Home Antitrust and Competition The NCAA Goes After College Athletes’ NIL Money—Here are the Antitrust Implications...

The NCAA Goes After College Athletes’ NIL Money—Here are the Antitrust Implications for Workers and Consumers

0
Photo by Missy Minear/Kansas Athletics

Having lost in the Supreme Court on student-athlete academic benefits, the NCAA has signaled a continuing attempt to suppress competition in the rapidly growing market for college athlete Name, Image, and Likeness (NIL) licensing. Reining in its anticompetitive behavior represents an opportunity for regulatory authorities to remind violators that competition laws exist to protect workers just as they do consumers.


Seemingly undaunted by its latest judicial defeat, a 9-0 unanimous Supreme Court decision on June 21, 2021 in the Alston case that struck down the NCAA’s collusively-set limits on academically-related benefits, the NCAA has signaled its intent to renew its efforts to suppress competition – this time in the nascent, but rapidly growing market for college athlete Name, Image, and Likeness (NIL) licensing. In its first year, the college NIL market is expected to reach over $500 million and even up to $1 billion. However, Alston only addressed “educationally-related compensation”—it touched neither NIL rights nor the NCAA’s prohibition on compensating athletes for their labor. 

The fact that the NCAA has already lost on the issue of NIL rights complicates its latest move. In the 2014 O’Bannon v. NCAA case, Plaintiffs challenged the fact that athletes could not benefit from their own NILs, a right available to every other college student. In the litigation that ensued, the Ninth Circuit upheld the district court ruling that the NCAA’s restriction on athlete NIL rights violated antitrust law. But, because precedent in the 1984 Board of Regents case permitted claimed “consumer demand” to offset harms to athlete labor, the appeals court did not enjoin the NCAA’s restraint on compensation unrelated to education. Applying the more relaxed rule of reason rather than the stricter per se standard, the OBannon court had reasoned that such a restraint serves the procompetitive purpose of preserving consumer demand for amateurism. 

The litigation and legislation that followed in the wake of OBannon far outweighed the case’s relatively minimal direct judicial consequences. On the litigation front, Plaintiffs seized on the Ninth Circuit’s direction that payments to college athletes must be “tethered to education” and filed the Alston and Jenkins cases, consolidated under the In Re NCAA Grant-in-Aid Cap Antitrust Litigation umbrella. On the legislation front, following California’s lead and ignoring veiled NCAA threats of litigation, states set about instituting their own laws, limiting the NCAA’s ability to arrogate the NIL rights of college athletes.

On July 1, 2021, the NCAA ceded in the face of legislative and market pressure, issuing an interim NIL policy that permitted college athletes to “engage in an NIL activity.” Ironically, the policy offered more relaxed terms than some of the state laws that had been implemented to counteract NCAA restrictions. Thus, states that had not passed any NIL laws imposed fewer restraints on athletes’ ability to monetize their NIL rights than states with such laws. As a result, states began rethinking such laws that placed their universities at a competitive disadvantage relative to institutions in states with no NIL laws and thus fewer restrictions. For example, the NIL interim guidance did not prohibit universities or their athletic departments from facilitating NIL deals, while laws, such as Florida’s, did so.

Market realities thus undermined the NCAA’s consumer demand procompetitive justification—on the contrary, companies flocked to offer NIL licensing deals to athletes. Further unmasking the NCAA’s specious antitrust defense, member universities themselves facilitated such deals. However, NCAA’s previous guidance still precluded payments in the form of recruiting inducements—NIL payments could not be contingent upon an athlete attending a certain school, either initially or as a transfer.

Yet, the NCAA did not enforce the latter rule, and boosters of specific university athletic programs, acting either individually or as a collective, began offering athletes NIL payments. Despite the fact that such activities provide direct evidence of consumer demand for rather than against paying athletes and thus further dismantles the NCAA’s sole remaining antitrust defense, on May 9, 2022, the NCAA Division I Board of Directors issued an updated NIL guidance, emphasizing that “NCAA recruiting rules preclude boosters from recruiting and/or providing benefits to prospective student-athletes.”  

“Despite its recent loss at the Supreme Court, the NCAA continues to flaunt its disregard for competition and the statutory framework protecting it.”

Antitrust Implications

The NCAA has made no secret of its expectation that antitrust lawsuits may follow its decision to enforce its collusive restraint on NIL compensation. However, such litigation falls in a landscape markedly different from that present during the OBannon case (even accounting for NCAA’s recent loss at the Supreme Court). 

First, the Plaintiffs classes in the OBannon and Alston cases constituted of athletes and, in Law v. NCAA, Division I entry-level coaches. The Board of Regents case, despite its role in sustaining amateurism, did not address college athlete payments but rather broadcasting rights. Now, the NCAA faces potentially different Plaintiff group(s): the very consumers whose demand the NCAA claimed would diminish upon the removal of the NCAA’s collusive restraint. Notably, the Alston Court declined to rule on the validity of such “balancing” of harms to athletes against benefits to consumers. But, the fact that boosters and other third parties want to pay college athletes obviates such balancing—no offsetting procompetitive justification exists to balance against the antitrust harm. Rather than countervailing it, consumer demand aligns with the removal of the restraint. 

Further, while surveys took center stage in the debate over consumer demand in previous litigation as a result of limited data availability, direct market evidence now exists. The millions of dollars that boosters, their collectives, and third-parties have spent on securing NIL deals with college athletes serve as direct, readily measurable, evidence that the NCAA’s NIL restraints have stifled consumer demand and would do so if such rules were enforced. To borrow from the Court’s language in Board of Regents, the fact that more consumer demand would be met in a free market than under the NCAA’s plan to restrict NIL deals “is a compelling demonstration that the plan’s controls do not serve any legitimate procompetitive purpose.”

Second, while it claimed in OBannon that removing the restraint on athlete compensation would destroy the very concept of amateurism, the NCAA has undermined its very position during the last year. In 2021-2022, the NCAA permitted NIL compensation, and, as reflected in its own bylaws, its system of amateurism still exists. The NCAA Division I manual for 2021-2022 continues to tout the “Commitment to Amateurism” and section 2.9 of its bylaws set forth the same “Principle of Amateurism” that the organization warned would collapse should it be forced to return the NIL rights it arrogated from athletes.

This point informs perhaps the most damaging fact to any antitrust defense that the NCAA may try to muster. In Alston, the Supreme Court explained that “Whether an antitrust violation exists necessarily depends on a careful analysis of market realities. If those market realities change, so may the legal analysis.” Courts can thus now rely on such changing market realities to condemn the NCAA’s collusive restraint on NIL rights under the per se standard, foreclosing any claimed procompetitive justifications of the type that arise at step two of the rule of reason. As the FTC has noted, when anticompetitive conduct receives per se condemnation (such as price-fixing, market allocation, or bid-rigging), “no defense or justification is allowed.”

The implications of per se scrutiny rather than rule of reason are twofold. First, the NCAA could no longer resort to the same fallacies that engendered its claimed procompetitive justifications in earlier litigation. Second, delegating the task of imposing NIL restrictions to the conference level would offer no safe harbor. The per se rule condemns horizontal collusion without inquiry into the existence of market power, even if conferences could show that they lacked it. 

The reason the per se standard should apply rests squarely on the market realities and the NCAA’s own admissions. In Board of Regents, the Supreme Court relied on Robert Bork’s reasoning that because the NCAA involves various institutions competing in sports, “horizontal restraints on competition are essential if the product is to be available at all.” But the realities of the last year have permitted a natural experiment to occur – the NIL restraint was relaxed and the counterfactual condition in its absence could be observed. The result? The collegiate athletic product survived. As noted above, the NCAA continued to tout its model of “amateurism”, fans filled stadiums, viewers flocked to their televisions to watch college sports, and so on. The NIL natural experiment revealed that the NCAA’s restraint is not ancillary (meaning subordinate and collateral to a separate, legitimate transaction). That is, the NIL restraint does not make the “main transaction more effective in accomplishing its purpose.” By illuminating its true anticompetitive nature, the natural experiment exposed the NIL restraint as a naked wage fixing agreement to restrain competition and thus per se illegal.

Third, the NCAA’s cartel’s collusive prohibition on boosters and any third-party promoters represents a horizontal no-poach agreement, the type of restraint that has drawn increasing condemnation not only in private litigation but also from antitrust regulators. Both the FTC and DOJ have made anticompetitive restraints on workers a focus of their enforcement activities, issuing a joint 2016 antitrust guidance that indicated the DOJ’s intent “to proceed criminally against naked wage fixing or no-poaching agreements.” The DOJ also signaled its disapproval of no-poach agreements by issuing a statement of interest in the Seaman v. Duke case, which involved a collusive arrangement between Duke and the University of North Carolina not to compete for each other’s medical faculty.

The NCAA’s latest attempt at subverting competition represents the dying throes of an anachronistic, exploitative system best relegated to the dustbin of antitrust history. Importantly, its horizontal agreement imposing no-poach and wage-fixing restraints on athlete labor mirrors the conditions facing workers in markets across the country. Despite its recent loss at the Supreme Court, the NCAA continues to flaunt its disregard for competition and the statutory framework protecting it. If anything, reining in the NCAA represents an opportunity for regulatory authorities to remind such violators that competition laws exist to protect workers just as they do consumers. 

Disclosure: Ted Tatos is the Associate Economics Editor of the Antitrust Bulletin Journal and an economic consultant with EconONE Research. His consulting practice focuses on quantitative economics and statistics, where he has testified in multiple antitrust, employment, and damages matters. He has published on issues involving antitrust, intellectual property, hedonic analysis of property values, and athlete welfare. His research on concussion studies using college athletes as research subjects formed the focus of a recent documentary by the sports journalism site, The Athletic. He has no conflicts of interest relating to NCAA antitrust litigation. He is currently a testifying expert for Plaintiffs in ongoing no-poach antitrust litigation.

Read more about our disclosure policy here.

Previous articleCrackdown on buyout deals coming, warns top US antitrust enforcer
Next articleDelaware: The State Where Companies Can Vote
Ted Tatos is an economist and statistician affiliated with EconONE Research. In addition to his consulting practice, where he specializes in empirical analysis, Mr. Tatos has been an Adjunct Professor of economics at the University of Utah, where he has taught both graduate and undergraduate economics and statistics classes. He is also the Associate Economics Editor of the Antitrust Bulletin journal, where he has also guest-edited two symposia. He has over twenty-five years of experience in litigation and non-litigation consulting, with a focus in antitrust, data analytics, higher education, healthcare, intellectual property, labor, and commercial damages. Mr. Tatos has advised both private sector and government clients, such as the Securities and Exchange Commission, on matters requiring complex economic and statistical analysis. He has published on various matters including antitrust issues, intellectual property matters, the use of hedonic analysis to estimate property values and investigate value diminution, labor rights, and athlete safety. His peer-reviewed paper in the Journal of Scientific Practice & Integrity on the use and misuse of college athletes as subjects in concussion research formed the basis of a 2019 documentary authored by the sports journalism outlet The Athletic and was produced by filmmaker Andrew Muscato and narrated by eleven-time Emmy winner Armen Keteyian. The documentary can be found at https://theathletic.com/video/21-adhd/