NCAA v. Alston: The Beginning of the End or the End of the Beginning?

Foley & Lardner LLP

Foley & Lardner LLPIn its unanimous 9-0 decision in NCAA v. Alston, the Supreme Court upheld a ruling by the U.S. Court of Appeals for the Ninth Circuit that struck down NCAA caps on student-athlete academic benefits (i.e. reimbursements and pay for academic-related expenses) on antitrust grounds. In so doing, the Court cut against a century-old “no-pay for play” college sports regime, but did so with a scalpel rather than a meat cleaver. Still, the Alston decision—and its sharply worded concurring opinion—conclusively propels the NCAA into a new reality, where the status quo of NCAA-mandated restrictions on student-athlete compensation will be no more.  With the NCAA’s Division I Council recently adopting an interim policy that would suspend its amateurism rules related to student-athlete name, image and likeness (“NIL”) monetization, this “new reality” is indisputably here.

Writing for the Court, Justice Gorsuch found that by limiting education-related compensation that college athletes are permitted to receive from their schools, the NCAA is acting in violation Section 1 of the Sherman Act, which prohibits any “contract, combination, or conspiracy in restraint of trade or commerce.” The Court reached this conclusion by affirming the lower court’s application of the “rule of reason” – a judicial doctrine of antitrust law – to scrutinize the NCAA’s regulatory scheme, dealing a blow to the NCAA’s hope for more antitrust deference from the Court.

When applying the rule of reason, a court must conduct a fact-specific assessment of market power and market structure to assess a challenged restraint’s actual effect on competition. In Alston, the athletes challenged the NCAA compensation limits as reducing competition among colleges and universities as to what those schools would otherwise provide the athletes.  Given this restriction on competition, the NCAA needed to articulate a procompetitive justification sufficient to justify the limits on educational-related compensation for student-athletes. In this vein, the NCAA relied on its longstanding position that the uniqueness of its product – the status of student-athletes as amateurs – required antitrust deference (if not immunity) and pointed for support to the 1984 decision in NCAA v. Board of Regents.  Specifically, the NCAA’s procompetitive justification for the status quo (whereby the NCAA limits athlete compensation tied to academics and athletics, and mostly prohibits athlete monetization of name, image and likeness rights) was that the survival of the product of college athletics depends on such restrictions by the NCAA. It reasoned that intercollegiate athletics differentiates itself from professional sports chiefly through the amateur (read, unpaid) status of its athletes, therefore diminishing the purity of amateurism through unrestrained athlete payment—even for academic expenses—would render intercollegiate athletics obsolete.

The Alston Court rejected this argument, holding that Board of Regents was inapplicable to questions of athlete compensation and that the decision’s oft-cited commentary that the NCAA enjoys “ample latitude” under federal antitrust law was mere dicta that could not insulate the NCAA from antitrust scrutiny. Specifically, the Court found the NCAA had failed to show any economic analysis as to how or why the consumer market for college sports might be irrevocably destroyed by teenage athletes receiving from their schools unrestrained educational benefits. The Court noted, in contrast, that the Alston plaintiffs were able to show the very opposite—namely that the popularity of college sports had actually increased in the years following increased allowances in educational benefits allocation. The idea that sports fans would tune out because individual schools and conferences might come up with different educational benefit schemes for athletes was apparently too much slippery-slopeism for the Court to indulge. 

Even as it demolished the NCAA’s procompetitive argument, the Court explained to the NCAA that, all things considered, it was getting off rather easy. The Court generally agreed with a number of the NCAA’s arguments—most notably that antitrust law does not require it to use anything like the least restrictive means of achieving its legitimate business purposes, and that Congressional action on student-athlete benefits would best serve all parties. The injunction at issue was narrowly tailored to affect only NCAA regulations concerning student-athlete educational benefits. NCAA prohibitions on athletics-related benefits remained unaffected by the decision, arguably leaving individual athletic conferences and colleges remain free to restrict benefits of all kinds, just as before.

In particular Justice Kavanagh’s more expansive concurrence effectively told the NCAA that it should be thankful that the Court was delivering what seemed to be only a slap on the wrist—for now. Kavanagh took issue with the NCAA’s argument that consumers benefit from the NCAA’s restrictions on benefits, metaphorically comparing it to a group of restaurants that cut cooks’ wages on the theory that customers prefer to eat meals prepared by low-paid cooks. Where the NCAA saw consumer benefits, Kavanagh saw only circular logic behind the NCAA’s “no pay” apparatus, which he starkly and sharply distilled: “[p]rice-fixing labor is price-fixing labor.”

What does Alston mean for college sports moving forward? In the short term, the decision simply invalidates NCAA restrictions on educational benefits.  Sorting out how individual schools will now define and dispense educational benefits alone will be complex and unpredictable. But that is not the only navigational challenge ahead for the NCAA and other stakeholders in the system. In the long term, following Alston, the NCAA is not likely to receive special judicial dispensation from antitrust scrutiny on matters of student-athlete pay. In particular, Justice Kavanagh’s biting concurrence reflects that the NCAA just lost a battle in what increasingly seems like an unwinnable war to preserve its conception of “amateurism” in college athletics.

To be sure, the Alston decision could bring a wellspring of student-athlete antitrust litigation on a variety of compensation restrictions (and “combinations” beyond the NCAA could find themselves in the crosshairs, including, e.g., college conferences and high school sports associations).  In addition, with increasing focus on state and federal legislation designed to challenge the NCAA’s name, image and likeness prohibitions or grant employment status to student-athletes, the NCAA’s historical and comprehensive restrictions on athlete compensation continues to be under attack on multiple fronts. The question before the Supreme Court in Alston did not require the Court to address the legality of all NCAA prohibitions on student-athlete compensation—nor did it. But the NCAA and its members must prepare for a changing landscape that will undoubtedly require universities to develop “all of the above” strategies for student-athlete monetization in the very near future. Other stakeholders, such as student-athletes, athlete representatives, marketing agencies, brands, and broadcasters should also seek to understand the intricacies of this shifting student-athlete compensation model. Alston alone, with its limited holding, did not revolutionize the college sports landscape, but it may well serve as a fulcrum for the massive change that the system is set to undergo and that, in many respects, is already underway.

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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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