Supreme Court Considers NCAA Antitrust Case

In its decision, the high court will balance overregulation concerns with arguments of price-fixing

Two college athletes play in a lacrosse game
The U.S. Supreme Court heard oral arguments in March in antitrust case regarding NCAA rules for student athlete compensation. / JEFFREY LIN

The Supreme Court on March 31 heard the first antitrust dispute involving the NCAA to reach the nation’s highest tribunal in 37 years. The cases set the NCAA’s insistence that college sports can survive only if it retains discretion to limit player education-related benefits against a growing push for equitable compensation for the men and women who generate billions of dollars for universities, athletic conferences and corporate America.

Technically, the cases focus on the extent to which the NCAA can limit the educational experiences and tools provided by colleges and universities. The Supreme Court brief filed on behalf of 31 former student-athletes framed the proceeding as one in which the question of exploitation is front and center. “Despite the massive revenues generated by these sports and the ever-growing demands on student-athletes, the NCAA’s members continue to restrict the type and amount of compensation and benefits — including education-related benefits — that schools may offer in competing for recruits,” wrote their lawyers.

According to the Department of Education, total revenue from college sports, including that generated by the colleges, has more than tripled since 2003 and exceeds $14.8 billion. Nevertheless, only about $4.2 billion in economic assistance is awarded to more than 480,000 student athletes each year.

The rising proceeds from the burgeoning college sports industry has been accompanied by a drive by the NCAA to cap the amount of financial help provided by member institutions to athletes. The 1,102-member cartel’s Division 1 Bylaws specify that a “full grant-in-aid” includes only “tuition and fees, room and board, books and other expenses related to attendance at the institution up to the cost of attendance,” which each university’s financial aid administrator calculates. Athletes can also receive an array of other payments and reimbursements, limited to small sums, but must also adhere to a separate Amateurism Rule that forbids them to use “athletics skill (directly or indirectly) for pay in any form” in their sport.

Whatever the plight of college athletes, Matt Mitten, a professor at Marquette University who is an expert in antitrust and the law of sports, said it’s not clear how well the approach of placing it front and center in the case worked. “Their argument was that, well, look at the evidence and, if there’s a less restrictive alternative, the court should be free on a case-by-case basis to say, ‘hey, you know, this is a better rule that will have less of a restraining effect in distinguishing college from professional sports,” he said. “The justices seemed to me to say, ‘well, that’s not going to result in any predictability at all, and there’s no stopping point.”

Jeremi Duru, a sports law professor at American University’s Washington College of Law who has represented student-athletes, saw it differently, pointing out that the NCAA’s historic ideal of amateur competition might have to be sacrificed if adherence to the antitrust laws is to be assured. “The NCAA’s model is going to undergo dramatic changes in the coming years,” he said. “Indeed, I think it is at risk. I don’t know [if] that’s something that society should be afraid of. If it’s the case that the current system is seen to both violate antitrust law and result in some individuals carrying a substantially greater burden than others to maintain the status quo, then it’s a problem.”

Wednesday’s arguments indicate the justices do not appear to be approaching the questions the cases present from ideological bunkers, said Shannon Stevenson, an appellate lawyer at Davis Graham & Stubbs. “Almost every justice asked something along the lines of ‘but isn’t this just a cover so that you don’t have to pay your players or pay your labor force.’ That seemed to be a concern pretty much across the board. Having said that, I think there were challenges for the other side as well.”

The NCAA and 11 athletic conferences asked the Supreme Court to review a 9th Circuit Court of Appeals decision that found the organization had violated the Sherman Act, a 19th century law that is still the foundation of the nation’s economic competition policy, by imposing a restraint of trade that could not be justified in the name of preserving the amateur nature of college sports competition. On Wednesday, the organizations’ counsel, Seth Waxman of WilmerHale’s Washington, D.C. office, opened his argument with a plea for a ruling that would protect “amateurism” and avoid too much opportunity for athlete pay. “We think that in order to avoid the situation that we currently have where we have endless line-drawing and judicial supervision, punctuated by requests for treble damages, it’s important for the court to speak clearly here,” he said, referring to a statutory provision aimed at deterring anti-competitive conduct in the marketplace.

His pitch was not enthusiastically greeted, said Shannon Stevenson, an appellate lawyer and chair of the trial group at Davis, Graham & Stubbs. “I think it was met with a pretty good bit of skepticism on a couple of issues” she said.

First on the list of concerns that apparently animated the justices was the question whether the failure to pay athletes is an injustice. Several justices sharply questioned the former U.S. solicitor general about whether the NCAA’s practices are actually consistent with any conception of amateur sports, with all but Chief Justice John Roberts and justices Steven Breyer and Neil Gorsuch pressing him on the subject. “You look at the limitations of the benefits or pay to players,” Justice Clarence Thomas said. “But is there a similar focus on the compensation to coaches to maintain that distinction between amateur coaches, coaches in the amateur ranks, as opposed to coaches in the pro ranks?” Waxman replied that a 1998 decision by the U.S. 10th Circuit Court of Appeals had invalidated another NCAA rule that limited coaches’ salaries. “Coaches are not student-athletes,” he said. “They are professionals, just like professors and presidents.”

Justice Samuel Alito suggested that the organization’s idea of amateurism might not merit deference. “Let me put on the table some of what is said by those who challenge your idea of amateurism,” he said. Some amicus curiae briefs, he explained, “paint a pretty stark picture.” Athletes “have a pretty hard life,” with “training requirements that leave little time or energy for study, constant pressure to put sports above study, pressure to drop out of hard majors and hard classes, really shockingly low graduation rates.” He asked Waxman to explain how the situation squares with a fair concept of amateur competition. Waxman responded that not all colleges make money on sports programs, graduation rates for some athletes are higher than that in the general student population, and that the NCAA bans athletes from working more than 35 hours per week on their sport.

Justices Sonia Sotomayor and Elena Kagan pressed Waxman on why the conferences cannot regulate athlete pay, and why the court shouldn’t consider NCAA member schools to be competitors who are collaborating to fix the price of athlete labor. Waxman argued a national, uniform approach is necessary to avoid a “prisoner’s dilemma” in which educational benefits would increase, as has coaches’ pay. And in response to Kagan’s price-fixing question, Waxman replied that the low cost of athlete labor is the NCAA’s product. “The cost of labor in this unique instance is what is the differentiating feature that provides a procompetitive product,” he said. “I sensed resistance from the court” on that issue, as on the question whether athletes should continue to receive little compensation, Stevenson said.

Justice Brett Kavanaugh indicated a concern that the NCAA sought to be excused from the antitrust laws. “I see your rhetoric and tradition and history argument being very similar to the arguments that were made for exempting baseball from the antitrust laws, Flood v. Kuhn, Federal Baseball, and that exemption has not been replicated in other sports in other cases,” he said, referring to two cases that had written Major League Baseball out of the Sherman Act’s reach. Waxman denied that the NCAA seeks an antitrust exemption and insisted that the question of athlete pay is one for Congress, not the court, to consider.

Christopher Jackson, a trial lawyer and appellate advocate at Holland & Hart, said he thinks the court is unlikely to be tempted by any NCAA entreaty to be practically excused from antitrust compliance. “You can never say never and you never know exactly what the justices are thinking, but I do think the questions that came from both the liberal and conservative wings of the court suggest that the court is not inclined to give this really deferential review,” he said.

Jeffrey Kessler of New York-based Winston & Strawn, who represented the student-athlete respondents, criticized Waxman’s assertion that the NCAA is unfairly subject to repetitive litigation over its rules with a blunt reminder that the organization made its bed. “The naked horizontal monopsony restraints that the competing NCAA schools have adopted in these labor markets would be per se unlawful in any other context,” Kessler said. “Petitioners had ample latitude to prove a procompetitive justification for all their restraints. Petitioners’ complaint is not a legal one. It’s that they lost on the facts.” Kessler also reminded the court that the NCAA has repeatedly tried to scare the judiciary away from enforcing antitrust laws by invoking the specter of an end to college sports. “For five decades, the NCAA has argued that economic competition among its member schools would destroy consumer demand for college sports,” he said. “Each time, the court struck down the restraints under the rule of reason, and history has proven the courts were correct. Demand for college sports has continued to flourish.”

The veteran sports and antitrust expert and co-executive chairman of his firm otherwise made a somewhat cautious argument, avoiding any complaint about the content of the lower courts’ orders after Chief Justice John Roberts asked him why the cases do not present a risk that the courts will require changes to individual rules while ignoring the entirety of the “game of Jenga” they resemble. “You’ve got this nice solid block that protects the sort of product the schools want to provide, and you pull out one log and then another and everything’s fine, then another and another and all of a sudden the whole thing comes crashing down,” Roberts said. Kessler responded by pointing to the fact-bound precision Wilken exhibited in crafting an injunction. “The basic alternative the Court imposed was not to micromanage.” He was referring to the rule of reason, a framework that courts use to evaluate claimed violations of the Sherman Act.

When Thomas, Sotomayor, Kagan, Kavanaugh and Barrett returned to the theme of potential repeat lawsuits, Kessler rebutted the concern by pointing out that the NCAA had established a $5,980 possible merit award available to student-athletes and about which Waxman had said an increase could be demanded later. Thomas, seemingly troubled by the possibility that more affluent schools could increase it on their own and shut out less prosperous competitors from recruiting talented players, pushed him to explain how the merit payments would maintain equity among teams. “The bigger schools would begin to cherry-pick with the transfer portal the athletes from the lower schools simply because they’re able to afford this income that you’re talking about,” he said. Kessler explained that the issue is not crucial because the NCAA “don’t compete now” and because the merit payment is not mandatory.

Stevenson said she thought this line of questioning indicated the court’s principal anxiety about ruling for the athletes. “That is, ‘are we really going to be in the business of micromanaging every single type of restriction that the NCAA wants to put on how universities are compensating these athletes. Isn’t that just sort of a disaster?,’” she said. “I think you heard that concern come out of almost every justice’s mouth, too.” But Kessler, she opined, handled it well. “I thought they had a pretty effective response on this $5,000 number, which was “’ook, it’s not like we just picked this out of the air,’” she said. “’This was an amount that the NCAA had already authorized with respect to certain types of compensation and we were just saying that, at a minimum, that should be okay for education-related expenses, too.’”

Justice Amy Barrett seemed to pick up on that attested flexibility, asking whether the lower courts had done enough to provide the cartel with “as much leeway as possible,” Kessler cited the specific aim of the injunction in saying they had. “It allowed the NCAA to continue to impose all of its restraints on compensation not related to education, and it said that what it can’t justify, what it can’t do, is just education-related restraint,” he explained.

The Biden administration’s leading appellate lawyer, Elizabeth Prelogar, argued on the side of the athletes. She urged the court to avoid being tempted by the NCAA’s urgings to provide only a “twinkle of an eye”-style glance at its rules. “This Court has never upheld restraints that have severe anticompetitive effects without traditional rule of reason analysis, and this case, involving horizontal price-fixing in the market for student-athlete labor, where the NCAA has monopsony power, would not be the place to start,” she said.

Roberts used his question time as an opportunity to interrogate Prelogar about whether a decision for the athletes would put courts in a position of substituting their ideas for the “business judgment” of NCAA leaders. For the courts, Stevenson said, the worry is that they will be pestered with minutiae. “’Are we going to be revisiting whether we can pay for these types of books? Can we pay for this type of internship?’” she said. “How detailed and ongoing are these kinds of problems going to be?”” Prelogar deflected Roberts’ worry with a claim that the antitrust law’s  “legal standards themselves guard against having courts come in and micromanage the rules of the NCAA.” She similarly addressed Thomas’ comments about preserving the nature of college sports. “Amateurism is not its own free-floating ideal under the antitrust laws,” she said. “It’s not something that the competition laws focus on to aspire to in and of its own right. It’s only relevant to the extent that it actually connects up to that procompetitive purpose of differentiating the product for consumers themselves.”

One obvious conclusion to be drawn from the arguments, according to Jackson, is that the court is faced with an industry that has undergone significant evolution. “College sports have changed so much since the 1980s,” he said.

The cases are NCAA v. Alston, No. 20-512, and American Athletic Conference v. Alston, No. 20-520. Decisions in both are expected by July.

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