As the National Collegiate Athletic Association (NCAA) continues to fight legal battles to limit the ability of student-athlete plaintiffs to bring antitrust suits challenging NCAA compensation rules, it is fighting to keep control of player compensation rules on other fronts as well. The NCAA has been lobbying Congress to step in and create a federal framework addressing name, image and likeness (NIL) payments in the wake of state legislation passed in multiple states allowing for NIL payments. Some states, with California leading the way, have passed legislation requiring the NCAA and its member institutions to allow student-athletes to earn compensation for commercial use of their NIL.[1] While California’s law does not go into effect until 2023, in June Florida accelerated the debate when it enacted its own NIL compensation law, set to take effect in July 2021.[2] The NCAA is seeking consistency across all colleges by lobbying Congress to enact a federal law addressing NIL issues. Many members of Congress have voiced their support for such legislation.
The NCAA has also been pushing Congress to exempt it from federal antitrust laws, wiping out a legal avenue many student-athletes have been somewhat successfully pursuing to limit NCAA compensation rules. On June 18, 2020, Senator Marco Rubio introduced a bill that would exempt the NCAA from being sued for violating antitrust laws; however, the bill has no co-sponsors. Many members of Congress are skeptical of such an exemption and have said so publicly. Senator Richard Blumenthal recently stated that already existing antitrust exemptions for sports leagues in relation to labor are highly exceptional and should be revisited. In June, Representative Anthony Gonzalez said an exemption would be legislatively impossible at the moment. Additionally, in an interview with The Wall Street Journal, Department of Justice (DOJ) antitrust chief Makan Delrahim stated that the DOJ was concerned that NCAA actions could limit competition and benefits for student-athletes.[3]
In the NCAA’s most recent attempts to persuade Congress to take federal action, Dr. Mark Emmert, President, testified before the Senate Judiciary Committee on July 22, 2020. In his testimony, Dr. Emmert stated, “[t]he [NCAA] has taken historic steps to expand NIL opportunities for student-athletes. However, its ability to make meaningful reforms is significantly undermined by impending state legislative action and outside legal factors, and underscores a compelling need for federal partnership on this issue.”[4] Dr. Emmert also said that it is “untenable for NCAA rules to be judged as unlawful and subject to repetitive antitrust lawsuits.”[5] Although Dr. Emmert clarified that the NCAA is not seeking a broad-based antitrust exemption, Senator Lindsey Graham stated that the Senate Judiciary Committee wants to have a bipartisan plan in place to regulate NIL rights by September 15, but that he was not sure legislation could be passed by the end of the Congressional term. However, members of the Committee took issue with the NCAA’s NIL plan, claiming the proposal was too restrictive.
On July 6, 2020, in its most recent legal battle, the NCAA and 11 member conferences moved to stay a Ninth Circuit mandate affirming a district court’s injunction enjoining certain NCAA compensation rules pending the NCAA’s planned appeal to the Supreme Court. If the case is not stayed, the NCAA would be enjoined from enforcing rules prohibiting payment of education-related compensation and benefits to student-athletes.
The case, In re: NCAA Grant-in-Aid Cap Antitrust Litigation, No. 14-md-02541 (N.D. Cal.), was brought against the NCAA and 11 member conferences by Division I Football Bowl Division football players and Division 1 men’s and women’s basketball players alleging that the NCAA’s rules limiting student-athlete compensation violated Section 1 of the Sherman Antitrust Act. The plaintiffs alleged that the NCAA artificially limited the compensation amounts student-athletes would receive for their athletic services absent such rules. After a trial on the issues, the district court entered a permanent injunction enjoining the NCAA from imposing any limit on compensation or benefits related to education expenses, but did not enjoin the NCAA from limiting non-education-related cash compensation.
On appeal, the Ninth Circuit reiterated that the NCAA is not exempt from the antitrust laws and must not engage in anticompetitive behavior.[6] Section 1 of the Sherman Act prohibits, inter alia, agreements “in restraint” of interstate trade of commerce.[7] When analyzing agreements involving league sports, a court must determine whether the restriction is unreasonable under the “Rule of Reason.”[8] In the NCAA context, the Rule of Reason requires a three-step analysis: “(1) Student-Athletes bear the initial burden of showing that the restraint produces significant anticompetitive effects within a relevant market; (2) if they carry that burden, the NCAA must come forward with evidence of the restraint’s procompetitive effects; and (3) Student-Athletes must then show that any legitimate objectives can be achieved in a substantially less restrictive manner.”[9]
In reviewing the district court’s analysis, the Ninth Circuit held that the district court properly applied the three-step analysis. First, the plaintiffs carried their burden in showing that the NCAA’s compensation rules have significant anticompetitive effects on student-athletes because they are forced to accept whatever compensation is offered to them due to the lack of a viable alternative to compete at a high level.[10]
Second, the district court properly held education-related compensation rules did not have a procompetitive justification but rules prohibiting unlimited non-education-related cash payments had a procompetitive justification.[11] The NCAA argued that the district court erred in deciding the second factor because the challenged rules preserve “amateurism,” which widens consumer choice by maintaining a distinction between professional and college sports, thus providing a procompetitive justification.[12] The Ninth Circuit agreed with the NCAA that rules against unlimited cash payments that are akin to professional salaries had a procompetitive effect of preserving amateurism, but disagreed with the NCAA that education-related benefits had a procompetitive effect.[13] In a win for the NCAA, the Ninth Circuit allowed the NCAA to continue prohibiting non-education-related cash payments.
Third, the Ninth Circuit also upheld the district court’s determination that uncapping certain education-related benefits would preserve consumer demand for college athletics just as well as the NCAA rules.[14] Therefore, there was a less restrictive measure the NCAA could take.
Importantly, the Ninth Circuit rejected the plaintiffs’ argument that the district court should have struck down all of the NCAA’s compensation limits as opposed to only those limiting education-related compensation. The Ninth Circuit held that cash compensation unrelated to education was not anticompetitive because it served a procompetitive purpose, and thus could not be enjoined.[15] This leaves in place an important tool for the NCAA to continue limiting payments that would be more akin to professional salaries.
The NCAA’s request for a stay sheds light on its arguments at the Supreme Court. In its motion, the NCAA argued that the Ninth Circuit was at odds with Supreme Court precedent as well as other circuit courts that have held that rules prohibiting student-athlete compensation to preserve amateurism should be upheld against antitrust challenges. The NCAA also argued that prior Supreme Court precedent and other circuits have rejected a least-restrictive-alternative requirement. The NCAA argued that good cause existed for a stay because “Division I schools that want to remain competitive will likely have to spend significant, unrecoverable amounts to attract or retain student-athletes who wish to take advantage of new benefits that must be allowed under the injunction.”[16] The NCAA stated that in reality the injunction opens the door to “massive cash payments to all student-athletes.”[17] Based on the NCAA’s submission, it appears that the NCAA believes the injunction would essentially create a workaround to bypass the rules against non-education-related compensation.
While state legislation and court rulings have forced the NCAA to change some of its compensation rules, the ultimate outcome is unknown. If Congress does indeed pass student athlete compensation legislation preempting states’ laws, the power of state legislatures to influence NCAA rules will be severely restricted. Additionally, it seems unlikely an antitrust exemption will garner enough support in Congress, allowing antitrust lawsuits to move forward. Finally, the DOJ seems likely to keep monitoring the NCAA’s rule changes and efforts to limit compensation.
[1] See Cal. S.B. 206 (Sept. 30, 2019), Cal. Educ. Code § 67456.
[2] § 1006.74 Fla. Stat. (2020).
[3] Brent Kendall and Louise Radnofsky, “U.S. Antitrust Chief Signals Skepticism of NCAA in Athlete Pay Fight,” The Wall Street Journal (Jan. 15, 2020), available at https://www.wsj.com/articles/u-s-antitrust-chief-signals-skepticism-of-ncaa-in-athlete-pay-fight-11579117132.
[4] Testimony of Dr. Mark Emmert, President, National Collegiate Athletic Association, Before the United States Senate Judiciary Committee (July 22, 2020), available at https://www.judiciary.senate.gov/imo/media/doc/Emmert%20Testimony.pdf.
[5] Id.
[6] In re NCAA Grant-in-Aid Cap Antitrust Litig., 958 F.3d 1239, 1256 (9th Cir. 2020).
[7] 15 U.S.C. § 1.
[8] NCAA Antitrust Litig., 958 F.3d at 1256.
[9] Id.
[10] Id. at 1256-57.
[11] Id. at 1257-59.
[12] Id. at 1257.
[13] Id. at 1260.
[14] Id. at 1260.
[15] Id. at 1263.
[16] Defs-Appellants’ Mot. to Stay Issuance of the Mandate 11-12, Nos. 19-15566, 19-15662 (9th Cir. Jul. 6, 2020
[17] Id.
