By Jacob Hebda
The Far-Reaching Impact of the Supreme Court’s Antitrust Analysis in Alston
On June 21, 2021, the Supreme Court issued a decision that altered the landscape of college athletics forever. For decades, the amateur status of college athletes meant few, if any, avenues for compensation. Whereas professional athletes have historically been free to earn money for playing their respective sports, the National Collegiate Athletic Association (“NCAA”) has long restricted college athletes from accessing the same opportunities for monetary earnings. In place of salaries and endorsements, the NCAA permitted scholarships and little more.[1] Now, that status quo, long the subject of much controversy, is no more.
The NCAA’s longstanding model took a substantial, perhaps even fatal, hit in June 2021 with the Supreme Court’s unanimous ruling in NCAA v. Alston.[2] Alston struck down the aforementioned rules, opening the door for new business opportunities for the over 500,000 NCAA college athletes[3] across the United States. The case was brought by current and former college athletes in the United States District Court for the Northern District of California.[4] After the Ninth Circuit upheld the ruling, the NCAA appealed to the Supreme Court, but to no avail. At the heart of the case is the “rule of reason” test, which is used to examine potential violations of §1 of the Sherman Act. The rule of reason test’s applicability to NCAA matters was recognized in a 1985 Supreme Court decision, NCAA v. Board of Regents of the University of Oklahoma.[5] It consists of three elements: “first, the plaintiff must prove that the challenged restraint has a substantial anticompetitive effect; then, if the plaintiff succeeds, the burden shifts to the defendant to demonstrate the restraint results in procompetitive effects; finally, if the court finds procompetitive effects, the plaintiff must show the procompetitive benefit could be achieved through less restrictive means.”[6] The District Court used these elements when examining the facts in Alston, a choice that the Supreme Court affirmed. The court also upheld the District Court’s decision – that certain NCAA rules restricting education-related benefits were unenforceable.[7] The third element was ultimately the downfall for the NCAA. The court found that while the NCAA rules were procompetitive, there were other feasible ways to achieve the same results.[8] In other words, while the NCAA is certainly a unique entity with special concerns, that does not mean it has full discretion to implement whatever restrictions it wants to.
The short-term effects of Alston have been clear. In addition to freeing up education-related benefits, the decision set the stage for new earning opportunities. Following the decision, the NCAA announced an interim policy permitting name, image, and likeness (NIL) deals. The rule permits college athletes to use their name, image, and likeness to make money through advertisements, endorsements, public appearances, and more. College athletes quickly took advantage of the policy, and a new market materialized almost immediately. From July 2021 through June 2022, an estimated $917 million dollars was spent on these agreements.[9] By 2023, this figure is projected to surpass $1 billion.[10]
The long-term impacts of Alston are not quite as obvious. The decision has, intentionally or not, brought college athletes closer to the precipice of professionalism. In fact, it has raised more questions about whether the traditional term, “student-athlete,” is still accurate.[11] With the Alston ruling, there is growing momentum behind the notion that college athletes should be compensated for their performance, a concept frequently referred to as “pay for play.”[12] This push has undoubtedly been empowered, at least partially, by a brash concurrence from Justice Brett Kavanaugh in Alston. Kavanaugh asserted that, “[n]owhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. And under ordinary principles of antitrust law, it is not evident why college sports should be any different. The NCAA is not above the law.”[13] Many have taken Kavanaugh’s concurrence to suggest that future challenges to NCAA rules could also be successful.[14] This likely includes the debate over whether college athletes are employees of the institutions they attend.
A Third Circuit case, Johnson v. NCAA, is contemplating this exact issue now. A former football player from Villanova University sued the NCAA and various universities, claiming that “Division I college athletes are employees under the Fair Labor Standards Act (FLSA) and are therefore entitled to be paid a minimum wage.”[15] While Johnsonis a case based on employment law, its link to antitrust law concepts discussed in Alston, as well as the greater conversation about compensation in college sports, is undeniable. The result, as well as the language from Kavanaugh, is an indication of a possible judicial shift. That the Supreme Court approved both the application of the rule of reason test and its upshot is a sign that college athletes might not be recognized strictly as amateurs for much longer. Johnsonand various other ongoing cases[16] against the NCAA are evidence of that.
Thus, it is fair to say that Alston, despite all the positives it created, leaves college sports in a precarious position. On the one hand, Kavanaugh’s concurrence appears well-grounded. His flagrant frustration is shared by countless other observers. As he suggests, the NCAA facilitates a system that seems blatantly violative of U.S. antitrust law. Despite the NCAA imposing twenty-hour limits on weekly practice time,[17] some have estimated that college athletes dedicate somewhere near sixty hours a week to their respective sports.[18] After all, they have to practice, travel, attend compliance meetings, partake in community service events, and, of course, play.[19] Those activities add up, and that list is not even exhaustive. Outside of the ties to educational institutions, is there really any other evidence that college athletes are not employees? With all of this in mind, the desired outcome seems fairly clean-cut—just pay them for their time.
However, there is another, seemingly opposing, concern at play. The notion of “pay for play” seems fair, but if Kavanaugh’s perspective wins out, where does that leave college athletes? It may seem appropriate to label them as employees, but there is a bevy of challenges to consider. Fewer than two percent play their sport professionally.[20] Revenue generated from football and basketball thoroughly exceeds the revenue other sports generate.[21] Deeming them to be employees may jeopardize Title IX protections.[22] How can these issues be navigated in a world where college athletes are employees? Can such a decision succeed without creating pay discrepancies across sports and threatening legal protections?
At the same time, amateurism increasingly feels like an anachronism in the context of modern college sports. Revenue generated by Division I sports exceeded $15 billion in 2019.[23] The NCAA alone earned approximately $1.14 billion in revenue last year.[24] College football coaches are often among the highest paid employees in their states.[25] With an industry of this size and profitability, it seems foolish to continue designating college athletes as amateurs. The arbiters of antitrust law seem to agree with this notion. Whether their agreement is a net positive for college athletes, however, remains to be seen. One thing is certain though—a fascinating conversation is about to take place in the realm of antitrust. Whatever the outcome may be, its implications will go far beyond this single area of the law.
[1] See Sherman Act – Antitrust Law – College Athletics – NCAA v. Alston, Harv. L. Rev. 471, 471-72 (2021).
[2] See Nat’l Collegiate Athletic Ass’n v. Alston, 594 U.S. 1, 1-6 (2021).
[3] NCAA Student-Athleres Surpass 520,000, Set New Record, NCAA (Dec. 5, 2022), https://www.ncaa.org/news/2022/12/5/media-center-ncaa-student-athletes-surpass-520-000-set-new-record.aspx.
[4] Sherman Act, supra note 1, at 472-73.
[5] Id. at 471-72.
[6] Id. at 473.
[7] See Alston, supra note 2, at 12-13 and 34-36
[8] Id. at 474-75.
[9] Erica Hunzinger, One Year of NIL: How Much Have Athletes Made?, NBC New York (Jul. 7, 2022, 3:13 PM ET), https://www.nbcnewyork.com/news/sports/one-year-of-nil-how-much-have-athletes-made/3765040/.
[10] Id.
[11] See Nicole Auerbach & Mike Vorkunov, Understanding Johnson v. NCAA, the Next Case That Could Upend the College Sports Model, The Athletic (Aug. 12, 2022), https://theathletic.com/3497617/2022/08/12/johnson-v-ncaa-college-athletes-employees/.
[12] See Dennis Dodd, NCAA Aims to Crack Down on Boosters Disguising ‘Pay for Play’ as Name, Image and Likeness Payments, CBS Sports (May 3, 2022), https://www.cbssports.com/college-football/news/ncaa-aims-to-crack-down-on-boosters-disguising-pay-for-play-as-name-image-and-likeness-payments/.
[13] See Nat’l Collegiate Athletic Ass’n v. Alston, 594 U.S. 1, 5 (2021) (Kavanaugh, J., concurring).
[14] See Sean Gregory, Why the NCAA Should Be Terrified of Supreme Court Justice Kavanugh’s Concurrence, Time (Jun. 21, 2021, 6:24 PM ET), https://time.com/6074583/ncaa-supreme-court-ruling/. See also Paul Myerberg Supreme Court Justice Brett Kavanaugh Rips NCAA in Antitrust Ruling, Says It ‘Is Not Above the Law’, USA Today (June 21, 2021, 5:20 PM ET), https://www.usatoday.com/story/sports/college/2021/06/21/justice-brett-kavanaugh-rips-ncaa-in-shawne-alston-opinion/7771281002/.
[15] Nicole Auerbach, In Johnson v. NCAA, Judges are Asking the Right Questions of the College Sports Model, The Athletic (Feb. 15, 2023), https://theathletic.com/4208822/2023/02/15/johnson-v-ncaa-case-judges-appeals/.
[16] See Dan Murphy, What You Need to Know About the Latest NCAA Legal Battle, ESPN (Feb. 14, 2023), https://www.espn.com/college-sports/story/_/id/35467766/what-need-know-latest-ncaa-legal-battle.
[17] See Katie Lever, Flaws of the 20-Hour Rule, 2aDays (Jan. 4, 2023), https://www.2adays.com/blog/flaws-of-the-20-hour-rule/.
[18] See Chris Isidore, Playing College Sports: A Long, Tough Job, CNN Money (Mar. 31, 2014, 6:58 AM ET), https://theathletic.com/4208822/2023/02/15/johnson-v-ncaa-case-judges-appeals/.
[19] See Lever, supra note 12.
[20]NCAA Recruiting Facts, NCAA (2022), https://ncaaorg.s3.amazonaws.com/compliance/recruiting/NCAA_RecruitingFactSheet.pdf.
[21] See George Malone, Which College Sports Make the Most Money?, Yahoo! (Mar. 21, 2022), https://www.yahoo.com/video/college-sports-most-money-130012417.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAEx3SDXijEItmV42mnYf9rAngENexsKswg3nDrWUIQGmHlIm6LokUeOQcYuz4gobvg8MesE912PP3ScAYOXRCXPJRjYvPr6DWH4B-ItzTFkwPWnBaE6OIFC_DWfVjFv2cFFPtZ1DUTG7j1HD-SFK9YUJKpFS9fJTaKVePzL3s3YH.
[22] See Eric Prisbell, Johnson v. NCAA: Why College Sports Fans Need to Pay Attention to this Court Case, On3 (Feb. 21, 2023), https://www.on3.com/news/johnson-v-ncaa-why-college-sports-fans-need-to-pay-attention-to-this-court-case/.
[23] Andrew Zimbalist, Analysis: Who is Winning in the High-Revenue World of College Sports?, PBS News Hour (Mar. 18, 2023, 7:14 PM ET), https://www.pbs.org/newshour/economy/analysis-who-is-winning-in-the-high-revenue-world-of-college-sports.
[24] Eben Novy-Williams, NCAA Revenue Dips to $1.14 Billion as Self-Insurance Costs Kick In, Sportico (Jan. 26, 2023, 12:14 PM ET), https://www.sportico.com/leagues/college-sports/2023/ncaa-revenue-2022-1234707661/.
[25] See Samuel Stebbins, College Coaches DominateList of Highest-Paid Public Employees with Seven-Digit Salaries, USA Today (Sep. 23, 2020, 7:00 AM ET), https://www.usatoday.com/story/money/2020/09/23/these-are-the-highest-paid-public-employees-in-every-state/114091534/.