial interests. The cases she cites            Apex Hosiery Co. v. Leader, 310 U.S. 469,
address whether the plaintiffs alleged injuries     492-93, 60 S. Ct. 982, 992, 84 L. Ed. 1311
within the meaning of the Clayton Act; in that      (1940). The Court also has noted that “in
context, the Court held that the statute was not    Apex [it] recognized that the Act is aimed
limited to redressing injuries to commercial        primarily at combinations having commercial
interests. See Reiter v. Sonotone Corp., 442        objectives and is applied only to a very limited
U.S. 330, 338-39, 99 S. Ct. 2326, 2330, 60 L.       extent to organizations . . . which normally
Ed. 2d 931 (1979) (holding that “injury to          have other objectives.” [**12] Klor's, Inc. v.
business or property” was not limited to            Broadway-Hale Stores, Inc., 359 U.S. 207,
commercial interests); [**10] Blue Shield of        213 n.7, 79 S. Ct. 705, 710 n.7, 3 L. Ed. 2d
Va. v. McCready, 457 U.S. 465, 473, [*185]          741 (1959).
102 S. Ct. 2540, 2545, 73 L. Ed. 2d 149
(1982) (holding that a subscriber to a health         The Supreme Court addressed the
plan who had employed the services of a             applicability of the Sherman Act to the NCAA
psychologist alleged a redressable antitrust        in National Collegiate Athletic Ass'n v. Board
injury); see also McNulty v. Borden, Inc., 474      of Regents, 468 U.S. 85, 104 S. Ct. 2948, 82
F. Supp. 1111, 1115-18 (E.D. Pa. 1979)              L. Ed. 2d 70, holding that the NCAA's plan to
(holding that an employee of an alleged             restrict television coverage of intercollegiate
antitrust violator was injured in his business or   football games violated section 1. The Court
property). The question which we now face is        discussed the procompetitive nature of the
different; it is whether antitrust laws apply       NCAA's activities such as establishing
only to the alleged infringer's commercial          eligibility requirements as opposed to the
activities. Thus, rather than focus on Smith's      anticompetitive nature of the television plan.
alleged injuries, we consider the character of      See id. at 117, 104 S. Ct. at 2969. Yet, while
the NCAA's activities.                              the Court distinguished the NCAA's television
                                                    plan from its rule making, it did not comment
  In this regard, we recognize that the             directly on whether the Sherman Act would
Supreme Court has suggested that antitrust          apply to the latter.
laws are limited in their application to
commercial and business endeavors. Thus, the          Although insofar as we are aware no court
Court has explained that                            of appeals expressly has addressed the issue of
                                                    whether antitrust laws apply to the NCAA's
[the Sherman Act] was enacted in the era of         promulgation of eligibility rules, cf.
'trusts' and of 'combinations' of businesses and    McCormack v. National Collegiate Athletic
of capital organized and directed to control of     Ass'n, 845 F.2d 1338, 1343 (5th Cir. 1988)
the market by suppression of competition in         (assuming without deciding that the NCAA's
the marketing of goods and services, the            eligibility rules were subject to antitrust
monopolistic tendency of which had become a         scrutiny and holding that the “no-draft” [**13]
matter of public concern. The end sought (by        and “no-agent” rules do not have an
these laws) was the prevention of the               anticompetitive effect), many district courts
restraints to the competition in business and       have held that the Sherman Act does not apply
commercial transactions which tended to             to the NCAA's promulgation and enforcement
restrict production, raise prices or otherwise      of eligibility requirements. See Gaines v.
control the market to the detriment of              National Collegiate Athletic Ass'n, 746 F.
purchasers or consumers of goods and                Supp. 738, 744-46 (M.D. Tenn. 1990)
services, all of which had come to be regarded      (holding that antitrust law cannot be used to
as a special form of public injury.                 invalidate NCAA eligibility rules, but noting



                                                                                          874
in dicta that the “no-agent” and “no-draft”                   Moreover, even if the NCAA's actions in
rules have primarily procompetitive effects);              establishing eligibility requirements were
Jones v. National Collegiate Athletic Ass'n,               subject to the Sherman Act, we would affirm
392 F. Supp. 295, 303 (D. Mass. 1975)                      the district court's dismissal of this claim. The
(holding that antitrust law does not apply to              NCAA's eligibility requirements are not
NCAA eligibility rules); College Athletic                  “plainly anticompetitive,” National Soc'y of
Placement Servs., Inc. v. National Collegiate              Prof'l Eng'rs v. United States, 435 U.S. 679,
Athletic Ass'n, 1974 U.S. Dist. LEXIS 7050,                692, 98 S. Ct. 1355, 1365, 55 L. Ed. 2d 637
1975 Trade Cas. (CCH) P60,117, available in                (1978), and therefore are not per se
1974 WL 998, * 2, * 3 (D.N.J. 1974) (holding               unreasonable, see National Collegiate Athletic
that the NCAA's adoption of a rule furthering              Ass'n v. Board of Regents, 468 U.S. at 101,
its noncommercial objectives, such as                      104 S. Ct. at 2960 (refusing to apply per se
preserving the educational standards of its                rule to NCAA's television plan because the
members, is not within the purview of                      NCAA is involved in an industry where
antitrust law), aff'd , 506 F.2d 1050 (3d Cir.             horizontal restraints are necessary to the
1974) (table).                                             availability of the product); McCormack, 845
                                                           F.2d at 1343-44; College Athletic Placement
  We agree with these courts that the                      Servs., 1974 U.S. Dist. LEXIS 7050, 1975
eligibility rules are not related to the NCAA's            Trade Cas. (CCH) P60,117, available in 1974
commercial or business activities. Rather than             WL 998, * 3. Consequently, if the eligibility
intending to provide [**14]the NCAA with a                 requirements were subject to the Sherman
commercial advantage, the eligibility rules                Act, we would analyze them under the rule of
primarily seek to ensure fair competition in               reason.
intercollegiate athletics. Based upon the
Supreme Court's recognition that the Sherman                 Under the “rule of reason” test, a court
Act primarily was intended to prevent                      considers all relevant factors in determining a
unreasonable [*186] restraints in “business                defendant's purpose in implementing the
and commercial transactions,” Apex, 310 U.S.               challenged restraint and the effect of the
at 493, 60 S. Ct. at 992, and therefore has only           restraint on competition, see Orson, Inc. v.
limited applicability to organizations which               Miramax Film Corp.,[**16] 79 F.3d 1358,
have principally noncommercial objectives,                 1367-68 (3d Cir. 1996) (citing Board of Trade
see Klor's, Inc., 359 U.S. at 214 n.7, 79 S. Ct.           of Chicago v. United States, 246 U.S. 231,
at 710 n.7, we find that the Sherman Act does
not apply to the NCAA's promulgation of
eligibility requirements.4                                     (Continued)

                                                           Ass'n v. Board of Regents, 468 U.S. at 100-01, 104 S.
                                                           Ct. at 2959-60).
4
  The recent decision of the Court of Appeals for the        The bylaw at issue in Law concerned a restriction
Tenth Circuit in Law v. National Collegiate Athletic       on the business activities of the institutions, whereas
Ass'n, 134 F.3d 1010, 1998 WL 23710 (10th Cir.             the Postbaccalaureate Bylaw does not. Because our
1998), does not alter our result. At issue in Law was      analysis regarding the applicability of the Sherman
the NCAA's bylaw restricting entry-level coaches'          Act focuses on the distinction between commercial
annual compensation. The court held that although          and noncommercial activities, Law is inapposite.
the restriction was a horizontal price restraint, which    Further, because of the significant difference in the
is usually per se invalid, the rule of reason applied      nature of the bylaw at issue in Law and the
because certain products, such as intercollegiate          Postbaccalaureate Bylaw, the Law court's rule of
sports, require horizontal restraints in order to exist.   reason analysis is not instructive here.
See id. at * 5-* 6 (citing National Collegiate Athletic


                                                                                                      875
238, 38 S. Ct. 242, 243-44, 62 L. Ed. 683           issue here, and we have found none, other
(1918)), and asks essentially whether the           courts have held that the NCAA's “no-draft”
challenged rule promotes or hinders                 and “no-agent” rules, which disqualify a
competition. See McCormack, 845 F.2d at             student-athlete from further intercollegiate
1344.                                               competition if the student-athlete enters a
                                                    professional draft or contacts an agent, are
  As noted above, the Supreme Court has             reasonable because they are procompetitive.
recognized the procompetitive nature of many        See McCormack, 845 F.2d at 1343; Banks v.
of the NCAA's restraints, including eligibility     National Collegiate Athletic Ass'n, 977 F.2d
requirements. See National Collegiate               1081, 1087-94 (7th Cir. 1992) (holding that
Athletic Ass'n v. Board of Regents, 468 U.S.        NCAA's “no-draft” and “no-agent” rules do
at 117, 104 S. Ct. at 2969. According to the        not have an anticompetitive[**18] impact on a
Supreme Court,                                      discernable market); Gaines, 746 F. Supp. at
                                                    746; Jones, 392 F. Supp. at 304 (noting in
  What the NCAA and its member institutions         dicta that “any limitation on access to
market in this case is competition itself--         intercollegiate sports is merely the incidental
contests between competing institutions. Of         result of the organization's pursuit of its
course, this would be completely ineffective if     legitimate goals”); see also Justice v. National
there were no rules on which the competitors        Collegiate Athletic Ass'n, 577 F. Supp. 356,
agreed to create and define the competition to      379 (D. Ariz. 1983) (holding that NCAA
be marketed. A myriad of rules . . . must be        sanctions such as rendering a college team
agreed upon, and all restrain the manner in         ineligible for post-season play and for
which institutions compete. . . . Thus, the         television appearances imposed for violations
NCAA plays a vital role in enabling                 of rule against providing compensation to
[intercollegiate sports] to preserve its            student-athletes did not violate antitrust law
character, and as a result enables a product to     because sanctions were reasonably related to
be marketed which might otherwise be                the NCAA's goals of preserving amateurism
unavailable. In performing this role, its actions   and promoting fair competition).
widen consumer choice[**17] . . . and hence
can be viewed as procompetitive.                      We agree with these courts that, in general,
                                                    the NCAA's eligibility rules allow for the
 468 U.S. at 101-02, 104 S. Ct. at 2960-61          survival of the product, amateur sports, and
(footnote omitted). In particular, the Court        allow for an even playing field. See
explained that “it is reasonable to assume that     McCormack, 845 F.2d at 1345. Likewise, the
most of the regulatory controls of the NCAA         bylaw at issue here is a reasonable restraint
are justifiable means of fostering competition      which furthers the NCAA's goal of fair
among amateur athletic teams and therefore          competition and the survival of intercollegiate
procompetitive because they enhance public          athletics and is thus procompetitive. Clearly,
interest in intercollegiate athletics” and          the rule discourages institutions with graduate
suggested that rules establishing eligibility       or professional schools from inducing
requirements of student-athletes were such          undergraduates[**19] at other institutions to
controls, while rules limiting television           forgo participating in the athletic programs at
broadcasts were not. See id. at 117, 104 S. Ct.     their undergraduate institutions in order to
at 2969.                                            preserve eligibility to participate in
                                                    intercollegiate athletics on a postbaccalaureate
 [*187] While the parties have not cited any        basis. Likewise, the rule discourages
opinion addressing the particular bylaw at          undergraduates from forgoing participation in



                                                                                          876
athletic programs on their own initiative to
preserve eligibility on a postbaccalaureate
basis at another institution. Indeed, we think
that the bylaw so clearly survives a rule of
reason analysis that we do not hesitate
upholding it by affirming an order granting a
motion to dismiss Smith's antitrust count for
failure to state a claim on which relief can be
granted.

                     ***




                                                  877
   RHIANNON TANAKA, Plaintiff-                    OPINIONBY: Diarmuid F. O'Scannlain
    Appellant, v. UNIVERSITY OF
SOUTHERN CALIFORNIA; MICHAEL                      OPINION: O'SCANNLAIN, Circuit Judge:
GARRETT; DARYL GROSS; PACIFIC-
                                                      We must decide whether a former
   10 CONFERENCE; NATIONAL
                                                  collegiate soccer player may pursue her
     COLLEGIATE ATHLETIC
                                                  federal    antitrust     challenge      to    an
 ASSOCIATION, Defendants-Appellees.
                                                  intercollegiate athletic association rule that
                                                  discourages        student-athletes        from
     UNITED STATES COURT OF
                                                  transferring to member institutions during
APPEALS FOR THE NINTH CIRCUIT
                                                  the course of their collegiate athletic careers.
  252 F.3d 1059; 2001 U.S. App. LEXIS
11837; 2001-1 Trade Cas. (CCH) P73,297;                                    I
 2001 Cal. Daily Op. Service 4649; 2001               A star high school soccer player,
        Daily Journal DAR 5741                    Rhiannon Tanaka ("Tanaka") was heavily
February 5, 2001, Argued and Submitted,           recruited by the athletic programs of a
          Pasadena, California                    number of universities, including the
           June 7, 2001, Filed                    University of Southern California ("USC"),
                                                  which belongs to the Pacific-10 Conference
PRIOR HISTORY:           Appeal from the          ("Pac-10"). The Pac-10 is an association of
United States District Court for the Central      ten universities which was formed for the
District of California. D.C. No. CV-99-           purpose of "establishing an athletic program
00663-GLT. Gary L. Taylor, District Judge,        to be participated in by the members."
Presiding.                                        Hairston v. Pacific 10 Conference, 101 F.3d
                                                  1315, 1317 (9th Cir. 1996).1 During her
DISPOSITION: AFFIRMED.                            senior year of high school, Tanaka met with
                                                  USC athletic officials, including Michael
CASE SUMMARY:                                     Garrett and Daryl Gross, who allegedly
                                                  made certain representations to her
PROCEDURAL POSTURE: Plaintiff                     regarding the USC women's soccer program.
student filed suit, asserting a state breach of   She also inquired about transfer restrictions,
contract claim and a claim under the Clayton      and was allegedly told that she would be free
Act, predicated on a violation of § 1 of the      to transfer without penalty provided she
Sherman Act, 15 U.S.C.S. § 1, against             remained at USC for one year and met
defendant university, athletic associations,      minimum academic requirements. Tanaka
and officials. Her suit was dismissed by the      thereupon signed a letter of intent to enroll
United States District Court for the Central      at USC and attended USC for the 1994-95
District of California, and plaintiff appealed.   academic year.
                    ***

JUDGES: Before: Diarmuid F. O'Scannlain,
Andrew J. Kleinfeld, and Raymond C.               1
                                                    The Pac-10's other members are Arizona, Arizona
Fisher, Circuit Judges. Opinion by Judge          State, Oregon, Oregon State, Stanford, University of
O'Scannlain.                                      California, Berkeley, UCLA, Washington and
                                                  Washington State.



                                                                                           878
    Tanaka quickly became dissatisfied with     eligibility.2 Tanaka unsuccessfully appealed
the state of USC's women's soccer program       her sanction. In addition to her loss of
and the quality of her USC education. In        athletic eligibility, Tanaka was denied any
particular, she claims that USC was             athletically related financial aid during her
arranging for athletes to receive fraudulent    first semester at UCLA.
academic credit through sham classes. In the
spring of 1995, she received permission                    Tanaka alleges that USC invoked
from USC to communicate with other                     the transfer rule sanctions against her
schools about transferring to their programs.          in retaliation for her participation in
Because she wished to remain in Los                    an     investigation    into   possible
Angeles, and because its women's soccer                academic fraud involving student-
program was nationally ranked, she decided             athletes at the school. In fact, her
to transfer to the University of California,           complaint expressly alleges that she
Los Angeles ("UCLA"), another Pac-10                   "is the only transferring athlete who
member institution.                                    had the sanctions imposed on her"
    USC opposed Tanaka's transfer to                   (emphasis in original), and further that
UCLA, however, and sought sanctions                    "in all other instances where student-
against her pursuant to Pac-10 Rule C 8-3-b            athletes transferred from USC,
("transfer rule"), which governs intra-                Pacific-10 penalties had not been
conference transfer. The rule provides, in             used."
pertinent part:
                                                    In May 1998, Tanaka filed an
       Each institution, before it              unsuccessful state-court action for fraud
      permits a student who has                 against USC. On May 5, 1999, Tanaka filed
      transferred directly or indirectly        the instant action, asserting a state breach of
      from, or practiced at, another            contract claim and a claim under the Clayton
      Pacific-10 member institution to          Act, 15 U.S.C. § 15, predicated on a
      compete      in     intercollegiate       violation of section one of the Sherman Act,
      athletics, shall require the              15 U.S.C. § 1. The district court dismissed
      student to fulfill a residence            the complaint in August 1999 with leave to
      requirement of two full                   amend. Tanaka filed her first amended
      academic years . . . and shall            complaint on September 13, 1999. On
      charge the student with two               November 15, 1999, the district court again
      years of eligibility in all Pacific-      dismissed, this time with prejudice. The
      10 sports, and during the period          court held that the Pac-10 transfer rule was
      of ineligibility shall not offer,         beyond the reach of the Sherman Act
      provide, or arrange directly or           because it was essentially "noncommercial"
      indirectly any earned or                  in nature, reasoning the rule "is more tied to
      unearned athletically related             defendants' noncommercial rather than
      financial aid.                            commercial activities. "The court noted that,
 USC insisted that Tanaka sit out her first
year at UCLA and lose one year of athletic
                                                2
                                                 A student-athlete is eligible to participate in Pac-10
                                                competition for a maximum of four years and has five
                                                years to complete this eligibility.



                                                                                           879
even if the Sherman Act applied, Tanaka            States, 959 F.2d 146, 147 (9th Cir. 1992).
would likely still lose, as the transfer rule      We need not reach the difficult issue of
would not be found unreasonable under the          whether collegiate athletic association
rule of reason. The court declined to              eligibility rules such as the Pac-10 transfer
exercise supplemental jurisdiction over            rule do not involve commercial activity and
Tanaka's state contract claim pursuant to 28       hence are immune from Sherman Act
U.S.C. § 1367(c)(3). This timely appeal            scrutiny. For purposes of our analysis, we
followed.                                          assume, without deciding, that the transfer
                                                   rule is subject to the federal antitrust laws.
                       II
                       A                                                 B
   Section one of the Sherman Act ("Act")              Tanaka does not contend that the transfer
provides in pertinent part:                        rule is unlawful per se, but rather concedes
                                                   that it is subject to rule of reason analysis.
       Every contract, combination in              We agree. See NCAA v. Bd. of Regents, 468
      the form of trust or otherwise,              U.S. 85, 117, 82 L. Ed. 2d 70, 104 S. Ct.
      or conspiracy, in restraint of               2948 (1984) (holding that NCAA
      trade or commerce among the                  restrictions on the televising of college
      several States, or with foreign              football games, which involved limits on
      nations, is declared to be illegal.          output and pricefixing, was subject to rule of
                                                   reason analysis); Mackey v. Nat'l Football
 15 U.S.C. § 1. In order to establish a claim      League, 543 F.2d 606 (8th Cir. 1976)
under Section 1, a plaintiff must                  (holding that league's restrictions on free
demonstrate: "'(1) that there was a contract,      agency were subject to rule of reason
combination, or conspiracy; (2) that the           analysis despite restrictions' resemblance to
agreement unreasonably restrained trade            restraints ordinarily constituting per se
under either a per se rule of illegality or a      antitrust violations, such as group boycotts
rule of reason analysis; and (3) that the          and concerted refusals to deal).
restraint affected interstate commerce. '"             A restraint violates the rule of reason if
Hairston, 101 F.3d at 1318 (9th Cir. 1996)         the restraint's harm to competition
(quoting Bhan v. NME Hosp., Inc., 929 F.2d         outweighs its procompetitive effects.
1404, 1410 (9th Cir. 1991)). The district          Hairston, 101 F.3d at 1319. The plaintiff
court concluded that Tanaka failed to meet         bears the initial burden of showing that the
the second part of this test, reasoning that       restraint        produces         "significant
the      transfer     rule    is     essentially   anticompetitive effects" within a "relevant
"noncommercial," and hence does not                market." Id. If the plaintiff meets this
involve "trade." Thus, according to the            burden, the defendant must come forward
district court, the transfer rule is simply not    with      evidence     of    the    restraint's
subject to antitrust analysis because it is        procompetitive effects. The plaintiff must
beyond the scope of the Act.                       then show that "any legitimate objectives
    Of course, "our review is not limited to a     can be achieved in a substantially less
consideration of the grounds upon which the        restrictive manner." Id.
district court decided the issues; we can              We have explained that the term
affirm the district court on any grounds           "relevant market" encompasses notions of
supported by the record." Weiser v. United         geography as well as product use, quality,


                                                                                        880
and description. The geographic market           according to her own allegations, Tanaka
extends to the "'area of effective               herself was "heavily recruited by universities
competition' . . . where buyers can turn for     across the country," from Connecticut to
alternative sources of supply." The product      Washington. Tanaka's own experience
market includes the pool of goods or             strongly suggests that the relevant
services      that     enjoy      reasonable     geographic market is national in scope.
interchangeability of use and cross-elasticity       Second, Tanaka has failed to identify an
of demand.                                       appropriately defined product market. Her
                                                 conclusory assertion that the "UCLA
 Oltz v. St. Peter's Cmty. Hosp., 861 F.2d       women's soccer program" is "unique "and
1440, 1446 (9th Cir. 1988) (quoting Moore        hence "not interchangeable with any other
v. Jas. H. Matthews & Co., 550 F.2d 1207,        program in Los Angeles" is insufficient.
1218 (9th Cir. 1977)) (alteration in original)   Again, Tanaka's strictly personal preference
(internal citations omitted). Failure to         to remain in Los Angeles is irrelevant to the
identify a relevant market is a proper ground    antitrust inquiry before us. Moreover, her
for dismissing a Sherman Act claim. Big          limitation of the relevant product market to a
Bear Lodging Ass'n v. Snow Summit, Inc.,         single athletic program is especially
182 F.3d 1096, 1105 (9th Cir. 1999).             unavailing insofar as the very existence of
                      1                          any given intercollegiate athletic program is
                                                 predicated upon the existence of a field of
     Tanaka's complaint alleges that the
                                                 competition composed of other, similar
relevant geographic market is Los Angeles
                                                 programs. Such programs compete in the
and the relevant product market is the
                                                 recruiting of student-athletes and, hence, are
"UCLA women's soccer program." Neither
                                                 interchangeable with each other for antitrust
of these "markets" is appropriately defined
                                                 purposes. Since Tanaka herself was recruited
for antitrust purposes, even at this stage of
                                                 by numerous Pac-10 and non-Pac-10
the litigation. First, Tanaka fails to allege
                                                 programs located throughout the country,
that Los Angeles is an "area of effective
                                                 nothing beyond her personal preferences
competition "for student-athletes competing
                                                 suggests that UCLA was the only potential
for positions in women's intercollegiate
                                                 option for women's intercollegiate soccer
soccer programs. In her reply brief, Tanaka
                                                 players in her position.
explains that "the relevant market is Los
Angeles becauses he wanted to be close to            Finally, Tanaka has failed to allege that
her family." Of course, Tanaka's personal        the transfer rule has had significant
preference to remain in the Los Angeles area     anticompetitive effects within a relevant
is irrelevant to the question of whether Los     market, however defined. If the relevant
Angeles is an area of effective competition      market is national in scope, as Tanaka's own
for the services of women's intercollegiate      complaint suggests, the transfer rule most
soccer players. Cf. id. (plaintiffs' complaint   certainly does not have a significant
identifying Big Bear Valley as the relevant      anticompetitive effect. By its own terms, the
market fails as a matter of law where            Pac-10 transfer rule applies only to
plaintiffs did not allege that "Big Bear         intraconference transfers; it has no
Valley is the area of effective competition in   application to student-athletes who transfer
which buyers of these products can find          to non-member institutions. If, on the other
alternative sources of supply"). In fact,        hand, Tanaka were to amend her complaint



                                                                                     881
and attempt to identify the Pac-10 as the        although defendants injured seller by driving
relevant market, she would still be unable to    it out of market, there was no injury to
allege that the transfer rule has had a          competition, only a temporary decline in
significant anticompetitive effect on this       number of competitors).
"market" given her assertion that she "is the                           2
only transferring athlete who had the
sanctions imposed on her" (emphasis in                We note that, in theory, restrictions on
original), and further that "in all other        student-athlete transfers could be loosely
instances where student-athletes transferred     analogized to the National Football League
from USC, Pacific-10 penalties had not been      free agency restrictions which the Eighth
used."                                           Circuit concluded failed rule of reason
                                                 analysis in Mackey .At issue in Mackey was
    In fact, Tanaka depicts USC's invocation     the so-called "Rozelle Rule," which granted
of transfer rule sanctions against her as an     the league commissioner the authority to
isolated act of retaliation. While "hundreds     award to a team that lost a free agent one or
of student-athletes transfer each year"          more players from the acquiring team as
without sanction, Tanaka alleges that she        compensation, thus restraining the market
was "singled out" in an attempt by USC to        for players' services. 543 F.2d at 620.
"keep her at the school to 'oversee' any         Nevertheless, unlike the Pac-10 transfer rule,
testimony that she might give" concerning        the "Rozelle Rule applied to every NFL
the alleged incident of academic fraud. In       player regardless of his status or ability . . .
short, Tanaka alleges nothing more than a        [and was] unlimited in duration . . .
personal injury to herself, not an injury to a   operating as a perpetual restriction on a
definable market. But [HN5] the antitrust        player's ability to sell his services in an open
laws "were enacted for 'the protection of
                                                 market throughout his career." Id. at 622.
competition, not competitors. '"Atlantic         Even if some student-athlete transfer
Richfield Co. v. USA Petroleum Co., 495          restrictions could be characterized as
U.S. 328, 338, 109 L. Ed. 2d 333, 110 S. Ct.     "concerted refusals to deal" having the effect
1884 (1990) (quoting Brown Shoe Co. v.           of locking players in their current athletic
United States, 370 U.S. 294, 320, 8 L. Ed. 2d    programs, and hence roughly analogous to
510, 82 S. Ct. 1502 (1962)). As we have          the Rozelle Rule, this would be of no avail
explained, "it is the impact upon competitive    to Tanaka, given her failure to allege that the
conditions in a definable market which           Pac-10 transfer rule has had a significant
distinguishes the anti-trust violation from      anticompetitive effect within a properly
the ordinary business tort.[The] failure to      defined geographic and product market, one
allege injury to competition is a proper         that is not circumscribed by Tanaka's own
ground for dismissal by judgment on the
                                                 (irrelevant) personal preferences.
pleadings." McGlinchy v. Shell Chem. Co.,
845 F.2d 802, 812-13 (9th Cir. 1988); see            Tanaka's reliance upon our decision in
also Adaptive Power Solutions, LLC v.            Hairston is also misplaced. In Hairston, we
Hughes Missile Sys. Co., 141 F.3d 947, 952       considered a Sherman Act challenge to a
(9th Cir. 1998) (holding that agreement          Pac-10 agreement to sanction the University
between missile component market's only          of Washington's football program for
two buyers not to purchase missile               recruiting violations. While affirming the
component from one of the market's only          district court's grant of summary judgment in
two sellers survived rule of reason analysis;    favor of the Pac-10 under a rule of reason


                                                                                       882
                                                          antitrust cause of action; thus, it is "clear
     analysis, we remarked, without further
                                                          that [her] complaint cannot be saved by
explanation, that the plaintiffs "met their
                                                          further amendment." Big Bear Lodging
initial burden [of demonstrating significant
                                                          Ass'n, 182 F.3d at 1101.
anticompetitive effects] by showing that the
Pac-10 members banned UW from
                                                                               III
participating in bowl games for two years."
                                                              For the foregoing reasons, the judgment
     Hairston, 101 F.3d at 1319. We hesitate
                                                          of the district court is
to read too much into this unexplained
remark; certainly, it does not remotely                      AFFIRMED
suggest that the mere exclusion of one
competitor from a market, without more,
satisfies the plaintiff's burden to show harm
to a relevant market. It is simply unclear
what additional facts the court in Hairston
relied on to conclude that the plaintiffs met
their initial burden. In any event, the
plaintiffs in Hairston did not, as Tanaka has
done, allege that the University of
Washington was the only competitor against
whom the Pac-10 recruiting rule at issue was
ever applied.
                          C

    By attempting to restrict the relevant
market to a single athletic program in Los
Angeles based solely on her own
preferences, Tanaka has failed to identify a
relevant market for antitrust purposes. If the
relevant market is national in scope, the Pac-
10 transfer rule could not have a significant
anticompetitive effect, because by its own
terms the rule does not apply to
interconference transfers. Moreover, even if
the relevant market is limited to the Pac-10
itself, Tanaka characterizes the Pac-10's
imposition of sanctions against her for her
intraconference transfer as an isolated act of
retaliation.3 n3 Tanaka simply has no

3
  Tanaka's Sherman Act claim against the NCAA fails
for the additional reason that she has not alleged that
the NCAA actually "contracted, combined or
conspired" with the other defendants. Indeed, the
NCAA's own transfer rule was not applied to Tanaka.


                                                                                             883
  POCONO INVITATIONAL SPORTS                  OPINION:
     CAMP, INC., AND EASTERN                    [*571]             MEMORANDUM                   AND
   INVITATIONAL BASKETBALL
                                              ORDER
  CLINIC, INC., AND FUTURE STARS
BASKETBALL, LLC., AND FIVE-STAR
                                              Anita B. Brody, J.
BASKETBALL CAMP, INC. AND BLUE
 STAR PRODUCTIONS, INC., Plaintiffs           April 30, 2004
     v. NATIONAL COLLEGIATE
ATHLETIC ASSOCIATION, Defendant                       On November 9, 2000, plaintiffs
                                              Pocono Invitational Sports Camp, Inc.
               00-CV-5708                     ("Pocono"), Eastern Invitational Basketball
                                              Clinic, Inc. ("Eastern"), Future Stars
 UNITED STATES DISTRICT COURT                 Basketball, LLC ("Future Stars"), Five-Star
  FOR THE EASTERN DISTRICT OF                 Basketball Camp, Inc. ("Five-Star"), and
         PENNSYLVANIA                         Blue Star Productions, Inc. ("Blue Star")
                                              brought this action against defendant
  317 F. Supp. 2d 569; 2004 U.S. Dist.        National Collegiate Athletic Association
 LEXIS 7958; 2004-1 Trade Cas. (CCH)          ("NCAA"). Plaintiffs alleged two antitrust
                P74,397                       violations under the Sherman Antitrust Act,
                                              15 U.S.C. §§ 1 and 2, and one count of
         April 30, 2004, Decided              tortious interference with contractual
          April 30, 2004, Filed               arrangements and prospective contractual
                                              arrangements.1 Jurisdiction is based on the
PRIOR HISTORY: Pocono Invitational            existence of a federal question. Defendant
Sports Camp v. NCAA, 2001 U.S. Dist.          has moved for summary judgment on all
LEXIS 9771 (E.D. Pa., July 10, 2001)          counts. For the reasons set forth below, I
                                              grant defendant's motion.
DISPOSITION: [**1] Defendant's motion
for summary judgment granted. Case            [**3]
dismissed with prejudice.
                                                  I. FACTS2
CASE SUMMARY:
                                              1
PROCEDURAL POSTURE: Plaintiffs,                This case was originally assigned to Judge Edmund
                                              V. Ludwig, and was reassigned to me on June 9,
non-institutional basketball camps, sued      2003.
defendant athletic association alleging
violations of the Sherman Antitrust Act, 15   2
                                                Defendant submitted a joint statement of material
U.S.C.S. § § 1 and 2, and one count of        undisputed facts with its motion for summary
tortious interference with contractual        judgment on September 11, 2003. In plaintiffs'
                                              response to the motion, they admitted some of the
arrangements related to restrictions placed   facts as undisputed, but listed many of defendant's
on the camps' operation. The association      proposed undisputed facts as actually disputed. Many
sought summary judgment as to all claims.     of defendant's proposed facts, however, are supported
                                              by uncontradicted evidence offered by defendant,
                   ***                        such as the text of their constitution, written reports,
                                              and depositions. In response to a court order directing
                                              plaintiffs to supplement their previous filing,


                                                                                          884
    [**4]                                                    universities, athletic conferences and
                                                             affiliated organizations. (JSMF P 1, see also
      A. The Parties
                                                             National Collegiate Athletic Ass'n v. Board
    Plaintiffs are operators of for-profit                   of Regents, 468 U.S. 85, 82 L. Ed. 2d 70,
summer basketball camps for children and                     104 S. Ct. 2948 (1984).) According to the
[*572] teenagers. (JSMF P 26.) Plaintiffs                    NCAA Constitution, the purposes of the
also conduct a variety of other youth                        NCAA are, among other things, "to uphold
basketball events and activities, including                  the principle of institutional control of, and
shootouts, tournaments, travel teams, and                    responsibility for, all intercollegiate sports in
leagues.3 (Id.) Defendant has acknowledged                   conformity with the constitution and bylaws
that the plaintiffs in this case operate some                of [the NCAA]," "to formulate, copyright
of the finest summer basketball camps in the                 and publish rules of play governing
United States. (Pl. SMF P 4.)                                intercollegiate athletics," and "to legislate,
                                                             through bylaws or by resolutions of a
[**5]                                                        Convention, upon any subject of general
    Defendant NCAA, formed in 1905, is a                     concern to the members related to the
non-profit,     voluntary    unincorporated                  administration of intercollegiate athletics."
association of approximately 1260 colleges,                  (NCAA Constitution, Article 1.2.) One of
                                                             the NCAA's many responsibilities is the
                                                             regulation of coaches' recruiting of
      (Continued)                                            prospective student-athletes ("prospects").
                                                             (Def. SMF P 12.) The NCAA Constitution
plaintiffs submitted their own statement of facts.
Because defendant's proffered evidence is necessary          includes a statement of the "basic purpose"
to best present the relevant facts of this case, I will      of amateurism, which guides the
sometimes refer to facts as stated by defendant. In this     organization's regulation of recruiting:
opinion, when a fact is taken from the parties' joint
submission of undisputed material facts and has not
                                                                 The      competitive       athletics
been contested by plaintiffs, it will be cited as "Joint
Statement of Material Facts," or "JSMF". When a fact             programs         of        member
is taken from this document but plaintiffs have                  institutions are designed [**6]
disputed it, it will be cited as "Def. SMF". When a              to be a vital part of the
fact is taken from plaintiffs' statement of facts, it will       educational system. A basic
be cited as "Pl. SMF".
                                                                 purpose of this Association is to
                                                                 maintain            intercollegiate
                                                                 athletics as an integral part of
3
  Plaintiff Pocono operates summer basketball camps              the educational program and the
for boys and girls and has been running basketball               athlete as an integral part of the
camps for 38 years. (JSMF P 42.) Plaintiff Eastern
                                                                 student body and, by so doing,
operates boys and girls basketball camps during the
summer. (JSMF P 43.) Plaintiff Future Stars has been             retain    a    clear     line of
operating 5-day summer basketball camps for boys                 demarcation                between
since 1997, and a girls basketball camp since 1994.              intercollegiate athletics and
(JSMF P 27.) Plaintiff Five-Star runs both boys and              professional sports.
girls basketball camps and has run basketball events
                                                             (NCAA Constitution, Article 1.3.1.)
and camps for 35 years. (JSMF PP 35-36.) Plaintiff
Blue Star operates several girls basketball events,              The NCAA Constitution also provides a
including camps, showcases and shoot-outs. (JSMF P           Principle of Recruiting:
30.)



                                                                                                   885
      The recruiting process involves           organization's       principles.      (NCAA
      a balancing of the interests of           Constitution, Article 2.01.) Plaintiffs
      prospective       student-athletes,       challenge certain regulations affecting the
      their educational institutions            recruiting of Division I basketball players at
      and the Association's member              their     summer        basketball    camps.4
      institutions.           Recruiting        Specifically, plaintiffs challenge three of
      regulations shall be designed to          these NCAA recruiting regulations as
      promote equity among member               anticompetitive: (1) the NCAA requirement
      institutions in their recruiting of       that Division I coaches can only evaluate
      prospects and to shield them              prospects at non-institutional basketball
      from undue pressures that may             camps if the camps are certified by [**8]
      interfere with the scholastic or          the NCAA (Bylaw 13.13.3) and the
      athletics interests of the                requirements with which non-institutional
      prospects or their educational            camps must comply in order to be certified
      institutions.                             (Administrative Regulation § 30.16); (2) the
                                                reduced number of days coaches are
(NCAA Constitution, Article 2.11.)              permitted to visit plaintiffs' camps; and (3)
                                                the prohibition of Division I men's
    Although the NCAA does not own,
                                                basketball     coaches      from    accepting
sponsor, or operate any youth basketball
                                                employment with non-institutional camps
camps, some of the NCAA member
                                                attended by prospects (former Bylaw
institutions do own and operate camps
                                                13.13.2.3.2, in effect from 1990 to 2001).
("institutional camps"). These institutional
camps compete with plaintiffs' camps ("non-
                                                [**9]
institutional camps") for campers. [**7] (Pl.
SMF P 9.) One notable difference between            I will describe each of the challenged
institutional and non-institutional camps is    recruiting regulations in turn.
that institutional camps are subject to NCAA
[*573] rules, including the entirety of the     The Certification           Requirement         and
NCAA's amateurism and recruiting bylaws.        Process
(Def. SMF P 55, NCAA Bylaw 13.13.)
Among other things, these guidelines require
that institutional camps be open to any and
all entrants. Plaintiffs' non-institutional     4
camps, on the other hand, are free to be           Division I is comprised of approximately 325
                                                member institutions and is generally composed of
selective. Non-institutional camps are not      those member institutions and conferences who
subject to the NCAA's direct control,           participate in the highest level of intercollegiate
although they are indirectly affected by        athletic competition. (JSMF P 8.) There are two other
many NCAA recruiting rules.                     membership divisions, and each of the three has its
                                                own federated governance structure. (JSMF P 16.)
                                                Division II is comprised of approximately 270
B. NCAA Regulating Activity and the             institutions, and is more regionally-based in both
Challenged Regulations                          competition and recruitment. (JSMF P 9.) Division III
                                                is comprised of approximately 411 member
    Under its constitution, the NCAA
                                                institutions, and these institutions do not provide
membership adopts and amends its various        student-athletes with athletic scholarships. (JSMF P
bylaws and regulations to advance the           16.)



                                                                                          886
    Plaintiffs object to both the existence of         opposed to [*574] the event's
the certification requirement, and the                 cost in purchasing the items);
certification process. Since 1993, Division I              & # 8226; Compensation
basketball coaches are only permitted by the           provided to event personnel
NCAA to attend (1) institutional camps and             shall be commensurate with the
(2) non-institutional camps certified by the           going rate for event personnel
NCAA. (JSMF P 71.) In order for a summer               of like teaching ability and
basketball event in men's basketball to be             event experience;
certified, an application form must be
submitted to the NCAA forty-five days                      & # 8226; The event or tour
before the camp begins. The following                  shall include a comprehensive
criteria must be met5:                                 educational session presented
                                                       in-person or in a video format
           & # 8226; A comprehensive                   that includes a review of
       financial     disclosure      of                regulations related to initial-
       information related to the                      eligibility standards, gambling,
       operation of the event (and any                 agents and drug use (Revised
       team participating in the event)                January 13, 2003);
       [must be submitted];
                                                           & # 8226; An event
          & # 8226; Admissions fees                    operator, staff member of a
       charged to all event participants               league or member of any team
       must be similar;                                may not participate if the
           & # 8226; No air or ground                  individual has been found guilty
       transportation or other gifts or                or pleaded guilty in a court of
       inducements shall be provided                   law for having been involved in
       to the event participants or their              sports bribery, point shaving or
       coaches or relatives;                           game fixing;
           & # 8226; A prospective                         & # 8226; The event shall
       student-athlete who attends an                  not be conducted in a venue
       NCAA certified event shall not                  where sports wagering on
       retain any athletics equipment                  intercollegiate   athletics   is
       or apparel provided for his use                 permitted, or on property
       at the event other than an event                sponsored by an establishment
       T-shirt.    [**10]    All other                 that permits sports wagering on
       apparel (e.g. shoes or shorts)                  intercollegiate   athletics  or
       may be retained only if the                     branded with signage for such
       prospect is charged the normal                  an establishment;
       retail value of such items (as                      & # 8226; The event (and
                                                       any team participating in the
                                                       event) shall not [**11] be
                                                       operated or managed by any
5
  Because plaintiffs complain that the certification   individual or agency involved in
requirements    are     unduly      burdensome,  the   the    marketing      of    any
requirements are set forth in their entirety.



                                                                                    887
      individual's athletics reputation         and recruiting bylaws. These bylaws require
      or ability;                               that institutional camps, among other things:
          & # 8226; The event (and                        & # 8226; must be open to
      any team participating in the                   any and all entrants (Bylaw
      event) may not receive financial                13.13.1.2),
      support from any individual or                      & # 8226; are not permitted
      agency involved in marketing                    to pay a prospect's expenses to
      any      individual's     athletics             attend        camp      (Bylaw
      reputation or ability or any                    13.13.1.5.2),
      representatives of an NCAA
      member institution's athletics                      & # 8226; may only give
      interests that is assisting or has              prospects awards with the
      assisted in the recruiting                      understanding that the cost of
      process;                                        such awards is included in the
                                                      admissions     fees    (Bylaw
          & # 8226; Individuals                       13.13.1.5.4),
      involved in coaching activities
      must have been approved in                          & # 8226; must include an
      accordance with guidelines                      educational session detailing
      established by the NCAA                         NCAA             initial-eligibility
      basketball certification staff                  standards     to      all     camp
      (Revised January 13, 2003);                     participants (Bylaw 13.13.1.6.)
          & # 8226; Participants on                 There is no evidence on the record about
      nonscholastic teams must be               what fees, if any, are required of non-
      legal residents of the state in           institutional camps that wish to be certified.
      which the team is located or a            Plaintiffs are currently [**13] all certified.
      geographically adjoining state            Plaintiffs have offered no evidence about
      and not more than a total of              [*575] what harm compliance with this
      three prospects from adjoining            requirement and process has caused them.
      states may participate on any                The Reduction in the Length of Coach
      one nonscholastic team (Revised           Visits to Plaintiffs' Camps
      January 13, 2003); and
                                                    In 1981, the NCAA developed a
          & # 8226; A participant may           complex recruiting calendar for Division I
      receive an award, provided the            men's basketball. (JSMF P 76.) The
      cost of the award is included in          recruiting calendar is divided by type of
      the participant's entry fee               permitted coach activity, and there are four
      (Adopted January 13, 2003).               types of recruiting periods: Contact periods,
    (NCAA Bylaw 30.17, adopted 11/1/01,         Evaluation periods, Quiet periods and Dead
effective April 1, 2002 (except those           periods. The NCAA bylaws describe the
requirements [**12] noted as having been        periods as follows:
adopted or revised on January 13, 2003).)                 Contact Period: that period
   The institutional camps are not subject to         of time when it is permissible
the certification requirements, but are               for    authorized      athletics
required to abide by all NCAA amateurism              department staff members to


                                                                                      888
make in-person, off-campus                  may not serve as a speaker at or
recruiting   contacts  and                  attend a meeting or banquet at
evaluations. (NCAA Bylaw                    which      prospects   are    in
13.02.4.1)                                  attendance, except as provided
                                            in Bylaw 13.1.9.1, and may not
    Evaluation Period: that
                                            visit the prospects' educational
period of time when it is
                                            institutions.     It    remains
permissible     for authorized
                                            permissible, however, for an
athletics    department    staff
                                            institutional staff member to
members to be involved in off-
                                            write or telephone prospects
campus activities designed to
                                            during such a dead period.
assess        the     academic
                                            (NCAA Bylaw 13.02.4.4)
qualifications    and   playing
ability of prospects. No in-             Plaintiffs object to the reduced length of
person off-campus recruiting         the evaluation period, which has fluctuated
contacts shall be made with the      many times over the years. In 1981, the
prospect during an evaluation        summer evaluation period was [**15] 45
period.      (NCAA       Bylaw       days. (JSMF P 76.) Although the period was
13.02.4.2)                           shortened to one month in 1983, from 1984
                                     to 1986 it was increased back to 45 days.
    Quiet Period: that period of
                                     (JSMF P 77.) In 1987, the summer
time when it is permissible
                                     evaluation period was decreased again to 21
[**14] to make in-person
                                     days. (JSMF P 78.) From 1989 to 1994, the
recruiting contacts only on the
                                     period was 27 days. (JSMF P 79.) In 1994,
member institution's campus.
                                     the evaluation period was reduced to 24
No      in-person,    off-campus
                                     days. (JSMF P 80.) In 2000, when this suit
recruiting       contacts     or
                                     was filed, the NCAA reduced the evaluation
evaluations may be made during
                                     period from 24 days to 14 days for the
the quiet period. (NCAA Bylaw
                                     summer of 2001. (Def. SMF P 85.) In 2002,
13.02.4.3)
                                     the evaluation period was 20 days. (Def.
    Dead Period: that period of      SMF P 92.)
time when it is not permissible
                                         Plaintiffs claim that giving their campers
to make in-person recruiting
                                     the opportunity to display their skills before
contacts or evaluations on or off
                                     Division I college basketball coaches, which
the member institution's campus
                                     can only occur during the evaluation period,
or to permit official or
                                     is essential to the success of their camps.6
unofficial visits by prospects to
the institution's campus. The
provision of complimentary
                                     6
admissions to a prospect during         Although plaintiffs describe Division I coach
a dead period is prohibited,         evaluation as "essential" in their complaint (which is
                                     supported by the verification of Pocono and Eastern
except as provided in Bylaw          representative Robert Kennedy,) plaintiffs Five Star,
13.8.2.5 for a prospect who          Blue Star and Pocono have admitted that attendance
visits an institution as part of a   by Division I basketball coaches is "not necessary" to
group. During such a dead            the operation of a basketball camp. (JSMF PP 104,
period, a coaching staff member      106, 109.)



                                                                               889
(Pl. SMF P 10.) Accordingly, plaintiffs                   evaluation period, nor any evidence that
factor the NCAA recruiting calendar into                  Division I coaches employed by institutional
their camp schedules.7 However, [*576]                    camps are permitted to formally evaluate
plaintiffs concede that they cannot and do                players while coaching them.8
not guarantee to campers that any Division I
coaches will attend the camps to observe the
campers. (JSMF P 94.)
                                                          8
                                                            Wilbur Klein was pressed on this point at his
[**16]                                                    deposition, but ultimately conceded that
                                                          coaches not employed by institutional camps
                                                          were not permitted to observe and evaluate at
    Although plaintiffs claim that the NCAA               those camps outside of the evaluation period:
permits observations and evaluations to take
place at institutional basketball camps
throughout the months of June, July and                        Q: Is it your belief that the
August, defendant claims that institutional                   institutional      camps         have
camps are never permitted to have formal                      advantages over the private
observation and evaluation of players by                      camps?
                                                               A: Yes.
Division I coaches. Plaintiffs have offered
                                                              Q: And I think one of them that
the following evidence in support of their
                                                              you talked about is the fact that
claim that the institutional camps permit
                                                              they can hire Division I coaches
observation and evaluation throughout the                     either from their own institution or
summer: (1) the text of NCAA Bylaw                            others?
13.13.1.1.2: "An institution's football or                    A: Plus, they can see kids play in
basketball camp or clinic may be conducted                    the quiet period and they can't see
only during the months of June, July and                      those kids play at our camp. It's a
August, unless such activities meet the                       big advantage. It means a kid who
provisions regarding developmental clinics                    wants to be seen - let's say a kid
set forth in Bylaw 13.12.3.1"; and (2) the                    can only go to camp in June. He's
deposition of Wilbur H. Klein, a                              going with his parents on a
representative [**17] of plaintiff Five-Star,                 summer trip to Europe, but he
which suggests that observation and                           wants to be seen. So he's going to
evaluation occur by Division I coaches who                    go to North Carolina's camp and
are employed by the institutional camps.                      not to Five-Star.
Plaintiffs offer no evidence suggesting that a                Q: But he's only going to be seen
Division I coach who is not employed by an                    by the North Carolina coach?
institutional camp can observe and evaluate                   A: Or whoever happens to go
prospects at that camp outside of the official                there. They don't tell people you
                                                              can't come in.
                                                              Q: But other coaches can't go
                                                              outside of the live period; isn't that
7
  For example, plaintiff Blue Star, in addition to its        true?
other basketball activities, runs an elite, invitation-       A: I don't know that. If there's an
only camp during the July evaluation period (JSMF P
30) and plaintiff Future Stars generally operates one
                                                              institutional camp, a coach can
week of camp during the evaluation period and one             work at that camp, can't he? In
week outside of the evaluation period. (JSMF P 27.)           other words, Wojo from Duke can
                                                              work at North Carolina's camp.


                                                                                                890
    The Coach Employment Prohibition              to protect the young prospects from being
                                                  exploited, [**19] and that this regulation
[**18]                                            has been in place for decades.9 Defendant
                                                  further states that the contested recruiting
    According to plaintiffs, it is significant
                                                  regulations were instituted in response to a
to the success of a summer basketball camp
                                                  growing concern that the summer evaluation
that the participants be exposed to, and
                                                  period had become "cancerous" and that the
taught by, the most knowledgeable, capable
                                                  campers were subjected to too much
and experienced
                                                  pressure. (Def. SMF P 74.) Defendant has
     coaches available. (Pl. SMF P 11.) From      responded in detail about each of the three
1990 through 2001, the NCAA prohibited            challenged recruiting regulations, and I will
Division I college basketball coaches from        summarize each explanation briefly.
being employed by or lecturing at non-
                                                     As for the certification requirement, in
institutional basketball camps, though these
                                                  1991, in response to a report10 prepared
coaches were permitted to coach and lecture
                                                  about the problems in summer recruiting,
at institutional basketball camps. (NCAA
                                                  [**20] defendant considered sponsoring or
Bylaw 13.13.2.3.2.) This restriction was
                                                  running its own summer camps. The NCAA
lifted for the 2002 summer camp season.
     [*577] C. The Parties' Explanations
for the Bylaws at Issue                           9
                                                    Defendant identifies Myron Piggie, a summer coach
    Not surprisingly, the parties offer very      indicted for his schemes to take advantage of high
different explanations for the challenged         school athletes, as illustrative of the problems
                                                  involved in summer recruiting. Piggie's criminal
recruiting regulations.
                                                  activities, which resulted in a 37 month prison term
    Plaintiffs claim that the NCAA enacted        and restitution in the amount of $ 324,279.87, are
the rules and regulations at issue in this case   described in detail in the Eighth Circuit's affirmance
                                                  of his sentence. United States v. Myron Piggie, 303
"in order to protect institutional basketball     F.3d 923 (8th Cir. 2002).
camps and to harm non-institutional
                                                  10
basketball camps." (Pl. SMF P 26.) Plaintiffs        In this report, the NCAA Recruiting Committee
also claim that the "NCAA [has] threatened        found that: "Currently, the area of basketball
to destroy non-institutional basketball           recruiting has become more of a showplace for
                                                  prospective student-athletes and 'advisors' to parade
camps." (Pl. SMF P 27.)                           their basketball talent in a manner that seems
    Defendant responds that its regulation of     inconsistent and inappropriate for college athletic
                                                  recruiters. A number of college coaches have
the recruiting of student-athletes is intended    indicated that the recruitment of basketball
                                                  prospective student-athletes during the summer
    (Continued)                                   months requires coaches to expend funds
                                                  unnecessarily for the sole purpose of being seen at
     Q: I guess he can work there. But            any of dozens of outside privately owned summer
     unless he's employed there, he               basketball camps. Also, many of these camps are
     can't go there; right? A: But once a         selective with regard to which coaches have
                                                  preferential treatment in observing a particular
     coach is there, he's there. He sees a        prospective student-athlete's abilities." Report of the
     kid play. That's an advantage no             NCAA Recruiting Committee to the NCAA Council,
     matter how you cut it.                       July 23, 1991. (Def. Ex. 7.)

(Klein Dep. 121-23.)



                                                                                             891
ultimately rejected this idea, and decided       for the proposal, among other things, to
instead to develop a certification program       "decrease the impact of nonscholastic
for non-institutional camps. (JSMF P 71.)        external influences in the recruitment of
Division I coaches would only be permitted       prospective basketball student-athletes."
to attend and evaluate prospects and non-        (Def. SMF P 87.) In response to concerns
institutional camps that complied with the       that too much of the evaluation period
certification requirements. (Id.) In this way,   occurred in the summer when prospects are
defendant was not exercising direct control      away from their parents and high school
over the non-institutional camps, but rather     coaches, at the same time that the summer
over the coaches, who are employees of           evaluation period was reduced by 10 days,
NCAA member institution schools.                 the number of evaluation days permitted
                                                 during the academic year was increased
[**21]                                           from 40 days to 50. Graham Spanier,
                                                 President of Pennsylvania State University,
    Turning to the reduction in the
                                                 who served on the NCAA Board of
evaluation period, in August 1998, the
                                                 Directors and the Executive Committee that
NCAA Division I Board of Directors created
                                                 approved the change in evaluation days, was
the Division I Working Group to Study
                                                 deposed on the question of what problems
Basketball Issues to examine issues
                                                 the NCAA was responding to in making
impacting basketball, including recruiting
                                                 these changes:
and the summer evaluation season. (JSMF P
81.) Among the problems discovered by the
                                                      The problems ranged from the
Working Group were street agents taking
                                                      length of the summer period and
advantage of prospects, the summer season
                                                      how taxing this was for high
hurting prospects by making them miss
                                                      school students from a physical
classes and tests, and a lack of parental
                                                      and emotional standpoint, time
involvement which exposed the prospects to
                                                      away from home, coaches who
exploitation by "street agents, runners, and
                                                      are away from home and away
hangers-on." (Def. SMF P 82.) After a year
                                                      from campuses for considerable
of meetings and information gathering, the
                                                      lengths of time, costs associated
Working Group identified goals for the
                                                      with all of the travel, rather
recruiting rules, which included increasing
                                                      widespread        reports      of
the importance of scholastics and decreasing
                                                      corruption in the summer
the impact of nonscholastic external
                                                      programs,       the      growing
influences in basketball [*578] student-
                                                      involvement [**23] of agents
athlete recruitment. (Def. SMF P 82.) The
                                                      and runners, street agents, the
Working Group was eventually replaced by
                                                      improper level of contacts
a standing subcommittee, the Basketball
                                                      between players and coaches
Issues Subcommittee. (JSMF P 81.)
                                                      and others, concerns about high
    The reduction in evaluation period days           school coaches whose influence
from 24 to 14 for the 2000 summer camp                was being diminished because
season resulted from the NCAA Board of                of the involvement of others,
Directors' approval of one of several                 shoe company involvement.
proposals aimed at promoting amateurism.              Those were most, but probably
[**22] The NCAA detailed as its rational              not all of the different kinds of


                                                                                   892
      concerns that had emerged                  from [*579] American Basketball Camp
      among athletic directors, to               Association, 12/16/91 at BS 986 & 989). In
      some extent basketball coaches,            addition, in the letter these four plaintiffs
      certainly university presidents            also all stated that a rule against employing
      and the public more generally.             Division I coaches was already in effect at
                                                 their camps. (Id.)
   (Spanier Dep. 27-28.)
                                                     The prohibition on Division I coaches
    After the evaluation period was reduced
                                                 working at non-institutional summer camps
to 14 days for the 2000 season, the NCAA
                                                 was repealed in 2001 as part of an "on-going
Division I Basketball Issues Committee
                                                 process of [**25]           deregulation and
continued to examine its recruiting rules.
                                                 simplification of [NCAA bylaws]." (Def.
After taking into account what the prospects
                                                 SMF P 68.) Since then, Division I coaches
could handle, the minimum number of days
                                                 have been permitted to work at non-
needed and the maximum number that could
                                                 institutional camps that meet the NCAA
be monitored, the Committee suggested
                                                 certification requirements.
increasing the period from 14 to 20 days,
and this recommendation was adopted. (Def.
                                                 The Market
SMF P 92.)
                                                     Plaintiffs describe the relevant product
    Defendant provides a two-fold response
                                                 market as the operation of summer
to plaintiffs' complaint about the decade
                                                 basketball camps. (Pl. SMF P 5.) Although
long restriction on Division I coaches
                                                 plaintiffs state the relevant product market in
working at non-institutional camps. First,
                                                 these terms in several papers (including their
defendant offers what it believes to be a
                                                 verified complaint, statement of facts, and
legitimate, non-discriminatory motivation
                                                 an interrogatory answer,) they offer no
for the rule. Specifically, defendant [**24]
                                                 evidentiary support for the statement.
explains that the NCAA was concerned that
                                                 Plaintiffs describe the geographic scope of
if these coaches were permitted to work at
                                                 the market as the United States of America.
non-institutional camps, they could obtain a
                                                 (Pl. SMF P 6.) In support of this assertion,
recruiting advantage as compared with those
                                                 plaintiffs offer the deposition testimony of
coaches who could only evaluate prospects
                                                 three representatives from plaintiffs' camps.
during the evaluation periods. (Def. Mot.
                                                 These depositions offer no specific numbers
Summ. J. 20.) Second, defendant contends
                                                 or data, but do indicate that the players and
that some of the plaintiffs themselves
                                                 coaches at plaintiffs' camps come from all
supported the rule. In this regard, defendant
                                                 over the United States. (See Pl. SMF P 6,
has     brought     forth     evidence    that
                                                 citing Robert W. Kennedy Dep. 81, 98;
representatives of plaintiffs Pocono, Eastern,
                                                 Wilbur H. Klein Dep. 50; Van D. Coleman
Five Star and Future Stars all signed a letter
                                                 Dep. 36.)
sent to