Client Alert: The NCAA Is Not “Above the Law” – What the Supreme Court’s Alston Ruling Finding Violations of Antitrust Laws Means for the Name, Image and Likeness Landscape Print PDF
On June 21, 2021, the U.S. Supreme Court issued a unanimous opinion in National Collegiate Athletic Association v. Alston, affirming the district court’s ruling and holding that the NCAA was not exempt from antitrust laws and that the NCAA’s restraints on education-related benefits to student athletes are improper. This decision will necessarily have an impact on how name, image and likeness (“NIL”) restrictions will be handled moving forward and student athletes must be prepared to know their rights and understand benefits to which they may be entitled.
In Alston, current and former student athletes brought a class action antitrust lawsuit challenging the “current, interconnected set of NCAA rules that limit the compensation they may receive in exchange for their athletic services” as violating Section 1 of the Sherman Antitrust Act, which prohibits contracts, combinations or conspiracies in restraint of trade. Essentially, the question before the Supreme Court was whether the NCAA’s compensation restrictions unduly limit competition, artificially suppressing the market for student athlete talent.
The Supreme Court ultimately found that the district court correctly decided to conduct a rule of reason analysis, using the following three-part test to evaluate whether the NCAA’s restrictions violate antitrust laws: (i) the plaintiff has the initial burden to prove the challenged restrictions do not unreasonably restrict competition; (ii) if part one is met, the burden then shifts to the defendant to show that the restraint has a procompetitive rationale; and (iii) if part two is met, the burden then shifts back to the plaintiff to show that the procompetitive efficiencies could be achieved by less restrictive means.
In applying the three-part test the Court upheld the district court’s findings that: (i) the student athletes had met their initial burden by establishing that the NCAA restricted competition by artificially capping compensation for student athletes in a market where it exercised complete control; (ii) the NCAA had put forth a procompetitive justification—that maintaining “amateurism” in college sports creates a product distinct from professional sports for consumers; but (iii) the student athletes had shown that the NCAA’s compensation restrictions were “patently and inexplicably stricter than necessary” to maintain its distinct product of college sports.
While the ruling does not give schools the right to directly pay their student athletes, it gives them the ability to provide almost any benefit, as long as the schools can tie the benefit to the students’ educational experience. Such benefits include tutoring, internships and postgraduate scholarships, as well as electronic equipment such as laptops.
Justice Kavanaugh’s concurring opinion, while highlighting that the majority opinion did not rule on the NCCA’s other compensation rules, included a scathing critique of the NCAA’s compensation restrictions in general, stating that there are serious questions as to whether the remaining compensation restrictions would survive a rule of reason analysis. His opinion declares that, “[n]owhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate . . . The NCAA is not above the law.” The Supreme Court’s ruling, while less blunt than Justice Kavanaugh’s concurrence, also leaves the door open for further challenges to the NCAA’s remaining compensation restrictions.
What’s Next for NIL?
Although the Alston decision applies only to benefits relating to the students’ educational experience, it will also have a material impact on the NIL landscape (i.e., the right of college athletes to profit from their name, image and likeness). It has long been against the rules in collegiate sports for athletes to profit from their NIL (while professional athletes have always been able to do so). Justice Kavanaugh could not make the coming end of this long standing practice clearer, by stating: “The bottom line is that the NCAA and its member colleges are suppressing the pay of student athletes who collectively generate billions of dollars in revenues for colleges every year.”
While there is no doubt that student athletes will be able to profit from their NIL, the question is what laws and rules will govern? The NCAA had been waiting for a ruling in the Alston case before deciding whether to implement NIL legislation (and the specifics of any such legislation), but the timing is especially sensitive because NIL laws in six states (Alabama, Florida, Georgia, Mississippi, New Mexico and Texas) are set to go into effect July 1.
Dozens of other states have either passed NIL laws with future effective dates or have introduced NIL bills that are pending before the state legislature. Many believe that the NCAA has to pass some sort of NIL legislation before July 1 to address the issues relating to how the six state laws affect the other 44 states (as well as the differences among the state laws). Others, however, believe that the NCAA should refrain from adopting NIL rules that contradict any NIL laws adopted by individual statues.
Indeed, following the Alston ruling, NCAA president Mark Emmert issued a statement saying: “Even though the decision does not directly address name, image and likeness, the NCAA remains committed to supporting NIL benefits for student athletes . . . Additionally, we remain committed to working with Congress to chart a path forward, which is a point the Supreme Court expressly stated in its ruling.”However, a group of major conference commissioners issued a statement urging an approach that leaves the creation and implementation of NIL regulations to each individual school (with only a few parameters that must be consistent across regulations for each school), rather than a set of regulations at the NCAA level. They feel that regulations at the NCAA level will lead to “inevitable confusion, uncertainty and likely litigation against the NCAA and its member conferences and institutions.”
Further, Congress will likely pass federal legislation preempting state NIL laws and providing for uniform rules (there are currently three bills being debated in Congress) in an attempt to avoid differentiating state regulations that may influence a student athlete’s decision to attend a particular college – the exact issue that Congress and the NCAA seek to avoid. However, there is little chance any legislation will be passed before the end of the year (let alone by July 1), leaving the regulation of NIL open for states and the NCAA to adopt potentially conflicting rules and regulations.
Ultimately, while the NCAA seems poised to act on NIL prior to July 1 (they are set to meet this week and have an emergency meeting set for June 28, if necessary), given the member pushback and the strong words of Justice Kavanaugh, the NCAA may further delay any action to avoid the risk of further antitrust litigation stemming from any potential NIL regulations. In any event, if they do not act, they will likely need to issue waivers against sanctions to schools that follow their home state’s NIL legislation.
Until then, the debate continues on what the framework of NIL regulation should look like for student athlete endorsements and compensation, codes of conduct, permissible NIL contracts, royalty revenues, personal branding, penalties and enforcement provisions. One thing, however, is clear – the NIL landscape is changing and student athletes should be educated and prepared with a plan for their own collegiate, financial and personal well-being.
We will continue to monitor any further developments on the NIL landscape, including pending legislation and the NCAA’s decision on whether to adopt regulations and will provide additional information, as received.
Note 6/25/21 - See updated development: NCAA to Issue Interim Waivers to Allow Student Athletes to Profit From Their Name, Image and Likeness
This information is provided only for general reference. It does not constitute legal advice. Legal advice may be provided based only on specific facts. Please consult us before relying on any general information stated herein. We are happy to discuss any questions you may have regarding the items contained herein.