Everyone that is waiting for the fall of our current definition of amateurism may have jumped the gun.1 The Northwestern football decision was overturned by the NLRB. Now, the O’Bannon decision from the Northern District of California has been upheld in small instances and overturned on its most interesting point.
Let’s start here. Antitrust laws don’t give us much of an idea about what they’re for from the name alone. They’re often called anti-monopoly or pro-competition laws. They’re designed to keep combinations of corporations, usually, from raising the cost/price of a product through agreements not to undercut each other. In general, this is supposed to allow the market to truly set the price, not for it to be artificially raised.
The main bit of legislation covering this is the Sherman Act of 1890.2 The most important provision is Section 1, it prohibits “[e]very contract, combination . . . , or conspiracy in restraint of trade or commerce.”
This is very broad, and it is meant to be. Sports leagues have an interesting situation as it compares to the ideas behind antitrust laws because they are designed to prevent restraints but sports require some forms of restraint in order to field a competitive, and therefore commercially viable, league.
Northern District of California
In the original hearing of the case, the NCAA was beaten down when the judge held that the current definition of amateurism violates Section 1 of the Sherman Act because it is price-fixing of the earnings of the athletes involved. Specifically, the court looked at whether the prohibition on players earning money on their “names, images, and likenesses” was allowed under the Sherman Act.
Beyond the names, images and likenesses part of the prohibition, the NCAA broadly gives a non-specific definition of the full prohibition as not allowing “financial aid based on athletics ability.” The history of changing the definition as shown in the Deadspin article is one reason that the NCAA doesn’t have more specific definition on the things that are prohibited under amateurism.
After deciding that it does violate the Sherman Act, the court, somewhat strangely, gave a very specific injunction that prohibited the NCAA from prohibiting its member schools from paying for full cost of attendance—instead of just “grant-in-aid”3 —plus a $5,000 per year deferred payment for each year they are enrolled at the school. Basically, by telling the NCAA that they couldn’t prevent this type of payment, it figured that the schools would quickly start to use such a payment to get the top players.
Ninth Circuit Court of Appeals
This is where things changed. The Court of Appeals just overturned that decision as to the most important part, the $5,000 deferred payment that was allowed under the first O’Bannon decision. This was the most important part because in 2014, as noted in the case, the NCAA’s most important schools already redefined amateurism to allow for the full cost of attendance to be paid to athletes as part of their scholarships.
Essentially, as a holding this opinion does one thing and one thing only. It opens up the NCAA to further lawsuits based on the Sherman Act. The court explained at length that a previous case involving the NCAA’s definition of amateurism, NCAA v. Board of Regents of University of Oklahoma, does not give the NCAA an antitrust exemption like Major League Baseball.
This does nothing directly for O’Bannon or athletes currently enrolled or about to enroll as athletes. They still will get the full cost of attendance ever since the NCAA agreed to change that part of scholarships. But they’ll get no deferred compensation in the meantime.
The court determined that Board of Regents University of Oklahoma only held that amateurism was not per se, or automatically, illegal. Instead, the Rule of Reason must be applied just like in other antitrust cases. The Rule of Reason has three parts.
- The plaintiff must show that alleged restraint produces an anti-competitive effect in a market subject to antitrust
- The defendant can then show evidence that the restraint is actually pro-competitive
- Finally, the plaintiff then must show that the pro-competitive effects can be achieved in a better way
The Ninth Circuit determined that this test was satisfied, basically that there was a violation. However, the lower court’s decision to institute the $5,000/year deferred payment was improper. Again, this case doesn’t do much as far as a direct remedy is concerned.
There are already lawsuits ready to challenge the NCAA per the antitrust laws, one by famed sports lawyer Jeffrey Kessler of Winston & Strawn, and these will decide how amateurism plays out in the future. Things are unlikely to become a free market for college athletes no matter how things turn out. Many courts and the NLRB have acknowledged that college sports has a major issue when it comes to payment.
The issues related to Title IX, taxation, public/private universities, and the competitive reasons for amateurism will not quickly be solved. But the inclusion of full cost of attendance instead of grant-in-aid shows that a successful lawsuit is not the only way to bring about change. Things are about to get interesting.
The Clayton Act supplements the Sherman Act by allowing a private person to sue someone or something for a violation of the Sherman Act. Originally, only the government could file lawsuits under antitrust laws ↩
Grant-in-aid is the cost of books, room/board, tuition/fees ↩