In a 9-0 decision, the Supreme Court ruled that the NCAA’s limits on educational compensation for student-athletes violated the Sherman Act. Student-athletes can now be awarded internships, post-graduate tuition, and other education benefits by their schools. These benefits used to have low caps on them or weren’t allowed to be offered at all.
However, the NCAA and the student-athletes who brought the suit still have grievances. The NCAA doesn’t like that its limits on educational compensation are gone. Students don’t like that educational compensation limits were the only limits struck down by the Supreme Court. They wanted the other limits on athletic compensation to fall, too.
But there’s hope for the students. As Justice Kavanaugh’s concurring opinion notes, this case offers a blueprint for future lawsuits against the NCAA for its high compensation limits. That’s great for student-athletes who want to be paid for their work, but terrible news for the NCAA.
Why The NCAA Has Compensation Limits In The First Place
The NCAA began as a vital supervising body. In the 1880s, college athletes were paid tens of thousands of dollars and given lavish gifts, especially in college football. That led to athletes who either put graduation off or made appearances at different colleges to keep earning fantastic amounts of money. But college football was also dangerous for athletes. Because of ruthless plays and little protective gear, college football players died during the game. They weren’t isolated incidents, either:
- Seven college football players died in 1893.
- 12 college football players died in 1894.
- 18 college football players died in 1905.
President Roosevelt formed the NCAA in 1905, which set safety standards for college athletes. But the NCAA didn’t make a significant move on student compensation until 1948. That’s when the NCAA adopted the Sanity Code, which allowed the NCAA to suspend or expel players that violated the compensation rules.
Those payment limits and credible threats turned college sports into a more legitimate athletic competition among students. Students were treated more like students instead of professional athletes.
However, the NCAA’s payment limits slowly swung to the opposite extreme. Instead of being too generous, NCAA compensation restrictions became too strict. NCAA rules forbid student-athletes from using their names, images, or likenesses like professional athletes can. Student-athletes lose a lot of money from that restriction, and there are many others like it. That’s why they brought the lawsuit against the organization founded to protect them.
The Two Main Reasons The NCAA Thought It Should’ve Won
The NCAA didn’t go down without a fight. However, the fight they waged was pitiful. It invoked three major reasons that it was justified in setting student-athlete compensation so low. Because of the district court’s ruling, this case only covered the limits on educational compensation. But if–and when–the NCAA is challenged on its other compensation limits, these reasons may pop up again. (If you want to know why the NCAA will likely use the same losing arguments again, skip to the end.)
Standard Of Legal Reasoning
When the courts hear an antitrust case, they use different levels of analysis depending on how flagrant the antitrust offense is. In this case, the courts used the “rule of reason” analysis. That’s when the courts weigh several factors concerning a contract’s effect on competition to see whether it’s “unreasonably restrictive” on the market. It just means the courts looked at the market and the NCAA rules’ impact on industry competition.
The NCAA thought that its rules should’ve been analyzed under a “more deferential” framework. It thought something easier should be used because the NCAA is a joint venture, because of a comment in a previous NCAA lawsuit, and because it’s not a “commercial enterprise.”
All three reasons are witheringly stupid.
Joint Venture Status
The NCAA’s status as a joint venture doesn’t matter. Joint ventures can encourage competition almost by definition. So, they can be procompetitive forces and leverage their status in antitrust cases. But the NCAA has a monopoly on the elite college sports market, which outweighs whatever procompetitive force its corporate structure may bring to the industry.
Comment In Previous Lawsuit
In 1984, the NCAA was sued by the Oklahoma Board of Regents in a dispute about broadcasting rights for college games. In it, the judge wrote this sentence:
“The NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports. There can be no question but that it needs ample latitude to play that role, or that 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.”
The NCAA thinks that this sentence is legally binding and should influence how the Supreme Court rules today. But the broadcasting rights case has no bearing on the educational compensation case. A couple of sentences out of context don’t create a binding legal argument. Even if it did, the fact that this was from a different case with different facts and different stakes renders the snippets moot. Or as Justice Gorsuch wrote:
“This Court may be ‘infallible only because we are final,’ …but those sorts of stray comments are neither.”
Commercial Enterprise
The NCAA argues that it should be exempt from the rule of reason analysis because it’s a non-profit organization, not a commercial enterprise. Again, its monopoly renders that point moot. But the NCAA’s non-profit status is “questionable” anyway due to the billions of dollars that the NCAA generates. Profit maximization is a bad look for a non-profit trying to appeal an antitrust ruling.
The NCAA’s Non-Definition Of “Amateur”
The second main reason the NCAA lost its appeal was its definition of “amateur sports.” It claims that athlete compensation limits are a defining factor of college sports. The NCAA claims that increasing those limits would be equivalent to offering student-athletes professional-level wages. In their eyes, that would blur the line between professional and amateur sports and bring us back to the days of exorbitant college corruption.
That fear is unfounded, too. No college sports fan will struggle to tell the difference between college and professional sports because of athletes’ salaries. The NCAA also has plenty of room to increase student compensation without paying them millions of dollars.
But the Supreme Court’s opinion raised an even more important issue. The NCAA has no standard definition of amateur sports. That makes it almost impossible for the NCAA to establish what “amateurism” means in court. Justice Gorsuch also pointed out that the NCAA enacted its compensation restrictions “without any reference to ‘considerations of consumer demand.’”
The definition of amateurism in sports didn’t matter until the NCAA needed it to. That seems to make amateurism impossible to invoke as a defense for anything the NCAA does.
The Consequences That The NCAA Fears
The NCAA lost in part because of the poor arguments it used to defend itself. But it claims to have the same fears that it did in the wake of the district court’s ruling. The Opinion of the Court identified three main concerns the NCAA had about the ruling and dismantled them one by one. The NCAA thinks that:
- Schools will use educational compensation to skirt around payment limits.
- Being forced to increase payment limits on awards for academic and graduation achievements equates to a professional salary.
- Schools will abuse educational benefits to give athletes ridiculous perks.
Each of these concerns is unfounded.
Abusing Educational Benefits
Fearing that schools will use internships to make up for payment limits seems like a genuine concern. However, the district court’s ruling still gives the NCAA all the room it needs to tell real internships from fake ones. The NCAA can still prohibit companies from offering glitzy internships that only serve to bribe student-athletes. Despite the ruling, the NCAA retains substantial flexibility and enforcement power.
Professional-Level Salaries
The NCAA’s concerns about educational compensation constituting professional-level salaries are absurd. The NCAA retains its right to set criteria for which educational benefits are legitimate and which are corrupt. As a side note, individual conferences can set these limits too. And as Justice Gorsuch notes, “individual conferences may adopt even stricter ones [policies].” There’s no need for concern about the NCAA’s ability to police its athletes’ new compensation packages.
Extravagant Gifts
In another what-if Hail Mary, the NCAA raised concerns about schools offering students “luxury cars to get to class” to pay athletes. Again, the NCAA retains the power to prevent that kind of nonsense. Justice Gorsuch even wrote that “nothing stops it [the NCAA] from enforcing a ‘no Lamborghini’ rule.”
The consequences of this case don’t strip the NCAA of the ability to regulate athletes’ educational compensation. It just strikes down the current set of rules and sets a few guidelines for the NCAA to follow in the future. It’s a far cry from the “judicial micromanagement” that the NCAA claims to fear.
Why The NCAA Is Doomed In The Future Too
This lawsuit strikes down rules on a narrow subset of NCAA compensation rules. However, student-athletes and their legal teams now have an example case for challenges to untouched sections of the NCAA’s compensation rules. They weren’t challenged at the Supreme Court, so the ruling didn’t touch them. However, Justice Kavanaugh’s concurring opinion offers a dire warning to the NCAA:
“…There are serious questions whether the NCAA’s concurring remaining compensation rules can pass muster under ordinary rule of reason scrutiny. Under the rule of reason, the NCAA must supply a legally valid procompetitive justification for its remaining compensation rules. As I see it, however, the NCAA may lack such a justification.”
He’s even blunter about why the NCAA lost so badly in a now widely quoted section of his concurring opinion:
“The NCAA’s business model would be flatly illegal in almost any other industry in America. All of the restaurants in a region cannot come together to cut cooks’ wages on the theory that ‘customers prefer’ to eat food from low-paid cooks.”
“Law firms cannot conspire to cabin lawyers’ salaries in the name of providing legal services out of a ‘love of the law.’”
“Hospitals cannot agree to cap nurses’ income in order to create a ‘purer’ form of helping the sick.”
“News organizations cannot join forces to curtail pay to reporters to preserve a ‘tradition’ of public-minded journalism.”
“Movie studios cannot collude to slash benefits to camera crews to kindle a ‘spirit of amateurism’ in Hollywood. Price-fixing labor is price-fixing labor.”
In other words, the NCAA is clearly in the wrong, regardless of its non-profit status, joint venture status, excuses, obfuscations, and desperate legal nonsense. It was true in this case, and it’ll likely be true when the next round of students and lawyers challenge a draconian compensation rule.
Why The NCAA Used Such Poor Arguments
Many may be wondering why the NCAA used arguments that were obviously fallacious, false, or otherwise spurious. A talented team of lawyers should’ve been able to put something together that was better than a quote from a 34-year-old case and a definition for amateur sports that had never been defined. The NCAA probably does have lawyers who can read, so that leaves one distasteful option:
They knew what they were doing was wrong.
If that sounds too cynical, it’s worth remembering Hanlon’s Razor:
“Never attribute to malice that which is explained by stupidity.”
Unfortunately, we can rule stupidity out, leaving greed. NCAA’s new March Madness deal alone is worth $1.1 billion per year. Top conference commissioners earn $2-5 million per year. Even Division I coach assistants can rake in $2.5 million each year. That’s a lot of money that a lot of people seem reluctant to split with underpaid college athletes.
A ruling in the NCAA’s favor would’ve not only meant those at the top of the NCAA would’ve gotten to keep their money. It would’ve also shielded the NCAA from future challenges. The stakes were high, but no legal loophole could salvage the NCAA’s weak case. This case was the NCAA’s last chance to escape the responsibility of compensating its student-athletes fairly.
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