A unanimous Supreme Court of the United States (the Supreme Court) recently affirmed in National Collegiate Athletic Assn. (NCAA) v. Alston that the National Collegiate Athletic Association’s (the NCAA) rules restricting the provision of “education-related benefits” (e.g. rules limiting scholarships for graduate or vocational school, payments for academic tutoring or paid post-eligibility internships) to student-athletes violated antitrust laws. Although the decision was confined to the narrow issue of limits on education-related benefits, as opposed to the NCAA’s restrictions on compensation generally, it provides important guidance on the antitrust considerations surrounding such restrictions.
In 2014, current and former student athletes in men’s Division I FBS football and men’s and women’s Division I basketball (collectively, the Athletes) brought an action against the NCAA and 11 Division I Conferences (the Supreme Court collectively referred to the defendants as the NCAA), challenging its student-athlete compensation rules under the Sherman Act. After lengthy proceedings, the district court upheld the NCAA’s rules limiting undergraduate athletic scholarships and other compensation related to athletic performance. The district court, however, found that certain rules limiting the education-related benefits were unlawful, and enjoined such rules. After both sides appealed, the Ninth Circuit Court affirmed the district court’s decision in full.
The NCAA appealed to the Supreme Court, arguing that the lower courts should have upheld all of its compensation rules. The Athletes did not renew their “across the board” challenge, and the Supreme Court therefore did not consider the NCAA’s remaining rules on compensation, and only limited its analysis to the validity of the rules concerning education-related benefits.
The Supreme Court’s decision
The Supreme Court found that the district court did not err in its analysis of the NCAA’s education-related benefits.
The NCAA argued that it was owed a considerable level of deference because it constitutes a joint venture among the various members, whose collaboration is necessary to offer the intercollegiate competitions. The Supreme Court rejected this argument, clarifying that the status of a joint venture does not categorically change the antitrust analysis. Rather, the NCAA’s limits on education-related benefits were correctly subjected to an ordinary antitrust assessment under a “rule of reason analysis,” which requires a court to “conduct a fact-specific assessment of market power and market structure” to assess a challenged restraint’s actual effect on competition.
The NCAA also submitted that the Supreme Court’s earlier decision, National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., approved its student-athlete compensation rules. The Supreme Court also rejected this argument, clarifying that the Board of Regents decision had involved an antitrust challenge against the NCAA’s limits on televising games, not its student-athlete compensation rules, and that the analysis is otherwise consistent with that decision. Moreover, the Supreme Court noted that whether an antitrust violation exists depends on the market realities. Given that the market realities of college sports had significantly evolved since that decision (e.g. the NCAA has since dramatically increased the benefits provided to student athletes, and has benefitted from a significant increase in revenues), the Supreme Court found that the Board of Regents decision was not dispositive.
The Supreme Court also rejected the NCAA’s argument that they should be exempted from the rule of reason analysis because its member schools are not commercial enterprises, and instead oversee intercollegiate athletics as “an integral part of the undergraduate experience” under the objective of higher education. The Supreme Court noted that it has regularly refused requests for exemptions from the Sherman Act, and that any exception to such antitrust laws should be brought before Congress.
Additionally, the Supreme Court underlined that the NCAA’s rules on education-related benefits failed because they were “patently and inexplicably stricter than is necessary” to promote procompetitive benefits, and not because the rules did not constitute the least intrusive restrictive means of preserving consumer demand. The Supreme Court also declined to defer to the NCAA’s inconsistent definition of “amateurism”, especially since the district court found that the NCAA itself had not adopted any consistent definition over the years. Finally, the Supreme Court rejected the argument that the lower courts’ decisions had undercut the NCAA’s business judgment, noting that (i) the district court had enjoined certain restrictions on compensation only after finding that relaxing such restrictions would not impair demand for college sports, and (ii) the district court’s injunction concerning the restrictions on education-related benefits provide significant leeway to the NCAA regarding their interpretation and implementation.
Interestingly, Justice Kavanaugh penned a separate concurring opinion. He was critical of the NCAA’s entire compensation model, underlining 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.”
Although the Supreme Court’s decision is narrow, it clarifies the antitrust framework for analyzing the NCAA’s remaining compensation rules. The judgment may also prompt additional legal battles on more wide-ranging athlete compensation issues, especially in light of Justice Kavanaugh’s concurring opinion. We will continue to closely monitor developments around the decision and its implications.
The author would like to thank Lauren Archibald, summer student, for her assistance in preparing this blog post.