NCAA Loses Critical U.S. Court Ruling on Athlete Compensation
(Bloomberg) -- A judge said the National Collegiate Athletic Association’s rules regarding compensation violate federal antitrust law and athletes may be compensated for education-related expenses beyond current caps.
The federal judge in Oakland, California, on Friday said the NCAA’s no-pay rules may remain in force but the organization may also adopt a definition of compensation and benefits that is “related to education” for the purposes of complying with the judge’s order.
The ruling is a middle ground of sorts in a case that had the potential to shatter the college sports economy. Instead of saying that NCAA football and basketball players could be paid in an open market, similar to pro athletes, the judge instead issued a much more narrow decision that will create change, but won’t fundamentally upend either sport.
Wilken’s remedy for the NCAA’s antitrust violations limits athletes’ new compensation to education-related costs, not pay for playing.
“Allowing each conference and its member schools to provide additional education-related benefits without NCAA caps and prohibitions, as well as academic awards, will help ameliorate their anti-competitive effects and may provide some of the compensation student-athletes would have received absent NCAA’s agreement to restrain trade,” U.S. District Judge Claudia Wilken wrote.
The NCAA said in a statement that while it agrees with Wilken’s decision not to fully open the marketplace, it believes the ruling is inconsistent with previous legal decisions. The Indianapolis-based governing body said it will “explore our next steps as appropriate.”
Wilken previously sided with the athletes in a separate antitrust lawsuit led by former University of California at Los Angeles basketball star Ed O’Bannon, though she stopped short of allowing a completely open market on athlete licensing. Her 2014 ruling after a trial was later pared back by the U.S. Court of Appeals in San Francisco.
Friday’s decision, following a non-jury trial in September, gives athletes a little more yardage in their effort to change the NCAA’s “antiquated definition of amateurism,” according to Warren Zola, sports business professor at Boston College’s Carroll School of Management, and an advocate for the loosening of the NCAA’s rules.
“The big picture for me is that once again the courts have deemed the NCAA rules to be a violation of antitrust laws,” Zola said.
In her decision Friday, Wilken wrote that “restricting non-cash education-related benefits and academic awards that can be provided on top of a grant-in-aid has not been proven to be necessary to preserving consumer demand for Division I basketball and FBS football as a product distinct from professional sports.”
“The judge’s opinion is a good first step in attacking these antitrust violations,” according to William Gould, a law professor at Stanford University. “I remain unconvinced that the limitations she left in place have a basis for being left in place.”
In her list of items that could be characterized as education-related benefits, Wilken included computers, science equipment, tutoring, and post-eligibility scholarships to complete undergraduate or graduate degrees at any school. She also listed a vague catch-all of “other tangible items not included in the cost of attendance calculation but nonetheless related to the pursuit of academic studies.”
That broad definition will create some interesting questions, and possibly some interesting interpretations, Zola of Boston College said.
“They’re uncapping educational costs, but now the devil is in the details, what does that mean?” he asked. “If we’re talking about graduate school, can you pre-pay that? Can you offer money before? I want to live in luxury condo. I want a car to get to class and to the library so I can study. I want to go to law school. I want my parents with me to help my educational pursuits. Does that qualify? I don’t know."
Following the 2014 ruling by Wilkens, top-tier athletic departments have begun offering scholarships that meet the total cost of attendance to most, if not all, its athletes.
Whereas current NCAA rules apply to all conferences, Wilken’s Friday decision allows individual conferences to opt out of or limit education-related benefits. That means any conference can choose to offer fewer benefits that the NCAA decides are allowable, so long as leagues don’t work together to limit their offerings.
Such a set-up is desired by the plaintiffs, who believe that once the decision rests with individual leagues, the richest ones -- like the Big Ten, Big 12, SEC, ACC and Pac-12 -- will choose to use their financial advantage to offer a larger suite of benefits. Under that logic, the big conferences may treat this new reality as a point of leverage to become even more enticing to top recruits, and to further separate themselves from their smaller competitors.
Public support for paying college athletes appears to grow every year, as the richest programs in college football and college basketball continue to reap record revenue from broadcast rights, ticket sales and donations. There were 28 athletic departments that made more than $100 million in revenue in 2015-16, led by Texas A&M at $194 million. Alabama football coach Nick Saban was paid more than $11 million dollars in the 2017 season and has three assistants paid more than the university president.
The discussion was front-and-center late last year when the U.S. Justice Department filed criminal charges against 10 men following a multiyear investigation into bribery in college basketball recruiting. Earlier this week, three of those men were sentenced to jail time.
The case is Jenkins v. National Collegiate Athletic Association, 4:14-cv-02758, U.S. District Court, Northern District of California (Oakland).
©2019 Bloomberg L.P.