NCAA Rules Limiting Education-Related Benefits Violate Antitrust Laws
Before the United States Supreme Court; Opinion by Justice Gorsuch; Concurring Opinion by Justice Kavanaugh; On writs of certiorari to the United States Court of Appeals for the Ninth Circuit.
Summary: NCAA’s restrictions on education-related benefits to student-athletes do not pass antitrust scrutiny; the compensation restrictions were properly subjected to a “rule of reason” analysis.
In the underlying district court case, current and former student-athletes (the “Plaintiffs”) filed a class action against the NCAA and eleven Division I conferences (the “NCAA”) alleging various NCAA rules restricting compensation of student-athletes violate §1 of the Sherman Act because the rules limit compensation Plaintiffs may receive in exchange for their athletic services. The district court upheld NCAA rules limiting athletic scholarships to the full cost of attendance and limiting other compensation related to athletic performance, but found unlawful and enjoined NCAA rules limiting education-related benefits offered by schools or conferences to student athletes, such as graduate/vocational school scholarships, payments for tutoring, and paid post-eligibility internships. In reaching these conclusions, the court undertook a rule of reason analysis, a fact-specific assessment of market power and structure to assess whether the anti-competitive effects of the challenged restraints outweigh the pro-competitive benefits. Both parties appealed to the Ninth Circuit, and the Ninth Circuit affirmed. The NCAA appealed to the Supreme Court.
The Supreme Court affirmed in a unanimous opinion. First, the Court rejected the NCAA’s argument that the lower courts should have used the less rigorous “quick look” review instead of the “rule of reason” analysis. The Court rejected the NCAA’s argument that it was exempt from a rule of reason review because it was a joint venture necessitating collaboration among its members, finding that its joint-venture status did not warrant “quick look” approval in view of the NCAA’s admitted monopsony power and harm to competition. Second, the Court rejected the NCAA’s argument that National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., 468 U.S. 85 (1984) expressly approved limits on student-athlete compensation. Rather, Board of Regents merely did not condemn the NCAA’s broadcasting restraints as per se unlawful because some horizontal restraints on competition are essential to the NCAA’s ability to offer its product. Third, the Court rejected the NCAA’s argument that it and its member schools are not subject to the rule of reason analysis because they are not commercial enterprises, but instead serve the societally important non-commercial objective of maintaining amateurism in college sports. The Court has regularly refused offer special dispensation from the Sherman Act for restraints of trade that serve important social objectives beyond enhancing competition. Fourth, the Court disagreed with the NCAA’s argument that the district court required the NCAA to show that the NCAA’s rules constituted the least restrictive means of preserving consumer demand. Instead, the district court found that the NCAA’s restraints were “patently and inexplicably” stricter than necessary to achieve the procompetitive benefits the league had demonstrated. Fifth, the Court rejected the NCAA’s argument that the district court “impermissibly redefined” the NCAA’s product by rejecting the NCAA’s definition of amateurism. A party cannot relabel a restraint as a product feature and declare it “immune from §1 scrutiny.” Moreover, the district court found the NCAA did not have a consistent definition of amateurism. Lastly, the Court rejected the NCAA’s argument that the injunction improperly micromanaged the NCAA’s business because the district court extended the NCAA considerable leeway and flexibility.
Editor: Paul Stewart