On June 21, the Supreme Court issued its opinion in NCAA v. Alston, unanimously affirming a 9th Circuit decision which held that numerous National Collegiate Athletic Association (NCAA) rules prohibiting the provision of educational benefits (tuition, fees, room, board, books and other expenses) to student athletes were unlawful. The NCAA had argued that these rules were an essential feature and draw of amateur sports, and help distinguish amateur sports from professional (mainly minor league) sports. Without those rules, the NCAA argued they would struggle to market their product.
The case is a successor to the 9th Circuit’s 2015 decision in O’Bannon v. NCAA, where the 9th Circuit held that the NCAA illegally restrained trade in violation of Section 1 of the Sherman Act by preventing football and men’s basketball players from receiving compensation for the use of their names, images, and likenesses (NIL). The issue before the Supreme Court in Alston was limited to restrictions on academic-related expenses. The district court below permitted the NCAA to ban pure cash salaries to players, and those restrictions were not at issue before the Court.
The NCAA’s appeal was focused on several primarily procedural and standard-of-review focused arguments. The NCAA did not challenge that it had monopsony power over the relevant market, or that its restrictions reduced the compensation student-athletes received; as Justice Gorsuch put it, “this suit involves admitted horizontal price fixing in a market where the defendants exercise monopoly control.” The NCAA’s arguments were primarily directed to explaining that it should not be subject to a rule-of-reason analysis. Their arguments on this fell into three buckets:
- Analysis of Joint Ventures. The NCAA argued that as a joint venture, it needed to collaborate among its members to allow them to offer the relevant product. The Court however noted that most joint venture restrictions under the Sherman Act are still subjected to a rule of reason analysis, and the amount of work required varies by the specific facts around market power and the nature of the challenged conduct. Because it was unchallenged that the NCAA has monopsony power, and it was harming student-athlete wage competition, the Court decided that rule of reason analysis would be appropriate to properly balance the costs and benefits.
- Prior Court Rulings. The NCAA also argued that regardless of the merits, the Court’s 1984 ruling in NCAA v. Board of Regents of the University of Oklahoma expressly authorized restrictions on educated-related expenses. The Court explained that while the conduct in Board of Regents was not held per se unlawful, it was still subject to a quick look, and that a similar but “more careful” analysis would be warranted before ruling against the NCAA here. The Court likewise explained that Board of Regents did not rule that all challenges to the NCAA’s compensation scheme must fail. And finally, the Court explained that antitrust analysis is highly fact specific, and the economics of college sports have changed in the 37 years since Board of Regents.
- Schools as Non-Commercial Entities. The NCAA also argued in the alternative that its member schools are not “commercial enterprises” and thus should not be subject to the Sherman Act. The Court rejected these requests for “a sort of judicially ordained immunity,” explaining that was an issue for Congress to take up.
The NCAA complained of how the district court applied the rule of reason:
- Burden Shifting. The NCAA argued that the district court did not employ the traditional three-step, burden-shifting framework used in a rule-of-reason analysis. In that framework, the plaintiff needs to show the challenged conduct is anticompetitive, at which point the defendant can show procompetitive benefits, and then the plaintiff must show that those benefits cannot be achieved through less restrictive means. While Justice Gorsuch agreed that there were “wrinkles” in how the district court applied this framework, they did not substantively change the analysis performed. The Court further concluded that the NCAA had not sufficiently drawn a connection between its prohibitions on educational grants and consumer demand for college sports. Accordingly, the Court agreed with the district court that the NCAA’s restraints were “patently and inexplicably stricter than is necessary to achieve the procompetitive benefits.”
- Product Definition. The NCAA also complained that the district court rejected its preferred definition of the “product” of amateur sports. The NCAA argued that its product was amateur sports itself, and that any payments to players would undermine it. The Court rejected this argument because it would allow anyone to label a competitive restraint a product feature, and thus immunize themselves from antitrust liability. The Court finally noted that the NCAA itself had redefined the core nature of amateurism many times over the years, so the definition need not be so rigid as to preclude all payments to players.
- Less Restrictive Means. Finally, the NCAA also took issue with the district court’s conclusion that there were less restrictive means available for it to maintain similar levels of consumer demand. However, the Court reasoned that because the district court’s judgment was limited to education-related benefits (and did not extend to outright cash grants), eliminating the restrictions on these limited benefits would not blur the line between professional and amateur sports.
The NCAA also raised several logistical issues with respect to allowing educational grants, which the Court likewise rejected as manageable.
Importantly, the Court’s decision is limited to the NCAA itself and does not bind the individual conferences in which most teams compete. This means that the Big Ten or SEC could still create their own rules limiting educational expenses available to student athletes without running afoul of the Alston decision. This leaves room for conference-level competition for education-related benefits to players. If a conference adopts a restrictive policy, then the athlete potentially has other options available from another conference.
Additionally, the Court did not reach the potentially much larger pot of money available from direct cash salaries or NIL payments. Those issues will likely need to wait for another case or unilateral action from the NCAA. Providing a sneak peek however, Justice Kavanaugh, writing in concurrence, wrote that “the NCAA’s business model would be flatly illegal in almost any other industry in America,” and indicated he would be inclined to look on such restrictions the same as he would other labor price fixing agreements. Additional litigation on this issue seems likely, and the current outcome—that some wages may be paid to athletes, but others may not—is unlikely to be a stable equilibrium.
Because of the narrow scope of the current decision however (and contrary to some news reports and social media discussion), the Alston decision is unlikely to mean the end of amateur sports. Consistent with this, shortly after the decision, and just ahead of the passage of a number of state laws allowing players to earn compensation from their NIL, the NCAA announced an interim policy allowing players to monetize from NIL activities. This means athletes can accept endorsements from brands, sell autographs, and otherwise profit from their publicity.
Separately generating significant publicity in the wake of the decision, NCAA expert witness and Nobel prize winning economist James Heckman gave an aggressive interview calling Kavanaugh’s concurrence as a “bull— opinion” and a “rant.” He went on to call Justice Kavanaugh “insane,” arguing he had been swayed by anecdotal evidence. He also stated Alston’s lead counsel, Jeffrey Kessler, was “a real hustler” who “should have worked for Joe McCarthy back in the day.” Professor Heckman’s expert report in the case was informed largely by survey results showing that college athletes accrue substantial benefits from athletic participation. This is, of course, insufficient, as even victims of a wage suppression scheme may accrue some benefits from their labor; it may just be below the fair-market rate. And of course, other Nobel Prize winning economists, namely Gary Becker, have previously opined against the NCAA’s business model.
The case generally, and Justice Kavanaugh’s concurrence in particular, are also striking for their focus on labor market monopsony issues. Though these issues pose the same competitive concerns and have the same deadweight loss effects as monopolies, the Court has rarely addressed monopsony issues. A Westlaw search turns up only 23 mentions ever of the word “monopsony” in the Court’s history, compared to 1,184 mentions of “monopoly.” The Alston decision also comes at a time of increasing focus on labor market competition issues from antitrust enforcers and the White House itself (for example, the White House’s July 9, 2021, Executive Order on competition had a full section dedicated to labor market competition issues). The unanimous and unequivocal nature of the decision could also help encourage more labor market antitrust litigation outside the sports context as well. This is likely to be especially true in contexts where the defendants cannot argue that the anti-competitive restraints are the business model.
Finally, as Jeffrey Ogar noted, this decision hints at the fact that the Consumer Welfare Standard which has guided antitrust enforcement for over 40 is flexible enough to address modern problems, including labor market issues. However, there are still unanswered questions in this respect as well. Specifically, because the Court concluded that the NCAA had failed to draw a causal nexus between the challenged restrictions and consumer demand for amateur sports, the Court did not address the question of whether benefits accruing to consumers could be used to offset the harm to workers in the first place. This question—along with similar questions about two-sided markets generally—remains unanswered, and it will likely need to be settled in future litigation.