Antitrust law is the key to making the NCAA pay student-athletes

Antitrust law is the key to making the NCAA pay student-athletes

By Sandeep Vaheesan

Sandeep Vaheesan is the legal director at the Open Markets Institute, an antimonopoly research and advocacy group.

April 1, 2021 at 7:00 p.m. GMT+9

The courts have long protected the NCAA. A new Supreme Court case might change that.

A Final Four banner across a street in Indianapolis. (Justin Casterline/Getty Images)

A day after Gonzaga and UCLA won their Elite Eight contests and joined Baylor and Houston in the Final Four of men’s college basketball, the Supreme Court heard oral argument in National Collegiate Athletic Association v. Alston, a case that could remake college basketball and football in the United States. In Alston, a group of basketball players (both men and women) and football players challenged, on antitrust grounds, the NCAA’s rules prohibiting pay to players and won a partial victory, with the district and appellate courts striking down the NCAA’s ban on payments tied to education. As the players successfully argued, the NCAA’s caps on player compensation restrain competition among colleges for athletes’ talents.

The NCAA now asks the high court to reverse the judgment in favor of the players and grant it an effective antitrust immunity. (The Open Markets Institute, where I serve as legal director, filed an amicus brief in support of the players.) At oral argument, several justices expressed skepticism that colleges, operating through the NCAA, should have the right to collusively cap compensation to the athletes who draw millions of fans, under the guise of “amateurism.” They were right to do so. The NCAA is, in effect, an employer cartel that deprives the predominantly Black basketball and football players of a fair share of the revenue they generate. Wednesday’s arguments further exposed the weakness of the NCAA’s position, showing that it absurdly upholds the supposed interests of its fans at the literal expense of the athletes it employs.

The NCAA is a peculiar institution. Many of its Division I colleges and universities run highly lucrative basketball and football programs. The NCAA and the major conferences produce tens of billions of dollars in annual revenue from the two sports. Member colleges, however, share only a small portion of this revenue with the players because they agree not to pay the players a wage and cap their compensation at a scholarship covering tuition, room and board and ancillary expenses of college attendance. Because not all players receive full scholarships, some have reported not having enough money to obtain food and other necessities. Whereas professional basketball and football players earn about 50 percent of league revenue in salaries and benefits, their college counterparts receive less than 20 percent of their sports’ revenue in the form of scholarships. Where does the remaining 80 percent of revenue go? In part to coaches like Alabama’s Nick Saban and Kentucky’s John Calipari, who each make around $10 million a year.

Ordinarily, the NCAA’s conduct would be clearly illegal under the antitrust laws as an association of employers collusively holding down the compensation of its workers. Until recently, however, the NCAA successfully used a 1984 Supreme Court case to defend its wage-fixing. In NCAA v. Board of Regents of the University of Oklahoma, the court struck down the NCAA’s rules that prevented top football programs from entering into separate television broadcasting contracts. In passing, it also praised the social value of amateur athletics. The NCAA has since persuaded several courts that this throwaway line in a decision invalidating the NCAA’s restraints on TV contracts protected its restrictions on compensation for players.

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Despite the NCAA’s expansive interpretation of Board of Regents and earlier victories in litigation, the players in Alston challenged the NCAA’s rules against paying players and won at trial. They successfully defended this victory on appeal. A district judge in California and the Court of Appeals for the Ninth Circuit concluded that the players showed that the NCAA’s restraints hurt them. In the absence of these restraints, colleges would compete for players’ talents by offering wages, salaries and benefits.

The courts, however, denied the players justice in full measure. They permitted the NCAA to introduce justifications of its restraints on player compensation. While rejecting most of the NCAA’s rationalizations, the lower courts did credit one of them: According to the NCAA, a nontrivial segment of college sports fans value watching college sports because the players do not receive competitive compensation in the way professional athletes do. In other words, capping player compensation is a way in which the NCAA differentiates its basketball and football from the NBA, NFL and WNBA. Because of this consumer “benefit,” the courts only invalidated the NCAA’s restraints limiting compensation to “education related payments.” The courts kept the NCAA’s general ban on wages and salaries for players intact. Under the ruling, colleges can compete for basketball players by granting scholarships for future graduate study, but not by offering, say, a $150,000 annual salary.

Simply put, the courts preserved the NCAA’s collusive system because fans purportedly value it. In essence, the courts catered to the viewing public’s supposed desire to watch athletes who do not receive fair competitive pay — a taste for exploitation that has a clear racial element. In research published in 2015, most Black sports fans supported paying players, while only about 20 percent of White fans favored this change. Notably, White viewers who expressed the strongest anti-Black racism were the most opposed to colleges paying players.

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The exploitation itself is racialized, too. In 2020, nearly half of players in football and women’s basketball and more than 55 percent of players in men’s basketball were Black. In contrast, the highly paid coaching and athletic director ranks were mostly White. The historian Taylor Branch analogized the system of compensation and control in college basketball and football to plantation slavery and colonialism.

Wednesday’s 90-minute oral argument in Alston seemed to favor the players. Several justices noted the exploitative character of the NCAA and expressed skepticism about the justifications offered by the NCAA’s lawyer, Seth Waxman, who served as solicitor general in the Clinton administration. Justice Clarence Thomas asked why the NCAA collusively limits the pay of players, but not coaches. He wondered if there is any principled distinction between the two classes.

Justices Samuel A. Alito Jr. and Brett M. Kavanaugh, meanwhile, homed in on the huge sums of money generated by college basketball and football and the paltry compensation to players, sounding unpersuaded by the NCAA’s repeated invocation of “amateurism.” Justices Neil M. Gorsuch and Elena Kagan noted the wage-fixing of NCAA members, with Gorsuch adding the NCAA has “monopsony control over the labor market.” In comparison, the justices’ questioning of the players’ counsel focused on the feasibility of remedies for the NCAA. Justice Stephen G. Breyer, adopting the most pro-NCAA posture over the 90 minutes, feared that a victory for the players could initiate the unraveling of the entire NCAA system.

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There is reason, though, to hope that the majority will ultimately find that the lower courts did not go far enough. Our antitrust laws protect workers and other producers, just as much as they protect consumers. As a court of appeals judge in 2001, now-Justice Sonia Sotomayor wrote, “A horizontal conspiracy among buyers to stifle competition is as unlawful as one among sellers.” Furthermore, courts are not free to tolerate employer collusion in a labor market because it ostensibly serves consumers in another market. As Justice Thurgood Marshall said in a 1972 antitrust ruling, “If a decision is to be made to sacrifice competition in one portion of the economy for greater competition in another portion this too is a decision that must be made by Congress and not by private forces or by the courts.” Employers like the NCAA have no right to hurt their workers to supposedly cater to viewer preferences.