Supreme Court Justices foreshadow a turbulent future for the NCAA
On June 21, 2021, the Supreme Court unanimously affirmed the Northern District of California’s findings in National Collegiate Athletic Association v. Alston concerning the NCAA’s rules limiting college athlete compensation. Leaving no doubt about the need for existential change from within the NCAA, the Supreme Court agreed that the NCAA’s compensation limits for “education-related benefits” violate Section 1 of the Sherman Act. In so doing, the Court rejected the NCAA’s primary argument that it should be granted deference in setting rules on compensation, noting that the NCAA was correctly subjected to a “Rule of Reason” analysis by the district court, which had been affirmed by the Ninth Circuit.
The Supreme Court also rejected the NCAA’s long-standing and incorrect use of Board of Regents v. NCAA to shield its college athlete compensation limits from antitrust scrutiny, making clear that nothing in that case saves the NCAA from such scrutiny going forward. Justice Kavanaugh, in a concurring opinion, went even further, noting that the NCAA’s business model would be “flatly illegal” in any other industry and foreshadowing additional litigation on the NCAA’s remaining compensation rules. The Court sent a clear message to the NCAA—college athletes deserve better, and the time for change is now.
National Collegiate Athletic Association v. Alston follows in the footsteps of Hausfeld’s pioneering litigation in O’Bannon v. NCAA, brought in 2009. In O’Bannon, college athletes challenged the NCAA’s rules prohibiting payment for name, image, and likeness rights and, for the first time, it was held that the NCAA was liable for antitrust violations for fixing compensation for college athletes.
Commencing in 2014, Alston built on O’Bannon by expanding the antitrust challenge to a broader set of compensation rules. In a 50-page opinion, Judge Claudia Wilken of the Northern District of California held that the NCAA’s restrictions on “non-cash education-related benefits” violated antitrust laws under the Sherman Act. However, Judge Wilken left in place the NCAA’s restrictions on compensation and benefits unrelated to education. Both sides appealed Judge Wilken’s decision to the Ninth Circuit, which affirmed in full, declaring that the district court “struck the right balance in crafting a remedy that both prevents anticompetitive harm to Student-Athletes while serving the procompetitive purpose of preserving the popularity of college sports.” Unsatisfied with that result, the NCAA petitioned the Supreme Court seeking reversal.
The Supreme Court affirms the NCAA’s antitrust violations
Justice Gorsuch authored the Court’s unanimous opinion on the NCAA’s i appeal. The NCAA requested that the Court rule that “all of its existing restraints on athlete compensation survive antitrust scrutiny,” first arguing that the compensation rules in question were improperly subjected to a “Rule of Reason” analysis, and then challenging the application of the rule based on a combination of accusations of error, lack of deference, and unfairness. Both arguments failed.
“Rule of Reason” as the appropriate framework
The NCAA argued that the district court improperly subjected its compensation rules to a “Rule of Reason” analysis when it should have applied an “abbreviated deferential review” or a “quick look.” The NCAA made three arguments in support of this position.
First, the NCAA characterized itself as a joint venture and argued that joint ventures are entitled to a deferential review. Justice Gorsuch succinctly dismissed this argument, noting that “most restraints challenged under the Sherman Act—including most joint venture restrictions—are subject to the ‘Rule of Reason’ …” The Court also noted that even if the NCAA is a joint venture, it is one with monopoly power, making the “Rule of Reason’s” fact-specific analysis particularly appropriate.
Next, the NCAA argued that Board of Regents precedent expressly approved limits on compensation, barring the matter from review in the district court. Justice Gorsuch dismissed this argument as well, noting that the NCAA’s reading of Board of Regents relied on a “passing comment” that was not “binding” or “dispositive” in the case before it. The Court also noted the markedly changed reality of college sports today as compared to 1984, when Board of Regents was decided, making it “particularly unwise to treat an aside in Board of Regents as more than that.”
Finally, the NCAA argued that a “Rule of Reason” analysis was inappropriate because its member schools are not “ ‘commercial enterprises,’ but rather institutions that exist to further the societally important noncommercial objective of undergraduate education.” In response, Justice Gorsuch pointed out that the Court has historically refused “special dispensations from the Sherman Act,” and that any argument that the NCAA should be exempt from the usual operation of the antitrust laws is “properly addressed to Congress.”
The NCAA’s next arguments criticized the way Judge Wilken applied the “Rule of Reason” analysis to the rules in question. Again, the NCAA made three arguments in support of its position, none of which prevailed.
First, the NCAA argued that in the second step of its “Rule of Reason” analysis, the district court improperly imposed a “least restrictive means” standard on the compensation rules being analyzed. Justice Gorsuch agreed that such a standard would be “erroneous and overly intrusive,” but it made clear that “the district court nowhere expressly or effectively required the NCAA to show that its rules met that standard.”
Next, the NCAA made the bold argument that the district court “impermissibly redefined” its “product” —amateurism—by replacing the NCAA’s definition with the court’s preferred conception. The Court agreed that “firms deserve substantial latitude to fashion agreements that serve legitimate business interests.” However, as Justice Gorsuch noted, “none of that means a party can relabel a restraint as a product feature and declare it ‘immune from § 1 scrutiny.’” In other words, the NCAA’s sleight of hand—arguing that “amateurism,” or prohibiting compensation to college athletes, is the essential product feature, and not an anticompetitive restraint—did not stand up to the Supreme Court’s scrutiny. The Court also referred to the district court’s factual findings, which showed that the NCAA has never adopted a consistent definition of the term amateurism, and that the NCAA’s rules and restrictions on compensation have “shifted markedly over time,” further demonstrating the malleability of the product definition to which the NCAA clung.
Finally, the NCAA argued that the district court’s ruling threatened to micromanage the NCAA’s business. Justice Gorsuch agreed with the NCAA that judges must be sensitive to the possibility that the “continuing supervision of a highly detailed decree” could wind up impairing rather than enhancing competition. Nevertheless, the Court commented, the district court had “honored these principles” by enjoining only the restraints on education-related benefits. Thus, in agreeing with the district court’s decision to apply a “Rule of Reason” analysis as well as the actual application, the Supreme Court affirmed the Northern District’s holdings that the NCAA’s compensation rules limiting “education-related benefits” for college athletes violate Section 1 of the Sherman Act, but that those relating to athletic performance do not.
Justice Kavanaugh’s concurrence: “The NCAA is not above the law.”
In his concurring opinion, Justice Kavanaugh went even further than the majority, pulling no punches. He stated the case succinctly: “price-fixing labor is price-fixing labor.” He also made clear that “the NCAA’s business model would be flatly illegal in almost any other industry in America.” Most striking, however, as if inviting litigation and foreshadowing the NCAA’s future, Justice Kavanaugh declared that “the NCAA’s remaining compensation rules also raise serious questions under the antitrust laws.” Furthering that invitation, Justice Kavanaugh made clear that the “Rule of Reason” is the appropriate level of antitrust scrutiny to be used when analyzing these “remaining compensation rules” and, reinforcing the majority’s dismissal of the NCAA’s long-standing reliance on Board of Regents, Justice Kavanaugh noted that “stray comments” about college sports and amateurism in Board of Regents carry no weight when evaluating the legality of the NCAA’s current compensation rules.
What’s next for the NCAA?
The Supreme Court’s decision in Alston strikes a massive blow to the NCAA’s regime of suppressing compensation to college athletes, and makes clear that the NCAA, like any other business in America, is subject to the antitrust laws for its anticompetitive conduct. The Court was unequivocal in its determination that the “Rule of Reason” properly applies to many of the NCAA’s restraints, and Justice Kavanaugh’s concurrence virtually invites college athletes to continue to challenge the NCAA’s remaining rules limiting college athlete compensation. Moving forward, it remains unclear whether the NCAA has continued viability as an umbrella organization for setting rules for its member schools, and it seems likely that a more dispersed governance system, with less restrictive rules on college athlete compensation, may lie ahead.
 NCAA v. Alston, 141 S.Ct. 2141 (2021).
 Id. at 2157.
 Id. at 2166.
 See O’Bannon v. NCAA, 802 F.3d 1049 (9th Cir. 2015).
 Am. Compl. at 8, In Re: NCAA Grant-In-Aid Cap Antitrust Litigation, No. 4:14-md-02541-CW, 2014 WL 6471614 (N.D. Cal.).
 Order, In Re: NCAA Grant-In-Aid Cap Antitrust Litigation, No. 4:14-md-02541-CW, 2014 WL 6471614 (N.D. Cal.).
 Alston, 141 S.Ct. at 2154.
 Id. at 2144–46.
 Id. at 2155.
 Id. at 2156.
 Id. at 2156–57.
 See National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., 468 U.S. 85 (1984).
 Alston, 141 S.Ct. at 2146.
 Id. at 2158.
 Id. at 2146.
 Id.; National Soc. of Professional Engineers v. United States, 435 U.S. 679, 689 (1978).
 Alston, 141 S.Ct. at 2146.
 Id. at 2163.
 Id. (Citing American Needle, Inc. v. National Football League, 560 U.S. 183, 199, n.7 (2010)) (emphasis added).
 Alston, 141 S.Ct. at 2163.
 Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U. S. 398, 415 (2004).
 Alston, 141 S.Ct. at 2164.
 Id. at 2166.
 Id. at 2168.
 Id. at 2167.
 Id. at 2166–69.
*Swathi Bojedla is a Partner in Washington, D.C. and Eduardo Carlo is a Staff Attorney in New York.