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Supreme Win for College Ballers

Earlier this week, the United States Supreme Court affirmed a Ninth Circuit ruling, bringing home a big win for college athletes against their most formidable opponent: the National Collegiate Athletic Association, or “NCAA.”

A federal anti-trust lawsuit was filed against the NCAA by current and former student athletes challenging restrictions on the amount of compensation they could accept from their schools, endorsers, and/or marketing companies.

To give you some context, the NCAA is comprised of over 1,100 colleges and universities among its three divisions – Division I football and basketball being among their most prized assets. (You may recognize the names from those betting boxes you get pulled into by your friends, each Spring). The organization, as a whole, brought in over $1.1 billion during the 2018-2019 fiscal year. And although the pandemic forced the cancellation of 2020 March Madness (the organization’s most lucrative event), and caused an $800 million loss, the NCAA still brought in more than half a billion, last year.

However, even though college ball players are awarded full scholarships to top-tier institutions, housing accommodations, food stipends, as well as a slot ib the most sought-after pool for NBA and NFL professional sporting scouts, many feel that the NCAA takes too much of the pie and doesn’t compensate the athletes fairly – especially due to current rules restricting players from taking endorsement deals with major companies.

So, when presented with the question of whether the NCAA’s restraint on compensation violates §1 of the Sherman Act, the district court applied a detailed analysis in order to balance the rising level of market realities within the sector (i.e. skyrocketing consumer demand for the college sports market) against whether the restraints were unduly burdensome on the athletes.

The district court held (and the Supreme Court affirmed) that while the NCAA restrictions limiting an athlete’s compensation to the full price of college admission may constitute a price-fixing agreement, they were reasonable in light of the possibility that “professional-level cash payments” (which is what the athletes are seeking) could negatively affect consumer demand. Lifting the restrictions would blur the distinction between college sports and pro sports, and would cause colleges to unfairly offer Lamborghinis to prospects so they could “get to class.”

On the other hand, the court also concluded that restrictions on education-related benefits (such as scholarships for graduate or vocational schools, payments for academic tutoring, or paid post-eligibility internships) had no such blurring effect. In fact, it noted “if anything, they emphasize that the recipients are students [and not pro-athletes]” Ultimately, the court issued an injunction limiting restrictions on these education-related benefits which took effect in August 2020. Both sides appealed, as the NCAA felt this was an overreach of authority, whereas the players thought the decision did not go far enough to compensate them for their hard work and skills.

However, this ‘split-the-baby’ rationale was hailed by the Ninth Circuit Appellate Court as one that “struck the right balance … that both prevents anticompetitive harm to Student-Athletes while serving the procompetitive purpose of preserving the popularity of college sports.” The Supreme Court concurred.

As a result, college athletes may have to wait the full four years until graduation to get those pro level checks and Air Jordan endorsement deals they so desire, as the injunction doesn’t ban the NCAA from continuing to prohibit compensation from sneaker companies, car dealerships, “or anyone else.” However, as the college sporting industry continues to gain notoriety and becomes much more profitable, additional challenges at the state level could see the balance of power shift further in favor of these young superstars.

Decision: https://www.supremecourt.gov/opinions/20pdf/20-512_gfbh.pdf