I know that there are a bunch of college sports fans on this message board, and as there’s not much actual sport to discuss, I thought people might be interested in the most recent court ruling on the NCAA. I realize that this OP is TLDR, but I wanted to put enough information in the post that people could get a sense of the case without doing extensive searches or reading the whole opinion.
Last Monday, May 18, the Ninth Circuit Court of Appeals released its ruling in Alston v. NCAA, in which it upheld a District Court judge’s ruling that the NCAA’s restrictions on education-related benefits violated anti-trust laws.
Ninth Circuit Court of Appeals Opinion (PDF)
Ninth Circuit Court of Appeals oral arguments video
Original District Court Findings of Fact and Conclusions of Law (PDF) document, and District Court Permanent Injunction (PDF).
This was and is a fascinating case, and it comes in the wake of the 2014 O’Bannon decision, in which the same District Court judge, Claudia Wilken, found that the NCAA’s rules were an unreasonable restraint on trade. In that case, the Ninth Circuit affirmed some parts of the District Court ruling, and reversed other parts. The overall result of the O’Bannon case was an expansion of the compensation that universities could offer to athletes, allowing scholarships up to the full Cost of Attendance (COA) at the university. Judge Wilken, in O’Bannon, also ruled for “name, image, and likeness” (NIL) payments of up to $5,000 per athlete per year, but this part of the ruling was reversed by the Court of Appeals. Both the NCAA and the plaintiffs filed Writs of Certiorari with the Supreme Court, the NCAA hoping for a reversal, and the plaintiffs hoping for a more substantial remedy, but the Supreme Court refused to hear the case, leaving the Circuit Court’s ruling in place. Also, before the O’Bannon decision came down, the NCAA, hoping to head off criticism and maybe get out in front of the ruling, allowed the five “power conferences” to offer bigger scholarship packages.
The end result of all this was a victory in principle for the plaintiffs, but a set of decisions that really didn’t change very much about how big-time college sports operated. It certainly did very little to curb the anti-competitive behavior of the NCAA.
This current case, Alston et al., v. NCAA, was another effort to curb the NCAA’s restrictive rules and expand the possibilities of various types of compensation for student-athletes. Again, this ruling, made by Judge Wilken in the District Court last year, and affirmed by the Court of Appeals this week, constituted a limited victory for the plaintiffs. The ruling says that the NCAA can’t stop universities and colleges from offering “compensation and benefits related to education,” even above the current scholarships and COA benefits. From the Permanent Injunction, linked above:
The NCAA is also allowed to define what constitutes an education-related benefit. The injunction also applies only to the NCAA, and explicitly allows the individual conferences and individual schools to set limits on these types of benefits:
So, each conference can make decisions about education-related compensation, as long they they don’t collude in making their determinations. Color me cynical, but there’s a lot of latitude for abuse there.
The ruling makes no provision requiring cash payments, or preventing the NCAA from continuing the prohibition on cash payments. The Findings of Fact and Conclusions of Law (linked above) mention on numerous occasions that “unlimited cash payments” would most likely reduce the competitive nature of college sports by eliminating the distinction between amateur and professional sports. So, players still won’t get paid, but they might at least end up with larger overall compensation packages for expenses related to their education.
In any discussion, legal or otherwise, about the NCAA, one of the things I find most hilarious is the straight face with which the organization makes its argument for “amateurism.” Even leaving aside the fact of billion-dollar television deals and coaches making seven-figure salaries, the idea of amateurism as a valid defense of violating a law—any law, whether related to competition or anything else—strikes me as ridiculous. Should I be allowed to start a business and not pay my workers, or pay them in some sort of non-monetary way, based on the principle that my potential customer base values the principle of amateurism? But even leaving that aside, the NCAA has never managed to actually defend the principle of amateurism in anything but self-interested ways.
When this board discussed the O’Bannon case back in 2014, Doper Red Wiggler pointed out, correctly, that a central defense made by the NCAA of its anti-competitive practices was that ending amateurism “would damage and possibly destroy fan interest in college sports.” As Red Wiggler noted at the time, the only real proof that the NCAA offered to support this position came from self-interested parties like college presidents, athletic directors, and other people who benefited from the status quo ante.
Not much changed in the Alston case. This time, the NCAA did try to offer “expert” testimony that paying players would result in a loss of fans, but the expert continued to rely largely on the same type of self-interested people, and the court found his argument completely unpersuasive:
The court then noted that it found the student-athletes’ witness much more credible because his analysis was “based on two natural experiments and, in some respects corroborated by defense witnesses.” Similarly with witnesses related to surveys:
Not a stellar performance by the NCAA’s key expert witnesses.
For me, perhaps the most interesting part of this whole case was not Judge Wilken’s decision, or the Ninth Circuit opinion upholding that decision; it was the concurrence to the opinion written by Circuit Judge Smith, which begins on page 57 of the Ninth Circuit Court of Appeals ruling, linked above. A concurrence, for those unfamiliar with appeals court lingo, basically means that he agrees with the majority’s overall decision, but disagrees with some of the reasoning behind it.
Judge Smith basically makes clear that he would like the ruling against the NCAA to go much further than it did, and that he feels constrained by the Ninth Circuit’s previous decision in O’Bannon. In particular, he levels criticism at the way that the court has applied a legal doctrine called the Rule of Reason, which is central to court cases related to anti-trust and competition.
In anti-trust actions, some types of behavior are per se illegal. One example is price fixing. If it’s proved in court that companies colluded with one another to fix prices, that’s a violation of the Sherman Act. But in many cases, including this one, determining the violation and possible remedies rests on a substantive analysis of the behavior and its consequences for competition, as well as the possible remedies. Basically, the Rule of Reason has four steps:
- The plaintiff [in this case, the student-athletes] has the burden of demonstrating that a certain rule or behavior is anti-competitive.
- If the plaintiff can do this, the defendant [in this case, the NCAA] then has to try and demonstrate that there is a legitimate pro-competitive justification for the behavior.
- If the defendant does this, the plaintiff then has to show that the type of restraint on trade isn’t reasonably necessary to promote competition, or that the pro-competitive objectives of the defendant could be met through less restrictive means.
- The court then tries to balance the pro- and anti-competitive effects in reaching a ruling.
The plaintiffs and defendants in this case both agreed that the NCAA’s behavior was anti-competitive, so they then shifted to Step 2 in the Rule of Reason, where defendants had to show a pro-competitive justification. The problem in this case, according to Smith, is that the NCAA was allowed by the court to shift the “defined market” under discussion in a way that unfairly disadvantages the plaintiffs.
The plaintiffs, the student-athletes, brought their case by arguing that the NCAA’s policies restricted trade in the market for the services of student-athletes at colleges and universities. But in Step 2, the defendants didn’t use that market as their point of justification. Instead, they pointed to the effect on the broader consumer market for college sports. Smith believes that this type of “cross market” analysis is wrong. He believes that the NCAA should have been required to demonstrate pro-competitive effects NOT in the consumer market for college sports, but in the market among colleges for the services of student-athletes. That would have been much harder for them to do. Smith notes that other courts have “rejected procompetitive justifications outside of the defined market,” (p. 63) citing a case from 1978 against the NFL draft. He believes that the Rule of Reason analysis should stick to a single market, and that “accepting procompetitive effects in a collateral market” (p. 64) undermines the aims of the Sherman Act.
Summing up his disagreement, he notes that “the court found that”
If Smith had his way, this case might have been even more of a game-changer in college sports. As it is, it’s fairly incremental, although still an important decision.