Athletes, Ivies and the NCAA

By Alexandros Kazimirov

On June 29, 2023, a student class action was filed against educational institutions that form the Ivy League, asserting that their agreement to restrict athletic scholarships for student athletes competing in Division I of the National Collegiate Athletic Association (NCAA) is a form of price-fixing, incompatible with antitrust law, under a per se and rule of reason analysis. The complaint echoes criticism of what is claimed as “procompetitive justification” for imposing limits on education-related expenses in National Collegiate Athletic Association v. Alston.

The question of compensation of student athletes has long permeated public discourse and the U.S. courts. At its core it is a matter of balancing between the interests of student athletes and the concept of amateurism, which constitutes intercollegiate sports under the NCAA. Some hold that refusing compensation to student athletes when the NCAA’s product is worth billions, is preposterous. The view that there is great disparity between the NCAA’s earnings and the student athletes’ compensation is one shared by Justice Kavanaugh, who laid out his separate opinion in Alston: “Those enormous sums of money flow to seemingly everyone except the student athletes. College presidents, athletic directors, coaches, conference commissioners, and NCAA executives take in six- and seven-figure salaries. Colleges build lavish new facilities. But the student athletes who generate the revenues end up with little or nothing”.

The NCAA on its part has historically focused on the premise of amateurism. According to the NCAA, amateurism defines college athletics, and the sport derives its value from it. Subsequently, the NCAA has been at arms with every court decision limiting NCAA’s discretion on how to address the issue.

A fundamental principle in all relevant cases so far, is that the courts discern between education-related expenses and education-unrelated expenses, such as endorsement deals based on a student-athlete’s name, image or likeness (NIL). What is more, education-related expenses can be in the form of tuition discounts or athletic scholarships.

The issue of whether college athletes should receive additional compensation beyond tuition, room and board, and other educational expenses has not been fully settled. In O’Bannon v. NCAA [802 F.3d 1049 (9th Cir. 2015)] the Ninth Circuit Court of Appeals lifted caps on education-related compensation, but allowed some discretion to the NCAA on limiting students’ earnings based on NIL deals which are unrelated to their education expenses. In Alston, the NCAA appealed the loss of their ability to cap educational-related expenses. And lost.

The Court described that just because the NCAA’s arrangement was not found to be illegal per se in a previous case (NCAA v. Board of Regents of the University of Oklahoma) this does not preclude the Court from examining it under the rule of reason.

And under the rule of reason, the Court laid out the process that the District Court employed to reach its conclusions. First, the students argued that the restraints on education-related expenses and additional compensation were anti-competitive measures by a party enjoying monopsony. Then, letting the NCAA rebut the argument by reiterating the pro-competitive aspects of the arrangement, such as retaining “amateurism”, i.e. the collegiate non-professional nature of sports. Third, carefully considering whether the consumer market can be attained using substantially less restrictive means.

The Court found in Alston that the District Court struck a good balance by condemning the restraints on educational-related expenses, but still leaving some discretion to the NCAA on how to manage such expenses, without having judges second-guess every decision they take.

Justice Kavanaugh’s concurring opinion is worthy of mention. He reminded the Court that NCAA’s appeal pertained only to caps on cost of attendance, which the Court unanimously rejected. But he went beyond this, saying he didn’t find the NCAA’s procompetitive justification for its rules limiting athletic scholarships or even NIL compensation persuasive either. In a nod to a future class of petitioners, Justice Kavanaugh indicated that there is more to be gained. His remarks were noticed and his call was answered in Choh v. Brown University.

From here on, with O’Bannon and Alston as precedent, it will be a tough road for the defendants to keep restrictions on athletic scholarships or NIL deals.