Each spring, the NCAA, colleges, and TV networks make hundreds of millions of dollars from the biggest basketball tournament on the planet. Student-athletes, who the viewers pay to watch, have historically not received any share of that massive profit. But after a recent surge of litigation and advocacy, it looks like that is about to change, and with it the face of amateur sports. But how?
With March Madness in full swing, Harvard Law lecturer and sports law expert Peter Carfagna took to chat with Harvard Law Today about ongoing antitrust litigation involving college athletes; name, image, and likeness (“NIL”) agreements; new transfer portal rules; and the end of amateurism as we know it. The biggest potential loser? According to Carfagna, it is the NCAA, which he predicts may soon be irrelevant. “The tail,” he says, “is wagging the NCAA dog.”
Harvard Law Today: Can we start very basic? What is an antitrust lawsuit against the NCAA?
Peter Carfagna: The National Collegiate Athletics Association, or NCAA, is the non-profit sports league that runs college athletics. In professional sports, athletes are compensated for their efforts subject to their contracts with teams and the collectively bargained agreements their player unions agree to with the league.
The NCAA is the sole organization in control of college sports and, in the past, has not allowed players to receive payments for their efforts. Meanwhile, the college sports industry is a billion-dollar industry in terms of media rights, advertising, ticket sales, merchandise, etc. Coaches and staff are compensated as professionals and the colleges and the athletic conferences that teams compete in receive substantial amounts of revenue from a variety of sources.
Thus, in a vacuum, NCAA rules restricting student athlete compensation are restraints on trade that arguably conflict with the Sherman Antitrust Act because the players are not being adequately compensated for their labor compared to what they could get in a competitive marketplace.
HLT: Before we dive into the current state of college athletics, can you walk me through how the definition of “student athlete” has evolved? What context do we need to understand what’s going on now with the NCAA?
Carfagna: Back in the day, under NCAA rules, student athletes could compete in exchange for tuition, room and board, and cost of attendance. That was it, nothing extra. They were amateurs. In a 1984 decision called [NCAA v.] Board of Regents, the Supreme Court seemed to agree. Essentially there were two competing markets — one being the professional market, the other being the unpaid market. Under Board of Regents, the Court held that ‘student athletes’ were people who couldn’t be paid, and they couldn’t be paid because they were student athletes. That circular reasoning held firm for many, many years.
Then the videogame settlements happened in 2015, when college players who had appeared in video games without any compensation filed a class action suit and settled. The settlement established that the NCAA and EA Sports could not use collegiate players’ NIL in a video game without paying them. That suit was a prelude to O’Bannon [v. NCAA] later that year — a Ninth Circuit case where the court effectively enjoined the NCAA from continuing to profit from those collegiate video games and continued to limit any benefits tethered to education. O’Bannon technically allowed schools to extend those benefits up to $5,000 per student athlete per year.
HLT: The recent landmark case on this subject is undoubtedly NCAA v. Alston from 2021. What were the legal arguments before the Court in Alston, and what was the outcome?
So, before it came to the Supreme Court, the Alston case had been adjudicated by a lower, district court that invalidated the NCAA rules designed to limit education-related compensation on antitrust grounds. We already talked about how student athletes have been allowed to receive certain education-related benefits, but NCAA rules also expressly limited other types of educational benefits such as scholarships for graduate or vocational school, payments for academic tutoring, etc.
When the lower court performed its antitrust analysis on the NCAA rules on education-based compensation, it did so under the “rule of reason” test — a test that is significantly less-deferential than other standards NCAA rules had been analyzed under. The rule of reason test basically means that if there’s a less-restrictive way to go about this, then the court is much more likely to find that the status quo is an undue restraint in violation of the Sherman Antitrust Act. Until this point, precedent had given the NCAA a pass under that circular Board of Regents logic.
The lower court issued a ruling that upheld some of the NCAA rules challenged, but under the new rule of reason test invalidated its limits on education-related compensation as undue restraints in violation of the Sherman Antitrust Act. The NCAA, of course, appealed and eventually the issue came before the Supreme Court.
On appeal, the Supreme Court affirmed the lower court ruling and upheld the injunction against NCAA’s rules limiting education-based compensation for student athletes. But in the majority opinion, the Court still upheld this notion from precedent that all such compensation must be “tethered to education.”
HLT: If Alston is about compensation related to education, how do name, image, and likeness rights come about?
Carfagna: The floodgates were opened by Alston, especially the concurrence. Alston made clear that the Board of Regents language regarding amateurism in college sports, which the NCAA had relied upon for years to stave off antitrust challenges, was merely dicta — that is, not binding — going forward. But apart from the majority opinion, the concurrence by [Justice Brett] Kavanaugh was what really put the kibosh on the NCAA’s traditional definition of college amateurism. The concurrence outlined his belief that, in the next case on this issue before the Court, each and every one of the amateurism rules should also be subject to the less deferential “rule of reason” test.
Both before and after Alston, many states had passed NIL laws. After Alston, the NCAA could have attempted to supervene state NIL laws by invoking the federal dormant commerce clause to try to achieve federal regulation. Instead, the NCAA couldn’t achieve a federal consensus and simply adopted new rules that allowed NIL compensation, but attempted to establish guardrails around it. For example, the new NCAA rules prohibited NIL from being used to induce an athlete to attend a university. So, the NCAA was still trying to hang on under a new theory that NIL money is fine because it’s for branding — but it still isn’t compensation, it still isn’t pay to play.
HLT: Alston seems like it was decided just yesterday, but it will already be turning three years old this summer. Is the death of amateurism on track, or now taking longer than anticipated? What’s happened since?
Carfagna: Well, this is when the real fun begins because now the inmates are running the asylum.
Almost immediately after the NCAA passed its new NIL rules, “collectives” were created at virtually every major university. A “collective” is a term of art for basically a booster club on steroids. It’s a third-party for-profit, or not-for-profit, entity that serves as an intermediary between the students and compensation that isn’t based on education. A collective is allowed to lure students to come play for a school at the cost of whatever the market requires and the bidding gets ferocious.
So, the NCAA tried to come down hard and pick a couple of key cases to enforce its new NIL guardrails. They eventually decided to target the University of Tennessee because, to them, this seemed like a particularly egregious case of ‘NIL run amuck’ — just outright buying players left, right, and center.
But in response to the NCAA’s enforcement attempt, the University of Tennessee filed a lawsuit challenging the validity of the new rules. And guess what? The judge in Tennessee agreed. So now, following the court’s ruling to grant an injunction on its NIL rules, the NCAA has completely ceased enforcing its NIL guardrails. With Tennessee, it was like the NCAA finally decided to put their foot down and it happened to be smack-dab on a rusty nail.
In sum, the NCAA currently cannot enforce any of its NIL guardrails and will not be able to apply them retroactively for violations that occur while the injunction is in place. This is especially problematic with the NCAA transfer limit rules, which are also currently enjoined under a separate lawsuit.
HLT: Beyond NCAA enforcement action, it’s hard not to notice a considerable amount of open court cases regarding these rules and rights. Can you walk me through some of the ongoing litigation?
Carfagna: Well Carter v. NCAA is a case with the potential to end the college amateurism status quo once and for all, it’s a direct challenge to the NCAA rules against paying college athletes to play sports. The famous class action attorney Jeffrey Kessler, who filed Carter and is co-counsel on the case, will be participating on a panel at the upcoming Sports Law Symposium on April 16 hosted by the Harvard Committee on Sports & Entertainment Law. Jeffrey was one of the lead lawyers in the Alston case as well, and has been at the forefront of the student athlete labor rights movement for decades.
Another one of the most exciting ongoing cases, House v. NCAA, is seeking retroactive NIL compensation on behalf of former NCAA players. The plaintiffs’ attorney requested class action status for former student athletes who weren’t allowed to have NIL going as far back as the statute of limitations would allow. And not only did the judge, [Chief District Court Judge] Claudia Wilken who previously presided over both Alston and O’Bannon, certify the classes, she has additionally said those athletes are entitled to their fair share of the media revenue! According to the expert opinion accepted by the Court, media rights in House would approximate 10% of all media revenue. That’s a damages claim in excess of $1 billion, which could be trebled — that is, tripled — under antitrust law. So, that’s an ongoing multi-billion-dollar lawsuit with wild implications.
Another recent case, State of Ohio v. NCAA, involves NCAA transfer portal restrictions. In light of all these rules collapsing under the weight of antitrust challenges, the NCAA also adopted new rules allowing Division I athletes to transfer schools without losing a year of eligibility. The only thing they held onto was, if you want to transfer more than once without losing eligibility, you need a waiver from the NCAA. So, that rule was challenged by a class of at least ten state attorneys general and now the [U.S.] Department of Justice has joined the suit against the NCAA. After the judge issued a TRO [temporary restraining order] against the NCAA transfer limits rules, the NCAA came back and consented to a preliminary injunction extending their suspension until the end of the spring 2024 semester.
Meanwhile, general counsel of the NLRB [National Labor Relations Board] Jennifer Abruzzo is arguing student athletes are employees in an official complaint she filed last May. There’s the Johnson [v. NCAA] case too, a Third Circuit case still under appeal brought on the basis of the Fair Labor Standards Act. The argument in Johnson is similar to the NLRB complaint, but on different grounds, asking if the student athletes are really employees, then shouldn’t they have been paid at least minimum wage, not just the cost of attending school?
So, between House v. NCAA over retroactive NIL/media revenues; Carter v. NCAA over pay to play; the NLRB complaint and Johnson v. NCAA case over employee status; State of Ohio v. NCAA over the transfer portal restrictions; and the Tennessee case, where the court has already enjoined the NCAA from enforcing its NIL restrictions — yeah, it seems like the emperor has no clothes.
HLT: Is there a future for amateurism in this new environment? What does the future of the NCAA and college sports look like?
Carfagna: That remains to be seen, but we’re right up against pay to play. March Madness is a great example to consider. The annual Men’s Basketball Tournament is the NCAA’s goose that lays the golden eggs. It’s the source of their $1.1 billion war chest, from which all else is funded. But there’s really nothing contractual with the schools that says, “I must participate in March Madness.” It’s just the only show in town.
In the March Madness Women’s Basketball Tournament, the world will be watching Caitlin Clark from the University of Iowa who is perhaps the greatest female college basketball player in the history of the game. She is an incredible draw for millions of viewers and just another great example of why these media rights are so valuable.
Going forward, what’s to stop conferences and schools from arranging a tournament on their own? They have the media rights. I think what we could be looking at is a secession movement where the conferences could say they don’t need help anymore.
It’s already happened with the college football playoffs [CFP]. The CFP championship is a private, non-NCAA sponsored postseason tournament that already plans to expand from 4 to 12 teams next year. I can see basketball going the same way. As long as conferences don’t collude with one another, and it’s considered pro-competitive, then you essentially have a salary cap across the major conferences. So, that’s my take — ultimately the major conferences will set some sort of a salary cap.
Then again, maybe it’s a trade association that negotiates for benefits and medical care. There’s no shortage of proposals. At least four different pieces of federal legislation have been filed as well. I’m skeptical Congress would be capable of taking prompt action along those lines, but options are certainly out there.
So, to answer your question, what does this portend for the NCAA? Well, that it’s just relegated to irrelevance. The tail is wagging the NCAA dog.
HLT: How difficult is it to teach a sports law class with all these ongoing changes spiraling?
Carfagna: It’s a blast! Seriously, it’s the best of times. In January, I teach Representing the Professional Athlete and the Preprofessional Athlete. That course has been significantly impacted because one of the few rules not being challenged right now is that you can’t have the same agent for NIL and professional. These changes have given rise to a totally new category of representative. This past semester was like being an anchor on SportsCenter. It’s amazing, and it really is so much fun.
HLT: Based on how this conversation has gone, I have to ask: Is our house is on fire? Or did we just hit a jackpot at the casino? It’s that kind of energy, but I can’t decide.
Carfagna: What can I say? It’s an exciting time.
Professor Carfagna will be moderating a discussion on Tuesday April 9 with a selection of Harvard Law alumni from the school’s Sports Law program to kick off the upcoming 2024 Sports Law Symposium which will be hosted by Harvard Committee on Sports & Entertainment Law.
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