                 FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


IN RE NATIONAL FOOTBALL                  No. 17-56119
LEAGUE’S SUNDAY TICKET
ANTITRUST LITIGATION,                        D.C. No.
                                         2:15-ml-02668-
                                            BRO-JEM
NINTH INNING, INC., DBA The
Mucky Duck; 1465 THIRD AVENUE
RESTAURANT CORP., DBA Gael Pub;            OPINION
ROBERT GARY LIPPINCOTT, JR.;
MICHAEL HOLINKO, an individual,
for himself and all others similarly
situated,
                Plaintiffs-Appellants,

                  v.

DIRECTV, LLC; DIRECTV
HOLDINGS, LLC; NATIONAL
FOOTBALL LEAGUE, INC.; NFL
ENTERPRISES, LLC; ARIZONA
CARDINALS, INC.; ATLANTA
FALCONS FOOTBALL CLUB LLC;
BALTIMORE RAVENS, LP; BUFFALO
BILLS, INC.; PANTHERS FOOTBALL,
LLC; CHICAGO BEARS FOOTBALL
CLUB, INC.; CINCINNATI BENGALS,
INC.; CLEVELAND BROWNS, LLC;
DALLAS COWBOYS FOOTBALL CLUB,
LTD.; DETROIT LIONS, INC.; GREEN
2     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

BAY PACKERS, INC.; HOUSTON NFL
HOLDINGS, LP; INDIANAPOLIS
COLTS, INC.; JACKSONVILLE
JAGUARS, LTD.; KANSAS CITY
CHIEFS FOOTBALL CLUB, INC.;
MIAMI DOLPHINS, LTD.; MINNESOTA
VIKINGS FOOTBALL CLUB, LLC;
NEW ENGLAND PATRIOTS, LP; NEW
ORLEANS LOUISIANA SAINTS, LLC;
NEW YORK FOOTBALL GIANTS, INC.;
NEW YORK JETS FOOTBALL CLUB,
INC.; OAKLAND RAIDERS, LP;
PHILADELPHIA EAGLES FOOTBALL
CLUB, INC.; PITTSBURGH STEELERS
SPORTS, INC.; SAN DIEGO CHARGERS
FOOTBALL CO.; SAN FRANCISCO
FORTY NINERS, LTD.; THE RAMS
FOOTBALL COMPANY, LLC;
BUCCANEERS, LP; TENNESSEE
FOOTBALL, INC.; WASHINGTON
FOOTBALL, INC.; FOOTBALL
NORTHWEST LLC; DENVER
BRONCOS FOOTBALL CLUB,
              Defendants-Appellees.


      Appeal from the United States District Court
          for the Central District of California
    Beverly Reid O’Connell, District Judge, Presiding

        Argued and Submitted December 7, 2018
                 Pasadena, California
        IN RE NFL SUNDAY TICKET ANTITRUST LITIG.                         3

                       Filed August 13, 2019

    Before: Sandra S. Ikuta and N. Randy Smith, Circuit
    Judges, and George Caram Steeh III,* District Judge.

                     Opinion by Judge Ikuta;
                   Dissent by Judge N.R. Smith


                            SUMMARY**


                               Antitrust

    The panel reversed the district court’s dismissal for
failure to state a claim of an antitrust action brought by a
putative class of residential and commercial subscribers to
DirecTV’s NFL Sunday Ticket, a bundled package of all NFL
games available exclusively to subscribers of DirecTV’s
satellite television service.

    Each NFL team entered into a “Teams-NFL Agreement”
with the NFL to pool their telecasting rights and give the NFL
the authority to exercise those rights. Acting on behalf of its
teams, the NFL entered into two additional agreements
licensing the teams’ telecast rights. Under the “NFL-
Network Agreement,” CBS and Fox coordinate to create a
single telecast for every Sunday-afternoon NFL game, and


    *
      The Honorable George Caram Steeh III, United States District Judge
for the Eastern District of Michigan, sitting by designation.
    **
       This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4      IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

the NFL permits CBS and Fox to broadcast a limited number
of what are known as local games through free, over-the-air
television. Under the “NFL-DirecTV Agreement,” the NFL
allows DirecTV to obtain all of the live telecasts produced by
CBS and Fox, package those telecasts, and deliver the
bundled feeds to NFL Sunday Ticket subscribers.

    Plaintiffs alleged that defendants’ interlocking agreements
work together to suppress competition for the sale of
professional football game telecasts in violation of §§ 1 and
2 of the Sherman Act.

    The panel held that plaintiffs stated a § 1 claim under the
rule of reason because they adequately alleged (1) a contract,
combination, or conspiracy among two or more persons or
business entities; (2) by which the persons or entities intended
to harm or restrain trade; (3) and which actually injured
competition; and (4) antitrust standing. The first and second
elements were undisputed. As to the third element, the panel
held that, under Nat’l Collegiate Athletic Ass’n v. Bd. of
Regents of Univ. of Oklahoma, 468 U.S. 85 (1984), plaintiffs
plausibly alleged that the interlocking agreements caused
injury to competition. As to the fourth element, it was
undisputed that plaintiffs had standing to challenge the
Teams-NFL Agreement and the NFL-DirecTV Agreement.
The panel held that plaintiffs also had standing to challenge
the Teams-NFL Agreement because they alleged that their
injury was caused by a single conspiracy. The panel
concluded that Illinois Brick, limiting the standing of indirect
purchasers, did not apply.

    The panel held that the plaintiffs stated a claim under § 2
of the Sherman Act in alleging that, by entering into
interlocking agreements, the defendants conspired to
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.                5

monopolize the market for professional football telecasts and
have monopolized it.

    Judge N.R. Smith dissented from Part III(C) of the
majority’s opinion, addressing antitrust standing. Judge
Smith disagreed with the majority’s conclusion that, because
plaintiffs alleged a conspiracy among defendants to limit
output, the direct purchaser rule of Illinois Brick did not apply
to plaintiffs’ damages claim related to the Teams-NFL
Agreement.


                         COUNSEL

Mark M. Seltzer (argued), Susman Godfrey LLP, Los
Angeles, California; Edward Diver, Howard Langer, and
Peter E. Leckman, Langer Grogan & Diver P.C.,
Philadelphia, Pennsylvania; Scott Martin, Hausfeld LLP,
New York, New York; for Plaintiffs-Appellants.

Greg H. Levy (argued), Derek Ludwin, John S. Playforth, and
Sonia Lahr-Pastor, Covington & Burling LLP, Washington,
D.C.; Beth A. Wilkinson, Wilkinson Walsh & Eskovitz LLP,
Washington, D.C.; Sean Eskovitz, Wilkinson Walsh &
Eskovitz LLP, Los Angeles, California; for Defendants-
Appellees.

Craig C. Corbitt, Corbitt Law Office, San Francisco,
California, for Amici Curiae Economists.
6      IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

                         OPINION

IKUTA, Circuit Judge:

     Every Sunday during football season, millions of National
Football League (NFL) fans tune in to watch their team play.
If they live in the same area as their favorite team—such as
Los Angeles Rams fans who live in Los Angeles—they can
tune into their local Fox or CBS station to enjoy their team’s
game on free, over-the-air television. But if NFL fans happen
to live far away from their favorite team—such as Seattle
Seahawks fans residing in Los Angeles—they can watch
every Seahawks game only if they purchase DirecTV’s NFL
Sunday Ticket, a bundled package of all NFL games available
exclusively to subscribers of DirecTV’s satellite television
service.

    The plaintiffs, a putative class of Sunday Ticket
subscribers, claim that this arrangement harms NFL fans
because it eliminates competition in the market for live
telecasts of NFL games. Without this arrangement restricting
the televising of NFL games, plaintiffs argue, the individual
teams would create multiple telecasts of each game and
would compete against one another by distributing telecasts
of their games through various cable, satellite, and internet
channels. We conclude that at this preliminary stage,
plaintiffs have stated a cause of action for a violation of
Sections 1 and 2 of the Sherman Act that survives a motion
to dismiss. We therefore reverse the district court’s decision
to the contrary.
        IN RE NFL SUNDAY TICKET ANTITRUST LITIG.                         7

                                    I

     To analyze the challenged arrangement between the NFL
teams, the NFL, and DirecTV, it is necessary to understand
the history of television broadcasting of NFL games. The
NFL, an association of “separately owned professional
football teams,” was formed in 1920. Am. Needle, Inc. v.
Nat’l Football League, 560 U.S. 183, 187 (2010). While the
NFL had a rocky first two decades, its teams gradually
became successful. See U.S. Football League v. Nat’l
Football League, 842 F.2d 1335, 1343 (2d Cir. 1988).
Indeed, by 1959, a majority of NFL team owners felt that
there was a “growing interest in professional football and the
healthier financial condition of the NFL teams.” Am.
Football League v. Nat’l Football League, 205 F. Supp. 60,
67 (D. Md. 1962), aff’d, 323 F.2d 124 (4th Cir. 1963). And
as professional football gained popularity, so did the telecasts
of its games.

    In the 1950s, the right to telecast NFL games was
“controlled by individual teams,” which independently
licensed the telecasts of their games to television networks.
U.S. Football League, 842 F.2d at 1346.1 For example, in


    1
       By this time, courts had agreed that sports teams had a property
interest in their games. In Pittsburgh Athletic Co. v. KQV Broadcasting
Co., the leading case on this issue, a radio station broadcast play-by-play
descriptions of the Pirates’ baseball games without the consent of the
team. 24 F. Supp. 490, 492 (W.D. Pa. 1938). The Pirates sued to enjoin
the unauthorized broadcasts. Id. The district court enjoined the radio
station, holding that the baseball team, “by reason of its creation of the
game, its control of the park, and its restriction of the dissemination of
news therefrom, has a property right in such news, and the right to control
the use thereof for a reasonable time following the games.” Id.; see Nat’l
Exhibition Co. v. Fass, 133 N.Y.S.2d 379, 380 (Sup. Ct. 1954) (enjoining
8       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

1951, the “Dumont network televised five regular season
games (twelve by 1954), as well as the championship game
each year.” Id. Additionally, in the mid-1950s, “the
Columbia Broadcasting System (‘CBS’) began broadcasting
certain NFL regular season games for $1.8 million per year,
and the National Broadcasting Company (‘NBC’) acquired
the right to televise the NFL championship game.” Id.

     Concerned that too much competition between the teams
in the market for broadcast rights might drive some teams out
of business, the NFL amended its 1951 bylaws to address this
issue. In Article X of the bylaws, the NFL required each NFL
team to agree to minimize competition by refraining from
telecasting its games into another team’s local market
whenever that local team was either playing at home or
broadcasting its away game in its local territory.2 United
States v. Nat’l Football League, 116 F. Supp. 319, 321 (E.D.
Pa. 1953) (NFL I).

    In 1951, the Justice Department brought suit in district
court to enjoin enforcement of Article X, alleging that it
violated Section 1 of the Sherman Act. Id. at 321. After a


the “defendant from the unauthorized transmission, subsequently
broadcast, of detailed accounts of games”); Sw. Broad. Co. v. Oil Ctr.
Broad. Co., 210 S.W.2d 230, 234 (Tex. Civ. App. 1947) (granting an
injunction to prevent a radio broadcaster from broadcasting play-by-play
accounts of football games); cf. Zacchini v. Scripps-Howard Broad. Co.,
433 U.S. 562, 575 (1977) (citing Pittsburgh Athletic Co., 24 F. Supp. at
490).
    2
       Article X would have prevented, for example, the New England
Patriots from broadcasting their game against the Minnesota Vikings
within 75 miles of Washington, D.C. when the Washington Redskins were
either (1) playing at home or (2) playing an away game but telecasting that
game in Washington, D.C. See NFL I, 116 F. Supp. at 325.
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.              9

bench trial, Judge Grim held that the NFL could restrict the
broadcast of distant games into home territories in order to
protect attendance for the local team’s game without violating
antitrust law. Id. at 325–26. Because “primarily all of NFL
revenues were derived from gate receipts,” protecting live
attendance at NFL games was important to the league’s
success. H.R. Rep. No. 93-483 at 5 (1973), reprinted in 1973
U.S.C.C.A.N. 2032, 2035; see NFL I, 116 F. Supp. at 325.
However, the NFL could not restrict teams from broadcasting
their games into another team’s local market when that team
was playing away games. NFL I, 116 F. Supp. at 326–27.
Such a restriction, Judge Grim held, would be an
impermissible restraint of trade that violated the Sherman
Act. Id. at 327. Judge Grim therefore enjoined the NFL
teams from entering into a contract that restricts “the sale of
rights for the telecasting of outside games in club’s home
territory on a day when the home club is permitting the
telecast of its away game in its home territory.” Id. at 330.

    The NFL did not appeal the 1953 injunction imposed by
NFL I, which remained in force until Congress addressed the
issue. “For a number of years after the 1953 decision, the
broadcasting practices of the member clubs of the National
Football League stabilized.” H.R. Rep. No. 93-483 at 4
(1973). The individual NFL teams competed against each
other on the field and in the market for telecasting rights.
Indeed, “[b]y the late 1950s, eleven individual teams had
signed contracts with the Columbia Broadcasting System;
two teams—Baltimore and Pittsburgh—had signed contracts
with the National Broadcasting Company; and one
team—Cleveland—had organized its own network.” Id.

   This changed when the NFL began to face competition
from its newly formed rival, the American Football League
10     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

(AFL). While the NFL was precluded under NFL I from
restricting the sale of telecasts, the AFL was not. Id. at 2034.
As a result, the AFL “entered into league-wide television
contracts,” id., and pooled its television rights and revenues
in a broadcast contract with ABC, U.S. Football League,
842 F.2d at 1346.

    In light of this disparity with the AFL, and out of concern
“that the league’s competitive balance on the field would
eventually be destroyed if teams in major television markets
continued to sell their broadcast rights individually,” in 1961,
the NFL teams also decided “to sell their collective television
rights as a single package and to share broadcast revenues
equally among all franchises.” Id. (quoting the testimony of
Commissioner Rozelle). In 1961, the NFL filed a petition
with Judge Grim seeking to implement a new television
contract between the NFL and CBS. United States v. Nat’l
Football League, 196 F. Supp. 445, 447 (E.D. Pa. 1961) (NFL
II). Under the terms of the NFL-CBS contract, the NFL
teams would pool their television rights in the NFL and then
the NFL would jointly sell those rights to CBS. Id. at
446–47. Judge Grim denied the petition, holding that the
proposed agreement violated the 1953 injunction because if
the agreement went into effect, “the member clubs of the
League [would] have eliminated competition among
themselves in the sale of television rights to their games.” Id.
at 447. Judge Grim therefore issued a second injunction (the
1961 injunction) enjoining the implementation of the pooled
rights contract between NFL and CBS. Id.

   Rather than appeal the 1961 injunction, the NFL sought
Congressional relief. In response to the NFL’s lobbying,
Congress passed the Sports Broadcasting Act (SBA), which
“was specifically designed to establish parity between the
      IN RE NFL SUNDAY TICKET ANTITRUST LITIG.            11

National Football League and the American Football
League.” H.R. Rep. No. 93-483 at 5 (1973). The SBA
effectively overruled NFL II, providing:

       The antitrust laws, as defined in section 1 of
       the [Sherman] Act . . . shall not apply to any
       joint agreement by or among persons
       engaging in or conducting the organized
       professional team sports of football, baseball,
       basketball, or hockey, by which any league of
       clubs participating in professional football,
       baseball, basketball, or hockey contests sells
       or otherwise transfers all or any part of the
       rights of such league’s member clubs in the
       sponsored telecasting of the games of football,
       baseball, basketball, or hockey, as the case
       may be, engaged in or conducted by such
       clubs.

15 U.S.C. § 1291. Thus, the SBA provides a tailored
exemption for “professional team sports” to sell their rights
to “sponsored telecasts” through a joint agreement. Id. In
passing the SBA, Congress recognized “that agreements
among league members to sell television rights in a
cooperative fashion could run afoul of the Sherman Act,” and
that therefore an exemption from Section 1 of the Sherman
Act was required. Nat’l Collegiate Athletic Ass’n v. Bd. of
Regents of Univ. of Oklahoma, 468 U.S. 85, 104 n.28 (1984)
(NCAA).

    For the next 25 years, the NFL teams pooled their
telecasting rights to their games and sold them as a single
package through free, over-the-air television. See In the
Matter of Implementation of Section 26 of the Cable
12     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

Television Consumer Protection & Competition Act of 1992,
8 F.C.C. Rcd. 4875, 4879–80 (1993).

    Because the SBA applied only to professional sports
leagues, it did not apply to college football, which continued
to be subject to the Sherman Act. See 15 U.S.C. § 1291.
Like the NFL, the NCAA had a long-standing restriction on
televising team games. See NCAA, 468 U.S. at 89–90.
Beginning in 1951, the NCAA enforced procedures ensuring
that “only one game a week could be telecast in each area,
with a total blackout on 3 of the 10 Saturdays during the
season,” and “[a] team could appear on television only twice
during a season.” Id. at 90. The NCAA maintained this
approach for the next two decades.

    Finally, in the 1980s, the NCAA’s arrangement was
challenged by colleges that wanted to negotiate more
lucrative television deals for their popular football teams. Id.
at 90–91. This challenge resulted in the Supreme Court’s
authoritative opinion on the antitrust law of league sports,
National Collegiate Athletic Association v. Board of Regents
of University of Oklahoma, 468 U.S. 85 (1984).

    In NCAA, the Supreme Court struck down the NCAA’s
restrictive telecast agreements as violating the Sherman Act.
According to the Court, “[b]y participating in an association
which prevents member institutions from competing against
each other on the basis of price or kind of television rights
that can be offered to broadcasters, the NCAA member
institutions have created a horizontal restraint—an agreement
among competitors on the way in which they will compete
with one another.” Id. at 99. Such an arrangement violated
Section 1 of the Sherman Act because “[i]ndividual
competitors lose their freedom to compete,” and “[p]rice is
        IN RE NFL SUNDAY TICKET ANTITRUST LITIG.                       13

higher and output lower than they would otherwise be, and
both are unresponsive to consumer preference.” Id.
at 106–07.

    After NCAA, commentators documented the changes
caused by the increased competition in college football
telecasts. “With conferences and teams now free to sign their
own deals, the number of televised college football games
grew exponentially.”        Nathaniel Grow, Regulating
Professional Sports Leagues, 72 Wash. & Lee L. Rev. 573,
617 (2015). Moreover, because college football teams could
compete “against one another in the marketplace,
broadcasters collectively pa[y] half as much for the rights to
televise a larger number of games than the NCAA had
previously received for its collective package.” Id. By
contrast, under the SBA, the NFL’s control over the pooled
broadcasting rights increased revenues from telecasting, see
Michael A. McCann, American Needle v. NFL: An
Opportunity to Reshape Sports Law, 119 Yale L.J. 726, 732
(2010), while decreasing the number of telecasts available to
consumers, see Ariel Y. Bublick, Note, Are You Ready for
Some Football?, 64 Fed. Comm. L.J. 223, 231, 234–36
(2011).

    While the NFL’s collective sale of telecast rights to free,
over-the-air television networks was squarely covered by the
SBA, as television technology advanced, from over-the-air to
cable to satellite television, the NFL and other professional
leagues began using new methods of distributing telecasts of
the games.3 In 1987, the NFL entered into its first cable deal,


    3
      Over-the-air television is conveyed by “[b]roadcast stations [that]
radiate electromagnetic signals from a central transmitting antenna.”
Turner Broad. Sys., Inc. v. F.C.C., 512 U.S. 622, 627 (1994). It is free to
14      IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

selling the right to telecast eight Sunday games to ESPN. See
8 F.C.C. Rcd. 4875, 4879. Beginning in 1994, the NFL
entered into an agreement with DirecTV, allowing DirecTV
to sell Sunday Ticket exclusively through its satellite
television service. Babette Boliek, Antitrust, Regulation, and
the “New” Rules of Sports Telecasts, 65 Hastings L.J. 501,
541 (2014).

    Courts considering challenges to the telecasting
arrangements between sports leagues and satellite television
services have concluded that “‘sponsored telecasting’ refers
to broadcasts which are financed by business enterprises (the
‘sponsors’) in return for advertising time and are therefore
provided free to the general public.” Shaw v. Dallas Cowboys
Football Club, Ltd., 172 F.3d 299, 301 (3d Cir. 1999).
Therefore, the SBA does not exempt league contracts with
cable or satellite television services, for which subscribers are
charged a fee, from antitrust liability. Id. at 303; see also
Chicago Prof’l Sports Ltd. P’ship v. Nat’l Basketball Ass’n,
961 F.2d 667, 671 (7th Cir. 1992) (Bulls I) (holding that the
SBA applies when a league has transferred rights to
sponsored telecasting and therefore did not apply to the
NBA’s efforts to limit distribution by the Bulls of their games


“any television set within the antenna’s range.” Id. Cable television, in
contrast, typically relies upon “cable or optical fibers strung aboveground
or buried in ducts to reach the homes or businesses of subscribers.” Id. at
628. Satellite television providers deliver their “signals via satellite
directly into its customers’ homes.” DirecTV, Inc. v. Webb, 545 F.3d 837,
841 (9th Cir. 2008). As with “conventional radio and television
broadcasting, [satellite television] signals are broadcast through the air and
can be received—or intercepted—by anyone with the proper hardware.”
Id. Because satellite signals could be received by anyone with a satellite
dish, satellite providers typically “encrypt[] [their] signals to protect
against signal theft.” Id.
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.             15

on a cable network); Chicago Prof’l Sports Ltd. P’ship v.
Nat’l Basketball Ass’n, 95 F.3d 593, 595 (7th Cir. 1996)
(Bulls II) (same); Kingray, Inc. v. NBA, Inc., 188 F. Supp. 2d
1177, 1183 (S.D. Cal. 2002) (“‘Sponsored telecasting’ under
the SBA pertains only to network broadcast television and
does not apply to non-exempt channels of distribution such as
cable television, pay-per-view, and satellite television
networks.”).

    The current arrangements for cable broadcasting of NFL
games is as follows. The 32 individual NFL teams, each of
which is a separate “independently owned, and independently
managed business,” Am. Needle, 560 U.S. at 196, entered into
an agreement with the NFL (“Teams-NFL Agreement”) to
pool their telecasting rights and give the NFL the authority to
exercise those rights, rather than exercising those rights
individually. The consequence of this agreement is that an
individual team cannot enter into individual agreements with
networks, satellite TV providers, or internet streaming
services. Instead, only the NFL can enter into an agreement
to sell those rights.

    Acting on behalf of its teams, the NFL entered into two
additional agreements licensing the teams’ telecast rights:
(1) “the NFL-Network Agreement,” which governs “local
games,” and (2) “the NFL-DirecTV Agreement,” which
governs “out-of-market games.”

    Under the NFL-Network Agreement, CBS and Fox
coordinate to create a single telecast for every Sunday-
afternoon NFL game. Pursuant to that agreement, NFL owns
the copyright in the telecasts. See, e.g., U.S. Copyright
Office, NFL 2016 Season: Cowboys @ Packers, Week #6,
Reg. No. PA0002069024 (Jan. 4, 2017) (noting that copyright
16    IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

was held by the NFL pursuant to transfer “[b]y contract”).
The NFL, in turn, permits CBS and Fox to broadcast a limited
number of games through free, over-the-air television. These
are the so-called local games.

    Under the NFL-DirecTV Agreement, the NFL allows
DirecTV to obtain all of the live telecasts produced by CBS
and Fox, package those telecasts, and deliver the bundled
feeds to NFL Sunday Ticket subscribers. Thus, Sunday
Ticket subscribers have access to both local and out-of-
market games.

    As a result of these agreements, fans who do not
subscribe to Sunday Ticket have access to, at most, two to
three local games each Sunday afternoon, in any given
geographic area. This means, for example, that Los Angeles
fans would be able to use over-the-air cable to watch the
Rams play the Chargers at 1:00PM E.T. on Fox, the Vikings
play the Patriots at 1:00PM E.T. on CBS, and the Dolphins
play the Cowboys at 4:00PM E.T. on CBS. But there is no
option for NFL fans to watch any of the other 7 to 10 games
played each Sunday afternoon which are not available on
free, over-the-air television.

    Fans who want to watch other out-of-market games
cannot purchase games individually or by team, but are
required to buy the entire package of NFL games.
Additionally, in order to subscribe to the Sunday Ticket,
consumers must also purchase a basic television package
from DirecTV. In 2015, the cost of a basic Sunday Ticket
package was $251.94 annually for residential subscribers.
For commercial subscribers, the price varied depending on
the capacity of the establishment, ranging from $2,314 to
$120,000 per year.
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.              17

                               II

    Four plaintiffs (Ninth Inning, Inc., 1465 Third Avenue
Restaurant Corp., Robert Gary Lippincott, Jr., and Michael
Holinko) filed a consolidated complaint against the National
Football League, NFL Enterprises LLC, all 32 individual
NFL teams, DirecTV Holdings LLC, and DirecTV, LLC, on
behalf of a putative class of residential and commercial NFL
Sunday Ticket subscribers. (Our reference to “plaintiffs”
refers to the plaintiffs collectively. We will refer to the
defendants collectively, or as the NFL, the NFL teams, and
DirecTV, as appropriate.)

     The plaintiffs’ consolidated complaint alleges that the
defendants’ interlocking agreements work together to
suppress competition for the sale of professional football
game telecasts in violation of Section 1 and Section 2 of the
Sherman Antitrust Act. Specifically, the complaint alleges
that absent the anti-competitive Teams-NFL and NFL-
DirecTV Agreements, the telecasts broadcast solely on
Sunday Ticket would be available through other distributors.
Additionally, each NFL team could make its own
arrangements for telecasts of its games, and could contract
with competing distribution channels or media, including
other cable, satellite or internet carriers or competing
networks. As a result of competition, the complaint alleges,
a greater number of telecasts of NFL games would be created,
and those telecasts would be more accessible to more viewers
at lower prices.

    The district court dismissed the consolidated complaint
for failure to state a claim under either Section 1 or Section 2
of the Sherman Act. “We review a district court’s grant of a
Rule 12(b)(6) motion to dismiss for failure to state a claim de
18      IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

novo.” Bain v. Cal. Teachers Ass’n, 891 F.3d 1206, 1211
(9th Cir. 2018). Additionally, we “take all allegations of
material fact as true and construe them in the light most
favorable to the nonmoving party.” Turner v. City & Cty. of
S.F., 788 F.3d 1206, 1210 (9th Cir. 2015). However,
“conclusory allegations of law and unwarranted inferences
are insufficient to avoid a Rule 12(b)(6) dismissal.” Cousins
v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009) (internal
quotation marks omitted). We examine the district court’s
dismissal of the Section 1 and Section 2 claims in turn.

    It is significant here that the defendants do not argue on
appeal that the SBA applies to the Teams-NFL or NFL-
DirecTV Agreements. As the foregoing history indicates, the
NFL and the NFL teams’ early decision to pool their telecast
rights into a single package and share broadcast revenues was
invalidated by Judge Grim as a violation of the Sherman Act.
NFL I, 116 F. Supp. at 329–30. The NFL recovered its ability
to enter into such pooling arrangements only by the
enactment of the SBA, which offered the NFL and the NFL
teams an exemption from antitrust law. See 15 U.S.C.
§ 1291. Because the defendants do not argue that the SBA
applies to satellite broadcasting, we assume (without
deciding) that it is not applicable to the Teams-NFL or NFL-
DirecTV Agreements. Accordingly, our analysis of the
complaint’s allegations regarding those agreements is largely
governed by the Supreme Court’s decision in NCAA,
468 U.S. 85, which analyzed a similar league sport
broadcasting arrangement under the Sherman Act, without
any applicable statutory exemption.4



   4
     The defendants argue, and the plaintiffs do not dispute, that the
NFL-Network Agreement is covered by the SBA. But the parties do not
        IN RE NFL SUNDAY TICKET ANTITRUST LITIG.                       19

                                   III

    Section 1 of the Sherman Act prohibits “[e]very contract,
combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States.”
15 U.S.C. § 1. Although on its face, Section 1 appears to
outlaw virtually all contracts, it has been interpreted as
“outlaw[ing] only unreasonable restraints” of trade. State Oil
Co. v. Khan, 522 U.S. 3, 10 (1997).

    We determine whether a particular restraint of trade is
unreasonable and thus a violation of Section 1 under the so-
called “rule of reason.”5 Under this rule, we examine “the
facts peculiar to the business, the history of the restraint, and
the reasons why it was imposed,” to determine the effect on
competition in the relevant product market. Nat’l Soc’y of
Prof’l Eng’rs v. United States, 435 U.S. 679, 692 (1978).



argue that the agreements at issue here are exempt from antitrust liability
merely because the NFL-Network Agreement has such immunity.
    5
       Under antitrust law, some restraints of trade, such as horizontal
agreements among competitors to fix prices, restrict output, and divide
markets, are generally deemed to be per se unreasonable, and therefore it
is unnecessary to apply the rule of reason in order to determine whether
such agreements violate Section 1. See In re Musical Instruments &
Equip. Antitrust Litig., 798 F.3d 1186, 1191 (9th Cir. 2015). Although
this case concerns a horizontal agreement, the Supreme Court has
concluded that the per se rule does not apply to agreements involving
teams engaged in league sports, on the ground that such sports “can only
be carried out jointly.” NCAA, 468 U.S. at 101 (quoting Bork, The
Antitrust Paradox 278 (1978)). Therefore, when considering agreements
among entities involved in league sports, such as here, a court must
determine whether the restriction is unreasonable under the rule of reason.
Id. at 103.
20     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

    “In order to state a Section 1 claim under the rule of
reason, plaintiffs must plead four separate elements.”
Brantley v. NBC Universal, Inc., 675 F.3d 1192, 1197 (9th
Cir. 2012). “[P]laintiffs must plead facts which, if true, will
prove: (1) a contract, combination or conspiracy among two
or more persons or distinct business entities; (2) by which the
persons or entities intended to harm or restrain trade or
commerce among the several States, or with foreign nations;
(3) which actually injures competition.” Id. (internal
quotation marks and citations omitted). Additionally, the
plaintiffs must plead antitrust standing, meaning they must
allege that (4) they are the proper parties to bring the antitrust
action because they were harmed by the defendants’ contract,
combination, or conspiracy, and the harm they suffered was
caused by the anti-competitive aspect of the defendants’
conduct. Id.

                                A

    The defendants do not dispute that the complaint
adequately alleges that defendants have contracts for the
purpose of restraining trade, the first and second elements.
The defendants argue only that the complaint does not
adequately allege the third and fourth elements of a Section
1 claim. We begin with the third element of a Section 1
claim, whether plaintiffs have adequately alleged that the
restraint injures competition.

    In order to satisfy this third requirement, the plaintiffs
must identify a harm that is “attributable to an anti-
competitive aspect of the practice under scrutiny.” Atl.
Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334
(1990). A harm that could have occurred under the normal
circumstances of free competition fails to satisfy this
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.             21

requirement. See Spectrum Sports, Inc. v. McQuillan,
506 U.S. 447, 458 (1993). An agreement between
competitors (a horizontal agreement) satisfies the requirement
of showing injury to competition if it reduces competitors’
independent decisions about “whether and how often to offer
to provide services,” F.T.C. v. Superior Court Trial Lawyers
Ass’n, 493 U.S. 411, 422 (1990), or fixes prices, United
States v. Socony–Vacuum Oil Co., 310 U.S. 150, 223 (1940),
or otherwise limits competitors’ “freedom to compete,”
NCAA, 468 U.S. at 106. In order to show that an agreement
injures competition, a plaintiff must generally show that the
defendants have market power within a relevant market,
Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1044
(9th Cir. 2008), meaning that the defendants have “the ability
to raise prices above those that would be charged in a
competitive market,” NCAA, 468 U.S. at 109 n.38.
Alternatively, plaintiffs can show that a restraint injures
competition if they plausibly allege “a naked restriction on
price or output,” such as “an agreement not to compete in
terms of price or output.” Id. at 109. An agreement between
companies at different levels of a supply chain (a vertical
agreement) may injure competition if it facilitates “horizontal
collusion.” Brantley, 675 F.3d at 1198.

                              B

    In this case, the plaintiffs’ allegations on their face
adequately allege an injury to competition. The interlocking
agreements at issue are similar to those that have historically
required an exemption from antitrust liability by the SBA:
they are “joint agreement[s]” whereby a “league of clubs
participating in professional football . . . sells or otherwise
transfers all or any part of the rights of such league’s member
clubs” in the telecasting of such games. 15 U.S.C. § 1291.
22     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

This is the exact type of arrangement that Judge Grim
concluded violated the Sherman Act—and, more importantly,
that the Supreme Court held caused an injury to competition
in the context of college football. See NCAA, 468 U.S.
at 104.

     Because we assume that the NFL’s interlocking
agreements are not protected by the SBA, the Supreme
Court’s decision in NCAA controls our analysis. In that case,
the Supreme Court held that an agreement among college
football teams and the NCAA violated Section 1 of the
Sherman Act because the agreement eliminated competition
in the market for college football telecasts. See generally id.
Here, the interlocking agreements impose similar restrictions.
First, the Supreme Court noted in NCAA that the agreement
at issue “limits the total amount of televised intercollegiate
football and the number of games that any one team may
televise.” Id. at 94. The complaint here alleges that the
interlocking agreements in this case impose analogous
limitations: plaintiffs assert that the Teams-NFL and NFL-
DirecTV Agreements limit the “amount of televised
[professional] football” that one team may televise because
they restrict the number of telecasts made to a single telecast
for each game.

    Second, the Supreme Court noted that the agreements in
NCAA provided that “[n]o member [college] is permitted to
make any sale of television rights except in accordance with
the basic plan.” Id. In our case, plaintiffs allege that the NFL
teams are similarly restricted. Under the terms of the Teams-
NFL and NFL-DirecTV Agreements, no individual NFL team
is permitted to sell its telecasting rights independently.
Independent telecasts are forbidden under the terms of the
Agreements because they would cause the teams to compete
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.             23

with each other and with DirecTV. Just as the University of
Oklahoma was forbidden from increasing the number of
telecasts made of its games, so too are the Seattle Seahawks
forbidden from selling their telecast rights independently
from the NFL.

    Third, in NCAA the Court concluded that the agreement
among the member colleges was a horizontal agreement
among competitors because “the policies of the NCAA with
respect to television rights are ultimately controlled by the
vote of member institutions.” Id. at 99. The same type of
agreement is alleged here. According to the complaint, the
NFL members vote to approve the contract between DirecTV
and the NFL. Therefore, the complaint adequately alleges
that the Teams-NFL Agreement is a “horizontal restraint—an
agreement among competitors” that “places an artificial limit
on the quantity of televised football that is available [for
sale] to broadcasters and consumers.” Id.

    Finally, NCAA held that the agreements constituted a
naked restriction on output, and defined the relevant output to
be “the quantity of television rights available for sale,”
meaning “the total amount of televised intercollegiate
football,” Id. at 94, 99, as opposed to whether each game was
broadcast in some market at some time. In our case, the
complaint likewise alleges that the interlocking agreements
restrain the production and sale of telecasts in a manner that
constitutes “a naked restriction” on the number of telecasts
available for broadcasters and consumers.

    Because the complaint alleges that the interlocking
agreements in this case involve the same sorts of restrictions
that NCAA concluded constituted an injury to competition, we
likewise conclude that the complaint plausibly alleges an
24     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

injury to competition.       Further, because the alleged
restrictions on the production and sale of telecasts constitute
“a naked restriction” on the number of telecasts available for
broadcasters and consumers, the plaintiffs were not required
to establish a relevant market. Id. at 109.

   The defendants make a number of arguments against this
conclusion. We consider each in turn.

                              1

    First, the defendants argue that under In re Musical
Instruments & Equipment Antitrust Litigation, 798 F.3d 1186
(9th Cir. 2015), it is necessary to analyze the horizontal NFL
Teams agreement separately from the vertical NFL-DirecTV
agreement, and when viewed in that light, the NFL-DirecTV
agreement does not injure competition because it is an
exclusive distribution agreement of the type that is
presumptively legal.        We disagree.        First, Musical
Instruments does not require a court to break down an alleged
conspiracy into its constituent parts. Musical Instruments
merely explained the uncontroversial principle that, in
general, horizontal agreements are analyzed under per se
rules, while vertical agreements are analyzed under the rule
of reason. Id. at 1191–92. But as noted above, both types of
agreements are analyzed under the rule of reason in cases
involving league sports. NCAA, 468 U.S. at 101–03.

    Contrary to the defendants’ argument, we are required to
take a holistic look at how the interlocking agreements
actually impact competition. See Nat’l Soc’y. of Prof’l
Eng’rs, 435 U.S. at 692. Indeed, “the essential inquiry” is
“whether or not the challenged restraint enhances
competition,” which is assessed by considering the totality of
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.               25

“the nature or character of the contracts.” NCAA, 468 U.S.
at 103–04 (quoting Nat’l Soc’y of Prof’l Eng’rs, 435 U.S.
at 690). Thus, the law requires that the “character and effect
of a conspiracy are not to be judged by dismembering it and
viewing its separate parts, but only by looking at it as a
whole.” Continental Ore Co. v. Union Carbide & Carbon
Corp., 370 U.S. 690, 698–99 (1962) (quoting United States
v. Patten, 226 U.S. 525, 544 (1913)). Accordingly, we must
give plaintiffs “the full benefit of their proof without tightly
compartmentalizing the various factual components and
wiping the slate clean after scrutiny of each.” City of Long
Beach v. Standard Oil Co., 872 F.2d 1401, 1404–05 (9th Cir.
1989), opinion amended on denial of reh’g, 886 F.2d 246 (9th
Cir. 1989) (quoting Continental Ore Co., 370 U.S. at 699).

    Looking holistically at the alleged conduct, we conclude
that the complaint adequately pleads that the vertical NFL-
DirecTV Agreement works in tandem with the Teams-NFL
agreement to restrain competition. The Supreme Court has
held that a horizontal agreement among competitors to pool
separate property rights and enter into an agreement to license
their rights vertically can constitute a Section 1 violation. See
Am. Needle, 560 U.S. at 201 (holding that an agreement
among the NFL and its member teams to create an entity that
jointly licensed their separately owned intellectual property
constituted concerted action in violation of the Sherman Act).
Accordingly, we reject the defendants’ argument that we
cannot view the effects of both the horizontal and vertical
agreements working together.

                               2

    Defendants further argue that plaintiffs have failed to
allege an injury to competition because the production of the
26     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

telecasts necessarily requires joint action, and therefore the
restrictions are pro-competitive. According to defendants,
each NFL game broadcast is a copyrighted work jointly
authored by the NFL, the two competing teams, and the
broadcast network, and the agreement of all participants is
necessary in order to create the telecasts at all. Thus,
defendants argue, the Supreme Court’s decision in American
Needle is inapposite because that decision concerned
separately owned intellectual property, id. at 187, whereas
here, the telecasts could only be created through cooperation
between competitors.

    We disagree. Defendants have failed to identify, and we
are unaware of, any binding precedent requiring the teams
and the NFL to cooperate in order to produce the telecasts.

    Under copyright law, it is well-established that the
underlying NFL game is not copyrightable subject matter.
See Dryer v. Nat’l Football League, 814 F.3d 938, 942 (8th
Cir. 2016) (noting that “courts have recognized that the initial
performance of a game is an ‘athletic event’ outside the
subject matter of copyright”); Nat’l Basketball Ass’n v.
Motorola, Inc., 105 F.3d 841, 846 (2d Cir. 1997) (“NBA”)
(“In our view, the underlying basketball games do not fall
within the subject matter of federal copyright protection
because they do not constitute ‘original works of authorship’
under 17 U.S.C. § 102(a).”).

    However, the telecasts of sporting events are plainly
copyrightable “motion pictures” under the Copyright Act of
1976. 17 U.S.C. § 102(a)(6); NBA, 105 F.3d at 847
(“[R]ecorded broadcasts of NBA games—as opposed to the
games themselves—are . . . entitled to copyright
protection.”). Indeed, “[t]he Copyright Act was amended in
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.                27

1976 specifically to insure that simultaneously-recorded
transmissions of live performances and sporting events would
meet the Act’s requirement that the original work of
authorship be ‘fixed in any tangible medium of expression.’”
NBA, 105 F.3d at 847 (citing 17 U.S.C. § 102(a); H.R. Rep.
No. 94-1476, at 52); see also Nat’l Football League v. McBee
& Bruno’s, Inc., 792 F.2d 726, 732 (8th Cir. 1986) (“[T]he
legislative history demonstrates a clear intent on the part of
Congress to ‘resolve, through the definition of “fixation” . . . ,
the status of live broadcasts,’ using—coincidentally but not
insignificantly—the example of a live football game.”).

     Under general copyright law, copyright ownership vests
initially in the author of the work, 17 U.S.C. § 201(a), who,
as a general rule, “is the party who actually creates the work,
that is, the person who translates an idea into a fixed, tangible
expression entitled to copyright protection.” See Cmty. for
Creative Non-Violence v. Reid, 490 U.S. 730, 737 (1989).
Thus, in the absence of an agreement otherwise, the person or
company that creates the telecast is the “author” of the
telecast for the purposes of copyright law. See id.; see also
Garcia v. Google, Inc., 786 F.3d 733, 744 (9th Cir. 2015) (en
banc). Assuming that this rule applies in the league sports
setting, the team or network that creates the telecasts would
be the sole owner of the copyright in the telecasts, absent
some agreement to the contrary. See Reid, 490 U.S. at 737;
see also Baltimore Orioles, Inc. v. Major League Baseball
Players Ass’n, 805 F.2d 663, 668–69 (7th Cir. 1986) (“When
a football game is being covered by four television cameras,
with a director guiding the activities of the four cameramen
and choosing which of their electronic images are sent to the
public and in which order, there is little doubt that what the
cameramen and the director are doing constitutes
28     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

‘authorship.’” (internal quotation marks and citations
omitted)).

     In the absence of a legal requirement that the NFL teams,
NFL, and broadcasters coordinate in filming and broadcasting
live games, the Los Angeles Rams (for instance) could
contract for their own telecast of Rams games and then
register the telecasts for those games with the Rams (and
perhaps the team against whom they are playing). Only the
agreements that are the subject of plaintiffs’ antitrust action
prevent such independent actions. Thus, we reject the
defendants’ argument that American Needle, 560 U.S. at 190,
is inapposite; here, like in American Needle, the agreements
not to compete concern separately owned intellectual
property, and impose an unlawful restraint on independent
competition.

    Indeed, the history of the NFL, as well as the practice in
other professional sports leagues, supports our conclusion.
As discussed above, prior to the passage of the SBA, the
telecast rights in NFL games “were controlled by individual
teams” and NFL teams routinely licensed telecasts of their
games to television networks. U.S. Football League,
842 F.2d at 1346. Indeed, by the late 1950s, thirteen
individual teams had signed contracts with either CBS or
NBC and one team “had organized its own network.” H.R.
Rep. No. 93-483 at 4 (1973). Thus, the Supreme Court
explained that college football teams “are clearly able to
negotiate agreements with whatever broadcasters they
choose.” NCAA, 468 U.S. at 114 n.53 (quoting the district
court, Bd. of Regents of Univ. of Oklahoma v. Nat’l
Collegiate Athletic Ass’n, 546 F. Supp. 1276, 1307–08 (W.D.
Okla. 1982)). Further, after the decision in NCAA, the NCAA
teams arranged telecasting on their own. Grow, supra,
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.             29

72 Wash. & Lee L. Rev. at 617. Additionally, in comparable
sports leagues, namely the National Hockey League and
Major League Baseball, “each team owns the initial right to
control telecasts of its home games.” Laumann v. NHL,
907 F. Supp. 2d 465, 473, 485 (S.D.N.Y. 2012); see also New
Boston Television, Inc. v. ESPN, No. 81-1010-Z, 1981 WL
1374, at *1 (D. Mass. Aug. 3, 1981) (“The copyright of the
teleplays of all Red Sox games is owned by the Red Sox.”).
And in another form of media, radio broadcasting, plaintiffs
allege that the NFL Teams already negotiate individual radio
broadcasting contracts.

    Therefore, we reject defendants’ argument that the
complaint fails to allege a Section 1 violation because the
telecasts can be created only through cooperation among
competitors.

                              3

    Defendants next assert that plaintiffs’ complaint failed to
allege injury to competition because the NFL-DirecTV
agreement did not reduce the output of NFL game broadcasts.
From the supply side, defendants argue, every regular season
NFL game is broadcast over free television in some
geographic area, and therefore, the entire potential supply of
NFL game broadcasts is produced and distributed to the
public. From the demand side, defendants argue, NFL
broadcasts receive the most views of any sports league;
202.3 million unique viewers watched an NFL football game
in 2014.

    We disagree that the defendants’ definition of output is
the only permissible definition for purposes of determining
whether plaintiffs have stated a claim. As noted above,
30     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

NCAA indicated that the relevant output is “the total amount
of televised intercollegiate football,” available to consumers.
468 U.S. at 94. We therefore reject the defendants’ argument
that because all NFL Sunday-afternoon games are broadcast
somewhere, there is no limitation on output as a matter of
law.

    The complaint alleges that defendants have limited output
by restricting the quantity of telecasts available for sale, and
that the NFL has set a uniform quantity of telecasts of
football games—one per game—with no regard to the actual
consumer demand for the telecasts. The plaintiffs plausibly
allege that “if member institutions were free to sell television
rights, many more games would be shown,” 468 U.S. at 105,
because an individual NFL team would “be free to sell the
right to televise its games for whatever price it could get.” Id.
at 106 n.30 (quoting the district court’s findings, 546 F. Supp.
at 1318). “The prices would vary for the games, with games
between prominent [NFL teams] drawing a larger price than
games between less prominent [NFL teams].” Id. (quoting
the district court’s findings, 546 F. Supp. at 1318). We
conclude that for purposes of determining whether plaintiffs
have stated an injury to competition, the plaintiffs have
plausibly alleged that the output in this case is the number of
telecasts of games, and that the defendants’ interlocking
agreements reduce that output.

                               4

    Finally, defendants claim that the complaint fails to allege
injury to competition because it has not alleged a properly
defined market in which defendants have market power.
Defendants argue that the complaint failed to plausibly allege
that they have market power in either the market for live
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.            31

video presentations of regular season NFL games or the
submarket for out-of-market game broadcasts. We reject
these arguments. Given that professional football games have
no substitutes (as fans do not consider NFL games to be
comparable to other sports or forms of entertainment), see
L.A. Mem’l Coliseum Comm’n v. Nat’l Football League, 726
F.2d 1381, 1393 (9th Cir. 1984), the defendants in this case
have effective control over the entire market for telecasts of
professional football games. The complaint therefore
plausibly alleges a naked restraint on output: that the
defendants’ interlocking agreements have the effect of
limiting output to one telecast of each game, which is then
broadcast in a limited manner, solely according to the NFL’s
agreements with CBS, Fox, and DirecTV. When there is such
an agreement not to compete in terms of output, “no elaborate
industry analysis is required to demonstrate the
anticompetitive character of such an agreement.” NCAA,
468 U.S. at 109 (quoting Nat’l Soc’y of Prof’l Eng’rs,
435 U.S. at 692). Here, as in NCAA, “an observer with even
a rudimentary understanding of economics could conclude
that the arrangements in question would have an
anticompetitive effect on customers and markets.” Cal.
Dental Ass’n v. F.T.C., 526 U.S. 756, 770 (1999). Because
the complaint adequately alleged that the defendants have
imposed “a naked restriction” on output, it has not failed to
allege market power. NCAA, 468 U.S. at 109.

    We conclude that the complaint adequately alleges the
element of injury to competition by alleging that the
interlocking Teams-NFL and NFL-DirecTV Agreements
injure competition.
32       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

                                     C

    Defendants next argue that the plaintiffs lack antitrust
standing to challenge the Teams-NFL Agreement.6 To plead
the fourth element, antitrust standing or antitrust injury,
plaintiffs must allege that they were harmed by the injury to
competition. Brantley, 675 F.3d at 1197. Further, plaintiffs
must allege that their harm was caused directly by the
antitrust violator. See Illinois Brick Co. v. Illinois, 431 U.S.
720, 746 (1977). In Illinois Brick, the Supreme Court
incorporated “principles of proximate cause” into an action
for violation of the Sherman Act, holding “that indirect
purchasers who are two or more steps removed from the
violator in a distribution chain may not sue.” Apple Inc. v.
Pepper, 139 S. Ct. 1514, 1520–21 (2019). The Supreme
Court reasoned that allowing every purchaser in a distribution
chain to claim damages flowing from a single antitrust
violation “would create a serious risk of multiple liability for
defendants.” Illinois Brick, 431 U.S. at 730. The Court also
wanted to avoid “the evidentiary complexities and
uncertainties” that would be “multiplied in the offensive use
of pass-on by a plaintiff several steps removed from the
defendant in the chain of distribution.” Id. at 732.
Accordingly, Illinois Brick “established a bright-line rule that
authorizes suits by direct purchasers but bars suits by indirect
purchasers.” Pepper, 139 S. Ct. at 1521. Said otherwise,

     6
       There is no dispute that the plaintiffs have standing to challenge the
NFL-DirecTV Agreement because they are direct purchasers of DirecTV.
Nor is there a dispute that the plaintiffs have standing to seek injunctive
relief based on the Teams-NFL Agreement because “indirect purchasers
are not barred from bringing an antitrust claim for injunctive relief against
manufacturers.” Lucas Auto. Eng’g, Inc. v. Bridgestone/Firestone, Inc.,
140 F.3d 1228, 1235 (9th Cir. 1998). The dissent agrees on these points,
as well. Dissent at 41 n.2.
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.               33

“purchasers who are two or more steps removed from the
antitrust violator in a distribution chain may not sue.” Id. To
illustrate, under this rule, if “manufacturer A sells to retailer
B, and retailer B sells to consumer C, then C may not sue A.”
Id. However, “C may sue B if B is an antitrust violator.” Id.

    These “principles of proximate cause,” id. at 1520, apply
differently when the injury to plaintiffs is caused by a multi-
level conspiracy to violate antitrust laws. We first considered
this issue in Arizona v. Shamrock Foods Co., 729 F.2d 1208
(9th Cir. 1984). In that case, a class of consumers brought an
antitrust action against dairy producers and grocery stores,
alleging they had jointly conspired to fix the price of dairy
products at the retail level. Id. at 1211. Because the
consumers alleged a price-fixing conspiracy implicating both
the dairy producers and the grocery retailers, we concluded
the plaintiffs’ claim was not barred. Id. at 1210. Under the
principles of Illinois Brick, we reasoned that the plaintiffs’
injuries were caused by the conspiracy itself (the concerted
action of the dairy producers and grocery retailers), and thus
the case did not require calculating the pass-through effects
of an indirect injury or raise the risk of duplicative damage
claims. Id. at 1213–14; see also In re ATM Fee Antitrust
Litig., 686 F.3d 741, 750 (9th Cir. 2012). As we subsequently
explained, “[i]f the direct purchaser conspires to fix the price
paid by the plaintiffs, then the plaintiffs pay the fixed price
directly and are not indirect purchasers (i.e., there is no pass-
on theory involved).” In re ATM Fee Antitrust Litig.,
686 F.3d at 750. In other words, when co-conspirators have
jointly committed the antitrust violation, a plaintiff who is the
immediate purchaser from any of the conspirators is directly
injured by the violation. See Pepper, 139 S. Ct. at 1522.
34       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

    Here, the plaintiffs allege that DirecTV has conspired
with the NFL and the NFL teams. According to the
complaint, the conspiracy involves both the Teams-NFL
agreement and the NFL-DirecTV agreement, which work
together as a single conspiracy to limit the output of NFL
telecasts. This output limitation in turn results in prices for
out-of-market games being higher than they would be in the
absence of the conspiracy. Because, as in Shamrock Foods,
the complaint alleges that plaintiffs’ injuries were
proximately caused by a single conspiracy, their complaint
does not require calculating the pass-through effects of an
indirect injury or raise a risk of claims for duplicative harms.
See 729 F.2d at 1213–14.7 Even though DirecTV is the
immediate seller to the plaintiffs, the plaintiffs’ allegation that
they were directly injured by the conspiracy among the NFL
teams, the NFL, and DirecTV is sufficient to allege antitrust



     7
       The dissent argues that our holding would require the complex
damages calculations that the rule in Illinois Brick was intended to avoid.
Dissent at 41. In Illinois Brick, the Court expressed concern that the
judicial system would be too burdened if it had to determine how much of
the antitrust violator’s overcharge to the first purchaser was passed on to
the second, third, or fourth purchasers in the distribution chain. 431 U.S.
at 733 n.13 (“[T]he final purchaser still will have to trace the overcharge
through each step in the distribution chain.”). But those sorts of
calculations are not required in this context. Unlike the situation in
Illinois Brick, the plaintiffs here do not allege that an innocent middleman
has passed through damages caused by a higher-level antitrust violator.
Because plaintiffs allege that DirecTV is part of the conspiracy, DirecTV
directly caused the injury to the consumers. Thus, to calculate the
plaintiffs’ damages, a court would not need to determine to what extent
the NFL overcharged DirecTV; it would need to consider only the prices
consumers paid compared to the prices that would have existed in a
competitive market. See Los Angeles Mem’l Coliseum Comm’n, 791 F.2d
at 1367.
        IN RE NFL SUNDAY TICKET ANTITRUST LITIG.                          35

standing for purposes of surviving a motion to dismiss. See
Pepper, 139 S. Ct. at 1521.

     The defendants argue (and the dissent agrees) that the
plaintiffs do not have standing to challenge the Teams-NFL
Agreement because In re ATM Antitrust Fee Litigation
limited the co-conspirator exception to Illinois Brick to cases
where an indirect purchaser “establishes a price-fixing
conspiracy between the manufacturer and the middleman.”
Id. at 749. Because the conspiracy in this case involved an
output restriction, defendants argue, Illinois Brick applies and
precludes the plaintiffs from challenging an agreement that
did not affect them directly. This argument misunderstands
ATM Antitrust Fee Litigation. As we explained, the “co-
conspirator exception is not really an exception at all,” but
rather describes a situation in which Illinois Brick is simply
not applicable. Id. at 750. Because the conspiracy alleged in
ATM Antitrust Fee Litigation was a price-fixing conspiracy,
we analyzed that sort of conspiracy, and held Illinois Brick
did not apply because “[i]f the direct purchaser conspires to
fix the price paid by the plaintiffs, then the plaintiffs pay the
fixed price directly and are not indirect purchasers.” Id.8

    Although ATM Antitrust Fee Litigation focused on an
alleged price fixing conspiracy, its reasoning is equally
applicable to an output-restriction conspiracy, such as the
situation here: if the direct purchaser conspires to limit the

    8
       Our analysis of ATM Antitrust Fee Litigation accords with the
Supreme Court’s instruction that in a distribution chain where
“manufacturer A sells to retailer B, and retailer B sells to consumer C, . . .
C may sue B if B is an antitrust violator.” Pepper, 139 S. Ct. at 1521.
Because this rule applies so long as B is an antitrust violator, it is
irrelevant whether B is engaged in a price-fixing or an output-restricting
conspiracy. See id.
36     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

output that will ultimately be available to the plaintiffs, then
the plaintiffs are directly impacted by the output limitation
and have standing to sue. See Pepper, 139 S. Ct. at 1521. In
other words, under our caselaw, when plaintiffs adequately
allege that their injury was caused by a conspiracy to violate
antitrust laws, even when the conspiracy involves multiple
levels of producers, distributors, and sales, the plaintiffs
sufficiently allege an antitrust injury that can withstand a
motion to dismiss.

     Defendants argue that we should distinguish between
price-fixing and output-restricting conspiracies, but provide
no reasoned basis for doing so.9 Nor can they, because the
Supreme Court has concluded that price-fixing conspiracies
are functionally indistinguishable from output-restricting
conspiracies. See Cal. Dental Ass’n, 526 U.S. at 777. As the
Supreme Court explained, “[a]n agreement on output also
equates to a price-fixing agreement,” because “[i]f firms raise
price, the market’s demand for their product will fall, so the
amount supplied will fall too—in other words, output will be
restricted.” Id. (internal quotations omitted). On the other
hand, “[i]f instead the firms restrict output directly, price will
as mentioned rise in order to limit demand to the reduced
supply.” Id. (internal quotations omitted). Accordingly, the
Supreme Court noted, “with exceptions not relevant here,
raising price, reducing output, and dividing markets have the
same anticompetitive effects.” Id. (internal quotations
omitted). A conspiracy between a cartel of widget producers
and their widget retailer to set an artificially high price for
widgets is functionally the same as a conspiracy to set an
artificially low total output of widgets, which causes prices to

    9
      The dissent echoes this argument, see Dissent at 41 n. 3, but
likewise fails to explain a reasoned basis for such a distinction.
       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.               37

rise. See id. Therefore, the consumer of widgets would be
directly injured by the antitrust violators at both levels of the
distribution chain and would have standing to sue those co-
conspirators in both scenarios. See Pepper, 139 S. Ct.
at 1521.

    Accordingly, we conclude that Illinois Brick is not
applicable here because the complaint adequately alleges that
DirecTV conspired with the NFL and the NFL Teams to limit
the production of telecasts to one per game, and that plaintiffs
suffered antitrust injury due to this conspiracy to limit output.

                               IV

    We now turn to the question whether the complaint
adequately alleges a violation of Section 2 of the Sherman
Act. Section 2 makes it unlawful for any person to
“monopolize, or attempt to monopolize, or combine or
conspire with any other person or persons, to monopolize any
part of the trade or commerce among the several States, or
with foreign nations . . . .” 15 U.S.C. § 2. Plaintiffs allege
two forms of Section 2 violations, a conspiracy to monopolize
claim and a monopolization claim. To establish a conspiracy
to monopolize claim under Section 2, plaintiffs must plead:
“(1) the existence of a combination or conspiracy to
monopolize; (2) an overt act in furtherance of the conspiracy;
(3) the specific intent to monopolize; and (4) causal antitrust
injury.” Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d
1145, 1158 (9th Cir. 2003). To plausibly plead a
monopolization claim, plaintiffs must allege: “(a) the
possession of monopoly power in the relevant market; (b) the
willful acquisition or maintenance of that power; and
(c) causal antitrust injury. ” Somers v. Apple, Inc., 729 F.3d
953, 963 (9th Cir. 2013) (quoting Allied Orthopedic
38      IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

Appliances Inc. v. Tyco Health Care Grp. LP, 592 F.3d 991,
998 (9th Cir. 2010)).10

    Plaintiffs allege that by entering into interlocking
agreements, the defendants conspired to monopolize the
market for professional football telecasts and have
monopolized it. Defendants argue that the complaint fails to
state a claim for the same reason that the Section 1 claim
fails: plaintiffs have failed to allege injury to competition or
a properly defined relevant market. Defendants also claim
that plaintiffs have failed to allege that the defendants had the
specific intent to monopolize a relevant market.

    We reject this argument. For the reasons explained
above, plaintiffs have adequately alleged injury to
competition, and have adequately alleged that defendants
have market power in the market for professional football
telecasts. Moreover, the complaint adequately alleges that
the interlocking NFL-Team and NFL-DirecTV agreements
were designed to maintain market power, which is sufficient
to allege defendants’ specific intent. Accordingly, we
conclude that the complaint adequately alleges a Section 2
violation.

     REVERSED.




    10
       By its terms, the SBA applies only to Section 1 of the Sherman Act
and has no relevance to the plaintiffs’ Section 2 claims. 15 U.S.C. § 1291.
         IN RE NFL SUNDAY TICKET ANTITRUST LITIG.           39

SMITH, N.R., Circuit Judge, dissenting from Part III(C) of
the Majority’s opinion*

    The Majority concludes that the direct purchaser rule
articulated in Illinois Brick Co. v. Illinois, 431 U.S. 720
(1977) does not apply to Plaintiffs’ damages claim related to
the Teams-NFL Agreement, because Plaintiffs have alleged
a conspiracy among Defendants to limit output. Maj. Op.
at 33–37. Because this conclusion is controverted by Supreme
Court and Ninth Circuit caselaw, I cannot agree.

    In Illinois Brick, the Supreme Court articulated the direct
purchaser rule, which instructs that “indirect purchasers may
not use a pass-on theory to recover damages [on an anti-trust
claim] and thus have no standing to sue.” Brennan v. Concord
EFS, Inc. (In re ATM Fee Antitrust Litig.), 686 F.3d 741, 748
(9th Cir. 2012) (citing Illinois Brick, 431 U.S. at 745–46).
The Court created this rule to alleviate the concern that pass-
on theories of recovery would require courts to “trac[e] a
wholesale overcharge through an intermediary and allocat[e]
the retail price between an unlawful wholesale overcharge
and market forces.”Arizona v. Shamrock Foods Co., 729 F.2d
1208, 1214 (9th Cir. 1984); Illinois Brick, 431 U.S. at 737
(“[T]he use of pass-on theories . . . essentially would
transform [damages] actions into massive efforts to apportion
the recovery among all potential plaintiffs that could have
absorbed part of the overcharge from direct purchasers to
middlemen to ultimate consumers. However appealing this
attempt to allocate the overcharge might seem in theory, it
would add whole new dimensions of complexity to [damages]
suits and seriously undermine their effectiveness.”).


   *
       I concur in the rest of the Majority’s opinion.
40       IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

    The rule has an exception: where a plaintiff alleges a
price-fixing conspiracy between a manufacturer and the direct
purchaser. We refer to this exception as the “co-conspirator
exception.” In re ATM Fee Antitrust Litig., 686 F.3d at 750.
With a price-fixing conspiracy, “[t]he injury suffered by the
[consumer] through the effectuation of a voluntary co-
conspiracy [to fix the consumer price] can be determined by
computing the retail price of [the product] but-for the alleged
price fix, and subtracting that total from the actual purchase
price.” Shamrock Foods Co., 729 F.2d at 1214 (quoting In re
Mid-Atlantic Toyota Antitrust Litig., 516 F. Supp. 1287, 1295
(D. Md. 1981)). In other words, where there is a price-fixing
conspiracy, the court need not engage in a complex damages
calculation, because the overcharge “was not passed on to the
consumers through any other level in the distribution chain.”
Id.

    In our case, Plaintiffs’ challenge to the horizontal
agreement among the NFL Teams is unquestionably based on
a pass-on theory of injury, and the co-conspirator exception
does not apply. After all, Plaintiffs have not alleged that the
NFL Teams set, or conspired to set, the actual price paid by
any consumers. Instead, they allege only that DirecTV has set
an artificially high consumer price—an allegation that would
require the court to determine whether the payment DirecTV
made to the NFL for the telecast rights was an overpayment,1
how much of an overpayment it was (relative to what
DirecTV would have had to pay had the NFL Teams not
agreed to pool all of their broadcast rights), and how much of


     1
      If DirecTV did not overpay the NFL, then consumers have not been
damaged by the NFL’s horizontal agreement. Under those circumstances,
any arbitrary inflation in the price set by DirecTV could not have stemmed
from that agreement, but must stem from some other source.
        IN RE NFL SUNDAY TICKET ANTITRUST LITIG.                          41

that overpayment was actually then passed on to the
consumers. Thus, Plaintiffs’ claim for damages stemming
from the alleged horizontal agreement among the NFL Teams
would require the very analysis prohibited by the Illinois
Brick rule. That claim fails.2

    The Majority disagrees, claiming that, because Plaintiffs
have alleged a conspiracy between the manufacturer and the
distributor to restrict output, the Illinois Brick rule is
inapplicable. Maj. Op. at 38. The Majority’s theory creates
problems for three reasons.

    First, this court has already rejected the Majority’s notion
that the Illinois Brick rule does not apply when an alleged
conspiracy has the same anti-competitive effect as fixing the
consumer price.3 See In re ATM Fee Antitrust Litig., 686 F.3d

    2
       On the other hand, Plaintiffs are correct in asserting that,
notwithstanding the direct purchaser rule, they “have standing to challenge
the agreements between the teams and the league” for injunctive relief.
Freeman v. San Diego Ass’n of Realtors, 322 F.3d 1133, 1145 (9th Cir.
2003) (“Illinois Brick doesn't apply to equitable relief.”). Thus, because
Plaintiffs seek injunctive relief in addition to their damages requests, their
claim challenging the NFL Teams’ horizontal Agreement is not entirely
precluded by the direct purchaser rule.
    3
       The Majority claims that a distinction between price-fixing and
output-fixing restrictions is foreclosed by California Dental Association.
Maj. Op. at 36 (citing Cal. Dental Ass’n v. FTC, 526 U.S. 756, 777
(1999)). However, California Dental Association does not discuss the
Illinois Brick rule or the distinction between indirect and direct purchasers.
See generally 526 U.S. 756. Instead, that case stands only for the
uncontested proposition that a conspiracy to price fix and a conspiracy to
restrict output both injure consumers by arbitrarily raising the price they
pay for a product—i.e., both types of conspiracy have the same anti-
competitive effects. Id. at 777. That says nothing about whether a
particular consumer’s injury is direct or indirect, or which consumers are
42      IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

at 753 (rejecting an argument that Illinois Brick did not apply
because “conspiring to set a [pre-market] price for the
purpose and effect of raising the [market] price . . . equates to
fixing [the market] price and makes the payers of the raised
[market] price direct purchasers.” (emphasis added)). It
simply does not matter that the alleged pre-market conspiracy
has the same effect as setting a specific market price. Id. at
752. Similarly, it does not matter that the ultimate consumers
“are purchasing from a violator” of the Sherman Act. Id. at
755. As long as a party challenging anti-competitive behavior
relies on a pass-on theory of injury, it may recover damages
only if it alleges and demonstrates a conspiracy that actually
sets the consumer price—not just a conspiracy that may have
the same practical effect. Id. at 754 (“[U]nder the co-
conspirator exception recognized in this circuit, the price paid
by a plaintiff must be set by the conspiracy and not merely
affected by the setting of another price.”).



authorized to seek judicial redress (i.e., which consumers do not rely on
a pass-on theory of injury). Indeed, in Illinois Brick itself, the Court
acknowledged that the indirect purchasers were injured by the
manufacturer overcharging the distributor, but held that those purchasers
were not the proper parties to sue to recover damages. 431 U.S. at 744–46.

     The Majority’s reliance on Apple Inc. v. Pepper, is likewise
misplaced, as the plaintiffs in that case purchased the relevant good
directly from the monopolizing entity—not from a middleman who
conspired with the monopolizing entity down the line. 139 S. Ct. 1514,
1521 (2019). Here, Plaintiffs purchased a service from DirecTV, which is
not a party to the NFL’s horizontal agreement. While the Majority is
correct that “we are required to take a holistic look at how the interlocking
agreements actually impact competition,” Maj. Op. at 24, determining
whether a party has alleged anti-competitive effects is distinct from
determining whether the party is a direct or indirect purchaser with respect
to a specific agreement—and none of the cases cited by the majority say
otherwise, or even address that issue.
        IN RE NFL SUNDAY TICKET ANTITRUST LITIG.                       43

     Second, the conspiracy alleged by Plaintiffs—that
Defendants conspired to reduce the output of television
broadcast rights—does not alleviate the concerns expressed
in Illinois Brick. Unlike a price-fixing conspiracy, the injury
to the consumer from an output-reduction conspiracy still
depends on a pass-on theory of damages. The initial
overcharge occurs between the manufacturer and the
distributer—i.e., a distributor pays a manufacturer an anti-
competitive price for distribution rights—and that overcharge
is passed on by the distributor to the consumer. In such cases,
courts must determine how much of the consumer price stems
from ordinary market forces, and how much of it stems from
the distributor’s efforts to recoup its overpayment to the
manufacturer.4 See Illinois Brick, 431 U.S. at 744–46. Thus,
unlike with a price-fixing conspiracy, the reviewing court
must still make the exact determination “sought to be avoided
in Illinois Brick.” Shamrock Foods Co., 729 F.2d at 1214.

    Finally, in In re ATM Fee Antitrust Litigation, we ruled
that the co-conspirator exception “only applies when the co-
conspirators fix the price paid by the plaintiff.” 686 F.3d
at 752 (emphasis added). Thus, because Plaintiffs have not
alleged that Defendants conspired to fix the price paid by the
consumer, the co-conspirator exception—at least in its
present form—does not apply. See Dickson v. Microsoft


     4
       Relying exclusively on the fact that Plaintiffs “allege that DirecTV
is part of the conspiracy,” the Majority conclusively states that “a court
would not need to determine to what extent the NFL overcharged
DirecTV,” because “it would need to consider only the prices consumers
paid compared to the prices that would have existed in a competitive
market.” Maj. Op. at 34 n. 7. However, it is unclear how in practice a
court could consider what the theoretical consumer price would have been
in a competitive market (absent the NFL’s horizontal agreement) without
considering whether and how much of an overpayment DirecTV made.
44     IN RE NFL SUNDAY TICKET ANTITRUST LITIG.

Corp., 309 F.3d 193, 215 (4th Cir. 2002) (“[W]e interpret
these cases as standing for the more narrow proposition that
Illinois Brick is inapplicable to a particular type of
conspiracy—price-fixing conspiracies.” (emphasis added));
In re ATM Fee Antitrust Litig., 686 F.3d at 752 (approving of
the Fourth Circuit’s analysis in Dickson). In other words, to
conclude that Plaintiffs have anti-trust standing, we must
create a new exception to the Illinois Brick rule. The Supreme
Court has instructed us not to do so. Kansas v. UtiliCorp
United, Inc., 497 U.S. 199, 216 (1990) (“[A]mple
justifications exist for the Court’s stated decision not to carve
out exceptions to the indirect purchaser rule for particular
types of markets.” (quoting Illinois Brick, 431 U.S. at 744));
Illinois Brick, 431 U.S. at 745 (“As we have noted . . .
Hanover Shoe itself implicitly discouraged the creation of
exceptions to its rule barring pass-on [theories], and we
adhere to the narrow scope of exemption indicated by our
decision there.”).
