Alston v NCAA

The Decision

In order to analyze the Supreme Court’s decision, we need to understand the judgments made in O’Bannon I and II and the decisions made by the 9th circuit and District court. The O’Bannon complaint alleged that the NCAA illegally restrained trade by preventing FBS football and D1 men’s basketball players from receiving compensation for the use of their names, images, and likenesses (“NILs”). After a bench trial, the district court agreed under the Rule of Reason, which we will analyze later in this paper, and entered relief for the plaintiffs.  After identifying two less restrictive alternatives (“LRAs”) to the challenged rules,  the district court implemented those LRAs through an injunction that required the NCAA to permit its schools to (a) Use the licensing revenue generated from the use of their student-athletes’ [NILs] to fund stipends covering the cost of admission; and (b) to make deferred, post-eligibility cash payments in NIL revenue, not to exceed $5,000, to student-athletes. This same district court would later preside over the Alston litigation. Later, the 9th Circuit panel unanimously affirmed the injunction. (i) FBS football players, (ii) D1 men’s basketball players, and (iii) D1 women’s basketball players filed anti-trust litigation in 2014 in what became the Alston litigation. Meanwhile, the NCAA contended that because they had already amended their rules to satisfy the requirements of O’Bannon, any anti-trust challenges to their compensation rules should be invalid. The court denied the motion after which summary judgment was granted to the student athletes. The District Court entered judgement for the student athletes, in part based on these key factors –

  1. The court identified key factual differences between O’Bannon and Alston, pointing out that the crux of the two cases was different.
  2. The court accepted the student-athletes’ trial theory narrowing the relevant market to one in which Student-Athletes sell their “labor in the form of athletic services” to schools for athletic scholarships and other payments permitted by the NCAA ie educational benefits.
  3. Based on the rule of reason analysis, the court found significant anti-competitive elements in the relevant market.
  4. The NCAA argued that the challenged rules implement “amateurism,” which drives consumer interest in college sports because “consumers ‘value amateurism.’ The district court accepted this justification with respect to the NCAA’s limits on cash compensation untethered to education, but not as to its limits on non-cash education-related benefits.

The district court’s decision was important because it highlighted the differences between educational and non-educational expenses. The court clearly defined education related benefits – such as scholarships, tutoring, internships etc as these would not be confused with a professional athlete’s salary. Ultimately, the NCAA could not prohibit education related compensation that conferences and schools may provide to student-athletes playing Division I football and basketball. They could, however, continue to limit cash awards for academic achievement. Both sides appealed and brought the matter before SCOTUS. The NCAA petitioned for reversal, but the student athletes did not renew their challenge to all NCAA compensation limits. It was up to SCOTUS to decide whether the NCAA’s compensation rules violated the Sherman act when they restricted non-cash education related expenses. There were several different contentions and arguments in this case, and we shall analyze each of them alongside SCOTUS’s response and ultimate decision.

The first and perhaps most important issue is the Rule of Reason analysis. The “rule of reason” analysis is a test that focuses on the state of competition within a well-defined, reasonable agreement and requires a complete review of the relevant market. In this case the relevant market would be Football and Basketball players at D1 schools. The Supreme Court stated that the NCAA was not above anti-trust laws, and the courts must not shy away from requiring the NCAA to play by the Sherman acts rules. It was stated that the Rule of Reason required that the NCAA permit its school to provide up to the cost of attendance to their student athletes and nothing more. SCOTUS agreed that this was fair definition and that the district court clearly distinguished O’Bannon II from the current litigation as a challenge to restrictions on NIL compensation. SCOUTS concluded that NCAA rules, including those governing compensation, must be subject to antitrust scrutiny. The NCAA’s compensation framework had significant anti-competitive effects in the relevant market by limiting competition and the burden was on them was to not just show procompetitive effects, but to prove that they outweighed anti-competitive effects. SCOTUS eventually affirmed the district court’s opinion that the procompetitive benefits could have been achieved without substantially restricting compensation. The NCAA argued that they should be afforded special consideration as a joint venture that necessitated collaboration between members to “offer consumers the benefit of athletic competition”. The court did concede to some procompetitive benefit in this regard but found that joint venture restrictions were subject to anti-trust scrutiny as well, especially monopolies. There was no fair competition to the NCAA. SCOTUS affirmed that the district court properly concluded that the student-athletes carried their burden at the first step of the Rule of Reason. This was not challenged by the NCAA. The second step at the Rule of Reason (which was challenged) placed the burden of proof on the NCAA to justify a significant deviation from the operations of a free market. The NCAA used a singular procompetitive benefit to justify this in that they were doing this to preserve amateurism. The district court concluded that only some of the challenged rules serve procompetitive purposes. They found that these restrictions lack a procompetitive justification. It was also found that since O’Bannon, when the NCAA loosened these restrictions, consumer demand was unaffected. Witnesses also confirmed that these limits on education-related compensation were set without demand studies. Both prior courts had stated that the rules surrounding the validity of amateurism had to be proved and not presumed. The NCAA contended that challenged rules helped preserve amateurism by referencing the highly controversial NCAA v Board of Regents (1984) case, in which the NCAA’s restrictions on televising games were deemed essential to the product and were a lawful restraint of trade. The language used by SCOTUS in 1984 was that “The NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports.” This time however, the court in Alston stated that this statement was not binding, and it was not enough to grant the NCAA anti-trust immunity. SCOTUS interpreted this language as suggestive of the fact that courts should be mindful when assessing NCAA restrictions student-athlete compensation with regard to their procompetitive benefits, but not simply reject all challenges to NCAA’s compensation rules. This forever eliminated the use of the Board of Regents case as a way of being exempt from ordinary rule of reason analysis, something that the NCAA had done in prior cases. At the Rule of Reason’s third step, it was the student athletes’ burden to “make a strong evidentiary showing” that their proposed LRAs to the challenged scheme “are viable.” The LRA identified by the district court would prohibit the NCAA from (i) capping certain education-related benefits and (ii) limiting academic or graduation awards or incentives, while (iii) permitting individual conferences to set limits on education-related benefits. The district court believed that these would be sufficient to preserve the NCAA’s procompetitive benefits. Finally at step three, the Student-athletes proposed LRA’s were rejected which would have eliminated all limits on cash payments unrelated to education stating that such payments could be akin to those observed in professional sports leagues. Those payments would diminish the distinction between college and professional sports. This judgement however, reflected that limits on cash compensation unrelated to education do not constitute anticompetitive conduct and thus could not be prohibited by the NCAA. The SCOTUS ultimately held that the district properly judged the NCAA limits on education-related benefits to be in violation of the Sherman acts rules. They were of the opinion that even if the NCAA is a joint venture, they enjoyed monopoly power in the relevant market and its restraints were properly analyzed under a fact-bound “rule of reason” analysis.  The significance of the Alston decision cannot be understated, as it lifted the limits on education-related compensation for student-athletes and greatly damaged the NCAA’s control over student-athlete compensation.

  • Impact on Current Athletes – Apart from access to education and non-education related benefits, the biggest impact of the Alston decision on current athletes is that they will now have stronger cases when fighting the NCAA’s compensation rules. This decision was the strongest indication that the NCAA’s amateurism model is cracking, and it also likely paved the way for the NCAA adopting an interim policy on June 30 2021, suspending all amateurism rules related to NIL (name, image, likenesses). If the rules surrounding amateurism cannot be justified, this decision will provide student athletes with further traction in their fight for fair compensation and treatment.
  • Student Athletes & NIL – The new interim policy ensures that no athlete in any state will be ruled ineligible for monetizing their NIL, which includes activities such as social media posts, autograph sales, Youtube, Private training lessons, Merchandise, Endorsement deals etc. This will open up a whole new world for not just student-athletes but even marketers, who will now have to make decisions between licensing teams and players. Student athletes can now indirectly profit of highlight plays and other events that boost their individual brands. I believe the new NIL rules will benefit women’s athletes the most and will also help boost the profile of women’s college and professional sports.
  • Will we soon see pay-to-play?The language used in Justice Kavanaugh’s judgement suggested that a pay for play system might not be far away. He wrote that these compensation restrictions would be “flatly illegal” in any other industry. One of the immediate effects of the Alston decision was that colleges began finding creative ways of maximising education related benefits. But ever since the NCAA adopted its interim policy allowing the use of NIL, the boundaries of these rules have been tested and the biggest impact has been on recruiting. For example, a Utah based protein bar company offered money to every scholarship player for a particular college and paid the tuition for every walk-on. Similarly, a former NFL quarterback tweeted that his company would pay a certain quarter-back $1 million to play one season at his alma mater. The concept of collectives has become very popular, which are third party companies set up explicitly to raise money from fans and donors to funnel money to their favourite star teams athletes. The use of these loopholes leads me to believe that an indirect pay-for-play model is already in place. When the NCAA allowed the use of NIL, it was quick to reaffirm its commitment to avoiding pay-for play and improper inducements to choosing to attend a particular school. So then why isn’t the NCAA clamping down on these incidents? Largely because of the Alston decision, after which the NCAA has been extremely cautious in setting any compensation limits as they look to avoid legal exposure. Though it may inevitable, I believe that a pay-for-play model would not be viable in the current framework of the NCAA’s rules, as NIL and certain other compensation rules are currently largely unregulated. This environment combined with a play for-play structure would significantly damage the distinction between college and professional sports.
  • What would happen if Claret v NFL were to happen now?Post the Alston decision, it is likely that challenged eligibility rules would have been in violation of the Sherman act. While the nature of the collective bargaining relationship and federal labor law took precedence, the Alston decision would have been used as reference to show that the NFL’s eligibility rules and the collective bargaining agreement itself should not be immune to anti-trust scrutiny under non-statutory labor exemption. The district court would have most likely had their judgement affirmed and the court would have pointed to Alston judgements where they ruled similar restrictions to be un unlawful restraint on trade.
  • Other issues to consider – There are a lot of other issues that can pop up in light of the Alston decision such as Title IX issues, as prior cases along with Alston have showed that justifications of changes in allowed compensation have to be carefully analyzed. One of the more problematic concerns surrounding Alston was the fact that the case did not specifically address amateurism and its pro-competitive benefits. These benefits would become open to interpretation and once again complex to resolve in court. The uncertainty around the clear definition of amateurism is likely to remain an issue in the years and cases to come.

 

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