• Supreme Court Sustains Injunction Against NCAA Rules Limiting Education-Related Benefits Received By Student Athletes
   

  06/29/2021
  On June 21, 2021, the United States Supreme Court issued a decision in a long running and closely watched dispute between the National Collegiate Athletic Association, along with 11 Division I conferences, (together, the “NCAA” or “Defendants”) and a class of current and former Division I football and basketball players claiming that NCAA restrictions on their compensation violated Section 1 of the Sherman Act (together, the “student athletes” or “Plaintiffs”).  NCAA v. Alston, et al., No. 20–512, 594 U.S. ___ (2021).  The Court’s unanimous decision, written by Justice Neil Gorsuch, upheld a district court order enjoining NCAA limits placed on education-related benefits provided by member schools to student athletes and permitting limits on compensation and benefits related to athletic performance.
  
  Formed in 1905 at the behest of then-President Theodore Roosevelt, the NCAA has long enforced rules designed to maintain college athletics’ “amateur” quality, including rules prohibiting student athletes from receiving compensation or similar benefits.  Plaintiffs sued in 2014 arguing that these rules were a combination in restraint of trade and therefore violated Section 1 of the Sherman Act.
  
  In 2019, following a ten-day bench trial, Judge Claudia Wilken of the Northern District of California enjoined the NCAA from enforcing limits on the type of academic scholarships and related educational benefits that member schools could offer in connection with the recruitment of college athletes but left in place the NCAA’s rules against direct student compensation.  Both sides appealed, and the Ninth Circuit sustained the district court’s order, finding that “the district court struck the right balance in crafting a remedy that both prevents anticompetitive harm to Student-Athletes while serving the procompetitive purpose of preserving the popularity of college sports.”  The NCAA, but not the student athletes, sought Supreme Court review.
  
  The Supreme Court sustained the orders of the lower courts, finding that the district court had properly applied the “rule of reason” framework, and rejected various arguments made by the NCAA as to why the at-issue restrictions should be upheld as presumptively lawful under the “quick look” approach.  The Court rejected the presumptively lawful standard suggested by the NCAA and sustained the district court’s application of the rule of reason’s three-part framework.
  
  In applying the rule of reason framework, the Court noted that there was no real dispute over whether the NCAA’s rules had a substantial anticompetitive effect.  The NCAA did not contest that its restrictions depressed compensation in a market that it monopolized.
  
  At the framework’s second step, the Court rejected the NCAA’s argument that the district court had viewed its proffered procompetitive benefits overly narrowly and had erroneously required each challenged rule to be the “least restrictive means” for achieving these benefits.  Though the Court agreed that the NCAA was only required to show the challenged rules “collectively yield a procompetitive benefit” and not defend against hindsight “imagining” of potentially less restrictive alternatives, the Court explained that the district court had properly rejected the NCAA’s defense upon finding that few of the challenged rules had any connection to consumer demand.
  
  Finally, the Court noted that the student athletes had shown that the NCAA could achieve its proffered procompetitive ends—maintaining a distinction between college and professional sports—with substantially less restrictive alternative rules related to educational benefits.  The Court also emphasized the discretion that the district court’s order gave to the NCAA to define and reasonably restrict educational benefits offered to student athletes, where the NCAA had asserted that such benefits would serve as a type of back door compensation.
  
  Justice Brett Kavanaugh, who joined the majority opinion in full, also concurred in an opinion that questioned whether the NCAA’s remaining compensation rules could survive future review.  He stressed that, while the NCAA’s rules against direct compensation were not before the Court, if subject to future litigation, they would be reviewed under the rule of reason, and not a more deferential standard.  And under the rule of reason, Justice Kavanaugh stated, going a step further than the majority, it was dubious whether the NCAA could cite the distinction between professional and college sports as a legitimate procompetitive benefit.  “Price-fixing labor is price-fixing labor,” he wrote.  “The NCAA is not above the law.”
  CATEGORIES: Joint Venture, Rule of Reason, Sherman Act § 1
  

LINKS & DOWNLOADS

• NCAA v. Alston, et al.