Supreme Court: Some NCAA Amateurism Rules Violate Antitrust Law
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Unanimous Supreme Court Sides with College Athletes Over NCAA — Here’s What You Need to Know

The Supreme Court of the United States unanimously sided with student-athletes on Monday, ruling that some of the NCAA’s “amateurism” rules violate federal antitrust law. Here’s what you should know about the case captioned as NCAA v. Alston.

Lead plaintiff Shawne Alston brought the case on behalf of a class of student athletes, arguing that prohibitions against student-athletes receiving computers, science equipment, and musical instruments amount to anti-competitive activity on the part of the NCAA. The Supreme Court ruled in favor of Alston, affirming the Ninth Circuit’s decision which upheld an injunction of the rules on the grounds that they constituted unreasonable restraint of trade.

The athletes did not seek to throw out all the NCAA’s amateurism rules. Rather, they challenged a few restrictions on specific educational benefits. The NCAA appealed, arguing that it is entitled to immunity from application of antitrust laws, and that the district court should have approved all of its existing restraints.

Justice Neil Gorsuch wrote a detailed opinion on behalf of the full court, thoroughly elaborating on the Court’s analysis, and reminding readers that the scope of the Court’s appellate authority is limited to reviewing the questions posed.

“From the start, American colleges and universities have had a complicated relationship with sports and money,” Gorsuch began, recounting lucrative prizes given in a Harvard v. Yale boat race in 1852. Football, however, was what “really caused college sports to take off,” explained the justice; even during the 1800s, football players were wooed with lavish gifts.

Just paragraphs into his opinion, Gorsuch noted that college football had a deadly history in the late 19th and early 20th centuries:

By 1905, though, a crisis emerged. While college football was hugely popular, it was extremely violent. Plays like the flying wedge and the players’ light protective gear led to 7 football fatalities in 1893, 12 deaths the next year, and 18 in 1905.

In response to growing concerns over football safety, President Theodore Roosevelt convened a meeting between Harvard, Princeton, and Yale, which culminated in forming the precursor to the NCAA. A fundamental tenet of the organization was that student athletes should receive no financial compensation for playing, but as Gorsuch pointed out, “reality did not always match aspiration.”

Sports continued to bring in boatloads of revenue for schools, which then, in turn, continued to lure athletes with financial benefits. In the late 1940s, the NCAA’s rules changed, and schools were allowed to offer athletes scholarships.

From the start, there was division over the changes. Justice Gorsuch explained, quoting Judge Milan D. Smith’s concurrence to the Ninth Circuit’s ruling:

To some, these changes sought to substitute a consistent, above-board compensation system for the varying under-the-table schemes that had long proliferated. To others, the code marked “the beginning of the NCAA behaving as an effective cartel,” by enabling its member schools to set and enforce “rules that limit the price they have to pay for their inputs (mainly the ‘student-athletes’).”

The NCAA’s rules continued to evolve, eventually allowing schools to fund everything from books to laundry services, and even post-graduate scholarships, sometimes far in excess of the actual tuition cost for the school.

The current NCAA, with 1,100 school members across its three divisions, is a flourishing, “massive business,” according to Gorsuch. He provided some numbers for context. Broadcasts for the March Madness basketball tournament are worth $1.1 billion annually, and those for College Football Playoff weigh in at $470 million per year; and that doesn’t even account for revenue from the games themselves. The Southeastern Conference (SEC) made over $650 million in one year — and the numbers are steadily increasing.

What’s more, Gorsuch pointed out, “the president of the NCAA earns nearly $4 million per year, college athletic directors average more than $1 million a year, and Division 1 football coaches have annual salaries of $11 million.”

It is against this very green backdrop that a class action of  current and former student-athletes in both men’s and women’s sports filed a complaint against the NCAA, arguing that its rules violated the Sherman Antitrust Act. The students argued that the NCAA’s “monopolistic practices” must be curtailed to allow students and colleges to enter into agreements that would better compensate them for engaging in taxing (and potentially harmful) activities.

The NCAA argued that although its rules did constitute a restraint on member colleges, it is entitled to an antitrust exemption because preserving amateurism is “part of serving a societally important non-commercial objective: higher education.”

The Court made it clear that this was a case in which all the parties appear to agree on the facts. The NCAA “do[es] not contest that the NCAA enjoys monopoly (or, as it’s called on the buyer side, monopsony) control in that labor market—such that it is capable of depressing wages below competitive levels and restricting the quantity of student-athlete labor.” The NCAA also acknowledges that schools compete fiercely for student-athletes. That amounts to horizontal price-fixing. Furthermore, “[n]o one disputes that the NCAA’s restrictions in fact decrease the compensation that student-athletes receive compared to what a competitive market would yield.”

Essentially, this is a classic violation of antitrust law. What the NCAA is arguing, however, is that it should be allowed an exemption to that law. The Court wasn’t willing to play ball on that one.

Justice Gorsuch made short work of the argument that the NCAA is entitled to an exemption on the grounds that it is a “joint venture.” Reasoning that “student-athletes have nowhere else to sell their labor,” the justice wrote, “[e]ven if the NCAA is a joint venture, then, it is hardly of the sort that would warrant quick-look approval for all its myriad rules and restrictions.”

The NCAA offered a second argument: that the 1984 SCOTUS case NCAA v. Board of Regents already approved the NCAA’s rules limiting student athlete compensation.

The Court again disagreed. In Board of Regents, SCOTUS had been considering the NCAA’s rules regarding televising sports, and while compensation rules may have been mentioned, they “were not even at issue” in the case. Moreover, that case occurred in 1984, and as Justice Gorsuch put it, “[w]hen it comes to college sports, there can be little doubt that the market realities have changed significantly since 1984.”

The NCAA offered yet another argument: that it and colleges are not “commercial enterprises” subject to traditional antitrust analysis. This argument also failed spectacularly, in large part because the NCAA itself agreed that its rules constitute a restraint on trade. The NCAA, wrote Gorsuch, is asking SCOTUS to give it “a sort of judicially ordained immunity” from federal law, “because they happen to fall at the intersection of higher education, sports, and money—we cannot agree.”

Appealing the Ninth Circuit’s ruling, the NCAA also argued that the Circuit Court had improperly required that it prove its rules to be the “least restrictive means of preserving consumer demand.” However, Justice Gorsuch found no such demand by the lower court; he dismissed this argument by the NCAA, saying that the Ninth Circuit’s handling of the case “hardly presages a future filled with judicial micromanagement of legitimate business decisions.”

Gorsuch went on to give the district court a favorable review in resisting the urge to go too far with its ruling. “Judges make for poor ‘central planners’ and should never aspire to the role,” commented Gorsuch, before detailing the lower court’s appropriate handling of the case. Recapping what happened below, the justice wrote:

The court enjoined only restraints on education-related benefits—such as those limiting scholarships for graduate school, payments for tutoring, and the like. The court did so, moreover, only after finding that relaxing these restrictions would not blur the distinction between college and professional sports and thus impair demand—and only after finding that this course represented a significantly (not marginally) less restrictive means of achieving the same procompetitive benefits as the NCAA’s current rules.

The district court still allowed the NCAA to prohibit members from providing players compensation “unrelated to legitimate educational activities” and still left the league room to “police phony internships.”

The NCAA also argued that if schools were permitted to give athletes computers and tutoring, some schools might exploit that authority by giving out luxury cars (on the premise that students need them to get to class). However, Gorsuch pointed out the NCAA is still “free to forbid in-kind benefits unrelated to a student’s actual education.” The district court’s ruling does not stop the NCAA “from enforcing a ‘no Lamborghini’ rule,” explained the justice. “To the extent the NCAA believes meaningful ambiguity really exists about the scope of its authority— regarding internships, academic awards, in-kind benefits, or anything else—it has been free to seek clarification from the district court since the court issued its injunction three years ago.”

Justice Gorsuch concluded his opinion by acknowledging that the Court’s decision in this case may be disappointing for people on either side of the argument. “Some will think the district court did not go far enough,” and that student athletes are entitled to even more compensation for all they bring to their schools. “At the same time,” Gorsuch continued, “others will think the district court went too far by undervaluing the social benefits associated with amateur athletics.” The Court, however, must be limited to scrutinizing the lower courts’ approach, viewed in context with antitrust law.

Justice Brett Kavanaugh penned a separate concurrence to join in full what he lauded as “the Court’s excellent opinion.” Justice Kavanaugh underscored the point that the majority’s decision only dealt with education-related benefits, while taking the opportunity to say that the NCAA’s other compensation rules “also raise serious questions under the antitrust laws.”

Kavanaugh summed up the imbalance of power between the NCAA and college athletes thusly:

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.

In a noticeably harsher tone than that of the majority, Kavanaugh gave his perspective on the NCAA’s amateurism rules as “textbook” antitrust violations:

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 otherwise obtain fair compensation for their work.

Kavanaugh seemed equally bothered by the disparate realities between those playing college sports and those profiting from them:

The bottom line is that the NCAA and its member colleges are suppressing the pay of student athletes who collectively 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 presidents, athletic directors, coaches, conference commission- ers, 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.

Ending with dramatic bluntness, Kavanaugh’s take on the NCAA was reminiscent of Judge Smith’s concurrence:

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.

Legal observers are hailing the Court’s opinion in NCAA v. Alston as an important step forward in protecting students athletes.

The NCAA issued a statement on Monday in response to the Supreme Court decision:

While today’s decision preserves the lower court ruling, it also reaffirms the NCAA’s authority to adopt reasonable rules and repeatedly notes that the NCAA remains free to articulate what are and are not truly educational benefits, consistent with the NCAA’s mission to support student-athletes.

NCAA President Mark Emmert pledged that he “remains committed to working with Congress to chart a path forward, which is a point the Supreme Court expressly stated in its ruling.”

[Image via Joe Robbins/Getty Images]

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Elura is a columnist and trial analyst for Law & Crime. Elura is also a former civil prosecutor for NYC's Administration for Children's Services, the CEO of Lawyer Up, and the author of How To Talk To Your Lawyer and the Legalese-to-English series. Follow Elura on Twitter @elurananos