National Collegiate Athletic Association v. Alston

Facts

American colleges and universities have used college sports as a golden goose for almost two centuries. “By the late 1880s, the traditional football rivalry between Princeton and Yale was attracting 40,000 spectators and generating in excess of $25,000 . . . in gate revenues.” Schools regularly had “graduate students and paid ringers” on their teams. (Why would anyone expect anything less than the scam that is a college education from the very start). Colleges offered all manner of compensation to talented athletes. The absence of academic residency requirements gave rise to “ ‘tramp athletes’ ” who “roamed the country making cameo athletic appearances, moving on whenever and wherever the money was better.” College sports became big business. College football was hugely popular and extremely violent. There were 7 football fatalities in 1893, 12 deaths the next year, and 18 in 1905. Thus began the existence of the D. Schools across the country sought to leverage sports to bring in revenue, attract attention, boost enrollment, and raise money from alumni. The University of California’s athletic revenue was over $480,000, while Harvard’s football revenue alone came in at $429,000. College football was an “organized commercial enterprise” featuring athletes with “years of training,” “professional coaches,” and competitions that were “highly profitable.” Many schools offered pecuniary and other inducements to enter a particular college. Of course, let’s not even get into the massive gambling that was driving everything behind the scenes. “When it comes to chicanery, double-dealing, and general undercover work behind the scenes, big-time college football is in a class by itself.” In 1948, D adopted the “Sanity Code.” The code also authorized colleges and universities to pay athletes’ tuition. It created a new enforcement mechanism-providing for the “suspension or expulsion” of “proven offenders.” In 1956, D expanded the scope of allowable payments to include room, board, books, fees, and “cash for incidental expenses such as laundry.” In 1974, D began permitting paid professionals in one sport to compete on an amateur basis in another. D has created the “Student Assistance Fund” and the “Academic Enhancement Fund” to “assist student-athletes in meeting financial needs,” “improve their welfare or academic support,” or “recognize academic achievement.” These funds have supplied money to student-athletes for “postgraduate scholarships” and “school supplies,” as well as “benefits that are not related to education,” such as “loss-of-value insurance premiums,” “travel expenses,” “clothing,” and “magazine subscriptions.” In 2018, D made more than $84 million available through the Student Activities Fund and more than $48 million available through the Academic Enhancement Fund. Disbursements to individual students have sometimes been tens of thousands of dollars above the full cost of attendance. D's membership comprises about 1,100 colleges and universities, organized into three divisions. D’s current broadcast contract for the March Madness basketball tournament is worth $1.1 billion annually. Its television deal for the FBS conference’s College Football Playoff is worth approximately $470 million per year. The Division I conferences earn substantial revenue from regular-season games. For example, the Southeastern Conference (SEC) “made more than $409 million in revenues from television contracts alone in 2017, with its total conference revenues exceeding $650 million that year.” The president of the NCAA earns nearly $4 million per year. Commissioners of the top conferences take home between $2 to $5 million. College athletic directors average more than $1 million annually. And annual salaries for top Division I college football coaches approach $11 million, with some of their assistants making more than $2.5 million. Ps are current and former athletes in Division I FBS football and men’s and women’s Division I basketball. Ps filed a class action against D. Ps are challenging D's rules that limit the compensation they may receive in exchange for their athletic services. Ps' claim is that D's rules violate § 1 of the Sherman Act, which prohibits “contract[s], combination[s], or conspiracies in restraint of trade or commerce.” The court applied a “rule of reason analysis.” The court held that D enjoys “near complete dominance of, and exercises monopsony power in, the relevant market.” D and its member schools have the “power to restrain student-athlete compensation in any way and at any time they wish, without any meaningful risk of diminishing their market dominance.” D uses its monopsony power to “cap artificially the compensation offered to recruits.” The district court found, that “competition among schools would increase in terms of the compensation they would offer to recruits, and student-athlete compensation would be higher as a result.” “Student-athletes would receive offers that would more closely match the value of their athletic services.” D claimed that its restrictions help increase output in college sports and maintain a competitive balance among teams. the district court rejected those justifications. The court noted that D “nowhere defines the nature of the amateurism they claim consumers insist upon.” The evidence failed “to establish that the challenged compensation rules, in and of themselves, have any direct connection to consumer demand.” Ps presented economic and other evidence suggesting as well that further increases in student-athlete compensation would “not negatively affect consumer demand.” The court rejected Ps' challenge to NCAA rules that limit athletic scholarships to the full cost of attendance and that restrict compensation and benefits unrelated to education. These may be price-fixing agreements, but the court found them to be reasonable in light of the possibility that “professional-level cash payments . . . could blur the distinction between college sports and professional sports and thereby negatively affect consumer demand.” As for caps on education-related benefits-such as rules that limit scholarships for graduate or vocational school, payments for academic tutoring, or paid post-eligibility internships the court found that such education-related benefits would not be “confused with a professional athlete’s salary.” The court enjoined D only from limiting education-related compensation or benefits that conferences and schools may provide to student-athletes playing Division I football and basketball. Everyone appealed. D claimed the court should have taken a quick-look analysis. Ps claimed the court should have unlimited other forms of compensation. The Ninth Circuit affirmed. D argued that the compensation restrictions were necessary to maintain the distinction between college and professional sports, thereby increasing consumer choice and enhancing competition. The Ninth Circuit agreed with the district court that only some of the restrictions - those on payments unrelated to education - served to enhance the distinction between college and professional athletics. It affirmed the district court which “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. D appealed. Ps did not appeal the decision to leave non-education-related compensation limits intact. The Supreme Court granted certiorari. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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