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Supreme Court Rules 9-0 Against NCAA, Opening Door to Further Antitrust Challenges of Student-Athlete Compensation Bans

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By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans. The United States Supreme Court  unanimously ruled Monday that the National Collegiate Athletic Association (NCAA) cannot prohibit its member schools from providing athletes with certain forms of education-related benefits, including paid post-graduate internships, graduate school scholarships, or free laptops or musical instruments. The Supreme Court has now weighed in on the issue, joining the Biden administration, and Congress, which are mulling what approach to take to the vexed question of compensation for student-athletes in the billion-dollar college sports marketplace. As I wrote in March in Sports Desk: DoJ Files Amicus Brief in Support of

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By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

The United States Supreme Court  unanimously ruled Monday that the National Collegiate Athletic Association (NCAA) cannot prohibit its member schools from providing athletes with certain forms of education-related benefits, including paid post-graduate internships, graduate school scholarships, or free laptops or musical instruments.

The Supreme Court has now weighed in on the issue, joining the Biden administration, and Congress, which are mulling what approach to take to the vexed question of compensation for student-athletes in the billion-dollar college sports marketplace. As I wrote in March in Sports Desk: DoJ Files Amicus Brief in Support of College Athletes, While Congress Mulls Giving Them Rights to Their Names, Images, and Likenesses:

The basic problem with big time college sports-  at least for the two main money-generating sports of basketball and (American) football: the system is awash in money. And many of those involved – colleges, coaches, athletic departments, television networks –  get their cuts.

All that is, but the athletes, who risk injury by participating in college sports, not to mention, devote considerable time to so doing, often to the detriment of their studies.

States have spearheaded action on this issue,  which beginning with California, have passed statutes that allow student-atheletes to benefit from use of their names, images, and likenesses (see my November 2019 post,NCAA Votes to Allow College Athletes to Benefit from the Use of Their Names, Images, and Likenesses). As I wrote in that piece, the NCAA appeared to bend to pressure to allow student-athletes to profit more widely, but as the NYT recognised on Monday in Supreme Court Backs Payments to Student-Athletes in N.C.A.A. Case, the organization hasn’t actually made good on those promises:

Next week, student-athletes in at least six states are poised to be allowed to make money off their personal fame — not because of action by the N.C.A.A., but because of state officials who grew tired of the industry’s decades-long efforts to limit the rights of players.

The N.C.A.A.’s response to the pressure routinely rising out of statehouses since 2019 has been, in effect, to stall.

Less than two weeks before some of the new laws are scheduled to take effect in Alabama, Florida, Georgia, Mississippi, New Mexico and Texas and allow athletes to make endorsements and monetize their social media presences, the N.C.A.A. has not agreed to extend similar rights to players nationwide. And in a setback last week for the association, senior members of Congress said that they did not expect to strike a deal for a federal standard before July 1.

A powerful N.C.A.A. panel is scheduled to meet this week to discuss how players could profit off their renown, but it is not clear when members will vote, particularly in the wake of Monday’s ruling.

Supreme Court Majority Ruling and Kavanaugh Concurrence

SCOTUS blog summarized the procedural history of Monday’s decision in NCAA athletes win 9-0 on educational perks as Kavanaugh calls out ban on direct payments:

Monday’s decision in NCAA v. Alston ended a dispute that began seven years ago as a class-action lawsuit filed against the NCAA and the major collegiate athletic conferences by athletes who played Division I football and basketball. Under the NCAA’s rules, universities generally are allowed to provide athletes with scholarships covering tuition while they are NCAA-eligible, and they are allowed to cover basic expenses like textbooks and room and board. But most other forms of compensation are banned.

The athletes contended in their lawsuit that the NCAA’s restrictions violate federal antitrust laws by barring the athletes from receiving fair-market compensation for their labor. A federal district court in California agreed in part: It ruled that the NCAA could restrict benefits that are unrelated to education (such as cash salaries), but it barred the NCAA from limiting education-related benefits. After the U.S. Court of Appeals for the 9th Circuit upheld that decision, the NCAA and the athletic conferences went to the Supreme Court, which late last year agreed to take up the case.

Writing for the majority, Justice Neil Gorsuch wrote in National Collegiate Athletic Association v. Alston et al:

Some will think the district court did not go far enough. By permitting colleges and universities to offer enhanced education-related benefits, its decision may encourage scholastic achievement and allow student-athletes a meas- ure of compensation more consistent with the value they bring to their schools. Still, some will see this as a poor substitute for fuller relief. At the same time, others will think the district court went too far by undervaluing the social benefits associated with amateur athletics. For our part, though, we can only agree with the Ninth Circuit: “ ‘The national debate about amateurism in college sports is important. But our task as appellate judges is not to resolve it. Nor could we. Our task is simply to review the district court judgment through the appropriate lens of antitrust law.’ ” 958 F. 3d, at 1265. That review persuades us the district court acted within the law’s bounds [majority option p. 35].

The opinion only considered the narrow issue of education-related benefits and didn’t address the wider antitrust issue raised by outright bans on cash and in-kind payments and other compensation for to student-athletes. But the opinion opens the door to a more far-reaching antitrust challenge of NCAA policies on amateurism – as Justice Brett Kavanaugh recognized in a separate concurrence. Permit me to quote from it at length:

The NCAA has long restricted the compensation and benefits that student athletes may receive. And with surprising success, the NCAA has long shielded its compensation rules from ordinary antitrust scrutiny. Today, however, the Court holds that the NCAA has violated the antitrust laws. The Court’s decision marks an important and overdue course correction, and I join the Court’s excellent opinion in full.

But this case involves only a narrow subset of the NCAA’s compensation rules—namely, the rules restricting the education-related benefits that student athletes may receive, such as post-eligibility scholarships at graduate or vocational schools. The rest of the NCAA’s compensation rules are not at issue here and therefore remain on the books. Those remaining compensation rules generally restrict student athletes from receiving compensation or benefits from their colleges for playing sports. And those rules have also historically restricted student athletes from receiving money from endorsement deals and the like.

I add this concurring opinion to underscore that the NCAA’s remaining compensation rules also raise serious questions under the antitrust laws. Three points warrant emphasis [Kavanaugh concurrence pp. 1-2].

Jerri-Lynn here. First, Kavanaugh recognized the Court does not address the legality of the NCAA’s remaining compensation rules. His concurrence provides a framework for such a challenge. Second, Kavanaugh noted that any future analysis of the ultimate legality of the NCAA’s remaining compensation rules should receive ordinary “rule of reason” scrutiny under the antitrust laws. And third, Kavanaugh wrote, “there are serious questions whether the NCAA’s remaining compensation rules can pass muster under ordinary rule of reason scrutiny. Under the rule of reason, the NCAA must supply a legally valid procompetitive justification for its remaining compensation rules. As I see it, however, the NCAA may lack such a justification [Kavanaugh concurrence pp. 2-3.”]

Kavanaugh minced no words:

The NCAA acknowledges that it controls the market for college athletes. The NCAA concedes that its compensation rules set the price of student athlete labor at a below-mar- ket rate. And the NCAA recognizes that student athletes currently have no meaningful ability to negotiate with the NCAA over the compensation rules.

The NCAA nonetheless asserts that its compensation rules are procompetitive because those rules help define the product of college sports. Specifically, the NCAA says that colleges may decline to pay student athletes because the de- fining feature of college sports, according to the NCAA, is that the student athletes are not paid.

In my view, that argument is circular and unpersuasive. The NCAA couches its arguments for not paying student athletes in innocuous labels. But the labels cannot disguise the reality: The NCAA’s business model would be flatly illegal in almost any other industry in America. All of the restaurants in a region cannot come together to cut cooks’ wages on the theory that “customers prefer” to eat food from low-paid cooks. Law firms cannot conspire to cabin lawyers’ salaries in the name of providing legal services out of a “love of the law.” Hospitals cannot agree to cap nurses’ income in order to create a “purer” form of helping the sick. News organizations cannot join forces to curtail pay to reporters to preserve a “tradition” of public-minded journalism. Movie studios cannot collude to slash benefits to camera crews to kindle a “spirit of amateurism” in Hollywood.

Price-fixing labor is price-fixing labor. And price-fixing labor is ordinarily a textbook antitrust problem because it extinguishes the free market in which individuals can oth- erwise obtain fair compensation for their work….[citation omitted] Businesses like the NCAA cannot avoid the consequences of price-fixing labor by incorporating price-fixed labor into the definition of the product. Or to put it in more doctrinal terms, a monop- sony cannot launder its price-fixing of labor by calling it product definition.

The bottom line is that the NCAA and its member colleges are suppressing the pay of student athletes who col-lectively generate billions of dollars in revenues for colleges every year. Those enormous sums of money flow to seem ingly everyone except the student athletes. College presi-dents, athletic directors, coaches, conference commissioners, and NCAA executives take in six- and seven-figure salaries. Colleges build lavish new facilities. But the student athletes who generate the revenues, many of whom are African American and from lower-income backgrounds, end up with little or nothing. …[citation omitted]

Everyone agrees that the NCAA can require student athletes to be enrolled students in good standing. But the NCAA’s business model of using unpaid student athletes to generate billions of dollars in revenue for the colleges raises serious questions under the antitrust laws. In particular, it is highly questionable whether the NCAA and its member colleges can justify not paying student athletes a fair share of the revenues on the circular theory that the defining characteristic of college sports is that the colleges do not pay student athletes. And if that asserted justification is una- vailing, it is not clear how the NCAA can legally defend its remaining compensation rules.

If it turns out that some or all of the NCAA’s remaining compensation rules violate the antitrust laws, some difficult policy and practical questions would undoubtedly ensue. Among them: How would paying greater compensation to student athletes affect non-revenue-raising sports? Could student athletes in some sports but not others receive compensation? How would any compensation regime com- ply with Title IX? If paying student athletes requires some- thing like a salary cap in some sports in order to preserve competitive balance, how would that cap be administered? And given that there are now about 180,000 Division I stu- dent athletes, what is a financially sustainable way of fairly compensating some or all of those student athletes?

Of course, those difficult questions could be resolved in ways other than litigation. Legislation would be one option. Or colleges and student athletes could potentially engage in collective bargaining (or seek some other negotiated agree- ment) to provide student athletes a fairer share of the rev- enues that they generate for their colleges, akin to how pro- fessional football and basketball players have negotiated for a share of league revenues….[citations omitted] Regardless of how those issues ultimately would be resolved, however, the NCAA’s current compensation re- gime raises serious questions under the antitrust laws.

To be sure, the NCAA and its member colleges maintain important traditions that have become part of the fabric of America—game days in Tuscaloosa and South Bend; the packed gyms in Storrs and Durham; the women’s and men’s lacrosse championships on Memorial Day weekend; track and field meets in Eugene; the spring softball and baseball World Series in Oklahoma City and Omaha; the list goes on. But those traditions alone cannot justify the NCAA’s decision to build a massive money-raising enterprise on the backs of student athletes who are not fairly compensated. Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. And under ordinary principles of antitrust law, it is not evident why college sports should be any different. The NCAA is not above the law [Kavanaugh concurrence pp. 3-5].

Jerri-Lynn here. In fact, the NCAA’s initial response to the ruling appears to be a denial of the ruling’s full ramifications. Per the NYT:

In a statement, the association said the ruling “reaffirms the N.C.A.A.’s authority to adopt reasonable rules and repeatedly notes that the N.C.A.A. remains free to articulate what are and are not truly educational benefits.”

What Form Might ChangeTake?

Now, the latest Supreme Court ruling is narrow in scope and is limited to upholding the district court’s decision striking down NCAA prohibitions on modest educational benefits. But further challenges to the entire NCAA rule-book covering all forms of restrictions on compensation to student-atheletes is surely coming. Some will arise from actions either undertaken or pending, at both state and federal level. Others will take the form of legal challenges, largely on antitrust grounds.

Writing in New York magazine in The NCAA Looks Like a Dead Organization Walking, Will Leitch, founder of the sorely-missed Deadspin blog,  sketched out some implications:

Kavanaugh makes it clear that no one should expect the Court to have the NCAA’s back in any future lawsuits against its business model, lawsuits that are surely coming. But he goes even farther by labeling the business model, which has been around for 150 years, absurd and exploitative. These sentiments would have been considered revolutionary had I professed them in this column space a decade ago. To hear them coming from a face of modern conservatism is flabbergasting and speaks to just how quickly the public sentiment on paying athletes — something not disconnected from how many billions television contracts suddenly poured into the sport over the last decade — has changed.

This isn’t a death knell for college athletics, but it invites one to begin listening for some bell-ringing. And it sure looks like the NCAA is a dead organization walking, since its central stated reason for being — keeping college athletes amateurs — just blew up in its face in the most dramatic way imaginable.

Whenever one has argued for college athletes to be paid, those who defend the current system have responded with some variation of, “Okay, how would you fix it?” This was a reasonable question. Do you pay some athletes but not all of them? Do colleges have to dig into their non-athletic funds? Do players get traded from one school to another in the middle of the school year? Do they even bother going to school at all? I always struggled to come up with answers to these questions, about how to reconcile the college sports I love with the financial and logistical realities of the situation. It used to frustrate me. But then I realized that throwing the question back at anyone who asked it was simply a way to deflect from complicity with an unjust system. What do you have that’s better? is not a defense of a corrupt model; it is a way to maintain your place in it. Whether you were a coach making millions off unpaid labor, a university or conference (or an organization like the NCAA) cashing billions in television checks, or just a fan who loved watching college sports so much that you never wanted it to change, defending the current way of doing things required rhetorical jujitsu. And that was a sure sign that it wasn’t really worth defending.

What the Supreme Court and Kavanaugh did on Monday was flip the focus: Now it’s up to the NCAA and administrators and university presidents to come up with a plan to save their sports — or else. The NCAA not only has to justify its own existence; it has to justify the entire notion of college athletics.

What Is To Be Done?

Readers, I don’t have many answers here. So I turn the floor over to the commentariat. What do you think?

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