Supreme Court Puts NCAA on Notice for Athletes’ Salaries

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In an important 9-0 opinion, the Supreme Court upheld a lower court decision saying that the NCAA is violating the antitrust laws by denying educational benefits to student athletes. The court didn’t say it’s unlawful for the NCAA to stop member schools from paying athletes outright — but only because that issue wasn’t before the court.

The opinion hints that, in a future decision, the justices could hold that antitrust law requires the NCAA to let colleges pay salaries to athletes. And in a separate concurrence, Justice Brett Kavanaugh said exactly that.

Anytime the Supreme Court addresses antitrust law, it matters. That’s not only because of the importance of the subject and its consequences for major companies like Amazon, Alphabet (Google’s parent company), Apple and Facebook, all of whom face antitrust inquiries in various stages.

The Supreme Court’s antitrust interventions matter because antitrust law in the U.S. rests almost entirely on a body of judicial interpretation of an extremely short and simple statute, the Sherman Act. The law prohibits contracts, combinations or conspiracies “in restraint of trade or commerce.”

That’s it. In practice, this leaves it up to judges to develop the law in what’s called “rule of reason analysis.”

“Rule of reason” is an antitrust lawyer’s term of art. According to the court’s current understanding of it, this approach requires a case-specific analysis of actors’ market power in the structure of a particular market.

The goal, again according to current interpretation of antitrust law, is to determine whether anticompetitive restraints help or hurt the consumer. (Critics of existing antitrust law, like Lina Khan, the newly confirmed chair of the Federal Trade Commission, would like to change the way this consumer welfare model is applied by the courts — but they will need the courts’ agreement to do that.)

In the NCAA case, a federal district court held that the NCAA was a monopsony — effectively, the sole buyer in the market — for “athletic services” in major college basketball and football. It explained that the NCAA uses its market power to “cap artificially the compensation offered to recruits.” In other words, without the NCAA’s restrictions, schools would compete with each other by offering better packages to prized athletic recruits.

The NCAA admitted all this, but defended itself on the grounds that it was preserving “amateurism.” That was a reasonable strategy given that, in past years, the Supreme Court had occasionally said nice things about the value of amateurism in the context of antitrust challenges to the NCAA — most notably in an important 1984 ruling.

Nevertheless the lower court rejected the NCAA’s argument, noting how the concept of amateurism is a moving target that has changed significantly over the years.

In a crucial passage of the court’s unanimous opinion, written by Justice Neil Gorsuch, the justices agreed with the lower court and essentially repudiated the statements from the 1984 case. Gorsuch wrote that “when it comes to college sports, there can be little doubt that the market realities have changed since 1984.” Television revenues have vastly expanded. And colleges allow many more forms of compensation to reach student-athletes.

In the other essentially important part of the opinion, the court rejected the NCAA’s argument that it shouldn’t be subject to ordinary antitrust analysis because it’s made up of universities that are nonprofits seeking to serve the overall goal of higher education. So what, the court basically said. The NCAA isn’t exactly a nonprofit in the deepest sense, and anyway, the law still applies.

(Along the way, in an aside sure to get lots of attention, the court hinted that while it has in the past allowed Major League Baseball an effective exemption from antitrust laws, it is no longer enamored of that precedent. As the court put it, “this court once dallied with something that looks a bit like an antitrust exemption for professional baseball.” For the record, it was a lot more than a dalliance.)

The lower court declined to hold that the NCAA must allow student athletes to be paid salaries, and the students who brought the lawsuit strategically decided not to challenge that conclusion before the Supreme Court. So the justices didn’t rule on the issue of whether, in the future, the NCAA may have to allow salaries.

Yet the tenor of the opinion suggests that the NCAA would have trouble convincing this court that the value of amateurism — an abstract concept that is hard to value in terms of its benefits to consumers, and that may not benefit student athletes much at all — would justify continuing its practices.

Kavanaugh wrote a separate concurrence laying this out in detail. The fact that no one else joined the concurrence could be seen as a reason to think that the other justices want to avoid deciding this issue too soon. But then again, no justice concurred separately to say that Kavanaugh was wrong.

So the best interpretation is probably that the other justices are pretty open to a transformation in how student athletes are compensated. They just would prefer that the NCAA makes those changes on its own rather than having to decide the issue themselves.

A gut check is coming for the NCAA. It should analyze the court’s opinion and conclude that the time has come for radical reform of student-athlete compensation.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Feldman is a Bloomberg Opinion columnist and host of the podcast “Deep Background.” He is a professor of law at Harvard University and was a clerk to U.S. Supreme Court Justice David Souter. His books include “The Three Lives of James Madison: Genius, Partisan, President.”

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