Introduction: Name, Image and Likeness Compensation in the NCAA
In October 2019, the National Collegiate Athletic Association (NCAA) announced a major change in its rules: student-athletes will be permitted to receive compensation for the use of their name, image and likeness (NIL).1 The announcement represented a reversal from the NCAA’s previous position that “in order to preserve the character and quality of the [NCAA’s] ‘product,’ [student] athletes must not be paid.”2 The NCAA’s announcement came alongside an increasing volume of state legislation permitting NIL compensation for college athletes.3 Allowing student-athletes to enter into endorsement deals and profit off the use of their NIL represents the death of the NCAA’s revered concept of amateurism. As a result, the NCAA may find itself newly vulnerable to antitrust challenges to its rules. Traditionally, the NCAA has avoided antitrust liability with the procompetitive justification of amateurism by arguing that, on balance, the challenged rule has procompetitive effects.4 If the NCAA is to defend its remaining rules unrelated to compensation (regarding academic eligibility or playing seasons, for example), it will need to utilize a procompetitive justification other than amateurism.
The NCAA’s Historical Treatment in Antitrust Law
Under Section I of the Sherman Act, horizontal agreements among competitors are illegal.5 In its application, however, the Sherman Act only prohibits unreasonable agreements.6 Although many NCAA “restraints,” such as rules setting the number of games played in a season or limitations on acceptable recruiting behavior, constitute price fixing and limitations on output—typically illegal per se—NCAA rules are subject to a Rule of Reason analysis.7 Courts have consistently recognized that in order to function, the NCAA and its member institutions—schools—must agree to certain rules, such as recruiting standards, rules of play, and length of the competition season.8 Thus, most of the NCAA’s rules, although constituting agreements among competitors, are reasonable and permitted under antitrust law.
Aside from establishing that the NCAA is entitled to rule of reason analysis, Board of Regents recognized the preservation of amateurism as a valid procompetitive justification for NCAA restraints.9 In subsequent antitrust cases, the NCAA has used the principle of amateurism to justify its rules and regulations with much success.10 However, impending changes to NCAA rules and a recent Ninth Circuit ruling in Alston v. NCAA (In re NCAA Athletic Grant-in-Aid Cap Antitrust Litigation), holding that the NCAA’s restrictions on “non-cash education-related benefits” violated antitrust law, suggest that amateurism will no longer be an effective defense to antitrust challenges.11
Amateurism: A Dying Concept
In an antitrust challenge to NCAA eligibility rules in O’Bannon v. NCAA, a California district court chastised the NCAA for its ever-evolving, internally inconsistent definition of amateurism.12 The O’Bannon district court’s criticism proves even more poignant today: despite its previous argument that any compensation above the cost of attendance would destroy the concept of amateurism, the NCAA currently permits compensation above the cost of attendance, such as monetary awards for participation or achievement in athletics.13 The NCAA’s Student Assistance Fund and Academic Enhancement Fund allow schools to give money to student-athletes above the cost of attendance, without requiring that the money be used for education-related expenses.14
In addition to payments above cost of attendance from schools to student-athletes, the NCAA has expanded permissible payments to student-athletes from third parties.15 Since 2015, “international” student-athletes can accept unlimited funds from their country’s Olympic governing body based on their performance in certain elite international competitions.16 Likewise, student-athletes competing for the U.S. Olympic team are permitted to accept unlimited funds from the U.S. Olympic Committee based on their performance.17 In light of all of the ways student-athletes may receive compensation above the cost of attendance, the NCAA’s insistence that amateurism still exists in college sports has become increasingly irrational.
Recent state legislation has chipped away at any reality of amateurism that remained in college sports. In September 2019, California became the first state to enact legislation allowing for student-athletes to enter into endorsement deals and profit off the use of their own NIL.18 The NCAA’s announcement that it would enact rules allowing NIL compensation came in response to the Act’s passage, only one month later.19 As of March 2021, six states have passed similar legislation, while over thirty others have introduced bills of their own.20 Against this backdrop, it is clear that amateurism—the concept that athletes cannot be paid—is no longer a coherent concept in the NCAA. Without amateurism as an effective pro-competitive justification for the NCAA’s existing rules, the NCAA could find itself newly vulnerable to antitrust attacks. The NCAA will have to identify a new procompetitive justification for its remaining rules, unrelated to student-athlete compensation, if it is to have rules at all.
A New Antitrust Defense for the NCAA
The NCAA Constitution identifies its basic purpose as retaining “a clear line of demarcation between intercollegiate athletics and professional sports.”21 In the past, courts have accepted that preserving amateurism is necessary to achieve this purpose. As student-athletes will soon begin to receive NIL compensation, “amateurism” is no longer a defining feature of intercollegiate sports. However, the death of amateurism does not necessarily mean that courts won’t recognize the NCAA’s need to impose certain rules in order to maintain their distinct product.
In a recent antitrust suit, NCAA witnesses testified that “‘student’ status drives [consumer] demand” for their product: college sports.22 Neither the District Court nor the Ninth Circuit accepted the NCAA’s argument that “student” status was connected to the challenged compensation rules, noting that “student-athletes would continue to be students in the absence of the challenged rules.”23 Although it can’t be used to justify all of its compensation rules, the NCAA shouldn’t abandon its position that “student” status drives demand. Rather, student status is one of the factors that makes intercollegiate athletics distinct from professional sports.
Expert surveys in subsequent antitrust cases provide support for the plaintiff’s claim in O’Bannon that “school loyalty and geography” drives consumer demand in college sports.24 An expert witness for the plaintiffs in Alston v. NCAA conducted research indicating that rule changes allowing payments above cost of attendance had “no negative impact on consumer demand.”25 Another expert survey found that “consumers would continue to view or attend college athletics (at the same rate) even if eight types of compensation that the NCAA currently prohibits or limits were individually implemented.”26 By all indications, compensation restrictions are not necessary to maintain consumer interest in the NCAA’s product.
It has become increasingly clear that compensation restrictions meant to preserve amateurism do not drive consumer demand for intercollegiate sports. The thing that makes the NCAA’s product distinct—and drives consumer demand—is the unique culture of college sports. NCAA rules allow this distinct product to exist, and consumers benefit as a result. In antitrust cases, courts have consistently recognized that horizontal restraints are reasonable when they are “necessary to market the product at all.”27 NCAA rules that are necessary to maintain the distinct product of college sports can still survive antitrust scrutiny but cannot be justified on the basis of preserving amateurism.
Rather than relying on the procompetitive justification of preserving amateurism, the NCAA should shift to a procompetitive justification of “preserving the unique culture of intercollegiate athletics.” This justification aligns with economic reality and consumer opinion. Such a justification would be much stronger than pretending “amateurism” still means anything. To defend its rules from antitrust challenges, the NCAA needs to stop talking about money, and start focusing on the culture of college sports.
Using this new procompetitive justification, NCAA eligibility rules regarding academics would be reasonable. NCAA bylaws require student-athletes to be enrolled in a “full-time program of studies, be in good academic standing, and maintain progress” toward a degree.28 This rule could be justified as necessary to maintain student-athletes’ status as students, thus protecting the unique culture of college sports. Rules limiting the number of seasons in which a student-athlete may compete, eligibility to play after transfer, and permissible recruitment activities could be defended on a similar basis.
Amateurism no longer exists in college sports. Student-athletes are already receiving compensation beyond the cost of attendance and will soon be permitted to enter into endorsement deals and profit off the use of their name, image and likeness. But the death of amateurism doesn’t have to mean the death of the NCAA. Preserving the unique culture of college sports is necessary to ensure the NCAA’s distinct product exists at all. Thus, the NCAA should justify its rules in future antitrust challenges as being necessary to preserving that culture, rather than preserving amateurism.
Board of Governors Starts Process to Enhance Name, Image and Likeness Opportunities, NCAA (Oct. 29, 2019, 1:08 PM), https://www.ncaa.org/about/resources/media-center/news/board-governors-starts-process-enhance-name-image-and-likeness-opportunities [hereinafter Board of Governors]. ↩
NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 102 (1984). ↩
Ross Dellenger, With Recruiting in Mind, States Jockey to One-Up Each Other in Chaotic Race for NIL Laws, Sports Illustrated (Mar. 4, 2021), https://www.si.com/college/2021/03/04/name-image-likeness-state-laws-congress-ncaa. ↩
John Niemeyer, The End of an Era: The Mounting Challenges to the NCAA’s Model of Amateurism, 42 Pepp. L. Rev. 883 (2015). ↩
15 U.S.C. § 1. ↩
Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 23 (1979). ↩
Bd. of Regents, 468 U.S. at 102; See also Cody J. McDavis, The Value of Amateurism, 29 Marq. Sports L. Rev. 275, 302 (2018) (noting that “the per se analysis has yet to be applied to antitrust claims against the NCAA.”). ↩
Bd. of Regents, 468 U.S. at 101 (noting that the NCAA’s product “is competition itself—contents between competing institutions” and that “this would be completely ineffective if there were no rules on which the competitors agreed to create and define the competition to be marketed.”). ↩
Id. at 102. ↩
Daniel E. Lazaroff, The NCAA in Its Second Century: Defender of Amateurism or Antitrust Recidivist?, 86 Or. L. Rev. 329, 329-30 (2007). ↩
958 F.3d 1239, 1250 (9th Cir. 2020). ↩
7 F. Supp. 3d 955, 1000 (N.D. Cal. 2014). ↩
NCAA, Division I Manual220.127.116.11 (2020). See also In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058, 1071-72 (N.D. Cal. 2019). ↩
NCAA, supra note 13, at 18.104.22.168, 15.01.6.1; In re NCAA Antitrust Litig., 375 F. Supp. 3d at 1072. ↩
In re NCAA Antitrust Litig., 375 F. Supp. 3d at 1074. ↩
NCAA, supra note 13, at 22.214.171.124.5.2. ↩
Id. at 126.96.36.199.5.1. ↩
Michael McCann, What’s Next after California Signs Game Changer Fair Pay to Play Act Into Law?, Sports Illustrated (Sept. 30, 2019), https://www.si.com/college/2019/09/30/fair-pay-to-play-act-law-ncaa-california-pac-12. ↩
Board of Governors, supra note 1. ↩
Dellenger, supra note 3. ↩
NCAA, supra note 13, at 1.3.1. ↩
Alston v. NCAA (In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig.), 958 F.3d 1239, 1250 (9th Cir. 2020). ↩
O’Bannon v. NCAA, 7 F. Supp. 3d 955, 1001 (N.D. Cal. 2014). ↩
Alston, 958 F.3d at 1250. ↩
Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 23 (1979). ↩
NCAA, supra note 13, at 14.01.2. ↩