The Supreme Court helped create today’s NCAA Cartel

. . . and the next good legal challenge will strip it of its power. 

As the battle over student-athlete compensation is more present in the national conversation than ever before, it is important to understand why the NCAA and its member institutions can refuse to pay college athletes. The simple answer is that  the Supreme Court allowed it back in 1984 in NCAA v. Board of Regents. However, the NCAA of 1984 surely is not the NCAA of 2018. Given the billions of dollars now coming into the organization each year and the multitude of litigation the NCAA is currently involved in, including a lawsuit for student-athlete compensation, it is important to reexamine whether the NCAA deserves this legal protection any longer.

 

NCAA v. Board of Regents

Case Background: As of 1952, the NCAA controlled all broadcast rights to both regular and postseason college football games and limited each school’s number of television appearances.[2] This output restriction became an issue in 1981 when the NCAA entered into a 4-year, $131 million agreement[3]  with ABC and CBS that granted both networks the semi-exclusive right to broadcast college football. Unhappy with the payout and telecast restriction, a group of 64 schools, the College Football Association (CFA), negotiated its own four-year $180 million contract with NBC, which provided more television appearances and increased revenues per school.[4] In response, the NCAA threatened to sanction any school that participated in the CFA contract and the CFA brought suit under the Sherman Act.[5]

In a 7-2 decision, the United States Supreme Court ruled the NCAA’s broadcast restrictions constituted an illegal horizontal restraint on trade under Section 1 of the Sherman Act.[6] Ironically the legacy of the case is not the antitrust violation, but the majority’s decision to give the NCAA special treatment under antitrust law in nearly all other aspects of its operation.

Majority: Writing for the majority, Justice Stevens held that the NCAA’s broadcast restriction was a per se illegal restraint on trade.[7] Nevertheless, the majority explicitly chose not to apply per se analysis because “a certain degree of cooperation (i.e. collusion) is necessary if the type of competition that [the NCAA] seek[s] to market is to be preserved.” Instead, the court applied the Rule of Reason to the telecast restrictions because the NCAA needed “ample latitude” to play “a critical role in the maintenance of a revered tradition of amateurism in college sports.”[8] Furthermore, Justice Stevens advised future courts “[it] is reasonable to assume that most of the regulatory controls of the NCAA are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive because they enhance public interest in intercollegiate athletics.”[9]

Dissent: In the dissent, Justice White[10] predicted the evolution of the NCAA and foretold the demise of amateurism that would result from the majority’s holding. His objection to the decision was simple: “unlimited [television] appearances by a few schools would inevitably give them an insuperable advantage over all others and in the end defeat any efforts to maintain a system of athletic competition among amateurs who measure up to college scholastic requirements.”[11] White sided with the restriction because it furthered the NCAA’s stated purpose: to “keep university athletics from being professionalized to the extent that profit making objectives would overshadow educational objectives.”[12]

Analysis: The effect of this holding was staggering. By labeling “most regulatory controls of the NCAA” procompetitive, the Supreme Court protected arguably every NCAA bylaw that furthered amateurism from antitrust challenges.[13] Nevertheless, what the dissent correctly predicted as the future of the NCAA proved to destroy the premise upon which the majority opinion was based. The majority reasoned the NCAA deserved special treatment because of its commitment to amateurism. Justice White believed this commitment would be temporal because the NCAA would covet profits rather than protect the most basic precept of its operation: amateurism. The next three decades of NCAA revenue streams[14] combined with the events of the past six months[15] proved Justice White’s prediction was correct. In retrospect, Board of Regents unmistakably created a monolith that antitrust laws were enacted to protect.

Legacy:  For more than three decades, the NCAA has been given ample latitude under the Sherman Antitrust Act to govern intercollegiate amateur sports in the United States because of the Supreme Court’s holding in NCAA v. Board of Regents (hereinafter “Board of Regents”).[1] It is time for this era to end.  Where the majority opinion carved out a unique application of antitrust law for the NCAA due to its stated commitment to amateurism, the dissent warned of the temptations that would befall the organization due to the influx of enormous television revenues. In the decades that followed the decision, the dissent’s forewarnings proved true as the NCAA demonstrated a greater commitment to maximizing revenue than to policing its most fundamental bylaws. As such, the FBI investigation into the pay-for-play underbelly of Division I college basketball is the logical consequence of the NCAA’s commitment to financial gain over student-athlete wellbeing.

The NCAA has proven it is willing to sacrifice amateurism for revenue, so it no longer deserves to be protected under antitrust law. Accordingly, a new legal antitrust challenge to NCAA amateurism bylaws deserve to be analyzed under a new lens, free from the Board of Regents grasp.

Furthermore, it is clear the tide has turned against the organization as more and more groups are taking action against the NCAA. Currently, there is a bill in the California Assembly to pay student-athletes, litigation in front of Judge Claudia Wilken in the United States District Court for the Northern District of California that will address the question of student-athlete compensation head on, and just this week, a bill in the House of Representatives to pay student-athletes for their use of name image and likeness. The NCAA could have avoided these external changes by reforming its model in the face of major revenue streams. Instead, it chased increased revenues at the expense of its student-athletes.

More and more, it appears that the NCAA cartel is on its last leg because change is coming from external forces. As the Supreme Court first conferred unchecked power to govern intercollegiate athletics in Board of Regents, the same legal system, alongside Congress, is ready to take it away.

[1] 468 U.S. 85 (1984).

[2] Id. at 90.

[3] Id. at 90.

[4] Id. at 95.

[5] Id.

[6] Id. at 88.

[7] Id. at 100.

[8] Id. at 120.

[9] Id. at 117.

[10] White was a former NCAA All-American halfback at Colorado-Boulder. Byron R. White, OYEZ, https://www.oyez.org/justices/byron_r_white (last accessed Mar. 14, 2018).

[11] Board of Regents, supra note 1 at 128.

[12] Id. at 123.

[13] The 9th Circuit rejected the NCAA’s claim that Board of Regents declared all amateurism rules valid “as a matter of law.” O’Bannon v. Nat’l Collegiate Athletic Ass’n, 802 F.3d 1049, 1061 (9th Cir. 2015).

[14] In 1985 the NCAA signed a 3-year, $94.7 million deal with CBS to broadcast March Madness. Revenue, NCAA, http://www.ncaa.org/about/resources/finances/revenue (last visited Mar. 14, 2018). In 2010, that contract was 14 years, $10.8 billion, and extended in 2016: 8 years, $8.8 billion. Id; Turner, CBS and the NCAA Reach Long-Term Multimedia Rights Extension for NCAA Division I Men’s Basketball Championship, NCAA (Apr. 12, 2016), http://www.ncaa.com/news/basketball-men/article/2016-04-12/turner-cbs-and-ncaa-reach-long-term-multimedia-rights. Revenues in football are equally impressive. In November 2012 ESPN signed a $7.3 billion deal to broadcast the College Football Playoff for 12 years. Frank Pallotta, ESPN’s $7.3 Billion College Football Gamble Pays Off, CNN MONEY (Jan 13., 2015), http://money.cnn.com/2015/01/12/media/espn-college-football-playoff-pays-off/.

[15] See infra, Section II. B.

Photo Credit: Kevin Jairaj-USA TODAY Sports

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