July 14, 2021

College Athletes Allowed Compensation According To Supreme Court Ruling Against NCAA

Supreme Court NCAA Ruling on Compensation for College Athletes

The case: The National College Athletic Association (NCAA) vs. Alston 

The ruling: 9-0 – upholds the lower courts’ ruling that the NCAA can no longer dictate limits on education-related compensation.

College Athletes

In a recent landmark decision, the Supreme Court affirmed a lower court injunction restricting the National Collegiate Athletic Association’s (NCAA) ability to regulate the educational benefits of Division I athletes. While this decision opens many avenues of compensation for athletes, the Supreme Court does not address whether current NCAA regulations, limiting player compensation for athletic performance, violate Sherman antitrust laws. Additionally, after the unanimous decision, the NCAA still maintains ways of regulating educational compensation and permits individual conferences large discretion in determining the scope educational benefits can reach. So, where does this leave Division I athletes, and what kind of compensation can they expect under current law? 

What is the NCAA and why does it exist?

The relationship between college athletics and money has always been complicated.  Universities during the late 1800s gave comprehensive compensation to athletes. For college football players, the benefits ranged from lavish vacations and jobs to large sums of money.

NCAA Supreme Court

University athletics before the NCAA lacked regulation with respect to athlete compensation and safety protocols. Thus, college football during this time period was often very violent, so much so that in 1905 there were 18 fatalities. The large number of fatalities became a turning point in college athletics and initially prompted the formation of the NCAA. However, the NCAA extended their reach to regulate other aspects of college sports such as player compensation.  In 1948 the NCAA implemented the strictest regulations in its history.  Since 1948 the rules surrounding athlete compensation evolved many times, and through the decision National Collegiate Athletic Assn. V. Alston the Supreme Court has curtailed some of the NCAA’s power. 

The Policy

The Supreme Court offers extensive legal justification for its holding, but the decision is rife with additional policy reasons supporting the findings. The evolution of athlete compensation, since the inception of the NCAA, is one of the underlying policy justifications that the Supreme Court addresses. The first major change came in 1956, when the NCAA began allowing payments to include room, board, books, fees, and “cash for incidental expenses such as laundry.”  [In re National Collegiate Athletic Assn. Athletic Grant-in-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058, 1063 (ND Cal. 2019)] The scope of allowable compensation continued to expand in 2014 when the NCAA began permitting member schools to give scholarships up to the full cost of attendance. 

The changing payment scheme adopted by the NCAA eventually led to the creation of the student assistance fund. The student assistance fund is used to help athletes meet financial needs, improve their welfare or academic support, or recognize academic achievement. [Id. at 1072] The Supreme Court in its historical examination of NCAA regulation implicitly justifies its decision to allow educational compensation by showing the fluidity of NCAA rules.  

The Supreme Court also implies a need for fairness as another policy argument.   The NCAA’s current contract for the March Madness Basketball tournament is worth $1.1 billion annually.  [Id. at 1077] The NCAA has an assortment of other contracts worth hundreds of millions of dollars. [See Nat'l Collegiate Athletic Ass'n v. Alston, 141 S. Ct. 2141, 2150 (2021)] The president of the NCAA earns $4 million a year and coaches earn up to almost $11 million while some assistant coaches are making more than $2.5 million.  By making these observations the Supreme Court is highlighting the great monetary value of the NCAA to show the injustice of some NCAA regulations.  

The Legal Backdrop

The student athletes (plaintiffs) were involved with Division I FBS football and men’s and women’s Division I basketball. The NCAA, alongside 11 Division I conferences, are the defendants.  

Plaintiffs filed a class action challenging several NCAA regulations that limit compensation of student athletes.  Plaintiffs specifically alleged that the NCAA violated the Sherman Act 15 U. S. C. §1 prohibiting restraint of trade or commerce.  The court reads restraint of trade to mean “undue restraint” [Ohio v. American Express Co., 585 U. S. ___, ___ (2018)] and they determine what an undue restraint is by looking at a “rule of reason test.”  [Texaco Inc. v. Dagher, 547 U. S. 1, 5 (2006); Standard Oil Co. of N. J. v. United States, 221 U. S. 1, 60– 62 (1911)]. The Court applies this test by analyzing market powers and structures on a case-by-case basis.  

In analyzing the NCAA regulations, the Court essentially looks at the pros and cons on the overall market, considering that the NCAA has a monopoly.  Because the Court found that the NCAA regulations produced significant anticompetitive effects on the market, the Court considered the NCAA’s pro-competitive justifications. The main argument the Supreme Court reconsidered from the lower court is that compensation restrictions play a role in consumer demand.  However, the Supreme Court unanimously reached the same conclusion as the lower Court, that the evidence failed to establish any direct relationship to consumer demand. [In re National Collegiate Athletic Assn. Athletic Grant-in-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058, 1070 (ND Cal. 2019) 

The Supreme Court did not offer an opinion on many of the arguments raised in the District Court, because the plaintiffs did not renew their claims. The main new issue the Supreme Court addressed related to the NCAA appeal is that they are subject to a rule of reason analysis.  The NCAA contends that subjecting their regulations to a rule of reason analysis is too strict a test.  They instead urge the Court to look at their restrictions using only a “quick look.” Here, the NCAA seeks to avoid the strict scrutiny of restrictions subject to antitrust law by advocating for a more lenient standard of review. However, the Supreme Court found it un-compelling that the NCAA restrictions should be given impunity from the Sherman Act simply because their rules intersect with higher education, money, and sports.  

The end result is that the Supreme Court affirms the District Court injunction and emphasizes that it only applies to the NCAA and multi-conference agreements. Individual conferences remain untethered by the injunction and may implement restraints as they see fit.  

NCAA Issues with the Injunction

The NCAA has three main objections to the injunction. Their objections show the practical effects the injunction will have on student athletes and the NCAA.  

  1. The NCAA’s first concern relates to the District Court inclusion of paid post eligibility internships. Their issue is that they see a possibility where internships are used to circumvent the rules governing payment limits for athletic performance.  The NCAA suggests that boosters may offer internships at sneaker companies or car dealerships with large salaries.  However, the Supreme Court says that the NCAA misreads the injunction and that they are still free to limit compensation from sneaker companies or anywhere else.  
  2. The second issue the NCAA has is that they may not set the aggregate limit for academic achievement at an amount lower than the current aggregate limit for parallel athletic awards (presently $5,980 annually). [Nat'l Collegiate Athletic Ass'n v. Alston, 141 S. Ct. 2141, 2165 (2021)]  The NCAA makes the claim that this is a professional salary, but that argument was quickly struck down. The Supreme Court is giving broad discretion for the NCAA to define the terms of “educational benefits” and to ensure that criteria is met.  
  3. The last objection the NCAA makes is against the new allowance that schools may provide in-kind educational benefits. They suggest that by allowing benefits of this kind (generally used for things like tutoring or computers) that schools will give benefits like “luxury cars” “to get to class”.  [Brief for Petitioner in No. 20–512, at 48–49] The Court rejects this argument and explains that the NCAA is free to implement restrictions against benefits of this nature.  In-kind benefits are compatible with NCAA regulations that would forbid schools from providing students with luxury cars and any other benefit it determines is not legitimately related to education.  

Available Compensation Opportunities for NCAA Athletes

Despite the broad discretion given to the NCAA to regulate the different types of educational compensation, athletes now have more opportunities to receive financial compensation and benefits.  Florida, Alabama, New Mexico, Mississippi, and most recently Georgia have gone further now permitting college athletes to monetize their image and brand.  The new name image and likeness law (NIL) still restricts payment for playing, but enables players to commercialize and monetize their image.  The possibility of payment for athletic performance and other methods of compensation remains available for the future.  The Supreme Court greatly emphasized that they have yet to speak on the issue of compensation for athletic performance, and that those NCAA regulations may be subject to the same limitations as educational compensation.  

Written by James Nohavicka

Fordham University School of Law

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