The NCAA is not above the law

Our fifteenth minisode of the fourth season of “The Creative Influencer” podcast is available today for download on iTunes, Spotify, and premier platforms everywhere. In this minisode, Jon discusses the US Supreme Court’s decision in NCAA v. Alston and what it means for student athletes who want to be influencers.

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A transcript of the episode follows:

This is the fifteenth minisode of Season Four of the Creative Influencer Podcast. Today we discuss the US Supreme Court’s decision in NCAA v. Alston and what it means for student athletes who want to be influencers

As you will remember from earlier episodes, the Alston case was argued in front of the Supreme Court in March. Former college athletes sued the NCAA, saying that rules that limit compensation to student athletes were illegal under antitrust law. The Supreme Court agreed, and in a big way. The decision was 9-0 in favor of the student athletes.

Now it is important to note that the decision by the Supreme Court is a narrow one. It involves only NCAA rules that restrict the education-related benefits that student athletes may receive, such as post-eligibility scholarships at graduate or vocational schools or athletic achievement awards. The court’s decision makes a point not to wade into the national debate related to amateurism in college sports or so-called “pay-for-play.”

But by saying that these rules restricting education related benefits are illegal under antitrust law, the implication is that other rules that limit compensation to student athletes would be deemed illegal as well if they were to be challenged in court. This ultimately means that the NCAA’s top-down control over compensation is coming to an end, and conferences and schools will set their own rules that comply with local state laws, as more and more states pass laws related to name, image and likeness and fair pay-for-play.

Looking more closely at the Supreme Court’s opinion, a few things stand out.

In its arguments to the Court, the NCAA stressed the importance of “amateurism.” The court found these unpersuasive. From Justice Brett Kavanaugh’s concurrence:

The NCAA couches its arguments for not paying student athletes in innocuous labels. But the labels cannot disguise the reality: The NCAA’s business model would be flatly il- legal in almost any other industry in America. All of the restaurants in a region cannot come together to cut cooks’ wages on the theory that “customers prefer” to eat food from low-paid cooks. Law firms cannot conspire to cabin lawyers’ salaries in the name of providing legal services out of a “love of the law.” Hospitals cannot agree to cap nurses’ income in order to create a “purer” form of helping the sick. News organizations cannot join forces to curtail pay to reporters to preserve a “tradition” of public-minded journalism. Movie studios cannot collude to slash benefits to camera crews to kindle a “spirit of amateurism” in Hollywood.

Price-fixing labor is price-fixing labor.

The Court’s opinion even spends some time talking about how college sports has a long history of paying players and in turn making a larger profit for the schools. It’s very interesting from a big-picture perspective, when you realize that paying student athletes is nothing new, and how the NCAA has restricted this while making larger profits themselves.

Kavanaugh points out in his concurrence:

The bottom line is that the NCAA and its member colleges are suppressing the pay of student athletes who collectively generate billions of dollars in revenues for colleges every year. Those enormous sums of money flow to seemingly everyone except the student athletes. College presidents, athletic directors, coaches, conference commissioners, and NCAA executives take in six- and seven-figure salaries. Colleges build lavish new facilities. But the student athletes who generate the revenues, many of whom are African American and from lower-income backgrounds, end up with little or nothing.

But while this may seem like a sea-change for college sports—that students may start to be paid for their work—paying student athletes is not a new idea. In fact, the idea of not paying college players is a relatively new one, and has been in effect for less time than before these NCAA rules were put into place.

The Court’s opinion outlines the history of paid student athletes. In the early days of college sports, in the late 1800, he absence of academic residency requirements gave rise to “‘tramp athletes’” who “roamed the country making cameo athletic appearances, moving on whenever and wherever the money was better.” One famous example was a law student at West Virginia University—Fielding H. Yost— who, in 1896, transferred to Lafayette as a freshman just in time to lead his new teammates to victory against its arch-rival, Penn. The next week, he was back at West Virginia’s law school.

The Court noted that college football was “not a student’s game”; it was an “organized commercial enterprise” featuring athletes with “years of training,” “professional coaches,” and competitions that were “highly profitable.”

In 1939, freshmen at the University of Pittsburgh went on strike because upperclassmen were reportedly earning more money.

In the 1940s, Hugh McElhenny, a halfback at the University of Washington, “became known as the first college player ‘ever to take a cut in salary to play pro football.’ “

In 1948, the NCAA adopted the “Sanity Code,” which placed limits on the compensation that could be paid to student athletes.

But for the first time the code also authorized colleges and universities to pay athletes’ tuition.

To some, these changes sought to substitute a consistent, above-board compensation system for the varying under-the-table schemes that had long proliferated. To others, the code marked “the beginning of the NCAA behaving as an effective cartel,” by enabling its member schools to set and enforce “rules that limit the price they have to pay for their inputs (mainly the ‘student-athletes’).”

The rules regarding student-athlete compensation have evolved ever since. In 1956, the NCAA expanded the scope of allowable payments to include room, board, books, fees, and “cash for incidental expenses such as laundry.”

In 1974, the NCAA began permitting paid professionals in one sport to compete on an amateur basis in another.

And today, even before last weeks’ Supreme Court decision, the NCAA had expanded rules to allow for funds for supplies, food allowances, family travel, academic and sports performance awards and much more.

It’s important to point out though that the narrow aspect of the court’s depiction in the Alston case means that the NCAA still has some power to limit compensation, in much the same way that the initial rules came into effect in the early 1950s to restore “sanity.”

For example Justice Gorsuch writes in the opinion: “Under the current decree, the NCAA is free to forbid in-kind benefits unrelated to a student’s actual education; nothing stops it from enforcing a “no Lamborghini” rule.”

So what does this mean for student athlete influencers?

While saying nothing about name, image and likeness (NIL), the Court’s decision will significantly influence the regulatory model chosen by the NCAA related to NIL. The NCAA will most likely choose a deregulation approach as opposed to more robust rules that would have created a national standard for how student-athletes can receive compensation for their NIL.

I think Justice Kavanaugh says it best in his concurrence:

To be sure, the NCAA and its member colleges maintain important traditions that have become part of the fabric of America—game days in Tuscaloosa and South Bend; the packed gyms in Storrs and Durham; the women’s and men’s lacrosse championships on Memorial Day weekend; track and field meets in Eugene; the spring softball and baseball World Series in Oklahoma City and Omaha; the list goes on. But those traditions alone cannot justify the NCAA’s decision to build a massive money-raising enterprise on the backs of student athletes who are not fairly compensated. Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. And under ordinary principles of antitrust law, it is not evident why college sports should be any different. The NCAA is not above the law.