Court Rejects Student-Athletes' Latest "Pay-for-Play" Bid

Jones Day

Jones Day

Judge permits schools, however, to offer additional non-cash, education-related benefits.

The U.S. District Court for the Northern District of California struck down, as antitrust law violations, certain NCAA rules that limit student-athletes from receiving non-cash compensation and benefits related to education. But in a significant victory for those who oppose "pay-for-play" college sports, the court upheld NCAA rules that limit compensation and benefits unrelated to education, as well as rules that limit cash awards for academic achievement or graduation.

Judge Claudia Wilken's 104-page order and accompanying injunction was issued in In re: National Collegiate Athletic Association Grant-in-Aid Cap Antitrust Litigation, which includes the highly publicized Alston and Jenkins cases. The class action lawsuit involves Division I football and basketball student-athletes who alleged that the NCAA and 11 collegiate athletic conferences deprived them of compensation by agreeing to fix the price of scholarships and other benefits that universities can offer to student-athletes in exchange for their athletic services.

The court agreed that the NCAA rules at issue amounted to horizontal price fixing but concluded that the NCAA established a procompetitive justification for the rules: preserving consumer demand for college sports (in the form of attending or watching games). The court found that college sports are products distinct from professional sports, but that distinction would be destroyed if universities could offer student-athletes "unlimited, professional-level cash payments."

Having found a procompetitive justification for the NCAA rules, the court nevertheless held that there was a less-restrictive alternative that would still achieve the NCAA's objectives. The court issued an injunction that permits schools to offer student-athletes additional non-cash, education-related benefits such as computers, science equipment, musical instruments, post-eligibility scholarships to complete undergraduate or graduate degrees at any school, vocational school scholarships, tutoring, expenses related to studying abroad, and post-eligibility internships. Schools, however, are not required to provide such benefits. Moreover, each conference may decide to prohibit its member schools from offering these additional education-related benefits, provided that decision is reached independently.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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