NCAA's Supreme Court Defeat Is Bad for Sports Fans — and Some Athletes

NCAA's Supreme Court Defeat Is Bad for Sports Fans — and Some Athletes
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On June 21st, in NCAA v. Alston, the U.S. Supreme Court unanimously upheld a lower court’s decision that National Collegiate Athletic Association (NCAA) rules limiting the education-related benefits that schools may make available to student athletes violate federal antitrust law.

The decision has been widely hailed by various commentators as a victory for underpaid college athletes who have been denied a fair share of the revenues that they generate for NCAA member colleges. A closer look, however, indicates that the decision will likely prove harmful to American college sports fans — and many student athletes as well.

Not all colleges and universities are NCAA members. Those institutions that join the organization, however, agree to adhere to a variety of NCAA rules governing intercollegiate sports competitions. Those rules seek to promote amateurism as a key feature of college sports.

The rules have evolved and become more flexible over time. Student athletes receive room, board, books, fees, and incidental expenses. Today, rule revisions also allow athletes to receive additional payments through special funds that help athletes meet their financial needs and recognize academic achievement. What’s more, students may now also receive certain payments “incident to athletic participation” (such as bowl games) and “payments from outside entities” (such as participation in the Olympics). NCAA rules, however, prohibit the payment of salaries to players.

The NCAA’s television contracts for high-profile sporting events have earned the NCAA and its member conferences huge amounts of money. Several years ago, football and basketball players from NCAA Division I (wealthy big name) programs sued the NCAA, arguing that existing NCAA rules that limit their compensation unreasonably restrain trade in violation of the federal antitrust laws.

A federal trial court rejected the NCAA’s defense that its rules help increase output in college sports and maintain a competitive balance among teams. The court gave some limited credence to the NCAA’s separate claim that the rules widen consumer choice by providing a unique product — amateur college sports.

The court rejected the student athletes’ challenge to rules that limit athletic scholarships to the full cost of attendance and that restrict compensation and benefits unrelated to educations. But the court struck down caps on education-related benefits — such as rules limiting scholarships for graduate or vocational school, payments for academic tutoring, or paid post-eligibility internships.

A court of appeals upheld the lower court’s decision, and the NCAA appealed to the Supreme Court, which also affirmed that holding. The Supreme Court considered only the education-related benefits rules that had been struck down, not the rules that had been upheld.

The Supreme Court agreed that the NCAA has “monopsony power” (monopoly buyer power) in the student athlete market, and that its restrictions hold student athlete compensation at below market levels. Thus, the Court rejected the NCAA’s argument that its restrictions should be presumed to be procompetitive.

Applying the antitrust “rule of reason,” which weighs anticompetitive effects against procompetitive effects, the Court ruled against the NCAA. It agreed that the lower court had acted correctly in finding that the NCAA could have achieved its purpose of promoting amateurism through “less restrictive means” than the rules under scrutiny.

A problem with the Court’s opinion is that it allows a lower court to second guess the overseer of highly popular college sports, the NCAA, as to the design of rules that define amateurism — which lies at the heart of the NCAA’s mission.

Applied more generally, this sort of approach lets a trial court micromanage a highly successful joint enterprise, based on its subjective non-expert view that the enterprise could have written better rules to advance its core purpose. This sort of regulatory interference by government, which runs counter to the American antitrust tradition, undermines business innovation.

In the case of the NCAA, college sports fans and even many student athletes could be harmed by this holding. The NCAA rules that were struck down did not deal with salaries for college athletes. But in a concurring opinion Justice Brett Kavanaugh all but said that he viewed all student compensation limits as illegal. He stressed that “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.... The NCAA is not above the law.” Trial lawyers will take note, and all remaining NCAA rules restricting athletes’ compensation may (and probably will) soon be challenged.

Getting rid of player compensation limits could effectively turn the big revenue college sports (basketball and football) into a professional minor league. The wealthier big-name football and basketball schools could bid up the price of a few star athletes, threatening competitive balance. “Cinderella stories” involving lesser-known schools could become extinct in the major sports.

Big sport salary disparities could undermine team cohesion. Also, the ability of coaches to “develop” lesser-but-promising players over time could be compromised, as the emphasis on receiving an immediate return on highly compensated stars could come to dominate.

In short, the nature of big-time college sports would change for the worse, eliminating key differences with the major pro sports. This could affect fan support for college programs, reducing welfare.

What’s more, high salaries for big revenue sports stars could drastically reduce athletic revenue available for other purposes, threatening scholarships and general support for “non-revenue” sports. Those “lesser” sports that are a big part of the college experience could shrink or be discontinued at many schools. This would harm large numbers of athletes, their parents, and friends. Fewer team-related friendships and connections lasting through life might be made. Alumni and booster support for collegiate sports funding could fall, as distinctions between college and pro environments vanished.

In short, while a few well-compensated big revenue athletes might benefit from the demise of core NCAA amateurism rules, a large number of student athletes would suffer. Furthermore, changes in college sports could degrade the quality of competition with pro sports and other entertainment offerings. This would harm consumer welfare.

In sum, the Supreme Court’s NCAA decision is a prime example of short-sighted judicial meddling with the core attributes of a successful product that is highly popular with the general public. The decision will tend to harm consumer welfare and competition, not improve it. While a few select “workers” (players) may benefit, many more will be worse off.

Alden Abbott is a senior research fellow with the Mercatus Center at George Mason University and formerly served as the Federal Trade Commission’s General Counsel.

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