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NCAA Antitrust Ruling Paves Steep Path for Certain Athlete Pay

June 22, 2021, 8:19 PM

College student athletes’ big U.S. Supreme Court victory against the NCAA opens a path to compensation, but future individual disputes will hardly be a slam dunk.

The Supreme Court unanimously held that the National Collegiate Athletic Association no longer can set limits on education-related compensation—like scholarships or school supplies—because it violates antitrust laws.

The narrow ruling sets the groundwork for future private lawsuits by individual athletes who are seeking other types of compensation or damages for lack of pay for prior athletic participation. But they must now meet a higher burden of proof to establish antitrust injury in court.

The Supreme Court also affirmed the lower court’s decision that courts should apply a “rule of reason” analysis in future disputes brought by student athletes. That analysis requires a more stringent review of data, facts, and evidence to establish an antitrust violation.

Most disputes brought by student athletes likely will be evaluated under this standard going forward, attorneys said.

“The decision should embolden college athletes to seek compensation or damages from the NCAA, but that may be blunted by the significant investment and risks required to prove each element of an antitrust claim without the benefit of any shortcuts,” said Lucy Clippinger, an antitrust attorney with Baker & Miller PLLC.

Monday’s opinion, written by Justice Neil Gorsuch, upends a decades-old notion of amateurism—derived from a 1984 Supreme Court ruling—that the NCAA has relied upon to defend its limits on athlete compensation. The latest ruling diminishes any chance the NCAA can rely upon that defense in the future, and will force the association to rethink the way athletes are recruited and compensated, and even how sports programs are structured.

“The NCAA can’t get away with this anymore. All restrictions are subject to antitrust review going forward. If they don’t pass muster, they’ll be struck down,” said Jeffrey Kessler of Winston & Strawn LLP, who represented the plaintiffs in the NCAA case.

‘Rule of Reason’

The rule of reason analysis would subject the NCAA to greater scrutiny in future litigation, as it requires a full study of the association’s undisputed market power, the existence of anti-competitive effects, and its sports programs.

The NCAA appealed on the basis that the lower courts should’ve used the “quick look” standard, an abbreviated and less strenuous form of review that the Supreme Court used in the 1984 case NCAA v. Board of Regents of the University of Oklahoma.

“Normally, a defendant wants an analysis to be done under the rule of reason because they want the plaintiff to go through the whole rigmarole of having expert evidence and it is much harder to prove antitrust injury in a rule of reason case,” Clippinger said.

Gorsuch rejected the NCAA’s bid for leniency, noting that “most restraints challenged under the Sherman Act—including most joint venture restrictions—are subject to the rule of reason.” He also rejected the NCAA’s argument that the 1984 decision’s brief aside on the value of amateurism could serve as an all-purpose shield against antitrust arguments.

“Justice Gorsuch just applied straight-ahead antitrust principles, just like he would in the steel industry or the chemical industry or anything else,” said Michael Kelly, a professor of sports law at the University of Miami School of Law.

New Rules Possible

The NCAA may be close to adopting new rules on athletes’ ability to profit off their own name, image, and likeness after multiple states adopted similar laws, many effective July 1. The change would compensate players if they are included in a video game or featured in an advertisement, and advocates say it’s a major step on the road to equity.

But those rules now will have to comply with antitrust law.

“If those rules are going to be restrictive, they could be struck down,” Kessler said. “Halfway measures aren’t going to help here. They need to free up the competition.”

The NCAA believes the ruling “reaffirms the NCAA’s authority to adopt reasonable rules and repeatedly notes that the NCAA remains free to articulate what are and are not truly educational benefits, consistent with the NCAA’s mission to support student-athletes, the association said in a statement Monday.

“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,” NCAA President Mark Emmert said.

—With assistance from Dan Papscun

To contact the reporters on this story: Siri Bulusu in Washington at sbulusu@bloombergtax.com; Claire Hao at chao@bloombergindustry.com

To contact the editors responsible for this story: Roger Yu at ryu@bloomberglaw.com; Laura D. Francis at lfrancis@bloomberglaw.com

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