{"id":2933,"date":"2021-01-02T12:09:30","date_gmt":"2021-01-02T17:09:30","guid":{"rendered":"https:\/\/journals.law.harvard.edu\/jsel\/?p=2933"},"modified":"2023-07-25T11:40:53","modified_gmt":"2023-07-25T15:40:53","slug":"exploring-the-ncaas-antitrust-arguments-ahead-of-oral-argument-in-ncaa-v-alston","status":"publish","type":"post","link":"https:\/\/journals.law.harvard.edu\/jsel\/2021\/01\/exploring-the-ncaas-antitrust-arguments-ahead-of-oral-argument-in-ncaa-v-alston\/","title":{"rendered":"Exploring the NCAA\u2019s Antitrust Arguments Ahead of Oral Argument in NCAA v. Alston"},"content":{"rendered":"

Cert Granted in\u00a0Alston<\/em>: Revisiting\u00a0Board of Regents<\/em> and the Uniqueness of Antitrust Law’s Applicability to Sports in Light of the NCAA’s Cert Petition<\/h3>\n

As Congress debates federal legislation on the subject of publicity rights for student-athletes, the NCAA works to rebound from a COVID-marred year, and the Supreme Court considers the NCAA\u2019s appeal in NCAA v. Alston<\/em>, 2021 is shaping up to be one of the most consequential years in the history of college sports. On December 16, 2020, the Court granted certiorari<\/a> in Alston<\/em>, a case concerning the applicability of federal antitrust law to the NCAA\u2019s eligibility rules. Those rules, as even the casual college athletics observer knows, restrict student-athlete compensation to preserve the NCAA\u2019s system of amateur athletics. In the NCAA\u2019s petition for certiorari, the organization frequently cited the 1984 Supreme Court case of NCAA v. Board of Regents of the University of Oklahoma<\/em><\/a> as supportive of its position in Alston<\/em>. As the Court considers Alston<\/em>, it is worthwhile to revisit Board of Regents<\/em> in the context of the present antitrust challenge.<\/p>\n

The procedural history of Alston<\/em> is as follows: Current and former NCAA Division-I-level football and basketball student-athletes sued the NCAA in the U.S. District Court for the Northern District of California. They argued that the NCAA\u2019s student-athlete compensation restrictions, implemented by the full slate of NCAA member schools, are unlawful restraints of trade that produce anticompetitive effects in violation of the Sherman Act, a federal antitrust statute that outlaws agreements in restraint of interstate trade or commerce. The Supreme Court has interpreted the Sherman Act to proscribe those restraints that are unreasonable<\/em>, under a \u201cRule of Reason.\u201d[1]<\/a> As such, the NCAA responded with evidence of the restraints\u2019 procompetitive effects (for example: the preservation of amateurism, purportedly key to distinguishing the NCAA\u2019s product from that of the professional leagues).<\/p>\n

The plaintiffs\u2019 argument was that the NCAA\u2019s compensation limits artificially restricted student-athlete compensation, and that without such limitations, they would be able to command greater remuneration for their services. But the NCAA\u2019s counter was that the compensation limits pass muster under the Rule of Reason because they preserve demand for the distinct, amateurism-based product of college sports (in contrast to professional sports), while better integrating student-athletes into the campus community and improving their educational experiences. Judge Wilken\u2014the judge at the trial court level\u2014accepted<\/a> as procompetitive this distinction between collegiate and professional sports as products, but found that the only procompetitive effect of the NCAA\u2019s eligibility rules to that end was the prevention of unlimited cash payments unrelated to education<\/em>. So, because the NCAA could achieve such prevention \u201cthrough less restrictive means,\u201d Judge Wilken issued an injunction generally barring the NCAA from limiting education-related payments to student-athletes.<\/p>\n

The Ninth Circuit affirmed<\/a>. The panel, in an opinion by Chief Judge Thomas, found that Judge Wilken properly applied the Rule of Reason in a manner consistent with the Ninth Circuit\u2019s 2015 decision in O\u2019Bannon v. NCAA (O\u2019Bannon II)<\/em><\/a>. That case, which concerned NCAA rules barring student-athletes from earning compensation for their names, images, and likenesses, walked through the Rule of Reason framework and required the NCAA to change its rules to allow the provision of full cost-of-attendance scholarships for student-athletes at NCAA member schools. Most notably, the Ninth Circuit agreed that because of the \u201cinherently fact-dependent nature of a Rule of Reason analysis,\u201d the NCAA\u2019s post-O\u2019Bannon II<\/em> changes to its eligibility rules (although ordered by the court and made to relax compensation limits) were not immune from a new round of antitrust scrutiny, as O\u2019Bannon II<\/em> did not foreclose Alston<\/em> as a matter of res judicata.<\/p>\n

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\u2019s eligibility rules.[2]<\/a><\/p>\n

Fearful of this state of affairs, the NCAA petitioned<\/a> the Supreme Court for a writ of certiorari. The introduction to the NCAA\u2019s petition opened with the following ominous statement: \u201cAt issue in this case is whether the nationwide rules that define who is eligible to participate in NCAA sports will henceforth be set by the NCAA or by one federal judge in California, assisted by the imagination of plaintiffs\u2019 lawyers and subject only to deferential Ninth Circuit review.\u201d Now that the Court has granted certiorari, it will hear oral argument in the case within the next few months.<\/p>\n

In its cert petition, the NCAA repeatedly cited Board of Regents<\/em>, a case that saw the Court actually rule against the NCAA in finding that a centralized broadcasting scheme (in which the NCAA limited the output of televised games) was violative of the Sherman Act. Perhaps counterintuitively, the NCAA claimed that the case stands for the proposition that anything the NCAA does to maintain amateurism is immune from antitrust scrutiny. To support this assertion, the NCAA pointed to key lines from the opinion in Board of Regents<\/em> that described the NCAA as playing \u201ca critical role in the maintenance of a revered tradition of amateurism in college sports,\u201d while painting it as beyond doubt that the NCAA \u201cneeds ample latitude to play that role\u201d and \u201cthat the preservation of the student-athlete in higher education adds richness and diversity to intercollegiate athletics and is entirely consistent with the goals of the Sherman Act.\u201d Indeed, Justice Stevens\u2019 majority opinion stated that \u201c[i]t is reasonable to assume that most of the regulatory controls of the NCAA are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive because they enhance public interest in intercollegiate athletics.\u201d<\/p>\n

The key words in that last line are \u201cpublic interest,\u201d and it is notable that in its cert petition, when quoting that sentence from the opinion three separate times, on each occasion the NCAA left out everything after the word \u201cprocompetitive.\u201d Consider that in Board of Regents<\/em>, the Court was looking to the public interest, not to the interests of the student-athletes themselves, because the case was about the market for television broadcasts (a consumer-facing market that implicates \u201cpublic interest\u201d), not the market for athletic talent. In this way, the restraint at issue in Board of Regents<\/em> (and the interests that may have been on Justice Stevens\u2019 mind when he wrote the NCAA-quoted passage) was significantly different from what is going on in Alston<\/em>. The former case was about a television rights deal that impacted delivery of the product to consumers (i.e., the public), while the latter is about more than just broadcast rights\u2014it is about how the players themselves are compensated. But although the relevant market in Alston<\/em> is probably a labor market, it cannot be described (or analyzed) as such because of the student-athletes\u2019 unique employment status (or, more bluntly, lack thereof). So, does this distinction matter?<\/p>\n

It is noteworthy to mention what this case is not. Alston<\/em> is a dispute that sits perhaps uncomfortably adjacent to, but not within, another line of sports law cases that established and applied a so-called nonstatutory exemption from antitrust scrutiny for certain labor-related restraints of trade in professional sports leagues (the \u201cnonstatutory labor exemption,\u201d often referred to as the \u201cNSLE\u201d). The most prominent decision in this line of cases came down in 1996: Brown v. Pro Football Inc.<\/em><\/a> There, the Supreme Court looked at the NFL\u2019s unilateral imposition of a proposed employment term (one that concerned \u201ca mandatory subject of [collective] bargaining\u201d\u2014wages, hours, and working conditions) after it had reached impasse in collective bargaining with the NFL Players Association (NFLPA). In an opinion written by Justice Breyer, the Court declined to subject the term to antitrust scrutiny, even though the term was not part of an actual agreement between the parties, because post-impasse imposition of an employment term was \u201cunobjectionable as a matter of labor law and policy\u201d and antitrust scrutiny would frustrate the collective bargaining process.<\/p>\n

Other decisions followed Brown<\/em>, including the Second Circuit\u2019s landmark opinion in Clarett v. National Football League<\/em><\/a>. Writing for the panel in that case, then-Judge Sotomayor found that the NSLE prevented prospective NFL draftee Maurice Clarett (who had not been out of high school for three years when he attempted to enter the NFL Draft) from lodging an antitrust challenge to a league rule prohibiting NFL teams from drafting athletes who had been out of high school for less than three years. Mind you, Clarett was not yet part of the NFLPA, and as prospective NFL players, no one<\/em> whose NFL eligibility would be restricted by the three-year rule could have been part of the union that collectively bargained for the rule\u2019s inclusion in the NFL-NFLPA collective bargaining agreement. Yet, the court still extended the NSLE to cover this situation.<\/p>\n

The restraint of trade at issue now in Alston<\/em>\u2014a formal agreement among the NCAA\u2019s member institutions to cap student-athlete compensation\u2014is the sort of thing that would normally fall under the NSLE as a classic subject of collective bargaining if it were between management and a union. Given that those subjects are wages, hours, and working conditions, it is without question that compensation limits would ordinarily fit neatly into the \u201cwages\u201d bucket. And as discussed above, recent experience demonstrates that the NSLE is the typical way in which courts would dispose of a question like the one presented in Alston<\/em>.<\/p>\n

Just one problem: There is no collective bargaining relationship between a players\u2019 union and the NCAA such as there is between the NFL and NFLPA, NBA and NBPA, MLB and MLBPA, or other management-labor pairings in America\u2019s major sports leagues. In fact, there is no players\u2019 union at all<\/a> in collegiate sports. And because of the student-athletes\u2019 amateur status, the players are not \u201cemployees\u201d like they are in the professional sports leagues. As such, there was no discussion of the NSLE here. Instead, the lawsuit has been litigated as a regular Sherman Act case, with the NCAA arguing that the restrictions on compensation should survive a Rule of Reason analysis, applied in a not-so-exacting way on account of the fact that the NCAA is a sports organization.<\/p>\n

The notion that antitrust scrutiny of the business practices of sports organizations should be different than regular application of antitrust law is no novel concept. Such a belief dates at least to the 1922 Supreme Court case of Federal Baseball Club v. National League<\/em><\/a>, in which the Court established a full-on exemption from antitrust scrutiny for Major League Baseball. And an exchange that Justice Breyer\u2014the author of Brown<\/em>\u2014had at that case\u2019s oral argument<\/a> with Kenneth Starr (then-counsel for the players) might be instructive when thinking about Alston<\/em>. Justice Breyer began his questioning by stating, \u201cI was brought up at my mother\u2019s knee to believe that antitrust and labor law do not mix, but the very reason that the [National Labor Relations Act] was passed was because judges decided it was a fine idea, under the antitrust laws, to start enjoining trades unions and interfering with the collective bargaining process.\u201d He continued by asking, \u201cWhy is this [case] about organized sports any more than Schechter<\/em> is about chickens? Why isn\u2019t this just a case about multiemployer bargaining units throughout industry?\u201d[3]<\/a>\u00a0Starr responded that the case was different \u201cbecause of the critical structure and nature of the sports industry, which is competition in the labor market. Player associations, in contrast to unions in conventional industries, exist for the very purpose of preserving competition that the employers would like to eliminate.\u201d Starr then cited another brief in the record to make the point that \u201csports is unique. Why? Because of competition.\u201d<\/p>\n

As the NCAA discussed in its cert petition here, numerous courts have cautioned against mechanical application of antitrust law in the context of sports. Quoting a Third Circuit case, the NCAA noted that \u201c\u2018courts have generally accorded sports organizations a certain degree of deference and freedom to\u2019 define their \u2018basic rules and guidelines,\u2019 as long as the organization \u2018offers\u2019 a \u2018justification\u2019 for its rules that is not \u2018in bad faith or . . . otherwise nonsensical.\u2019\u201d Why is this so? The Court in Board of Regents<\/em> recognized that \u201c[w]hat the NCAA and its member institutions market . . . is competition itself\u2014contests . . . between competing institutions, [and] this would be completely ineffective if there were no rules . . . defin[ing] the competition to be marketed.\u201d The same logic applies to other sports leagues.<\/p>\n

To take one example, as any NFL fan knows, the NFL Draft (a restriction on the NFL\u2019s member clubs, prohibiting unfettered competition for the services of top college football prospects seeking to join the NFL) is a massive boon<\/a> to the achievement of competitive balance in the league. For the NCAA, perhaps the cap on compensation effectuates a similar result, allowing (at least in theory) schools like Fresno State to compete with powerhouses like Alabama and Clemson for five-star recruits. The NCAA made a related argument in its cert petition, claiming that mandatory compensation would undermine the defining difference of its product from that of the NFL and NBA: amateur athletes playing for the love of the game. Recall that under a traditional Rule of Reason analysis, the NCAA would need to demonstrate the procompetitive impact of the trade restraint to survive Sherman Act scrutiny. It is not clear whether this means procompetitive from the standpoint of the consumer (good for the NCAA) or procompetitive for the student-athletes (perhaps not so good for the NCAA).<\/p>\n

To be sure, the Ninth Circuit expressed some skepticism about the NCAA\u2019s argument that amateurism is exceedingly important to the product, noting evidence that \u201cschool loyalty and geography\u201d are probably the driving factors in consumer demand. But being forced to even justify, in federal court, amateurism\u2019s importance to the business model is a step beyond what the NCAA thinks it should be required to do. Citing a footnote in Board of Regents<\/em>, the NCAA expressed a preference that courts sustain all of the Association\u2019s product-related restraints under the Sherman Act in \u201cthe twinkling of an eye.\u201d And, because of the unique nature of college sports, the NCAA claims that student-athletes\u2019 lack of compensation is<\/em> an integral aspect of the product.<\/p>\n

Is this odd? It may at least demonstrate the awkward fit of using antitrust law to burn down the system of amateur college athletics. Even the Ninth Circuit\u2019s rulings against the NCAA have indicated potential discomfort with the upheaval that full-on invalidation of the rules would effectuate. In O\u2019Bannon II<\/em>, the Ninth Circuit affirmed the district court\u2019s ruling that the NCAA needed to allow schools to offer scholarships to student-athletes all the way up to the full cost-of-attendance, but vacated another part of the lower court judgment and injunction that would have required the allowance of $5,000 payments of deferred compensation. Make no mistake: Whatever you think of the merits of establishing a free market for student-athletes as a policy goal, effectuating such an end by judicial fiat could be a drastic way to go about it.<\/p>\n

This is, after all, why the NCAA appealed the Ninth Circuit\u2019s ruling in Alston<\/em>: It fears a constant deluge of antitrust challenges to its eligibility rules, preferring to run its own affairs as opposed to constantly adjusting to new injunctions from individual federal judges. The Court will need to decide if the underlying nature of this dispute can be properly distinguished from what Justice Stevens was thinking about in Board of Regents<\/em> when he wrote the famous lines on which the NCAA now relies to secure seemingly blanket antitrust protection for amateurism-related regulations.[4]<\/a> If it can be, does the fact that we are talking about a sports organization matter?<\/p>\n

It remains to be seen whether the Court buys the argument that the unique nature of sports\u2014or at least the unique nature of the NCAA itself, as an organization promoting amateur athletic competition\u2014is sufficient to foreclose future antitrust scrutiny of NCAA eligibility rules, based on the teachings of Board of Regents<\/em>. Oral argument should give us a better sense of the current Justices\u2019 views on the subject. In particular, Justice Breyer\u2019s approach to the question presented may indicate whether he believes that, unlike Schechter<\/em>, Alston<\/em> really is a case specific to a particular industry. If a majority of the Court thinks so, the NCAA may walk away with far more latitude to limit student-athlete compensation than it currently enjoys. Either way, Alston<\/em> is shaping up to significantly impact the debate about college athletics, and sports law enthusiasts should be excited to see what comes next.<\/p>\n

 <\/p>\n

[1]<\/a> This essay omits discussion of per se<\/em> rules, another aspect of antitrust review not at issue here.<\/p>\n

[2]<\/a> In an ideal world for the NCAA, Congress would grant it immunity from antitrust law. Indeed, that is what the NCAA has requested<\/a> in regard to federal legislation on the subject of publicity rights for student-athletes. For an argument that Congress should refrain from acceding to this request, see<\/em> Thaddeus Kennedy, NCAA and an Antitrust Exemption: The Death of College Athletes\u2019 Rights<\/em>, Harv. J. Sports & Ent. L. Online<\/strong> (Aug. 31, 2020), https:\/\/journals.law.harvard.edu\/jsel\/2020\/08\/ncaa-and-an-antitrust-exemption-the-death-of-college-athletes-rights<\/a>. This essay was published as part of a special Summer 2020 edition of the Harvard Journal of Sports and Entertainment Law on NCAA name, image, and likeness legislation.<\/p>\n

[3]<\/a> \u201cSchechter<\/em>\u201d refers to A. L. A. Schechter\u2019s Poultry Corporation v. United States<\/em>, 295 U.S. 495 (1935), a New Deal-era case in which the Supreme Court invalidated, under the so-called nondelegation doctrine, the National Industrial Recovery Act\u2019s unconstitutional delegation of legislative power to the president. The case concerned a New York City chicken slaughterhouse that was indicted for failing to follow certain regulations on the sale of chicken, promulgated pursuant to the Act. For some reflections on the tortured history of the nondelegation doctrine, see<\/em> Cass Sunstein, Nondelegation Canons<\/em>, 67 U. Chi. L. Rev.<\/strong> 315 (2000).<\/p>\n

[4]<\/a> Given the NCAA\u2019s recent<\/a> explosion of revenues, there is perhaps a separate discussion to be had about whether Justice Stevens\u2019s reflection in Board of Regents <\/em>has even stood the test of time; that important question is not addressed here.<\/p>\n

 <\/p>\n

Eli Nachmany is a second-year law student at Harvard Law School, where he serves as Managing Editor (Print) of the <\/em>Harvard Journal of Sports and Entertainment Law.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Cert Granted in\u00a0Alston: Revisiting\u00a0Board of Regents and the Uniqueness of Antitrust Law’s Applicability to Sports in Light of the NCAA’s Cert Petition As Congress debates federal legislation on the subject of publicity rights for student-athletes, the NCAA works to rebound from a COVID-marred year, and the Supreme Court considers the NCAA\u2019s appeal in NCAA v. 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