Unanimous Supreme Court Subjects College Sports Cartel to Antitrust Scrutiny

The Supreme Court told the NCAA on June 21 that it cannot limit the academic benefits that athletes receive from post-secondary institutions, handing the cartel an antitrust loss that may open the door to more competition among schools for athletes. 

In a 9-0 opinion that rested on the Sherman Antitrust Act, a Progressive Era law that forbids “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce,” the nation’s high court also bluntly told the combine that it’s professed goal of promoting “amateurism” does not excuse it from complying with the nation’s laws protecting economic competition.

It’s also a repeat defeat for the NCAA at the Supreme Court. “This decision marked the Supreme Court’s second rebuke of NCAA practices in the past 37 years,” Marc Edelman, a legal consultant on sports law, expert witness, and law professor at the City University of New York’s Zicklin School of Business, told Forbes magazine.

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Justice Neil Gorsuch’s unanimous opinion in NCAA v. Alston began with a recitation of the college athletics umbrella organization’s history, providing a reminder that the organization’s founding corresponded with a rise in economic competition among colleges for competitors and explaining that, since 1948, universities have been permitted by the consortium’s rules to offer scholarships. 

“To some, these changes sought to substitute a consistent, above-board compensation system for the varying under-the-table schemes that had long proliferated,” Gorsuch wrote. “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 Colorado jurist explained that the NCAA has, during the past decade, permitted member schools to provide increased scholarship assistance and established funds that allow athletes to pay for academic and other expenses. He detailed the findings of U.S. District Judge Claudia Wilken of San Francisco, who ruled in 2019 that education-related compensation and benefits provided to Division I football and basketball players could not be limited by NCAA rule. “Put simply, this suit involves admitted horizontal price fixing in a market where the defendants exercise monopoly control,” Gorsuch said. 

That frame for analysis established, Gorsuch turned to the NCAA’s principal claim that the organization is a “joint venture” and, as such, should not be subjected to the usual “rule of reason” approach to determining whether the Sherman Antitrust Act, a 19th-century law enacted at the start of the country’s Progressive Era, was violated. Gorsuch said that, even if the syndicate could be considered a joint venture, that status would not prevent application of the rule of reason and, in any event, the NCAA is a monopsonist – the sole employer in the market for major college sports – and so student-athletes cannot sell their labor anywhere else. 

Gorsuch also rejected the organization’s claim that it’s rules on academic compensation should be cursorily examined on grounds that they promote competition. “We do not doubt that some degree of coordination between competitors within sports leagues can be procompetitive,” he wrote. “That some restraints are necessary to create or maintain a league sport does not mean all aspects of elaborate interleague cooperation are.” He concluded that the NCAA’s restrictions on academic compensation are not essential to the goal of providing athletic entertainment to consumers. “Nobody questions that Division I basketball and FBS football can proceed (and have proceeded) without the education-related compensation restrictions the district court enjoined; the games go on.” Gorsuch found that “complex questions requiring more than a blink to answer” were presented by the parties’ arguments about whether the NCAA’s “rules fixing wages for student-athletes” are reasonable.

The college sports cartel also argued that it is not subject to rule of reason scrutiny under a 1984 decision known as NCAA v. Board of Regents of the University of Oklahoma, which involved the organization’s efforts to control television exposure of member colleges. The court rejected this argument, too. “[T]he Court simply did not have occasion to declare— nor did it declare—the NCAA’s compensation restrictions procompetitive both in 1984 and forevermore” in that 37-year-old opinion, Gorsuch wrote. He explained that changes to the college sports market since 1984, including the increase of college revenues from the industry to an amount exceeding at least $14 billion per year, meant that the court should carefully examine NCAA rules for consistency with antitrust law.

Gorsuch also firmly swatted away an NCAA argument that its aim to “maintain amateurism” gives it immunity from the Sherman Act. “This Court has regularly refused materially identical requests from litigants seeking special dispensation from the Sherman Act on the ground that their restraints of trade serve uniquely important social objectives beyond enhancing competition,” he wrote before detailing the court’s history of refusing to extend antitrust immunity to sports ventures other than Major League Baseball. “[T]his Court has refused to extend Federal Baseball’s reasoning to other sports leagues — and has even acknowledged criticisms of the decision as “‘unrealistic’” and “‘inconsistent’” and “aberrational,” he said, referring to the 1922 opinion that gave MLB a Sherman Act exemption. “Indeed, as we have seen, this Court has already recognized that the NCAA itself is subject to the Sherman Act.” Gorsuch’s opinion told the NCAA to take its case for a break from the Nation’s antitrust laws to the legislative branch instead. “The NCAA is free to argue that, because of the special characteristics of its particular industry, it should be exempt from the usual operation of the antitrust laws — but that appeal is properly addressed to Congress,” he said.

A concurring opinion by Justice Brett Kavanaugh included a warning to the NCAA that its other monopsony practices, including prohibitions on non-academic compensation to athletes, may also be prone to antitrust invalidation. “[T]here are serious questions whether the NCAA’s remaining compensation rules can pass muster under ordinary rule of reason scrutiny,” Kavanaugh wrote. “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.”

“The NCAA couches its arguments for not paying student athletes in innocuous labels,” Kavanaugh continued. “But the labels cannot disguise the reality: The NCAA’s business model would be flatly illegal in almost any other industry in America.” Comparing the NCAA’s practices to restaurants collaborating to “cut cooks’ wages on the theory that customers prefer to eat food from low-paid cooks” or law firms working together to “cabin lawyers’ salaries in the name of providing legal services out of a love of the law,” Kavanaugh said he thinks the cartel is plainly violating the Sherman Act’s ban on restraining trade. 

Kavanaugh essentially accused the NCAA of exploiting student-athletes in the course of his 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,” he wrote. “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.” 

The court’s second-most junior justice seemed to invite college athletes to challenge non-academic compensation rules in additional litigation. Kavanaugh almost invites plaintiffs to come out of the woodwork, analogize themselves to employees and take aim at the NCAA,” said Jeremi Duru, a professor of law at American University Washington College of Law and an expert on sports issues, said. Matt Mitten, a professor of law and executive director of the National Sports Law Institute at Marquette University Law School, thinks those lawsuits are inevitable. “I would expect to see a fair number of lawsuits pushing the envelope to try to chip away at the NCAA’s traditional amateurism model, claiming that agreements among schools that are economic competitors for player services” may violate the antitrust laws, he said. 

Kavanaugh believes college athletes are exploited. “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,” he said. “Those enormous sums of money flow to seemingly everyone except the student athletes. College presidents, 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.”

Whether the opinion will lead to any short-term changes in the way the NCAA operates is unclear. “Kavanaugh’s concurrence as a majority is basically the death of the NCAA as it currently exists,” said Marshall Steinbaum, an assistant professor of economics at the University of Utah and an expert on labor markets. He pointed out that the way the NCAA treats student-athletes is “the same dynamic that gave rise to free agency in professional sports.” Duru is not as sure that the NCAA status quo cannot largely weather the Supreme Court’s holding.I wouldn’t say it’s the beginning of the end,” Duru said. “I would say it’s a significant atmospheric shift. The technical issue we’re dealing with is not going to result in any huge windfall for any student athlete.” 

Since the court’s decision, the bloc has shown signs it may back off on another contentious battle with student-athletes over name, image and likeness compensation. On Monday the Division I Council, a panel of athletic conference commissioners and college and university athletic directors, recommended that the organization make no effort to prevent athletes from profiting from publicity rights. That suggestion comes days before numerous states, including Alabama, Florida, Ohio, and Texas, enact laws that allow just such economic benefits to take effect.

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