Sports leagues enjoy some exemptions from antitrust laws; the question in NCAA v. Alston is how those exemptions apply to player compensation.
College sports are a massive industry. In the 2015-’16 academic year, Division I basketball and Division I-A football generated $4.3 billion in revenue. The question of whether these basketball and football programs need to use some of this revenue to provide more compensation to players is now before the Supreme Court in NCAA v. Alston, which the justices will hear next Wednesday.
The case was brought by several college football and basketball players (the basketball players include men and women) who allege that “the NCAA and its members have unlawfully agreed that no college will pay an athlete any amount for his or her work that exceeds the value of a grant-in-aid,” the mix of athletic scholarships and similar compensation provided to many of the nation’s top college athletes. All of the plaintiff athletes play (or, at least, played — the case was filed in 2014) at the elite Division I level.
If you watch a college football or basketball game on television, you’re watching the product of a long list of workers who are all paid market salaries or wages. Coaches in top programs earn millions of dollars a year. Such programs also employ an array of athletic directors, assistant coaches, and athletic trainers. Stadiums need janitors to clean up after games. Football fields need groundskeepers. Basketball programs require workers to maintain the court’s surface. And all of these workers are generally paid whatever compensation they are able to secure in the open market.
But the players are not. The National Collegiate Athletic Association (NCAA) enforces a strict set of rules limiting player compensation.
College athletes aren’t necessarily uncompensated. At the elite level, many receive scholarships that cover the cost of attending college, including expenses such as room and board. And some players even receive small cash stipends to cover their living expenses, as well as other perks such as meals and medical care for sports-related injuries.
Of course, some of these players will go on to make a lot of money as professional athletes, but that’s only a rare few. As Judge Milan Smith pointed out in his opinion in this case, “fewer than 5% of Student-Athletes will ever play at a professional level, and most of those lucky few will stay in the pros only a few short years.” So “the college years are likely the only years when young Student-Athletes have any realistic chance of earning a significant amount of money or achieving fame as a result of their athletic skills.”
But these players cannot negotiate for a salary. And they often can’t benefit financially from the fame they earn while playing. The NCAA’s bylaws strip players of eligibility “for intercollegiate competition in a particular sport if the individual ... uses athletics skill (directly or indirectly) for pay in any form in that sport.”
In virtually any other industry, this arrangement would violate federal antitrust laws. Vox Media, for example, could not form a cartel with its competitors where they all agree to pay depressed salaries to reporters.
But that brings us to why Alston is actually a difficult case. Having laid out the facts of Alston in fairly pro-worker terms, I should now acknowledge that the NCAA has a reasonably strong case under existing precedents. And it has a strong case because the Supreme Court has long recognized that sports leagues must have some exemptions from federal antitrust law in order to function.
As the Court explained in NCAA v. Board of Regents of the University of Oklahoma (1984), sports leagues necessarily require individual teams to collude with their competitors. The teams that make up a football league, for example, must all agree upon “rules affecting such matters as the size of the field, the number of players on a team, and the extent to which physical violence is to be encouraged or proscribed.” They also have to agree on even more basic things such as which teams play which other teams at what times, and where those games will take place. Without this kind of collusion, organized competitive sports could not exist.
Yet, while there’s widespread agreement that the NCAA needs to have some leeway to set rules that would ordinarily violate antitrust laws, this leeway is not absolute. The fundamental question in Alston is just how much freedom the NCAA should have to set rules that limit players’ compensation.
Why sports are different
In the parlance of antitrust law, the NCAA’s rules limiting player compensation are what is known as a “horizontal agreement” among competitors — that is, they are an arrangement among multiple businesses that compete at the same level within the college sports industry.
As the Court explained in the Board of Regents case, “horizontal price fixing and output limitation are ordinarily condemned as a matter of law under an ‘illegal per se’ approach because the probability that these practices are anticompetitive is so high.” This is why media companies couldn’t collude with one another to underpay their writers.
But this strong rule against horizontal price fixing is relaxed for what antitrust lawyers call “joint ventures.” Sometimes, multiple competitors are able to work together to produce a product that could not exist without such collusion. As Robert Bork, the former judge and failed Supreme Court nominee, wrote in an extraordinarily influential 1978 book, the “leading example” of such a venture “is league sports.”
Few people are going to watch a single sports team show off its skills in isolation. The essence of team sports is that two or more teams go up against each other in a prearranged competition. As Bork wrote, such competition is the very sort of activity that “can only be carried out jointly.” If Duke cannot collude with UNC to decide when their two teams will meet on a basketball court, fans of both teams will lose a cherished tradition.
Yet, while Board of Regents acknowledged that sports teams must have some ability to enter into arrangements that would ordinarily violate antitrust laws, the Court did not give the NCAA free rein to do whatever it wants.
Board of Regents involved the NCAA’s efforts to control which games could be broadcast on television at which times. Under the NCAA’s terms, only two networks (ABC and CBS) were allowed to broadcast college football games, and those networks were required to “schedule appearances for at least 82 different [teams] during each 2-year period.” No team, moreover, was “eligible to appear on television more than a total of six times and more than four times nationally, with the appearances to be divided equally between the two carrying networks.”
The apparent purpose of this arrangement was to prevent television broadcasts of games from having “an adverse effect on college football attendance.” The NCAA feared that if too many games were broadcast, fans would choose to watch college football at home rather than buying tickets and watching them in the stadium.
In any event, the Court held that this sort of arrangement was not allowed. Limits on which games can be televised, the Court explained, do not “fit into the same mold as do rules defining the conditions of the contest, the eligibility of participants, or the manner in which members of a joint enterprise shall share the responsibilities and the benefits of the total venture.”
A sports league cannot exist unless every team plays by the same rules, and it cannot exist unless the teams agree to a set schedule. But college football is perfectly capable of thriving without the limits on televised games imposed by the NCAA in the Board of Regents case. Indeed, college football is a successful industry right now, even though the Court struck down the NCAA’s restrictions on televised games.
The NCAA claims that “amateur” athletes are an essential part of its product
The core insight of Board of Regents is that antitrust law may not prevent competitors from colluding with one another — even if such collusion involves activity like horizontal price fixing that is typically illegal — if such collusion allows those competitors to offer a product to consumers that otherwise could not exist.
But what exactly is the “product” offered by the NCAA and the various schools that belong to it?
The NCAA argues in its brief that “the ‘product’ of college sports” is “different from professional sports because the participants are not only students but also amateurs, i.e., not paid to play.” Competition among “amateurs,” which in this context appears to mean players who can receive scholarships and small stipends but not salaries, the NCAA claims, is a fundamentally different product than competition among athletes who are paid whatever they can earn in the free market.
One problem with this argument is that if it can be applied to other industries, it could eviscerate antitrust protections for workers.
Think again of a cartel of media companies that all collude to depress salaries for their employees. Imagine that this cartel announces it has created an exciting new product — “amateur journalism!” — and that the members of the cartel will now employ entire newsrooms of college students who are compensated solely with college credit or maybe a small stipend similar to the ones offered to some college athletes.
Imagine as well that the cartel starts laying off professional reporters because at least some of the work done by those professionals can also be performed by “amateurs” for far less money. And the laid-off workers are unable to find work at a professional rate because anyone who might hire them is part of the cartel. This is the very sort of collusion and price fixing that antitrust laws are supposed to prevent.
But while workers everywhere should hope that the Court won’t tolerate the NCAA’s “amateurism” argument in any other industry, the NCAA does have a fair amount of case law on its side.
In Board of Regents, for example, the Court did suggest that “amateur” competition among college students is different in kind from professional competition:
[T]he NCAA seeks to market a particular brand of football — college football. The identification of this “product” with an academic tradition differentiates college football from and makes it more popular than professional sports to which it might otherwise be comparable, such as, for example, minor league baseball. In order to preserve the character and quality of the “product,” athletes must not be paid, must be required to attend class, and the like. And the integrity of the “product” cannot be preserved except by mutual agreement; if an institution adopted such restrictions unilaterally, its effectiveness as a competitor on the playing field might soon be destroyed.
The Alston plaintiffs, for what it’s worth, dismiss Board of Regents’ suggestion that college athletes “must not be paid” as mere “dicta” — that is, a part of a judicial opinion that is not necessary to resolve a case and is not considered to be binding on future judges. But many judges have treated Board of Regents’ paean to amateurism as a fixture of antitrust law.
One federal appeals court, for example, held in 2018 that rules “meant to preserve the amateur character of college athletics” are “presumptively procompetitive” and therefore should typically be upheld. Emboldened by decisions like this one, the NCAA asks the Supreme Court to give it a rather sweeping exemption from antitrust laws.
A joint venture, the NCAA claims, “‘must have the discretion to determine’ the defining features of its products, even if that means forming an agreement that might otherwise be unlawful.” So if the NCAA says that undercompensating athletes is an essential feature of its product, courts must defer to the NCAA’s judgment.
But at least one federal appeals court, the United States Court of Appeals for the Ninth Circuit, rejected this argument — which takes us to the case now before the Supreme Court. The Ninth Circuit’s decision in the Alston case, didn’t so much deny that “amateur” sports are different from professional sports as reject the NCAA’s definition of amateurism as incoherent.
“Though the NCAA defined amateurism during the litigation as ‘not paying’ the participants,” the Ninth Circuit explained, a trial court determined that “this purported pay-for-play prohibition is riddled with exceptions.” Players can receive stipends, “athletic participation awards,” “personal and family expenses,” and other forms of compensation from their schools, and still meet the NCAA’s definition of an “amateur.” So why would these players cease to be amateurs if they received additional compensation?
And yet the Ninth Circuit’s approach to student-athlete compensation is no less incoherent than the NCAA’s. Under the appeals court’s decision, most of the NCAA’s restrictions on paying student-athletes remain in place, but schools would be allowed to compensate athletes with educational materials such as computers or musical instruments (if the athlete is studying that instrument), as well as benefits such as “post-eligibility scholarships to complete undergraduate or graduate degrees at any school; scholarships to attend vocational school; tutoring; expenses related to studying abroad that are not included in the cost of attendance calculation; and paid post-eligibility internships.”
So the Ninth Circuit’s approach doesn’t so much draw a bright line that separates amateurs from professionals as come up with a new set of rules that are no less arbitrary than the NCAA’s rules.
It’s a huge mess. Though the Board of Regents decision does suggest that the antitrust laws must bend somewhat to ensure that “amateur” college sports leagues exist, no one can figure out a coherent definition of the word “amateur.” And the NCAA’s proposed solution to this problem is to ask a conservative Supreme Court to let it do whatever it wants with respect to player compensation.
Alston is really a case about what antitrust laws are supposed to accomplish
As mentioned above, the idea that sports teams should be given a fair amount of freedom to collude with their competitors derives from Judge Bork’s 1978 book The Antitrust Paradox. Though a bipartisan majority of the Senate voted to reject Bork’s nomination to the Supreme Court in 1987, Bork remains one of the most significant figures — if not the most significant figure — in modern antitrust law.
Bork’s core belief was that antitrust law should exist solely to benefit consumers. So companies should be allowed to collude, or even form monopolies, so long as such behavior did not lead to higher consumer prices. And sometimes, Bork claimed, less competition can even be good for consumers.
Mega-retailers like Amazon and Walmart, for example, benefit from economies of scale. As they capture more and more of the retail market, they can also drive harder and harder bargains with their suppliers — because those suppliers cannot afford to lose their ability to sell to Amazon’s or Walmart’s customers. And companies that dominate a market can fire reductant workers and potentially pay much lower wages than a company that has to compete with multiple other retailers for employees.
In the short term, this kind of market dominance really can benefit consumers, because all these efficiencies allow Amazon or Walmart to charge lower prices. The long-term implications of Bork’s model, however, are far less clear. Yes, Amazon can charge lower prices because it squeezes every possible penny out of its suppliers, but that’s cold comfort to a worker at one of those suppliers who is laid off because the company can no longer afford to pay them.
And what happens if Amazon manages to crush all its competitors? With no one to compete against, Amazon will be free to raise prices because it no longer needs to worry about having its prices undercut by someone else — and, with Amazon’s total dominance of the retail sector, workers in that sector will have nowhere to go if they want higher wages.
Because of these concerns, a new liberal consensus is forming that Bork’s ideas are wrong. As Sen. Elizabeth Warren (D-MA) said in 2016, “for markets to work, there has to be competition.” Without robust antitrust enforcement, a few big companies consolidate both economic and political power. And workers and consumers risk having no alternative when the big players decide to pay them very little and charge them a great deal.
Bork’s approach to antitrust law infuses decisions like Board of Regents. The fundamental premise of judicial decisions carving out a special role for “amateur” sports is that, so long as consumers get to watch a particular kind of competition, it doesn’t matter what happens to the workers who make that competition possible.
And in a Court dominated by Republican appointees, Bork’s views are likely to remain ascendant for many years to come.
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