OPINION ANALYSIS

NCAA athletes win 9-0 on educational perks as Kavanaugh calls out ban on direct payments

The Supreme Court on Monday reshaped the relationship between universities and the athletes who play college sports. In an opinion by Justice Neil Gorsuch, the justices unanimously ruled that the National Collegiate Athletic Association cannot prohibit its member schools from providing athletes with certain forms of education-related benefits, such as paid post-graduate internships, scholarships for graduate school, or free laptops or musical instruments.

Although the decision did not involve cash payments to college athletes, it may pave the way for a future Supreme Court ruling on whether college athletes should be able to earn money for playing sports – either directly from their universities or through lucrative endorsement deals. In a concurring opinion, Justice Brett Kavanaugh wrote that the NCAA’s policies banning those types of compensation “raise serious questions under the antitrust laws.”

Monday’s decision in NCAA v. Alston ended a dispute that began seven years ago as a class-action lawsuit filed against the NCAA and the major collegiate athletic conferences by athletes who played Division I football and basketball. Under the NCAA’s rules, universities generally are allowed to provide athletes with scholarships covering tuition while they are NCAA-eligible, and they are allowed to cover basic expenses like textbooks and room and board. But most other forms of compensation are banned.

The athletes contended in their lawsuit that the NCAA’s restrictions violate federal antitrust laws by barring the athletes from receiving fair-market compensation for their labor. A federal district court in California agreed in part: It ruled that the NCAA could restrict benefits that are unrelated to education (such as cash salaries), but it barred the NCAA from limiting education-related benefits. After the U.S. Court of Appeals for the 9th Circuit upheld that decision, the NCAA and the athletic conferences went to the Supreme Court, which late last year agreed to take up the case.

In a 35-page decision, Gorsuch first addressed which legal test should apply to the NCAA’s rules restricting athletes’ compensation. The district court applied the most common test in antitrust law, known as the “rule of reason.” The NCAA contended that a less stringent test should apply because the association and its members act as a “joint venture” and have to work together “to offer consumers the benefit of intercollegiate athletic competition.” But Gorsuch noted that less stringent tests apply only in extreme cases, when it is easy to determine what impact an agreement will have on competition. That is not the case here, Gorsuch stressed, because the NCAA and its members control the market for the services of college athletes. The potential anti-competitive effects of the NCAA’s restrictions, he concluded, demand a searching inquiry.

Gorsuch also dismissed the NCAA’s efforts to rely on the Supreme Court’s 1984 ruling in NCAA v. Board of Regents of University of Oklahoma, involving an antitrust challenge to the NCAA’s plan to televise college football games. The NCAA pointed to language in that decision indicating that it “plays a critical role in the maintenance of a revered tradition of amateurism in college sports” and “needs ample latitude to play that role” as evidence that the NCAA’s actions to preserve amateurism are “entirely consistent” with the federal antitrust law. But Gorsuch noted that restrictions on compensation were not at issue in the Board of Regents case. And although that ruling “may suggest that courts should take care when assessing the NCAA’s restraints on student-athlete compensation,” Gorsuch observed, it certainly doesn’t mean that courts “must reflexively reject all challenges to the NCAA’s compensation restrictions.”

And in any event, Gorsuch continued, the realities of college sports have changed significantly since 1984. Division I football and basketball programs now bring in billions of dollars each year, and the NCAA has established funds for college athletes that distribute more than $100 million per year.  

Gorsuch similarly rebuffed the NCAA’s argument that the restrictions on compensation are subject to less searching scrutiny because its work to preserve amateurism in college sports effectively means that the NCAA and its members are not commercial enterprises. He suggested that the association seemed to be seeking “a sort of judicially ordained immunity” from federal antitrust law merely because its restrictions involve “the intersection of higher education, sports, and money.” The NCAA, Gorsuch said, is free to make that argument to Congress, which is currently considering legislation that would (among other things) allow college athletes to enter into endorsement deals. Efforts to create a federal standard are a response to state laws, scheduled to go into effect on July 1, allowing endorsement deals for college athletes in Alabama, Florida, Georgia, Mississippi, New Mexico and Texas.

Gorsuch also rejected the NCAA’s argument that the district court’s ruling would “micromanage” the organization’s business. The district court, Gorsuch explained, merely barred the NCAA from imposing restraints on benefits related to education. And it did so, he added, only after concluding that “relaxing these restrictions would not blur the distinction between college and professional sports and thus impair demand for college sports” – a cornerstone of the NCAA’s argument. Moreover, Gorsuch noted, the district court gave the NCAA “considerable leeway” in deciding how to define what constitutes an education-related benefit.

In his final paragraph, Gorsuch outlined the dilemma facing the court. Some people may think that the district court should have gone further, he suggested, while “others will think the district court went too far by undervaluing the social benefits associated with amateur athletics.” But in the end, Gorsuch emphasized, the Supreme Court agreed with the 9th Circuit that although “[t]he national debate about amateurism in college sports is important,” it is not the Supreme Court’s job to resolve it. Instead, Gorsuch observed, the court’s job is to determine whether the district court properly applied principles of antitrust law to this dispute – which, Gorsuch concluded, it did.

Kavanaugh joined the court’s opinion in full, but he also wrote a separate concurring opinion in which he questioned the legality of the remaining restrictions on benefits for college athletes. He made clear that although those restrictions were not before the court in this case, Monday’s ruling established a framework for future challenges to the restrictions – and, he wrote, there are “serious questions” about whether those rules “can pass muster” under that framework. Kavanaugh, an avid sports fan who coaches his daughters’ basketball teams and unsuccessfully tried out for the varsity basketball team while an undergraduate at Yale, acknowledged that college athletics includes “important traditions that have become part of the fabric of America.” But, he warned, the “NCAA is not above the law.”

This article was originally published at Howe on the Court.