NCAA v. Alston – The Supreme Court Unanimously Rules Against the NCAA

On June 21, 2021, the United States Supreme Court issued its decision in National Collegiate Athletic Association v. Alston, et al.  While the decision in NCAA v. Alston is narrow and, by itself, only a small victory for college athletes, it represents another significant blow to the NCAA’s outdated concept of amateurism and another step toward the fair compensation of college athletes.  The NCAA’s current model allows colleges and universities to leverage sports (and the athletes that play them) to “bring in revenue, attract attention, boost enrollment, and raise money from alumni,” but allows limited compensation to student athletes by categorizing them as “amateur,” providing the justification for the refusal to pay college athletes for their play. 

Fed up with this system, former West Virginia running back Shawne Alston and former Cal basketball player Justine Hartman brought a case in District Court, alleging that the NCAA’s cap on the education-related benefits that a university can provide to student athletes violated antitrust laws under the Sherman Act (“because Plaintiffs would receive greater compensation in exchange for their athletic services in the absence of these artificial limits”).  The NCAA argued that none of its existing restraints on athlete compensation violate antitrust law.

After both sides made oral arguments in March 2021, The Supreme Court unanimously ruled for the college athletes, shutting out the NCAA with a 9-0 ruling in the athletes’ favor.  This doesn’t mean that college athletes will soon be awash in cash and luxury cars, but it is part of an accelerating trend toward allowing students involved in college sports to share in the substantial revenue generated by their athletic performance on behalf of their schools and generate and keep revenue secured on their own through sponsorship, endorsement, and social media influencer agreements with third parties.  

Justice Neil Gorsuch wrote the Court’s opinion, noting that the lower court’s rulings in favor of the athletes were entirely consistent with established antitrust principles, but did not attempt to make any judgment on the larger issue of whether student athletes should receive compensation because that issue was beyond the narrower issues before the Court.  Justice Gorsuch, in addressing the discrepancy of compensation between student athletes and the coaches, administrators, and NCAA, acknowledged that “some will see this as a poor substitute for fuller relief.”  While the majority opinion did not address the larger compensation issue, in his concurring opinion, Justice Brett Kavanaugh certainly did, writing that antitrust laws “should not be a cover for exploitation of the student athletes.”  Essentially inviting a college athlete to bring a claim for compensation against the NCAA, Kavanaugh wrote, “[n]owhere else in America can businesses get away with agreeing to not pay their workers a fair market rate on their theory that their product is defined by not paying their workers a fair market rate. The NCAA is not above the law.”  A clear warning shot to the NCAA to change their model.  

The athletes’ Supreme Court victory must be viewed in the context of earlier courtroom rulings and legislation, all of which show the march toward allowing college athlete compensation in exchange for playing for their college teams, as well as enabling athletes to receive compensation from third parties seeking to leverage the athletes’ notoriety as a result of playing in front of thousands of spectators in person and millions more on tv sets and other screens across the country and worldwide.  

The legal challenges regarding compensation of collegiate athletes started back in 2014, when Ed O’Bannon, a former UCLA basketball star, seeing his likeness in a video game (left-handed, same skin tone, mannerisms, and jersey number) brought a class action lawsuit against the NCAA asserting an antitrust claim, claiming the organization and its member universities were profiting immensely from the use of his likeness, and that none of that money was finding its way to O’Bannon and similarly situated athletes. Northern District of California Judge Claudia Wilken found for O’Bannon and the other plaintiffs, ruling that the NCAA was violating antitrust laws by using college athletes’ images and likenesses in video games without compensating them and her decision was upheld in part by the Ninth Circuit.

The O’Bannon case paved the way for a slew of legislation at the state level, providing that NCAA athletes should be able to freely exploit their publicity rights – their name, image, signature, voice, and other personally identifiable characteristics – and thus receive compensation for sponsorships, endorsements, and as social media influencers, and that those activities would not jeopardize their collegiate athletic eligibility.  For example, in October 2019 the state of California passed the Fair Pay to Play Act, providing student athletes more control over their names and likenesses for sponsorships and endorsements and allowing them to generate revenue from licensing their right of publicity without jeopardizing their athletic eligibility.  However, California delayed enforcement of this law until 2023, thus giving the NCAA some time to come up with a regime in compliance with the law.  

The NCAA has been in no hurry to change its methods of operation in light of California’s Fair Pay to Play Act.   However, other states, out of fear of losing top high school athletes to California schools who are allowing students to earn some money from their publicity rights and still maintain their amateur status, were in a hurry to be on even footing with California.  Since the passage of the California law, more than a dozen other states have passed similar legislation, with some states making their legislation effective sooner than the Fair Pay to Play Act (there are now California legislators seeking to advance the effective date of the California law).  

So, what does this all mean for the future of the NCAA and the future of college sports and the athletes involved?  For one thing, it is quite clear that college athletes across the country will soon be able to generate money from the licensing of their rights of publicity, also known as NIL rights (name, image, likeness).  Even though the California Fair Pay to Play Act and similar state-level legislation is not yet effective, in the current landscape, one has to wonder whether the NCAA or a college would take negative action against an athlete that entered into a sponsorship or endorsement agreement at this time.  It seems unlikely.  Taking disciplinary action against a student athlete – such as stripping an athlete of his or her eligibility to compete or taking away his or her scholarship – would place a school in a negative light vis a vis other recruits, and, based on the trend in the Courts in these matters, a judge or jury would not likely look favorably upon such actions should another similar suit be filed.  Certainly, if such a case were appealed to the Supreme Court, we know how Justice Kavanaugh would rule and we can assume the other Justices would feel similarly.

Whether the NCAA changes its model on its own or is forced to do so to comply with the dictates of the Courts, the NCAA’s longstanding limits on the compensation athletes can receive is breaking down.  Star college players will soon be engaging marketing firms to assist in securing opportunities to endorse third party goods and services and engaging attorneys to negotiate and complete sponsorship and endorsement agreements and social media influencer deals, all without impacting their academic or athletic eligibility (and with the ability to earn some income, maybe these star athletes will stick around in college for a couple of years, rather than the “one and done” scenario).  This doesn’t mean that student-athletes will be able to use school branding and insignia in their marketing efforts, as those items are, and will continue to be, the property of the schools or conferences, but the trend indicates that if things continue in the current direction, and they likely will, there will be little else left in terms of restrictions on college athletes making money.  College athletes with large social media followings will similarly be able to able to leverage their online presence and reach with influencer deals.  Even the small-town heroes sitting on the bench at the big state school could receive endorsement deals from merchants in their hometown looking to align themselves with the goodwill surrounding a local kid and as a way to legally get some walking around money into the pocket of the local legend.

The NCAA’s compensation model, or more aptly the lack thereof, is crumbling.  In addition to the doors opening to allow college athletes to secure endorsement dollars, the NCAA will be faced with the bigger issue of providing some meaningful direct compensation to college athletes out of the pool of billions of dollars received by the NCAA, member schools and the conferences from rights deals, ticket sales, jersey sales, etc.  As Justice Kavanaugh noted in his concurring opinion in NCAA v. Alston, “[t]he NCAA’s business model would be flatly illegal in almost any other industry in America.”  College sports generates billions of dollars for the NCAA, the collegiate sports conferences, and its member schools.  Given the billions generated by college sports, the NCAA’s refusal to provide a cut of that revenue to the athletes performing on the field of play is becoming increasingly untenable.