Authored by Higher Education Attorney Scott Cole | July 1, 2021
Since the release of GrayRobinson’s Higher Education e-lert: Preparing Your University for Possible Student-Athlete Compensation for Use of Name, Image, or Likeness (NIL), the U.S. Supreme Court issued its opinion in National Collegiate Athletic Association v. Alston. While the opinion did not directly rule on National Collegiate Athletic Association (NCAA) bylaws, which, until today, prohibited student-athletes from monetizing their NIL, it has given colleges and universities the best indication yet of where the Supreme Court stands on the application of federal antitrust laws to the NCAA.
What Was at Issue in NCAA v. Alston?
In Alston, current and former student-athletes challenged the NCAA’s restriction on their compensation, both from education- and athletics-related activities. Specifically, they alleged that NCAA bylaws limiting their ability to earn compensation violated Section 1 of the Sherman Act, which prohibits contracts, combinations, or conspiracies in restraint of trade or commerce. The District Court’s lengthy opinion did not overturn the current NCAA bylaws regarding compensation related to a student-athlete’s athletic performance, including NIL. However, it did enjoin the NCAA from enforcing its rules, limiting the education-related benefits that universities could provide to its student-athletes. Both parties appealed, and the U.S. Court of Appeals for the Ninth Circuit affirmed. The NCAA then appealed to the Supreme Court, challenging the injunction prohibiting the NCAA from limiting what universities could pay its student-athletes in education-related benefits. The student-athletes did not appeal.
The Supreme Court confirmed that the District Court properly assessed the NCAA restrictions under the Sherman Act’s “Rule of Reason” analysis. The Court also confirmed that the NCAA would not receive any special treatment under the antitrust laws because of its unique mission to promote amateur athletics. The Court found that by restricting the amount of education-related benefits a university can provide to student-athletes, the NCAA was using its monopoly power to restrain competition in the labor market for student-athletes. The NCAA countered that even if that were true, its rules have pro-competitive effects by offering consumers a unique product – amateur athletics, which gives consumers an alternative to professional sports. However, the Court found that the limits on education-related compensation did not affect consumer choice. In fact, the NCAA has for years increased the types of compensation student-athletes could receive, and consumer demand for its products has only increased. However, it agreed with the District Court’s finding that NCAA rules restricting compensation unrelated to education were reasonable because compensating athletes as a result of their athletic skills could blur the distinction between amateur and professional athletes.
The Court did provide some concession to the defendants by allowing the NCAA to define what constitutes education-related benefits and allowing conferences and individual schools to continue to impose restrictions, even on education-related benefits, since they do not exercise monopoly power. It also confirmed that the NCAA could continue to prohibit “compensation from sneaker companies, auto dealerships, boosters, or anyone else,” including “phony internships.”
Finally, the Court upheld the District Court’s ruling that it can fix the aggregate limit on awards universities can give for academic or graduation achievement to no lower than its current limits on similar athletic achievement. The NCAA expressed concern that this would allow schools to pay student-athletes for fake academic achievements. The Court countered that the NCAA could still define a proper academic award and/or lower its awards for athletic achievements in response.
Perhaps of most interest in the Court’s decision was the concurrence of Justice Brett Kavanaugh. While agreeing with the Court’s ruling related to education-related benefits, he voiced concern that the NCAA’s remaining compensation rules are questionable under the antitrust laws, stating, “the NCAA’s business model would be flatly illegal in almost any other industry in America.” In his view, the NCAA’s argument that colleges may decline to pay student-athletes because the defining (and therefore pro-competitive) feature of college sports is not paying its student-athletes is circular reasoning and would not pass muster.
Where Does This Leave NIL and Other Student-Athlete Compensation Issues?
On June 30, the NCAA issued an interim policy on NIL, effectively waiving all restrictions with some limited exceptions. These include continuing to prohibit payments for athletic performance or achievement. In other words, athletes cannot accept payments to attend a particular university or as a reward for performance on the field. Florida and eleven other states have passed statutes allowing student-athletes to receive compensation for the use of their NIL effective today. These laws were passed by state legislatures to expand the opportunities for student-athletes to earn compensation for their NIL beyond what was then allowed by NCAA rules. Ironically, because the NCAA waiver is so broad, student-athletes in these states may actually be subject to more restriction than in states without such laws.
For the next several months, the NCAA will continue to lobby Congress for an antitrust exemption and federal legislation defining how students can be compensated for non-education-related activity. However, it is far from clear how, and even if, Congress will act. It might even pass currently pending legislation expanding student-athletes’ rights to benefits, including the right to collectively bargain as employees and obtain healthcare and other benefits.
If Congress does not act, we can expect additional court decisions further clarifying the rights of student-athletes to earn athletics-related compensation beyond NIL. It is too early to determine how far those decisions will go and whether the Supreme Court will issue further guidance, but it is safe to say amateurism as historically defined by the NCAA is soon to be a thing of the past.