By Jake Abrahamian.
In March 2019, the Northern District of California decided the much-anticipated case in re National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation (NCAA Athletic Grant-in-Aid). Plaintiffs in the case were current and former Division I college football and basketball players who sued the NCAA, the governing body for college athletics. Plaintiffs alleged that the NCAA violated antitrust laws by artificially capping the compensation that member athletes receive for their athletic services to NCAA schools. The court held that, although the NCAA did violate antitrust law, the appropriate remedy is uncapping only compensation related to education. This is a far cry from the remedy sought by the student-athletes who were hoping to lift all limits on compensation.
For years now, student-athletes have taken to the courts to try to open the door to better compensation. Vital to this 2019 decision was the precedent set by the Ninth Circuit in 2015 when the court decided O’Bannon v. National Collegiate Athletic Association. O’Bannon centered on student-athletes alleging that the NCAA illegally denied them the monetary value of their names, images, and likenesses (NILs). The appellate court affirmed the district court’s ruling that the NCAA violated antitrust law, but rejected the lower court’s remedial idea of allowing schools to pay up to $5000 in compensation to an athlete. Instead, the court held that schools must only compensate student-athletes up to the cost of attendance.
Part of the O’Bannon court’s reasoning included that the NCAA must maintain its amateurism model to drive demand for its product. The court’s antitrust analysis was based on the rule of reason, which is a multistep test that compares the anticompetitive and procompetitive effects of the challenged restraint. First, plaintiffs must show an anticompetitive effect. Then, defendants must show a procompetitive effect that outweighs the anticompetitive effect. Finally, plaintiffs must demonstrate that the procompetitive effects can be achieved through less restrictive means. Importantly, those less restrictive means must be virtually as effective in maintaining the procompetitive effects as the more restrictive means. In O’Bannon, the student-athletes showed that the NCAA anticompetitively restrained the market. The NCAA then countered by demonstrating that it needed to maintain an amateurism model to distinguish its product from professional sports and keep demand high. At the district court level, the less restrictive means of maintaining an amateurism model was determined to be a $5000 sum for the NILs. The Ninth Circuit rejected that idea, stating that paying athletes a sum of $5000 cannot possibly be as effective at maintaining the amateurism model because not paying the athletes is precisely what makes them amateurs.
The O’Bannon holding clearly plays a key role in NCAA Athletic Grant-in-Aid. While the latter case was not about NILs, it was similarly about the NCAA restricting payments to student-athletes. Again, in NCAA Athletic Grant-in-Aid just as in O’Bannon, the Rule of Reason analysis proceeded through the first two steps and resulted in a chance for plaintiffs to demonstrate that the procompetitive effect of maintaining the NCAA’s amateurism model could be achieved through less restrictive means.
But what is the NCAA’s amateurism model? The Ninth Circuit clearly understood amateurism to mean that student-athletes could not be paid cash for their athletic abilities. Yet the NCAA Athletic Grant-in-Aid court’s findings of fact demonstrate that the NCAA’s “amateurism” model is arbitrary. It allows student-athletes to receive cash-equivalent payments up to $5600, $50,000 premiums for loss-of-value insurance against loss of future professional wages, and thousands of dollars in travel expenses for family members, amongst other payments. The court also notes that all of these payments are untethered to education and that the economic evidence shows that none of these payments limit demand. But when it came to ruling on the case, the district court held that the NCAA must uncap only payments related to education. The district court was bound by the Ninth Circuit’s interpretation of amateurism, despite what seems to be compelling evidence that paying student-athletes does not decrease demand for NCAA sports.
Student-athletes will continue to fight for fair compensation, but they should seek out a new jurisdiction. The Ninth Circuit has clearly shown deference to the NCAA model’s status quo, but district courts elsewhere may analyze the facts without being bound by precedent. Perhaps student-athletes are closer to their long-awaited remedy than they might think.