NCAA v. Alston at the Supreme Court
March 31, 2021 marked an important moment in the history of college sports. The Supreme Court heard oral argument in a case involving the NCAA for the first time in nearly 40 years. This article provides a comprehensive summary of that argument.
What is Alston and how did we get here?
The question at issue in NCAA v. Alston asks whether the NCAA's restrictions on compensation for student-athletes are violative of federal antitrust law. Shawne Alston, the lead plaintiff who represents a class of former student-athletes, filed the original complaint in 2014. Almost seven years later, Alston represents a culmination of years of antitrust litigation for the NCAA and a push for the expansion of economic rights for collegiate athletes.
The Ninth Circuit affirmed the district court's order in Alston, holding that the NCAA could no longer enforce rules restricting certain education-related benefits that its member institutions could offer to student-athletes. The court's analysis found that the lower court properly applied the Rule of Reason test and properly held that the NCAA's restrictions on non-cash benefits related to education violated the Sherman Act.
Summary of the Petitioner's Argument
The NCAA argued that the uniqueness of its product—the amateur status of student-athletes—compels antitrust deference. Attorney for the NCAA, Seth Waxman, noted that this unique differentiator between college and professional sports can only be achieved through some agreement, which is a reason why the Rule of Reason test, instead of a "per se" analysis, applies in this case. Mr. Waxman also emphasized the Court's own prior characterization of amateurism as a procompetitive benefit of the NCAA's product. Petitioner's concern is that the Ninth Circuit's ruling, which arguably created a much narrower version of amateurism and opened the potential for an annual $5,980 cash award to student-athletes, would blur any line of demarcation between college and professional sports. Generally, the NCAA takes issue with courts policing its rules, especially those it considers to be related to amateurism. The NCAA argued that any rule reasonably designed to protect the unique feature of amateurism should be upheld. The NCAA also harbors continuing concern over constant antitrust litigation.
Summary of Justice's Questions to Petitioner
Chief Justice Roberts inquired about the applicability of the quick look Rule of Reason test in analyzing the NCAA's restrictions. Historically, the quick look Rule of Reason analysis is used for restraints that are not per se unlawful but are sufficiently anti-competitive so that they do not require a full Rule of Reason inquiry. Mr. Waxman essentially acknowledged that it is appropriate for the Court to analyze whether the product, intercollegiate athletics, is really procompetitive.
Justice Thomas inquired as to whether the NCAA felt concern about college coaches' compensation in maintaining a distinction between them and their professional counterparts. Mr. Waxman's answer contained a discussion of Law v. NCAA, in which the NCAA sought to defend a rule that set limits on the compensation of assistant coaches based on the principle of amateurism. In that case, the Tenth Circuit struck down the NCAA's restraint after applying the Rule of Reason test. Justice Thomas then asked whether the Court conducted a quick look Rule of Reason analysis in NCAA v. Board of Regents. The restraints at issue in Regents limited how many televised games a school could have. The Court conducted a Rule of Reason inquiry in that case because the NCAA operates in an industry in which agreement is necessary for the product to exist at all. The full Rule of Reason analysis considered the procompetitive benefits of the agreement because the television restrictions were not related to the NCAA's core amateurism rules. Thus, the Court subjected the restrictions to stricter scrutiny.
Justice Breyer sought to understand the NCAA's particular issue with the Ninth Circuit's holding. Mr. Waxman explained that the NCAA's broad issue is that courts in an antitrust proceeding lack the authority to redefine the central differentiating feature (i.e., amateurism) that makes the NCAA's product procompetitive. The more specific problem, as characterized by the NCAA, is that the Court's decision imposed a regime where student-athletes can be paid a sum of money solely on account of their athletic participation. The NCAA's brief describes the annual cash payment as available to those student-athletes who maintain academic eligibility.
Justice Alito and Justice Kavanaugh both expressed concern over potential student-athlete exploitation. Justice Alito pointed to the argument of exploitation made in amicus briefs for the respondents and detailed some of the hardships for student-athletes. Mr. Waxman emphasized the NCAA's view that if student-athletes get paid to play, they will spend even more time on athletics and even less time on academics. Mr. Waxman also highlighted the value that consumers place on the tradition of amateur intercollegiate athletics after Justice Kavanaugh expressed concern over the organization's repeated appeals to tradition.
Justice Sotomayor inquired as to each individual conference's ability to limit education-related benefits. The NCAA's position is that national agreement, through NCAA bylaws, is the only viable solution to this issue. During the Justice's questions, Mr. Waxman again reiterated the NCAA's concern over continued litigation should the district court's $5,980 payment regime be upheld. NCAA rules already allow schools to provide student-athletes with athletic achievement awards (often in the form of rings, trophies, and cash gifts) up to $5,980 in value. The district court's injunction allows up to that same sum to be provided for non-cash education-related benefits to student-athletes per year.
Justice Kagan described the NCAA and its member institutions as competitors getting together as an organization with total market power and using that power to fix prices. In response, Mr. Waxman attempted to provide a justification by discussing the NCAA's history and value to society. Mr. Waxman additionally offered the defense that the cost of labor, in this unique instance, is the differentiating feature that enables a procompetitive product since consumers value watching amateurs compete.
Justice Gorsuch agreed with the petitioner that joint ventures often need agreements which would otherwise appear anticompetitive. However, the Justice focused on the agreement here as between competitors to fix price within the labor market where those competitors have monopsony control. Mr. Waxman reasoned that an abbreviated Rule of Reason analysis is all that is necessary because the product of amateur college athletics is procompetitive, and the challenged restrictions are reasonably related to the amateur status of college athletes.
Justice Barrett began with an inquiry as to why the NCAA gets to define what pay is when it comes to student-athletes. Mr. Waxman cited the general principal that a producer gets to define its product along with its typifying features. Additionally, Justice Barrett questioned the petitioner about the effects that a ruling against it may have on the organization, specifically with regard to Title IX and women's sports. Mr. Waxman alleged that if schools must follow the lower court's decree, the effect would be to reduce the number of non-revenue sports.
The NCAA's argument concluded with an emphasis on the history of the Sherman Act and how this case would be the first in history to strike down restraints that speak to the core of what differentiates the product and makes it unique.
Summary of Respondents' Argument
Respondents' argument began by identifying the NCAA's restraints as a naked horizontal monopsony that the member institutions have adopted in labor markets which would be per se unlawful in any other context. The attorney for the respondents, Jeffrey Kessler, recognized the suitability of a Rule of Reason analysis in this case because of the inherent need for NCAA schools to cooperate. Demand for college athletics has flourished even in the face of continued commercialization. Respondents argued that economic competition among schools will not destroy demand for college sports and that the NCAA no longer deserves a judicially created antitrust exemption in order to maintain its tradition of amateurism. Ultimately, the district court found that the NCAA's restraints on education-related benefits could not be justified under the Rule of Reason inquiry as reasonable or necessary to maintain demand for college sports.
Summary of Justice's Questions to Respondents
Chief Justice Roberts expressed concern over a potential situation where the NCAA is dismantled rule by rule. Mr. Kessler explained that the district court's initial test asked the NCAA to provide a procompetitive justification for all of its rules together, which it failed to do. The NCAA could justify only some specific rules, so the burden fell on the plaintiffs to demonstrate that substantially less restrictive alternatives to the NCAA's rules were available. Thus, the district court determined that there is no justification for limiting any education-related benefits.
Justice Thomas and Justice Kavanaugh both addressed the threat of continued litigation against the NCAA. Step three of the Rule of Reason inquiry requires the plaintiff to show that the restraints at issue are patently and inexplicably stricter than necessary and that less restrictive alternatives are available—and according to Mr. Kessler, plaintiffs struggled to show that small differences in money meet the inexplicably stricter than necessary burden. Mr. Kessler also explained that while predicting the threat of continued litigation is difficult, the NCAA, as a matter of fact, has been successful in proving that compensation limits are not contrary to the Rule of Reason. Thus, the NCAA maintains a strong foundation for many of its restraints, and therefore, slippery slope-style fears of continuing litigation are unfounded.
Justice Breyer focused on the unique nature of the NCAA's product and its effect on the antitrust analysis. Respondents maintain that under antitrust laws and the Rule of Reason test, the procompetitive justification must be competition-enhancing, and questions exist as to whether the NCAA's justification, rooted in amateurism, is actually enhancing competition.
Justice Alito inquired as to whether there is any way that the NCAA could limit educational benefits for college athletes. Mr. Kessler explained that the injunction allows the NCAA to set reasonable rules to define what constitutes educational benefits and how the benefits are related to education. Under the injunction, the NCAA also retains responsibility to create rules for how the benefits are provided. Respondents argue that the outcome here is a better educational experience for college athletes under a system that remains within the NCAA's control. Mr. Kessler also emphasized that the injunction does not require schools to pay anything, but simply says that the NCAA cannot prohibit the payment.
Justice Sotomayor and Justice Kagan both addressed the $5,980 number set by the district court and raised concerns over antitrust courts engaging in price administration. However, Mr. Kessler argued that the NCAA set that price and that the lower court had not engaged in judicial price fixing. Mr. Kessler also noted, contrary to earlier assertions, that the $5,980 would be awarded in response to academic performance or achievements. Mr. Kessler noted that the lower court's injunction does not mention the dollar amount, but rather, only that the NCAA cannot set a limit on academic achievement awards that is lower than what it allows for the greatest amount in cash awards.
Justice Gorsuch focused on how the Ninth Circuit's antitrust inquiry was broad when general practice in joint venture cases is to conduct a narrower Rule of Reason inquiry with a heavy burden on the plaintiff to show that a restraint violates the Sherman Act. Respondents argued that the full Rule of Reason inquiry here is consistent with other joint venture cases. In response to another question, respondents emphasized the idea that the NCAA's vast market power necessitates a more traditional Rule of Reason inquiry.
Justice Barrett inquired as to whether the injunction is a substantially less restrictive alternative than the current system while maintaining the procompetitive nature of the current product. Mr. Kessler replied affirmatively and emphasized how the NCAA will continue to impose its restraints on all other compensation not related to education. The injunction is a substantially less restrictive alternative because the educational opportunities that could be afforded to college athletes will change lives. The injunction allows college athletes to receive certain education-related benefits, which undoes some of the NCAA's compensation restrictions, but does not undermine the procompetitive effects of the NCAA's amateurism rules.
Solicitor General Prelogar
The acting Solicitor General, Elizabeth Prelogar, argued on behalf of the respondents. Ms. Prelogar emphasized that the lower courts properly engaged in a Rule of Reason inquiry in this case because, in following Board of Regents, the NCAA had an opportunity to show that its compensation restraints fuel consumer demand for its product. Ms. Prelogar cautioned the Court to avoid adhering to the petitioner's request for a quick look Rule of Reason inquiry. Since this case involves horizontal price-fixing in the market for student-athlete labor where the NCAA has monopsony power, a traditional Rule of Reason inquiry should apply. Ms. Prelogar's argument noted that the determination of what differentiates the NCAA's product is up to the consumer and not the NCAA's own beliefs.
Hannah Holmes is a third-year student at Tulane Law School (Class of 2021) and the President of the Tulane Sports Law Society.
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