By Tanner Bowen
Tanner Bowen is a sophomore at the University of Pennsylvania studying business.
The history of college athletics has been a long and complicated one. During the course of this history, the NCAA has developed a set of rules in order to foster a sense of amateurism at the collegiate level, while still allowing students to both perform athletically and obtain a solid college education. Out of all of these rules, the most highly contested is whether student athletes should be paid above the cost of attending the school. The NCAA has said no, and the courts have taken a similar opinion on this subject.
In the court case O’Bannon v. National Collegiate Athletic Association, the Ninth Circuit Court of Appeals recently ruled that college athletes should not be paid above the full cost of attendance to a university. But what was particularly interesting about this case was that it was brought under the Sherman Antitrust Act of 1898, as the plaintiffs alleged that the NCAA was engaging in anticompetitive activities through not allowing deferred compensation. In particular, they were restraining “trade” in the sense that college athletes could not sell their names, images, or likenesses (NILs) to video game producers or other licensors.
Tanner Bowen is a sophomore at the University of Pennsylvania studying business.
The history of college athletics has been a long and complicated one. During the course of this history, the NCAA has developed a set of rules in order to foster a sense of amateurism at the collegiate level, while still allowing students to both perform athletically and obtain a solid college education. Out of all of these rules, the most highly contested is whether student athletes should be paid above the cost of attending the school. The NCAA has said no, and the courts have taken a similar opinion on this subject.
In the court case O’Bannon v. National Collegiate Athletic Association, the Ninth Circuit Court of Appeals recently ruled that college athletes should not be paid above the full cost of attendance to a university. But what was particularly interesting about this case was that it was brought under the Sherman Antitrust Act of 1898, as the plaintiffs alleged that the NCAA was engaging in anticompetitive activities through not allowing deferred compensation. In particular, they were restraining “trade” in the sense that college athletes could not sell their names, images, or likenesses (NILs) to video game producers or other licensors.
The first issue in the case was whether the NCAA was even subject to an antitrust analysis under the Sherman Antitrust Act. For this, the NCAA set out three reasons why the plaintiffs’ claim failed on merits: Firstly, the Supreme Court ruled in NCAA v. Board of Regents of the University of Oklahoma that amateurism rules are “valid as a matter of law”; in addition, the compensation rules in respect to the issues here are not covered by the Sherman Act at all because they don’t regulate commercial activity; and finally, the plaintiffs have no standing because they haven’t suffered an “antitrust injury.” With each of these three arguments, the Ninth Circuit quickly dismissed them. [1]
For the Regents case, the “amateurism” argument came from a discussion about why a particular television rule should be analyzed under the Rule of Reason. The NCAA interpreted this, however, to say that the Court interpreted their amateurism rules to be consistent with the Sherman Act. Disposing of this argument, the Court next turned to the commercial activity and injury arguments. It seems almost absurd to argue that the NCAA does not engage in any form of “commerce,” considering the years of Supreme Court decisions that have broadened its definition. Using a common definition of “…including almost every activity from which the actor anticipates economic gain,” it makes sense to show that athletes competing within the NCAA could forego economic gain from the amateurism rules. [2] This feeds into the final point, in which most media corporations would be happy to buy the NILs of players. Because of this missed opportunity for deferred compensation on behalf of the players, that is all that is needed to establish “antitrust injury” subject to the Sherman Act.
After the Court rejected these arguments, it launched into the primary analysis of the NCAA’s actions subject to Section 1 of the Sherman Act. In particular, the Ninth Circuit ruled that the NCAA engaged in anticompetitive activities by fixing the “price” that recruits pay to attend college—thus creating a monopsony where the buyer (the university) fixes the amount that can be paid for playing for the school. Taking this into consideration, however, the NCAA does take some genuine pro-competitive actions with the college education market. The goal of promoting amateurism is legitimate in that sometimes restraint can increase consumer demand for sports, but the NCAA’s argument that restraining commerce would “widen” athletes’ range of economic choices seems almost counter-intuitive when one realizes, once again, that some athletes could actually get additional compensation in college for licensing their NILs. Noting this, the justifications of these anticompetitive measures do not hold up to the Rule of Reason. [3] What was left now was to state some of the less restrictive alternatives to the current NCAA compensation rule. On this point, the Ninth Circuit disagreed with the district court. Specifically, they said that universities were permitted to provide up to the full cost of attendance to athletes in compensation, but nothing more. The additional proposal of paying each player up to $5,000 per year seemed rather erroneous.
This once again comes back to the NCAA’s rule of promoting amateurism. Although not sufficient by itself to shield the NCAA from antitrust analysis, trying to keep collegiate athletes at an amateur level does carry some validity. When colleges pay student athletes, the students will essentially lose their amateur status. But beyond this, the arbitrary “$5,000” compensation came from a district court testimony where it was asked whether making large payments or small payments to athletes would make the collegiate sports market better off. The answer was small payments, but this was the wrong question to ask. In fact, the question should have been, “Will any form of payments to college athletes adversely affect the sports market?” Once schools cross the line of offering athletes cash sums above education-related compensation, then the point of amateurism within collegiate sports becomes moot and a minor league system of colleges has been created.
This recent opinion is the first to rule on the nature of whether players could legally force the NCAA to pay them. Although it is unclear as to whether the Supreme Court will take up the case, it is nonetheless important in the expanding definition of commerce. Moreover, with the growing influence and money attached to the world of college sports, opening up the possibility for athletes to be paid also complicates an otherwise standardized process that allows students to play in college while getting an education. This is because the individuals that are bringing these suits are often rare, talented Division I players who do not speak for the rest of these amateur athletes that actually benefit from the amateurism of the NCAA. In the end, this amateur status is a double-edged sword: it ensures the longevity of the NCAA, but also makes it vulnerable to competition-based lawsuits.
[1] Solomon, Jon. “NCAA Supreme Court Ruling Felt at O’Bannon Trial 30 Years Later.” CBSSports.com. January 22, 2013. Accessed October 8, 2015.
http://www.cbssports.com/collegefootball/eye-on-college-football/24598262/ncaa-supreme-court-ruling-felt-at-obannon-trial-30-years-later
[2] Areeda, Phillip, and Herbert Hovenkamp. Antitrust Law: An Analysis of Antitrust Principles and Their Applications. 4th ed. Wolters Kluwer Law and Business, 1995. 260.
[3] Fundakowski, Daniel C. “The Rule of Reason: From Balancing to Burden Shifting.” American Bar Association. January 22, 2013. Accessed October 8, 2015.
http://www.americanbar.org/content/dam/aba/publications/antitrust_law/at303000_ebulletin_20130122.authcheckdam.pdf
Photo Credit: Flickr User Phil Roeder
The opinions and views expressed through this publication are the opinions of the designated authors and do not reflect the opinions or views of the Penn Undergraduate Law Journal, our staff, or our clients.
For the Regents case, the “amateurism” argument came from a discussion about why a particular television rule should be analyzed under the Rule of Reason. The NCAA interpreted this, however, to say that the Court interpreted their amateurism rules to be consistent with the Sherman Act. Disposing of this argument, the Court next turned to the commercial activity and injury arguments. It seems almost absurd to argue that the NCAA does not engage in any form of “commerce,” considering the years of Supreme Court decisions that have broadened its definition. Using a common definition of “…including almost every activity from which the actor anticipates economic gain,” it makes sense to show that athletes competing within the NCAA could forego economic gain from the amateurism rules. [2] This feeds into the final point, in which most media corporations would be happy to buy the NILs of players. Because of this missed opportunity for deferred compensation on behalf of the players, that is all that is needed to establish “antitrust injury” subject to the Sherman Act.
After the Court rejected these arguments, it launched into the primary analysis of the NCAA’s actions subject to Section 1 of the Sherman Act. In particular, the Ninth Circuit ruled that the NCAA engaged in anticompetitive activities by fixing the “price” that recruits pay to attend college—thus creating a monopsony where the buyer (the university) fixes the amount that can be paid for playing for the school. Taking this into consideration, however, the NCAA does take some genuine pro-competitive actions with the college education market. The goal of promoting amateurism is legitimate in that sometimes restraint can increase consumer demand for sports, but the NCAA’s argument that restraining commerce would “widen” athletes’ range of economic choices seems almost counter-intuitive when one realizes, once again, that some athletes could actually get additional compensation in college for licensing their NILs. Noting this, the justifications of these anticompetitive measures do not hold up to the Rule of Reason. [3] What was left now was to state some of the less restrictive alternatives to the current NCAA compensation rule. On this point, the Ninth Circuit disagreed with the district court. Specifically, they said that universities were permitted to provide up to the full cost of attendance to athletes in compensation, but nothing more. The additional proposal of paying each player up to $5,000 per year seemed rather erroneous.
This once again comes back to the NCAA’s rule of promoting amateurism. Although not sufficient by itself to shield the NCAA from antitrust analysis, trying to keep collegiate athletes at an amateur level does carry some validity. When colleges pay student athletes, the students will essentially lose their amateur status. But beyond this, the arbitrary “$5,000” compensation came from a district court testimony where it was asked whether making large payments or small payments to athletes would make the collegiate sports market better off. The answer was small payments, but this was the wrong question to ask. In fact, the question should have been, “Will any form of payments to college athletes adversely affect the sports market?” Once schools cross the line of offering athletes cash sums above education-related compensation, then the point of amateurism within collegiate sports becomes moot and a minor league system of colleges has been created.
This recent opinion is the first to rule on the nature of whether players could legally force the NCAA to pay them. Although it is unclear as to whether the Supreme Court will take up the case, it is nonetheless important in the expanding definition of commerce. Moreover, with the growing influence and money attached to the world of college sports, opening up the possibility for athletes to be paid also complicates an otherwise standardized process that allows students to play in college while getting an education. This is because the individuals that are bringing these suits are often rare, talented Division I players who do not speak for the rest of these amateur athletes that actually benefit from the amateurism of the NCAA. In the end, this amateur status is a double-edged sword: it ensures the longevity of the NCAA, but also makes it vulnerable to competition-based lawsuits.
[1] Solomon, Jon. “NCAA Supreme Court Ruling Felt at O’Bannon Trial 30 Years Later.” CBSSports.com. January 22, 2013. Accessed October 8, 2015.
http://www.cbssports.com/collegefootball/eye-on-college-football/24598262/ncaa-supreme-court-ruling-felt-at-obannon-trial-30-years-later
[2] Areeda, Phillip, and Herbert Hovenkamp. Antitrust Law: An Analysis of Antitrust Principles and Their Applications. 4th ed. Wolters Kluwer Law and Business, 1995. 260.
[3] Fundakowski, Daniel C. “The Rule of Reason: From Balancing to Burden Shifting.” American Bar Association. January 22, 2013. Accessed October 8, 2015.
http://www.americanbar.org/content/dam/aba/publications/antitrust_law/at303000_ebulletin_20130122.authcheckdam.pdf
Photo Credit: Flickr User Phil Roeder
The opinions and views expressed through this publication are the opinions of the designated authors and do not reflect the opinions or views of the Penn Undergraduate Law Journal, our staff, or our clients.
