The Student-Athlete Compensation Saga: U.S. Supreme Court Deals Blow to NCAA’s Defence in Alston Decision

The U.S. Supreme Court dealt a blow to the National Collegiate Athletic Association’s (the NCAA) defence regarding certain compensation restrictions for student athletes in its 21 June decision in NCAA v. Alston (2021). The Court’s ruling covers only a narrow scope of such restrictions, limited to education-related benefits. However, its broader critique of the NCAA’s arguments regarding the unique nature of amateur athletics could subject a range of related restrictions to antitrust scrutiny going forward. In essence, the Court held that the restraints in question covering education-related benefits such as graduate school scholarships are subject to standard antitrust analysis under the rule of reason – expressly rejecting the notion that the market for college athletes should enjoy any special treatment under antitrust laws.

Procedural History and Background

As discussed in our 9 April blog post, this case came to the Supreme Court from the Ninth Circuit Court of Appeals, which ruled in favour of Alston but limited its holding to the NCAA rules that restrict academic-related compensation not included in the student “cost of attendance” calculation. As a result, the Supreme Court’s review on certiorari was limited to the district court’s decision enjoining the NCAA’s limits on such education-related benefits.

This limited scope notwithstanding, the Court appeared to appreciate the significance of its ruling for the college athletics industry and American sports more broadly, engaging in a long historical account of this case’s path to its Bench. Though initially conceived as a standard-setting body concerned with mitigating the violence and danger of early 20th century college (American) football, the Court recognised that the NCAA, which effectively operates as a joint venture among U.S. universities, has steadily evolved into a much more significant commercial behemoth. The purpose of the policies and rules promulgated by the NCAA have in turn evolved along the way, with the compensation-related restrictions at issue being just one of countless policies governing a multi-billion-dollar business.

As part of its defence, the NCAA relied heavily on NCAA v. Board of Regents of the University of Oklahoma (1984), despite the Court’s ultimate holding in that case that NCAA restraints on the rights to televise college football games violated antitrust laws. In that majority opinion, however, Justice Stevens did acknowledge that the NCAA needs to enact certain restrictions to ensure that the product in the relevant market – in that case, college-affiliated football – be available at all. In the NCAA’s view, this acknowledgment by the Court provided a basis for the argument that the organisation’s unique tradition of amateurism ought to shield it from traditional antitrust scrutiny.

NCAA is “Not Above” Antitrust Law

As the justices’ prying questions during the 2021 March oral argument previewed, the Court was not persuaded by the NCAA’s reliance on Board of Regents. In short, the Court rejected the NCAA’s reasoning and endorsed the district court’s application of the rule of reason to the challenged restraints. The Court stated flatly that amateurism could not support “a sort of judicially ordained immunity from the terms of the Sherman Act for [the NCAA’s] restraints of trade[,]” and emphasised that such restrictions would not be overlooked simply “because they happen to fall at the intersection of higher education, sports, and money[.]” In the Court’s view, such special treatment could only be granted by the legislature, not the judiciary.

In his concurring opinion, Justice Kavanaugh went even further in dismissing any notion of immunity, concluding that the NCAA “is not above the law.” Notably, Kavanaugh asserted that the NCAA’s remaining compensation rules outside the scope of the present case would also be analysed under the rule of reason in future litigation and further suggested that such rules would not pass muster under this method of analysis.

The Alston decision suggests that the current Bench would be amenable to future challenges to the NCAA’s compensation restrictions for student athletes, a reality that may also prompt the NCAA to enact changes to the current rules on its own.

Wide-ranging Implications

• No Handicap for Joint Ventures: Justice Gorsuch took the opportunity to emphasise that restraints imposed by joint ventures like the NCAA are not guaranteed abbreviated or “quick look” review under antitrust laws. Instead, such abbreviated scrutiny only applies to restraints imposed by joint ventures with small market shares that are “obviously incapable of harming competition” on the one end, or on the other end those that “so obviously threaten to reduce output and raise prices that they might be condemned as unlawful per se or rejected after only a quick look.” Gorsuch clarified that most restraints, including those imposed by joint ventures, fall in the “great in-between” and are thus subject to scrutiny under the rule of reason – regardless of whether the joint venture itself claims that they are necessary to maintain competition or ensure the availability of a particular product, as the NCAA did here. Accordingly, joint ventures remain best served by evaluating proposed restrictions with an honest, clear-eyed assessment of their potential procompetitive benefits and anticompetitive effects, without appeal to unique market characteristics or arguments for special treatment.
• Looking to Congress for an Assist: The Supreme Court’s decision comes amid increased attention to the issue of student-athlete compensation rules at the national and local levels. Multiple U.S. states are already poised to implement laws that would allow amateur athletes to receive compensation in connection with use of their name, image, and likeness – a reality that has recently prompted the NCAA board to approve an interim policy lifting the ban on such compensation. Both the opinion of the Court and Justice Kavanaugh’s concurrence note the possibility that Congress could choose to modify the NCAA’s treatment under the antitrust laws through legislation, as it has for other industries such as insurance and agricultural cooperatives. Until this occurs, would-be plaintiffs have been invited to hop on to the proverbial court of antitrust litigation.

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