It would raise an eyebrow to many college alums if their alma mater supplied limited edition Stealth MacBook Pros to all members of the football team each year or if the bank executive on their university’s board announced they would be facilitating $150,000 post-graduate fellowships to all members of the women’s basketball team.
These examples are not generally likely to occur, but the path to additional benefits that are tethered to education is now significantly broadened with the U.S. Supreme Court’s ruling in the Alston-NCAA litigation.
At the trial court level, the Alston plaintiffs challenged all of the NCAA’s restrictions on benefits and compensation for student athletes as unlawful under the Sherman Act. But the trial court saw an important distinction between education-related benefits (such as tutoring assistance and internships) and non-education-related benefits (such as athletic scholarships and benefits relating to athletic performance).
The NCAA’s restrictions on non-education-related benefits were found to serve the interests of amateurism; however, the trial court found that the NCAA’s restrictions on education-related benefits were not so clearly related to its amateurism mission to justify their breadth and, therefore, were inconsistent with settled antitrust precedents. The Ninth Circuit affirmed both of these holdings on appeal.
A key procedural point of the Alston case is that only the NCAA appealed to the Supreme Court—the plaintiffs elected not to appeal regarding non-education-related benefits. As a result, the only question presented to the Supreme Court was whether the NCAA’s restrictions on education-related benefits for FBS football players and Division I men’s and women’s basketball players violated the antitrust laws.
NCAA Not Entitled to Lesser Degree of Scrutiny
The Supreme Court joined the trial court and the court of appeals in rejecting the NCAA’s assertion that it holds a special place in society that entitles it to a lesser degree of antitrust scrutiny. The court highlighted that the NCAA and its member institutions are, in addition to their nonprofit academic missions, a billion-dollar enterprise involving “education, sports, and money,” and therefore subject to normal rule-of-reason analysis.
The court also found that the NCAA’s restrictions on education-related benefits did not directly serve the ends of amateurism (in contrast to its rules on non-education-related benefits), and therefore that those restrictions were too broad to be justified by its amateurism mission.
This leads to a “what now” moment for colleges across the nation. First, although this ruling applies to a class of FBS football players and Division I men’s and women’s basketball players (which as the generally considered revenue-producing sports, would constitute a separate market of athletes), it is difficult to envision the NCAA or schools having different sets of rules on educational benefits for their student-athletes in other sports.
Therefore, the interpretation of the scope of educational benefits will need to apply across the athletic program. This will carry the added nuance that as a result of Alston, this assessment rests locally at the institution-level since the NCAA restriction has been voided.
There is also a prospective tax issue as Section 117 of the Internal Revenue Code excludes “qualified scholarships” from gross income. This would include tuition, fees, books, supplies, and equipment required for courses of instruction, but where may certain benefits go too far to be considered “required”? There is a 44-year-old revenue ruling of the IRS that affirms such tax exclusion to athletic scholarships, but does not negate the other conditions relating to qualified treatment.
Currently in the NCAA’s 465-page Division I Manual, you will find one by-law that specifically addresses post-graduate scholarships for students (as compared to its more substantives rules for graduate assistants/athletics personnel), a relative rarity given the highly prescriptive nature of NCAA regulations.
Colleges should work with their counsel to create a legally defensible framework to assess a uniform standard of determination for education benefits, provide safeguards to avoid subjective application of these assessments, and still maintain a framework to account for gender equity concerns under Title IX that may arise from the imbalance these additional benefits may present.
This column does not necessarily reflect the opinion of The Bureau of National Affairs,Inc. or its owners.
Tyrone Thomas is a member and co-chair of Mintz’s Sports & Entertainment Practice focused on legal issues pertaining to intercollegiate athletics and professional sports. He advises on issues involving college athletics programs, including the NCAA infractions process, conference and head coaching contracts, FERPA, and Title IX participation requirements. He also serves as chair of the firm’s diversity committee.
Robert G. Kidwell is a member in Mintz’s Antitrust Practice who counsels clients on business strategies, regulatory matters, policymaking and lobbying, compliance issues, privacy, and litigation. He defends clients in class action and competitor litigation, and guides transactions through merger reviews.