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SCOTUS Analysis: NCAA v. Alston

By Kwanghyuk David Yoo |

The Supreme Court of the United States recently rendered a landmark decision in the antitrust case National Collegiate Athletic Association v. Alston. On June 21, the court ruled on the legality of the National Collegiate Athletic Association’s restrictions on student-athlete compensation and benefits. Current and former student-athletes who played in men’s Division I Football Bowl Subdivision football and men’s and women’s Division I basketball (collectively, “student-athletes”) filed an antitrust class action against the NCAA and eleven Division I conferences (collectively, “NCAA”), alleging that the NCAA implemented anticompetitive bylaws unreasonably limiting the compensation and benefits that student-athletes might receive in exchange for their athletic participation. The court unanimously found the NCAA’s compensation rules violated the Sherman Act when they restricted non-cash education-related benefits such as post-eligibility undergraduate or graduate scholarships or tutoring, study-abroad expenses, and paid post-eligibility internships.   

 The court upheld the district court’s finding based on the rule of reason analysis that the NCAA and its member schools collectively enjoyed monopsony power in the relevant market as defined as the market for student-athlete services in Division I basketball and FBS football and exercised such power to restrain compensation without risking their market dominance. The district court found that there were no viable substitutes for the Division I market that student-athletes could switch to in response to decreases in compensation.

The NCAA’s compensation framework had significant anticompetitive effects in the relevant market by restricting competition between or among the member institutions for offering better compensation in recruiting student-athletes. Reduced compensation caused depressed athletics participation so that the price and quantity of student-athlete labor were suppressed below competitive levels. The court rejected the NCAA’s defense arguing that special consideration should be afforded to the association as a joint venture that inevitably necessitates collaboration among members to “offer consumers the benefit of intercollegiate athletic competition.” The court admitted that “some degree of coordination between competitors within sports leagues can be procompetitive.” But it found that joint venture restrictions, especially with monopoly power, were appropriately subject to antitrust scrutiny under “the ordinary rule of reason’s fact-specific assessment of their effect on competition.”

With special emphasis, the court made it clear that the rule of reason analysis was structured with flexibility depending on the circumstances. The court highlighted that the rule of reason review purported to “furnish an enquiry meet for the case, looking to the circumstances, details, and logic of a restraint” to determine that the challenged practices harmed competition. The burden-shifting framework of the rule of reason poses the complex question as to whether the procompetitive benefits outweigh the anticompetitive harms. The court affirmed the district court’s finding that the procompetitive benefits the NCAA had established with compensation restraints in the labor market could have been achieved by “substantially less restrictive alternative means.”       

It is noteworthy that the court had due regard to the preservation of amateurism as contended by the NCAA to show its compensation limits are procompetitive. Relying on long-standing controversial language in NCAA v. Board of Regents of University of Oklahoma (1984), the NCAA contended that the challenged rules helped preserve amateurism that drives consumer demand for college sports. The court in Board of Regents noted that the NCAA plays a critical role in maintaining “a revered tradition of amateurism in college sports;” that it has “ample latitude to play that role;” and that the preservation of amateurism is “entirely consistent with the goals of the Sherman Act.” The court in Alston maintained due balance in interpreting this language. The court construed its earlier wording as neither binding nor dispositive and thereby refused to grant wide antitrust immunity. The court further understood this language as suggesting that “courts should take care when assessing the NCAA’s restraints on student-athlete compensation, sensitive to their procompetitive possibilities,” but does not imply that “courts must reflexively reject all challenges to the NCAA’s compensation restrictions.” As such, the court struck the sensitive balance in considering the admissibility of amateurism as a viable defense by allowing the NCAA having the shifted burden of proof to argue that the preservation of amateurism has procompetitive effects.   

Alston has particular significance in that it provided legal clarification as to when the reshaped relationship between institutions and student-athletes ensures legitimacy in the college-sport labor market from an antirust perspective. Alston unprecedently lifted the limits on education-related compensation/in-kind benefits for student athletes and further attenuated the NCAA’s control over student-athlete compensation. The significance of Alston is, nevertheless, not confined to its contribution to the accumulation of antitrust jurisprudence. Alston paved the way for re-establishment of the delicate relationship between universities or colleges and student-athletes from business transactional perspectives. It revealed the evolving landscape of college athletics in terms of fair compensation and treatment. Alston recognized that the NCAA relied heavily on amateurism to unduly exploit student-athlete labor for free or for a lower price in college sports. Invoking amateurism to the extreme creates controversy by oversimplifying and solidifying the relationship between institutions and student-athletes rather than aligning their business interests on an equal footing as in the competitive market. The court implied that amateurism acted to eliminate market dynamics and reduce competition in the student-athlete labor market.

Alston, however, did not answer the question of whether and where the preservation of amateurism might be a successful procompetitive rationale on the merits. The court left room for more flexible interpretation by stating that courts dealing with complex business arrangements should be amenable to “clarifying and reconsidering their decrees in light of changing market realities” because markets tend to be “more effective than the heavy hand of judicial power when it comes to enhancing consumer welfare.” The court also left room for future discourse on how to define amateurism as it stated that “the national debate about amateurism in college sports is important.” The elimination of conceptual uncertainty and ambiguity will be necessary to better inform the antitrust analysis of practices in college sports demanding free labor in the name of amateurism.  

—Kwanghyuk David Yoo
law librarian, adjunct professor of law