College sports are in a state of upheaval. Recent legal outcomes and legislative maneuvers have continued to upset the control of the NCAA as pandemic-induced turmoil has thrown competition schedules completely out of whack. The state of college sports is in flux, and this is the perfect time to check in on the industry as another season is set to warily begin. In Part 1 of this two-part series, we’ll explore how “post”-pandemic return-to-play plans have facilitated an unprecedented moment in student-athlete organizing and collective action. In Part 2, we’ll examine how the NCAA has continued to move forward on amending rules related to name, image, and likeness (“NIL”) while another landmark case on student-athlete compensation was decided on appeal in the Ninth Circuit.
The State of College Sports, Part 2: NIL and Alston
In October 2019, California Governor Gavin Newsom signed the state’s Fair Pay to Play Act into law, permitting student-athletes in the state to earn certain types of compensation related to their athletic abilities in spite of contrary NCAA regulations. Despite earned skepticism of any real progress toward player empowerment in college sports, this decision felt like change was coming, albeit slowly and at the NCAA’s pace. That intuition was confirmed less than a month later when the NCAA announced it would be introducing rule changes for the 2021-2022 academic year allowing student-athletes to earn compensation for the use of their names, images, and likenesses (NIL). Despite bills similar to California’s popping up in other states, enthusiasm for the federal regulation of college sports following efforts led by New Jersey Senator Cory Booker, and recent court cases, the NCAA — the organization that has long held firm to the facade of amateurism — would once again be responsible for “expanding” the benefits available to student-athletes.
Fulfilling its commitment to exploring rule changes related to NIL, the NCAA Board of Governors Federal and State Legislation Working Group released a report on April 17 proposing an outline to NCAA legislation on the issue. The report makes two primary recommendations. First, student-athletes should be permitted to receive compensation for the use of NIL in third-party endorsements or social media influencer activity. Second, student-athletes should be permitted to receive compensation from third parties for the use of NIL in their work product or business activities (e.g., social media content, promotion of student-athlete businesses, and personal promotional activities). Naturally, the report also suggested any new rules implement sufficient “guardrails” to protect student-athletes, most notably:
- Compensation for NIL activities must be a genuine payment for use of NIL and not simply be a disguised form of pay for athletics participation;
- Schools, conferences, and the NCAA must not arrange NIL activities or payments for student-athletes;
- NIL activities must not be contingent on a prospective student-athlete’s enrollment at a particular school, nor otherwise used as a recruiting inducement;
- Certain categories of promotional activities and businesses may be precluded from NIL activities/agreements; and
- Disclosure and enforcement mechanisms may be required to monitor NIL activities and payments.
On July 31, the NCAA followed up with an NIL proposal to Congress, which hinted vaguely at the contours of forthcoming NCAA legislation and which also asked Congress to implement various legal protections for the organization. The NCAA noted that they expect to reveal a complete version of their NIL legislation by November 1, which would be voted on in January and enacted at the start of the 2021-2022 academic year. The new rules would establish standards and guidelines for administering financial aid, participation benefits, and licensing revenues and other benefits or payments, including NIL.
To supplement the changes to its bylaws, the NCAA is asking Congress to grant the organization a host of legal protections. The NCAA is asking for federal legislation to preempt possibly inconsistent state NIL laws. They want Congress to decree that no state or political subdivision may regulate the compensation, IP rights, employment status, or qualifications of student-athletes, including with respect to NIL, and they want the law to set out that student-athletes may not be considered “employees” based on their participation in college athletics. Perhaps in the most brazen request of all, the NCAA is asking lawmakers to give the organization safe harbor from legal challenges based on unfair competition and immunity from antitrust suits, as the NCAA continues to lose such battles in court.
The most recent such battle is the case of In re NCAA Ath. Grant-In-Aid Cap Antitrust Litig. (Alston v. NCAA, hereinafter referred to as Alston). In March 2014, antitrust actions, brought by FBS football and Division I men’s and women’s basketball players seeking to dismantle the NCAA’s compensation framework, were consolidated before the United States District Court for the Northern District of California. The Plaintiffs contended that NCAA rules limiting compensation violate federal antitrust laws because student-athletes would receive greater compensation in the absence of such limits.
The Court’s antitrust analysis proceeded in three parts. First, the Court determined that NCAA rules do produce significant anticompetitive effects in the market for student-athletes’ athletic services. At that point, the NCAA bore the burden of asserting procompetitive justifications for the challenged restraints, arguing that the rules at issue safeguard “amateurism,” which drives consumer interest in college sports. The Court found the NCAA’s purported connection between amateurism and consumer demand exceedingly tenuous, but credited the distinction between college sports and professional sports as important to driving consumer demand.
To that end, the Court next determined that some NCAA rules serve the purpose of distinguishing college sports from the pros by precluding unlimited payments unrelated to education like those in professional sports leagues. In the final step of the analysis, the Court determined that a less restrictive alternative scheme of compensation could be virtually as effective in achieving the acknowledged procompetitive effect of the challenged rules. This alternative would (1) allow the NCAA to continue to limit grants-in-aid at not less than the cost of attendance (COA); (2) allow the NCAA to continue to limit compensation and benefits unrelated to education; and (3) prohibit NCAA limits on most compensation and benefits related to education other than education-related academic or graduation awards and incentives, which could be limited not lower than the NCAA’s limits on athletic performance awards. The District Court justified this scheme, explaining that the NCAA could continue to regulate the cash or cash-equivalent awards that could otherwise morph into professional-like salaries while non-cash, education-related benefits must be unrestricted, as caps on those awards do nothing to preserve consumer demand for college sports.
In May, the United States Court of Appeals for the Ninth Circuit affirmed the District Court’s ruling in full.
The Alston decision leaves the NCAA’s existing scheme of student-athlete compensation largely in place. The limit restricting the value of grant-in-aid athletic scholarships to the COA remains, as do all NCAA limits on compensation and benefits unrelated to education. Moreover, the NCAA may limit education-related benefits, namely, academic or graduation awards or incentives, that are provided in cash or cash-equivalents.
The main thrust of the decision is that all other education-related benefits may not be capped by the NCAA. These benefits include computers, science equipment, musical instruments, and other items not currently included in the COA but nonetheless related to the pursuit of various academic studies; post-eligibility scholarships for undergraduate, graduate, and vocational programs at any school; tutoring; study-abroad expenses; and paid post-eligibility internships. Payments for these benefits would be limited to their actual value and could be provided in kind. In fact, the decision allows the NCAA to regulate how its members provide education-related benefits (e.g., the NCAA could require schools to pay for these items directly or to reimburse student-athletes for expenses if adequate proof of purchase is shown). The decision also gives the NCAA latitude to modify its list of education-related benefits and to incorporate a definition of compensation and benefits that are “related to education” if it chooses to adopt one. Lastly, the decision emphasizes that NCAA member institutions remain free to independently restrict compensation and benefits to the extent they desire.
In a one-sentence order, the Ninth Circuit denied the NCAA’s motion to stay the district court’s injunction. On August 5, the NCAA filed a petition asking the Supreme Court to stay the District Court decision, which was denied less than a week later. While the NCAA still plans to formally appeal the case to the Supreme Court, the NCAA and its member conferences must prepare for the injunction to take effect for at least one recruiting cycle, as the Supreme Court’s calendar for October is already full (if the high court chooses to hear the case at all).
Ultimately, the Alston decision has two major implications. First, it expands the benefits available to student-athletes, a result that should not be overlooked. Second, the decision, like O’Bannon before it, again finds that NCAA compensation limits violate antitrust laws, but fails to reach a result far-reaching enough to approach pay-for-play or an open market for college athlete services. However, the very end of the appeals court decision addresses an argument by the Plaintiffs that, while unsuccessful in this case, could open the door for legal decisions that further amend the collegiate athletic system.
On appeal, the Plaintiffs argued that the NCAA can no longer rely on the conclusion that limiting cash payments untethered to education is critical to preserving the distinction between college and professional sports (the one procompetitive justification for the challenged restraints that the Court accepted) because the NCAA had endorsed NIL benefits in response to California’s introduction of the Fair Pay to Play Act (FPP). In its opinion, the Court of Appeals responded that that “argument is premature” because the NCAA had not endorsed cash compensation untethered to education, but rather, had simply undertaken to comply with the FPP, consistent with O’Bannon, by loosening its restrictions to permit NIL benefits that are tethered to education.
Now, mere months removed from oral argument in this case, the NCAA is poised to adopt rules for the 2021-2022 academic year that permit student-athletes to earn unlimited compensation for use of their NIL on the basis of their athletics ability. As future Plaintiffs will argue, this move almost tacitly acknowledges that payments untethered to education are not critical to preserving the distinction between college and professional sports. Without the support of the one procompetitive justification for limits on compensation that the Court has accepted, the NCAA may be open to future challenges to its compensation scheme.
Alex Blutman is the Managing Editor of Online Content for the Harvard Journal of Sports and Entertainment Law and a second-year student at Harvard Law School (Class of 2022).