NCAA Anti-Trust Case May See Collegiate Cartel Win by Losing
Arthur Halliday, CLS ’22
As unpaid student-athletes compete in the lucrative National Collegiate Athletic Association (NCAA) men’s and women’s basketball tournaments, the NCAA is playing for much higher stakes in a different kind of court.[1] At the end of March, the Supreme Court heard argument in NCAA v. Alston, a case that means both more and less than the casual college basketball fan might think.
Alston presents the question of whether the Ninth Circuit erred in finding that the NCAA “eligibility rules regarding compensation of student-athletes violate federal antitrust law.”[2]
On its face, Alston is about a ruling from the Northern District of California that struck down NCAA restrictions on “non-cash education-related benefits and academic awards.”[3] Judge Claudia Wilken found that these limits on what aid a school can give a student-athlete in excess of the school’s stated “cost of attendance” are not necessary to differentiate NCAA sports from professional sports in the eyes of consumers.[4]
However, commentators have pointed out that the NCAA is asking the Supreme Court for much more than a win in this case—they’re asking for broad antitrust immunity.[5] This ask is particularly significant because of what this case is not about: paying student-athletes a salary.
Judge Wilken explicitly permitted only benefits that “could not be confused with a professional athlete’s salary.”[6] Affirming, the Ninth Circuit noted that the ruling “does not permit the type of unlimited cash payments asserted by the NCAA.”[7] The rich and powerful at the NCAA may see this as a slippery slope, but the case follows important elements of the status quo that allow the NCAA to remain a “cartel.”[8]
Under the Sherman Act, alleged violations that restrain competition are judged by a three-step Rule of Reason analysis, which first asks if “the challenged agreement is one that promotes competition or one that suppresses competition.”[9] If the plaintiff can prove that the alleged violation “produces significant anticompetitive effects” in the market, the second step of the Rule of Reason analysis gives the defendant the burden of providing evidence of the practice’s “procompetitive effects.”[10]
This second step is the core of the NCAA’s victories in Sherman Act cases—they cite consumer demand for college sports, as differentiated from professional sports by the NCAA’s definition of amateurism, as an overwhelming procompetitive effect.[11] In the Ninth Circuit, Judge Smith expressed frustration that this step two analysis is allowed to cross markets, without analytical rigor, turning consumer demand for college sports into a cudgel to deprive student-athletes of “the fair value of their services.”[12]
The Supreme Court has not ruled on the proper scope of this analysis, and whether the second Rule of Reason step may cross markets.[13] Alston may present them with an opportunity to do so.
Even if the NCAA loses its appeal, it may still “win” by seeing the Supreme Court affirm the Ninth Circuit’s decision to permit a cross-market step two analysis—on its way to relaxing a small subset of NCAA restrictions.
While the NCAA may care about the small benefits at stake in this case, they are far more significant as a step towards allowing schools to pay student-athletes.[14] To maintain their status as a cartel run on the backs of unpaid labor, the NCAA will need to preserve its special treatment in anti-trust law.
Winning this case, and having the Supreme Court grant them broad anti-trust immunity under the auspices of amateurism, would be a huge victory for the NCAA. Losing, but having the Supreme Court affirm the NCAA’s use of cross-market differentiation, would be a great consolation prize.
Even when student-athletes win, the NCAA wins too.
[1] The 2021 men’s tournament is expected to bring in $613 million in revenue, all of which will be distributed to member schools. Dennis Dodd, “NCAA to pay entire $613 million revenue distribution to members if NCAA Tournament completed in entirety,” CBS Sports (Feb. 24, 2021), https://www.cbssports.com/college-basketball/news/2021-ncaa-tournament-bracket-predictions-march-madness-picks-odds-lines-for-second-round-games-sunday/. Even the women’s tournament, which the NCAA undervalues and underserves, brings in $35 million per year in TV revenue. Laine Higgins, “Women’s March Madness Is Growing in Popularity—and Undervalued,” Wall Street Journal (Mar. 19, 2021), https://www.wsj.com/articles/march-madness-womens-college-basketball-ncaa-tournament-11616155596.
[2] Petition for a Writ of Certiorari at i, Nat’l Collegiate Athletic Ass’n v. Alston, 2020 WL 6150345 (No. 20-512).
[3] In re Nat’l Collegiate Athletic Ass’n. Athletic Grant-in-Aid Cap Antitrust Litigation, 375 F. Supp. 3d 1058, 1110 (N.D. Cal. 2019) (In re NCAA).
[4] See id.
[5] “The NCAA instead seeks a broad legal pronouncement that its rules are valid as a matter of law if, on their face, they are ‘clearly meant to help maintain … amateurism in college sports’—and that amateurism means whatever the NCAA says it means. Under the NCAA’s position, any challenge to its amateurism rules should be dismissed at the motion to dismiss stage if it could make such a showing. In other words, the NCAA is seeking for the Court to provide it special treatment under the antitrust laws.” Maurice M. Suh, Daniel L. Weiss, & Zathrina Z. Perez, “Supreme Court needs to rethink NCAA ‘amateurism,’” Daily Journal (Jan. 5, 2021), https://www.gibsondunn.com/wp-content/uploads/2021/01/Suh-Weiss-Perez-Supreme-Court-needs-to-rethink-NCAA-amateurism-Daily-Journal-01-05-2021-.pdf.
[6] In re NCAA, 375 F. Supp. 3d at 1083.
[7] In re Nat’l Collegiate Athletic Ass’n. Athletic Grant-in-Aid Cap Antitrust Litigation, 958 F.3d 1239, 1261 (9th Cir. 2020) (In re NCAA II).
[8] Id. At 1267 (Smith, J, concurring).
[9] Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 691, 98 S. Ct. 1355, 1365 (1978).
[10] In re NCAA II at 1267 (Smith, J, concurring) (quoting O’Bannon v. Nat’l Collegiate Athletic Ass’n.802 F.3d 1049, 1070).
[11] See, e.g., Brief for Petitioners at 16, Nat’l Collegiate Athletic Ass’n v. Alston, 2021 WL 398167 (2021) (No. 20-520) (“Sports played by amateur college students who are competing on behalf of their schools and are not paid to play are different in character–in the language of this Court, such athletics are a different “product”–than sports played by professional teams.”) .
[12] In re NCAA II at 1270 (Smith, J, concurring).
[13] Id. At 1269 (Smith, J, concurring).
[14] “The practical import of such a decision is that the NCAA could be subject to a never-ending loop of antitrust challenges to its eligibility rules. Plaintiffs could bring a case, prompt a Rule of Reason analysis, convince the court to issue an injunction that moves the ball five more yards down the field toward the endzone of a full-on free market for student-athletes, wait for the NCAA to implement the changes pursuant to an injunction, then sue again for more incremental gains given that the rules have changed. Lather, rinse, and repeat. The result could be perpetual judicial micromanagement of the NCAA’s eligibility rules.” Eli Nachmany, “Exploring the NCAA’s Antitrust Arguments Ahead of Oral Argument in NCAA v. Alston,” Harvard J. of Sports and Enter. L. (Jan. 2, 2021), https://harvardjsel.com/2021/01/exploring-the-ncaas-antitrust-arguments-ahead-of-oral-argument-in-ncaa-v-alston/#_ftn2.