Compensation for Student Athletes
The recent Supreme Court decision in NCAA v. Alston, et al. does not require NCAA affiliated universities to pay student athletes. Instead, the case addressed whether the NCAA’s policies and practices regarding student athletes violated antitrust laws. The District Court agreed with the NCAA that most restrictions on paying college players do promote competition with professional sports organizations – except for caps on education-related benefits: such as limits on scholarships for graduate or vocational schools, payments for academic tutoring, or paid post-eligibility internships. Therefore, the District Court enjoined the NCAA from putting a cap on education-related benefits for student athletes.
On appeal, the NCAA only challenged the District Court’s injunction, but it was affirmed by the 9th Circuit Court of Appeals. The Supreme Court of the United States granted certiorari and affirmed the injunction. The Court conducted a fact-based analysis of the actual effects that the NCAA’s market power has on the both the market for sports and the market for college athlete labor. The NCAA is a participant in two markets: it is a monopoly seller of collegiate sports and a monopsony buyer of labor, particularly college athletes.
In his Supreme Court opinion, Justice Gorsuch explained that some market restraints are necessary to facilitate competition. Namely, if college athletes receive unlimited payments unrelated to education, the NCAA loses its competitive advantage against professional sports organizations. Following this, the NCAA must show that their vast restrictions in the labor market for college athletes have the effect of promoting competition against professional sports organizations – or distinguishing professional and amateur athletes.
However, the Court determined that the education-related restrictions were not necessary to preserve consumer demand, and the restrictions were overly strict for achieving pro-competitive benefits – removing the restrictions did not blur the distinction between college and professional sports or impair demand for college sports.
NCAA voiced concerns that by including “paid post-eligibility internships,” the Court opened the door to numerous loopholes to compensate college athletes with professional-level salaries under the guise of an internship. However, the Court stated that the internships are only available from conferences and schools – not shoe companies or car dealerships. Moreover, the NCAA still has complete discretion to define “benefits related to education.”
The Court assumed without deciding that the other restrictions on compensation were procompetitive. However, in Justice Kavanaugh’s concurrence, he expressed a strong sentiment that if the other noneducation-related restrictions were scrutinized under the same ‘procompetitive test’, they would fail under antitrust laws. This sentiment was not binding, but it is most likely what induced the NCAA to offer Name, Image, and Likeness compensation – a non-education related form of compensation that is still distinguishable from the paid benefits of a professional athlete.
WHAT IS THE NIL RULE?
Under U.S. law, you have a right to be compensated if a third party uses your name, image, or likeness for financial gain. For example, if Wheaties puts your image on the front of their cereal box, you have the right to be compensated for their use of your image. For decades, the NCAA barred student athletes from being compensated for the use of their NIL as a provision in the contracts signed for financial assistance or scholarships to attend the university.
Now that the rule has changed, students who play for NCAA affiliated universities are eligible to receive payments for sponsorship deals, endorsements, personal appearances, and more. The universities are not allowed to pay the athletes directly, nor can they assist the athletes in obtaining the NIL deals, and all NIL deals must be submitted to the NCAA for review. One major concern is that universities will use the NIL deals to incentivize or pay the athletes under the table as it were, but this behavior is prohibited. The NCAA is seemingly committed to preserving a college league that is not pay to play.