On June 21, 2021, the Supreme Court of the United States changed the collegiate sports world by rendering an opinion in the National Collegiate Athletic Association (“NCAA”) v. Alston, which ultimately will allow student athletes to be presented with education-related benefits outside of what the NCAA has historically permitted. While this opinion surely will be cited in future litigation that aims to change the way the NCAA governs, we will focus on what it does for student-athletes today.
Background
Current and former college student athletes sued the NCAA alleging the NCAA violated federal antitrust law by placing limits on the compensation they could receive in exchange for their participation in college sports. Specifically, NCAA v. Alston outlined the antitrust violation in terms of the rules limiting compensation resulted in compensation below what a competitive market would produce. Thus, the NCAA rules violate Section 1 of the Sherman Act, which prohibits “contract[s], combination[s], or conspiracy[ies] in restraint of trade or commerce.”
In the District Court for the Northern District of California, the court made two conclusions. First, it refused to disturb the NCAA’s rules limiting undergraduate athletic scholarships and other compensation related to athletic performance. However, second, it struck down NCAA rules that limited the education-related benefits that schools may offer to student athletes, such as graduate or vocational school scholarships, payments for academic tutoring, or paid post-eligibility internships. Accordingly, the district court entered an injunction preventing the NCAA from limiting education-related benefits provided by individual universities or conferences. Both the NCAA and the student athletes appealed, and the ruling of the district court was affirmed by the Ninth Circuit before certiorari was granted by the Supreme Court.
Supreme Court Opinion
The Supreme Court, addressing only the injunction granted by the lower courts, affirmed the district court’s ruling. It found that the scope of the district court’s injunction was an appropriate balance. The injunction only prevented the NCAA from limiting education-related compensation that conferences and schools may give to student athletes. In addressing the NCAA’s attempts to avoid scrutiny under the Sherman Act, the Court maintained that the Act is only predicated on one assumption: “Competition is the best method of allocating resources.”
The Court held that the correct analysis for rules limiting education-related benefits is a “rule of reason” analysis under the Sherman Act, which required more than a “quick look.” The rule of reason analysis is a fact specific analysis of market power and structure designed to assess the challenged rule’s actual effect on competition. The Court agreed with the district court that the NCAA uses its monopsony power to artificially cap the compensation offered to recruits and student athletes, therefore producing significant anti-competitive effects in the market. Additionally, the Court also agreed that the NCAA’s restraints are “patently and inexplicably stricter than is necessary” to reach the pro-competitive benefits declared by the organization.
Takeaways
So what does this all mean? The Supreme Court emphasized that the injunction does not prevent the NCAA from continuing to place limits on compensation from any other entity aside from member conferences or schools. Additionally, individual conferences may still impose whatever rules they see fit and the injunction allows the NCAA to define what benefits relate to education. Thus, the entire NCAA system is not changing overnight. However, with name, image, and likeness laws sweeping across states, this ruling does add strength to the tide of change. Ultimately, many will fear the lines between amateur and professional sports will be blurred by this decision, but the Supreme Court does not agree. The NCAA’s definition of “amateurism” was not reason enough for the Court to continue to allow the NCAA to place restrictions on education-related benefits.
As we continue to monitor the changing landscape of collegiate athletics, we will keep the words of Justice Kavanaugh in mind. In a passionate concurring opinion, Justice Kavanaugh emphasized that “[t]he NCAA is not above the law.” Justice Kavanaugh highlighted that the NCAA’s remaining compensation rules also raise questions under antitrust laws, and that the NCAA’s business model would almost certainly be illegal in any other industry. Kavanaugh went on to emphasize that NCAA directors, college coaches, and others affiliated with collegiate sports make millions of dollars, whereas many student athletes “end up with little or nothing.” It is safe to say that this will likely not be the last litigation over the NCAA’s restrictions on student athletes’ ability to earn compensation.