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InreNCAAGrant-In-AidCapAntitrustLitig

375F.Supp.3d1058(N.D.Cal.2019)

Facts: The plaintiffs, being student-athletes from the Division 1 men’s and women’s basketball and FBS football, filed a myriad of lawsuits against the NCAA alongside its eleven member conferences across the country. The plaintiffs in their suits sought to challenge the post O’Bannon cost of attendance limitation on student-athlete compensation. The plaintiffs contended that the cap was unreasonable and placed an undue restraint on trade contrary to Sec 1 of the Sherman Act. The ensuing petitions emanated from the U.S. District Court of North California’s March 2019 decision that the NCAA’s rules are placing a cap on the compensation commensurate to collegiate athletes for the services they render to their respective colleges’ restrained trade in the relevant markets, defining the relevant markets thereof as a market for education and the market for student-athlete labor. The district court further noted that limits on college athlete compensation presented significant anticompetitive effects. While remaining cognizant of the fact that capping compensation to college athletes may be necessary to cushion against unlimited cash payments that are unrelated to education to realize desired procompetitive effects, the court was persuaded that there were other less restrictive ways to realizing procompetitive effects.

Some of the less restrictive measures identified by the district court to realize the pro-competitive effects such as promoting amateurism in collegiate sports include: (1) Permitting the defendants to place a cap on grants-in-aid above attendance cost; (2) permitting continued limitation on non-educational compensation and benefits for student-athletes; (3) Allowing continued limitations on academic or graduation awards above the set caps on athletic performance awards while prohibiting NCAA’s limits on education-related compensation and benefits (“In re NCAA Ath. Grant-In-Aid Cap Antitrust Litig., 375 F”). Thus, the court imposed sanctions against limitations on specific education-related compensation and benefits accruing to student-athletes such as musical instruments, science equipment, computers, among other items not included in calculating the cost of attendance. In their cross-appeal, the NCAA and its 11 conferences contended that college athletes are not paid to play, noting that colleges extend grants and payments to student-athletes to cater for reasonable educational expenses, capping non-educational payments. The defendants further invoked the Rule of reason, contending that the federal courts cannot unilaterally reverse reasonable restraints. They further pleaded that the courts may only invalidate procompetitive restraints that are proved to be significantly more restrictive for the intended procompetitive objectives. Consequently, the NCAA and its 11 conferences appealed the decision of the district court in Re [1244] NCAA Athletic Grant-In-Aid Cap Antitrust Litig. (Alston), 375 F. Supp. 3d 1058 (N.D. Cal. 2019) at the United States Court of Appeals for the Ninth Circuit.

Issue: Whether the NCAA’s capping of the amount of education-related compensation for student-athletes is anti-competitive and a violation of the Sherman Act.

Holding: Yes, rules restricting NCAA member colleges from awarding educational related benefits to college athletes are anticompetitive to collegiate sporting trade.

The NCAA is prohibited from enforcing rules restricting education-related benefits for student-athletes (“In re NCAA Ath. Grant-In-Aid Cap Antitrust Litig., 375 F”).

Rationale: The Ninth Circuit agrees with the district court’s finding that an objective and purposive application of the Rule of Reason would find the enjoining rules imposed by the NCAA an unlawful restraint of trade under Sec. 1 of the Sherman Act. In its determination, the district found that NCAA had violated antitrust laws since the challenged caps on education-related benefits for student-athletes contravened Sec 1 of the Sherman Act. The court’s view was that imposing such restraints resulted in significant anticompetitive outcomes in the relevant market. The NCAA had failed the burden of proof in demonstrating how the cited procompetitive effects necessitated limitations on non-cash education-related benefits that did not adversely impact consumer demand for college athletics. The NCAA’s procompetitive means could be achieved through less restrictive means (“In re NCAA Ath. Grant-In-Aid Cap Antitrust Litig., 375 F”). Consequently, NCAA rules that served the procompetitive benefits to distinguish between collegiate sports and professional sports, including rules limiting above-cost-of attendance payments that are non-education related, restrictions on cash academic and graduation awards, as well as caps on athletic grants-in-aid were allowed.

Important Information: This decision is important because it protects student-athletes from NCAA’s overly restrictive and exploitative compensation rules, opening opportunities for the college athletes to benefit more from their talents while allowing reasonable procompetitive compensation restrictions necessary to distinguish college athletics from the open market sports.

References

Cotton, D.J., & Wolohan, J.T. (2020). Law for Recreation & Sport Managers 8th edition. Kendal Hunt.

In re NCAA Ath. Grant-In-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058 United States District Court for the Northern District of California March 8, 2019, Decided; March 8, 2019, Filed No. 14-md-02541 CW