On June 21, 2021, the United States Supreme Court issued a landmark decision reducing the NCAA’s limits on student-athlete compensation in NCAA v. Alston. Originally, the plaintiffs (current and former student-athletes) challenged a wide variety of NCAA compensation limits including athletic scholarships and other compensation related to athletic performance. The lower courts did not strike down the NCAA limits on athletic compensation but did rule that the NCAA’s limits on education-related benefits were unlawful under federal anti-trust law. The United States Supreme Court agreed with the lower court’s decision and upheld the ruling that the NCAA could not lawfully limit education-related benefits for student athletes.
The NCAA rules set forth what types of benefits student athletes are allowed to receive from member schools. In addition to athletic scholarships, the NCAA allows certain additional educational and athletic related payments. Some of these payments include: (1) athletic participation awards; (2) disbursements from NCAA Student Assistance Fund and Academic Enhancement Fund; (3) cash stipends to cover additional costs of attendance at the student athlete’s discretion, (4) mandatory medical care for athletic injuries, (5) unlimited meals, (6) reimbursements for expenses incurred by family to attend certain athletic competitions, and (7) a per diem paid to the student athlete for incidental expenses during championship events.
Although the plaintiffs originally argued that all of the NCAA’s compensation limits were unlawful, the courts focused on the NCAA’s prohibition on certain education-related benefits such as scholarships for graduate/vocational school, tutors, internships, study abroad, computers, and other education-related costs. The plaintiffs argued that those prohibitions violated Section 1 of the Sherman Act, which prohibits contracts, combinations, or conspiracies “in restraint of trade.” 15 USC § 1. The NCAA countered that those prohibitions were necessary to protect the “amateur” nature of the sport. The United States Supreme Court disagreed. The Court used a “rule of reason” test to evaluate whether the prohibitions violated the Sherman Act – considering whether the NCAA’s restraints produced anti-competitive effects in the market, whether those restraints had a “procompetitive rationale” that protected consumer demand, and whether there were any alternatives to achieve that “procompetitive rationale” that were substantially less restrictive than the current rules in place.
The education-related benefits limits failed at the third prong of the “rule of reason” test. The United States Supreme Court affirmed the lower courts’ determinations that there were other less restrictive alternatives available short of a blanket prohibition on the education-related benefits at issue. These benefits were not akin to professional athletic salaries and consumers interest would not likely be impaired by the grant of academic benefits. These benefits “emphasize that the recipients are students” and therefore do not impact the NCAA’s interest in maintaining an “amateur” nature to the market. The Court held that without a reasonable connection between the limit and the NCAA’s interest in preserving the nature of collegiate sports, the limits were unlawful and unenforceable under the Sherman Act. Moving forward, member schools have the discretion to offer more education-related benefits to student athletes if they choose, without limitation by the NCAA.
It is worth noting that this case is limited to education-related benefits and does not yet provide an open door for student athletes to collect compensation through professional salaries, sponsorships, or other athletic related extra compensation. However, those athletic benefits are the topic of new state law enactments and NCAA deliberations. How the United States Supreme Court’s recent ruling affects other areas of student athlete compensation and benefits remains to be seen, but one key takeaway is the Court’s skepticism of the NCAA’s historical monopoly over collegiate sports and whether federal law prohibits other restrictions and prohibitions concerning competition and free market in college sports. The full text of the Court’s opinion may be found by clicking here.
Our firm has extensive experience representing both universities and athletes with respect to NCAA rules and by-laws, eligibility concerns, scholarships, compensation, and benefits. If you have any questions about this Legal Briefing or how this change in law affects your rights, please contact any member of our Firm at (585) 730-4773. Please note that any embedded links to other documents may expire in the future.
This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2021 Law Offices of Pullano & Farrow PLLC