The United States Supreme Court unanimously held that the National Collegiate Athletic Association (“NCAA”) cannot restrict education-related benefits provided by its member schools to student-athletes. The decision in NCAA v. Alston, 141 S. Ct. 2141 (2021) arises out of a class-action lawsuit filed by current and former Division I student-athletes against the NCAA alleging anti-trust violations that restrict student-athletes from receiving a fair market rate for their labor. Anti-trust laws operate to promote competition between businesses and organizations to prevent monopolies by creating an even playing field among similar businesses.
The appeal to the Supreme Court stems from a federal district court ruling that permitted the NCAA to continue restricting benefits unrelated to education like cash payments to student-athletes in the form of salaries but prohibited the NCAA from restricting education-related benefits such as graduate school scholarships, post-graduate internships, and free laptops. The 9th Circuit Court of Appeals affirmed the decision of the district court, and the decision was appealed to the Supreme Court. The scope of the decision pertained only to the subset of NCAA rules restricting education-related benefits enjoined by the district court, not an across-the-board challenge to the NCAA’s rules restricting student-athlete compensation.
The NCAA urged the Court to overrule the 9th Circuit, arguing the lower courts misapplied the anti-trust standard of review, endorsing a less stringent examination to preserve the institution and integrity of American collegiate sports. Adding to this, the NCAA advanced the argument that because the NCAA is a joint venture offering its customers a unique product of intercollegiate athletic competition, the Association and its member schools are not a commercial enterprise, but are institutions advancing the societal objective of undergraduate education. In response, the athletes argue that the NCAA is asking for a complete exemption from federal anti-trust laws based on the NCAA’s reliance on a loose and inconsistent concept of “amateurism” and its importance in the realm of higher education. Pointing to the rapid ascension of college sports into the mainstream, the athletes underscore that the NCAA is a multi-billion-dollar business with television contracts in the billions per year that is only made possible by maintaining monopsony power – monopoly control on the buyer side – over the labor market for college athletes and price-fixing the ceiling on those labor costs.
Justice Gorsuch penned the Court’s opinion, affirming the decisions of the lower courts in their application of the “rule of reason” analysis to evaluate the NCAA’s compensation restrictions and their compliance with anti-trust policies encouraging competition. The rule of reason analysis requires a fact-specific assessment of an organization’s market power and structure to assess the challenged restraint’s actual effect on competition. Through this analysis, the Court determined that the NCAA and its members control the market for the services of college athletes giving rise to anti-competitive restrictions on the student-athletes’ ability to earn fair compensation for their labor. This is done by creating horizontal restraints across all NCAA member conferences and schools, restricting how the schools may compensate its student-athletes for their athletic play. The foundation on which the NCAA rests its argument in support of its compensation restrictions is to maintain the distinction between collegiate and professional sports, and that such restrictions preserve the concept of amateurism the NCAA’s consumers demand. This argument was rejected by the Court because relaxing the restrictions on education-related benefits “would not blur the distinction” or “impair demand for college sports” because the NCAA is free to continue forbidding benefits unrelated to a student-athlete’s education. The NCAA is free to implement a “no Lamborghini” rule or establish a means to police the benefits conveyed to athletes that are devised to circumvent the existing restrictions like phony internships with extravagant salaries. In addition, the NCAA is given latitude in determining what does and does not constitute an education-related benefit.
The NCAA is not immune from anti-trust scrutiny merely because it asserts that a restraint its business imposes is a product feature. Amateurism and the anticompetitive means the NCAA employs to maintain it are not necessary to preserve its consumer demand. By using its monopsony power over the market, the NCAA artificially caps the compensation offered to student-athletes, thereby employing anticompetitive means incompatible with anti-trust laws.
In closing, Justice Gorsuch sounded the responsibilities of the judiciary in deciding similar anti-trust disputes, stating that it is not the task of the Court to decide the national debate on amateurism in college sports, but to review the judgments of the lower court through the appropriate lens of the law.
Justice Kavanaugh joined the opinion and submitted a spirited concurrence opinion, questioning the legitimacy of the NCAA’s across-the-board restrictions on student-athlete compensation and whether such restrictions can “pass muster” under the ordinary rule of reason scrutiny employed by the Court. Kavanaugh went on to say “[t]he NCAA couches its arguments for not paying student athletes in innocuous labels. But the labels cannot disguise the reality: The NCAA’s business model would be flatly illegal in almost any other industry in America.”
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