Antitrust Law Daily NCAA unable to overturn injunction against rules restricting education-related benefits
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Monday, June 21, 2021

NCAA unable to overturn injunction against rules restricting education-related benefits

By Jeffrey May, J.D.

Concurring opinion by Justice Kavanaugh suggests that legislation might be needed to resolve difficult questions raised by remaining NCAA student-athlete compensation rules not addressed by Ninth Circuit.

Calling out the National Collegiate Athletic Association for seeking "immunity from the normal operation of the antitrust laws," a unanimous Supreme Court has rejected the organization’s effort to overturn a Ninth Circuit decision, holding that certain NCAA limits on education-related benefits for student-athletes violated the antitrust laws. In an opinion authored by Justice Neil M. Gorsuch, the Court rejected the NCAA’s call for deferential treatment or a "quick look" by courts for its restrictions on student-athlete compensation. The NCAA unsuccessfully argued that detailed "rule of reason" analysis should not have been applied in reviewing rules regarding education-related benefits, such as graduate school scholarships. The Court also was not swayed by the organization’s objections to the district court’s application of the rule of reason. Justice Brett M. Kavanaugh wrote a separate concurring opinion, joining in the majority opinion in full, and questioning the remainder of the NCAA compensation rules that were not at issue before the Court on the ground that the "NCAA’s business model would be flatly illegal in almost any other industry in America." The decision opens the door for additional compensation opportunities for college athletes (National Collegiate Athletic Assn. v. Alston, June 21, 2021, Gorsuch, N.).

Background. Current and former student-athletes in men’s Division I Football Bowl Subdivision or FBS football and men’s and women’s Division I basketball filed an antitrust class action against the NCAA and 11 Division I conferences. In that suit, they challenged the "NCAA rules that limit the compensation they may receive in exchange for their athletic services." A federal district court order assessed the lawfulness of the NCAA’s challenged restraints under rule of reason analysis and found a violation of Section 1 of the Sherman Act. It enjoined the NCAA from enforcing rules that restrict the education-related benefits that its member institutions may offer students. The court did not hold that NCAA limits on compensation unrelated to education likewise violated the antitrust laws. Thus, the order did not preclude the NCAA from fixing compensation and benefits unrelated to education. The U.S. Court of Appeals in San Francisco upheld the lower court’s liability determination and injunction. The NCAA filed a petition for review, and the High Court heard oral arguments on March 31.

Rule of reason analysis. At the outset, the Court dispensed with the contention that the lower courts erred by subjecting the NCAA compensation restrictions to a rule of reason analysis, instead of an "abbreviated deferential review." The Court noted that its 1984 decision in National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., 468 U. S. 85, did not compel a more deferential review or a finding that the compensation rules were lawful. It also rejected an argument that there was antitrust immunity for conduct that falls "at the intersection of higher education, sports, and money."

"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," the Court explained.

The NCAA also was unsuccessful in its attempt to show that the application of the rule of reason was improper. The district court did not, as the NCAA apparently contended, expressly or effectively require the organization to show that its rules constituted the least restrictive means of preserving consumer demand for college athletics. The standard imposed did not suggest a future of "judicial micromanagement," as the NCAA suggested.

The Court, however, warned against courts serving as "central planners." However, it noted that the district court in this instance did not "set sail on a sea of doubt." Rather, its judgment "stands on firm ground—an exhaustive factual record, a thoughtful legal analysis consistent with established antitrust principles, and a healthy dose of judicial humility."

Too far or not far enough? In closing, the Court noted that some would question whether it went too far or not far enough in reining in the NCAA restrictions on compensation for student-athletes. Ultimately, the Court decided that the "district court acted within the law’s bounds." While the Court limited its review to the restrictions on education-related benefits, the holding has much broader implications for the NCAA’s business model.

Justice Kavanaugh, in a concurring opinion, called the majority decision "an important and overdue course correction," and he questioned the fate of remaining compensation rules that generally restrict student athletes from receiving compensation or benefits from their colleges for playing sports, including restrictions on receiving money from endorsement deals. He suggested that legislation could be an option for dealing with the difficult questions that remain.

The Open Markets Institute took the position that the Court did not go far enough. "Don’t be deceived: The Supreme Court just did the bare minimum that it could for college athletes," said Sandeep Vahessan, legal director of the organization. "And, in doing so, it implicitly affirmed the lower courts’ use of cross-market balancing, which potentially opens the door for employers across the economy—whether colleges in the NCAA, Uber, or Amazon—to impose restraints on workers and escape liability by pointing to theoretical benefits to consumers."

NCAA reaction. In response to the decision, the NCAA said that the holding reaffirms the NCAA’s authority to adopt reasonable rules and repeatedly notes that the NCAA remains free to articulate what are and are not truly educational benefits, consistent with the NCAA’s mission to support student-athletes.

"Even though the decision does not directly address name, image and likeness, the NCAA remains committed to supporting NIL benefits for student-athletes," said NCAA President Mark Emmert. "Additionally, we remain committed to working with Congress to chart a path forward, which is a point the Supreme Court expressly stated in its ruling."

Pending legislative fixes. The decision comes as legislation to allow student-athletes to receive compensation for their efforts and to monetize their names, images, and likenesses has been working its way through state legislatures across the country. For example, the Illinois legislature just passed legislation that would enable student-athletes to sign endorsement deals, with a number of restrictions, free from NCAA restrictions. If the governor signs the bill, Illinois would join a number of states that have enacted similar legislation.

Meanwhile, Congress is grappling with putting together a national fix. On June 9, the Senate Commerce Committee held a hearing titled "NCAA Athlete NIL Rights." Following the release of the decision, Senate Commerce Committee Chair Maria Cantwell (D., Wash.) said in a statement that the opinion "gives new urgency to the bipartisan work we are doing to set a nationwide standard for student athletes that gives them control of their Name, Image and Likeness (NIL) as well as providing additional health benefits and standards."

Legislative fixes for the issue have been proposed on both sides of the aisle. Representative Lori Trahan (D., Mass.), a member of the U.S. House Energy and Commerce Committee and a former college athlete, and Senator Chris Murphy (D., Conn.), a member of the U.S. Senate Health, Education, Labor and Pensions Committee, have introduced legislation, known as the "College Athlete Economic Freedom Act," in both the House of Representatives (H.R. 850) and Senate (S. 238) that would allow college athletes to make money from uses of NIL. Senator Jerry Moran (R., Kan.) also introduced a bill that would allow student athletes to be compensated for use of their NIL. The measure is the proposed "Amateur Athletes Protection and Compensation Act of 2021" (S.414).

The case is No. 20-512.

Attorneys: Seth P. Waxman (Wilmer Cutler Pickering Hale and Dorr LLP) for National Collegiate Athletic Association. Andrew John Pincus (Mayer Brown LLP) for The Big Ten Conference, Inc. Linda T. Coberly (Winston & Strawn, LLP) for Shawne Alston.

Companies: National Collegiate Athletic Assn.

MainStory: TopStory Antitrust Advertising GCNNews

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