Legal Alert

Supreme Court Issues Highly Anticipated Decision in NCAA Antitrust Suit

By Stephen Kastenberg, Marcel Pratt, and Elizabeth Wingfield
June 21, 2021

Summary

The Supreme Court on Monday unanimously ruled that the National Collegiate Athletic Association (NCAA) rules restricting student-athletes educational benefits are not entitled to deference under the antitrust laws and are subject to antitrust scrutiny under a "rule-of-reason" analysis. The Court upheld the trial court injunction against NCAA rules limiting the education-related benefits schools may offer student-athletes—such as rules that prohibit schools from offering graduate or vocational school scholarships. Justice Brett Kavanaugh’s concurrence cautioned that while the decision only considered NCAA restrictions on educational benefits, under its reasoning there are “serious questions” regarding whether the NCAA’s remaining restrictions on non-educational compensation are permissible under antitrust laws.

The Upshot

  • Courts are likely to clarify what does and does not constitute educational benefits under this ruling, so schools should look for future updates to NCAA rules regarding what benefits they can and cannot offer student-athletes. The trial court order, affirmed by the Supreme Court, permits the NCAA to develop its own definition of educational benefits and to seek modification of the court’s injunction to reflect that definition.
  • The Court’s ruling is likely to encourage other student-athletes to challenge the NCAA’s rules, especially the current limits on student-athlete compensation. Justice Kavanaugh’s concurring opinion emphasized that “serious questions” exist regarding whether the NCAA’s remaining compensation rules are lawful, remarking that the NCAA’s business model would be “flatly illegal in almost any other industry in America.”
  • The NCAA, other collegiate athletic conferences, and individual schools also may see lawsuits seeking damages (which are trebled under the antitrust laws), attorneys’ fees, and/or injunctions for adopting and complying with the enjoined education benefits rules or any other compensation limitation later found to be unlawful under the antitrust laws.

The Bottom Line

The NCAA’s and other collegiate athletic conferences’ rules limiting student-athlete educational benefits are subject to review under traditional antitrust analysis, not a more deferential standard of review that had been applied in the past. Immediately, the Court’s ruling means that the challenged NCAA rules limiting the education-related benefits that may be conferred upon student-athletes remain enjoined. 

Schools should also be on the lookout for further challenges and changes to the NCAA rules.

On June 21, 2021, the U.S. Supreme Court issued a ruling in favor of student-athletes' in the highly anticipated antitrust suit, NCAA v. Alston, et.al.. No. 20-512 (June 21, 2021). The unanimous ruling affirmed the lower courts’ decisions enjoining the National Collegiate Athletic Association’s (NCAA) rules limiting the educational benefits student-athletes may receive (such as laptops, vocational and graduate scholarships, and paid post-eligibility scholarships). The Court did not consider the lower courts’ rulings upholding the NCAA’s limits on non-educational benefits and compensation student athletes may receive.

Procedural History

In 2014, current and former student-athletes brought suit, arguing the NCAA’s limits on student athlete compensation and educational benefits violate federal antitrust laws by barring athletes from receiving fair-market compensation for their labor. Following a 10-day trial, the trial court ruled partially in favor of the student-athletes and partially in favor of the NCAA, finding that the NCAA can restrict compensation and benefits as long as they are unrelated to education but enjoining the NCAA’s limitation on education-related benefits. The district court invited the NCAA to submit a proposed definition of what benefits are education-related and to seek modification of the court’s injunction to align with that proposed definition.

Both parties appealed the trial court’s decision and the Ninth Circuit affirmed. The NCAA sought certiorari, a judicial review, before the U.S. Supreme Court, which the Court granted. The student-athletes did not renew their across-the-board challenge to the NCAA’s rules; the Court considered only the subset of NCAA rules restricting education-related benefits that the district court enjoined.

Before the Supreme Court, the NCAA argued that as a member organization that regulates amateur athletics it is entitled to deference and that courts applying antitrust laws should not apply the full “rule of reason” test when evaluating agreements between it and its member schools. Rather, the NCAA proposed that it is entitled to immunity, or, in the alternative, its rules only should receive an abbreviated, deferential review — or a “quick look.” The Department of Justice submitted an amicus brief arguing that the fact that the NCAA regulates amateur sports should not insulate it from full antitrust scrutiny under the full “rule of reason” test, the test applied by the trial court.

The Supreme Court – Majority Opinion

The Court found that the challenged NCAA rules, which amounted to price-fixing the compensation of student-athletes, are not so unlikely to cause anticompetitive effects as to warrant anything less than a full rule of reason analysis.

Here, the full rule of reason analysis meant that the student-athletes challenging NCAA rules had the initial burden of showing that the rules have a substantial anticompetitive effect. As the student-athletes made the showing that the rules significantly reduced competition by placing limits on education-related benefits schools may use to compete for student-athlete labor, the burden shifted to the NCAA to present a procompetitive justification for the rules. The NCAA presented the procompetitive rationale of ensuring the distinct character of amateur athletics, which the NCAA argued consumers enjoy as a separate product from professional sports. After the NCAA presented its justification, the burden shifted back to the student-athletes to explain how the proffered procompetitive efficiencies could be achieved through less anticompetitive means. 

The Court found that the district court applied the rule of reason appropriately in finding that the rules limiting education-related benefits were unnecessarily restrictive to meet the goal of protecting the distinct nature of amateur athletics. In so doing, the Court noted that the evidence did not demonstrate that consumers were harmed when student-athletes received educational benefits beyond those that were disallowed by the NCAA’s enjoined rules.

Justice Kavanaugh’s Concurring Opinion

Justice Kavanaugh joined the majority opinion in full but wrote separately to highlight that while the only issue before the Court was NCAA-imposed limits on education-related benefits, in his view the majority opinion applies to restrictions on student-athlete compensation more generally. Though the issue was not before the Court, Judge Kavanaugh expressed skepticism that the NCAA could present sufficient procompetitive effects to justify its limits on non-educational student-athlete benefits and compensation. Justice Kavanaugh was dubious of the NCAA’s argument that consumers benefit from the NCAA’s limits on student-athlete compensation. He also noted that college and university sports generate significant revenue, and that he perceives an imbalance in the NCAA’s current regime that bars student-athletes—whose labor helps produce the revenue—from receiving a share of it. In addition, Justice Kavanaugh acknowledged that compensating student-athletes could create a number of logistical challenges and policy questions, but stated that the NCAA could resolve many of those issues without litigation. 

Takeaways

Immediately, the Supreme Court’s decision means that the challenged NCAA rules limiting educational benefits for student-athletes remain enjoined. If the NCAA chooses to take advantage of the district court’s order allowing it to submit a proposed definition of what benefits are or are not education related, we could see further guidance on the kinds of benefits schools may or may not provide their student-athletes.

More broadly, the decision is likely to encourage further challenges to NCAA rules and rules imposed by collegiate athletic conferences regarding limits on both educational and non-educational benefits and compensation for student-athletes. The lawsuits, which are likely to be against both collegiate athletic conferences and individual schools that agree to and enforce conference rules, could seek damages (which are trebled under the antitrust laws), attorneys’ fees, and/or injunctions for adopting and complying with the enjoined education benefits rules or any other compensation limitation later found to be unlawful under the antitrust laws.


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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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