Supreme Court focusses on antitrust in NCAA class action

Analogies with NACAC/DoJ settlement are clear after Wednesday’s hearing

  • Questioning by the justices shows growing skepticism about intercollegiate agreements that restrict financial benefits granted to students
  • Court questions align with the economic logic behind the 2019 consent decree between the Department of Justice (DoJ) and the National Association for College Admission Counseling (NACAC)

Wednesday’s Supreme Court hearing of the National Collegiate Athletic Association (NCAA) v. Alston class action appeal aired bipartisan skepticism about the NCAA’s justifications for restricting payments to college athletes. If the NCAA loses it case, it increases the chances that other intercollegiate agreements will come into question as the current wave of antitrust reform efforts rise in prominence.

Justices from both sides of the aisle voiced this line of thinking. Elena Kagan suggested that “what this case boils down to is that schools that are naturally competitors have all gotten together and used their power to fix salaries for college athletes at extremely low levels.” Brett Kavanaugh pursued a similar line of reasoning, basing his reasoning on the principle that anti-trust laws “should not be a cover for exploitation of the student-athletes.”

(Quotes here are taken from Amy Howe’s informative post on the hearing, found at both the SCOTUSblog and her personal blog, which are well worth reading if you are interested in learning more.)

Adding to the difficulties the NCAA experienced in making its case, the justices honed in on compensation the association was already permitting, paying premiums for athletes to insure them in case an injury damaged their pro sports prospects, as well as a California district court ruling allowing colleges to pay a minor stipend to student athletes. If the NCAA’s restrictions on pay were intended to maintain college sports’ amateur nature, why was this compensation, as well as the earnings of athletic department staff, acceptable?

The tone of the proceedings – with speculation by John Roberts and Stephen Breyer about the major impact a ruling in favor of the the plaintiffs would have on other adjacent antitrust cases – further indicated that the NCAA may very well lose the decision.

To turn back to the business of higher ed, two questions come up:

  • In an environment where colleges are facing increasing recruitment competition, the value of high-visibility sports programs as a marketing vehicle is clear. If the NCAA was forced to abandon its restrictions on pay, college sports practice would gradually evolve, with compensation of athletes becoming an investment in the school’s public image. To take an extreme example, LeBron James was a national celebrity at the age of 18. What would it have been worth to Ohio State to keep him in state, playing for their team? And how would smaller athletic programs compete against teams that are effectively semi-professional?
  • What other anti-competitive practices are embedded in college’s business models? Areas of antitrust focus might be on coordination by colleges to prevent students from submitting multiple early decision applications, restrictions between colleges on faculty hiring or the 568 Presidents Consensus Methodology, covered by a congressional anti-trust exemption but subject to government review.

Shifting sentiment on antitrust today is of course primarily focussed on tech but, interestingly enough, higher education is another big industry which may be affected. Yesterday’s Supreme Court hearing marked a potentially significant development.

You can also find this post and others at our CTAS Higher Ed Business blog at Substack.