In re NCAA Athletic Grant-in-Aid Cap Antitrust Litigation: The Future for NCAA Athletes

When we think of student athletes playing major sports in college, there is often an unfounded presumption that they are well-off and profit immensely from their activities. After all, professional athletes receive profits from commercials and advertisements. Yet aside from tuition scholarships, there is a principle of amateurism rooted in the NCAA which prevents colleges from publicly sharing any meaningful part of sports-related revenues with the athletes who perform in these sporting events. While schools claim that this forces athletes to focus on academics first and sports second, it leads to a billion dollar enterprise for college sports without any pay to the student athletes. This makes it even harder for student-athletes to focus on school, as their participation requires the time commitment of a full-time job without the monetary compensation to go along with it.

Recently, a class action of student athletes has been formed in the case of In re NCAA Athletic Grant-In-Aid Cap Antitrust Litigation, alleging that the defendants (the National Collegiate Athletic Association and eleven of its member conferences), violated federal antitrust law by conspiring to impose an artificial ceiling on the scholarships and benefits that student-athletes may receive as payment.

In previous cases, such as O’Bannon v. NCAA in 2014, the monetary remedy provided to the student-athletes was limited because there was not enough evidence that a true free market would not harm consumer demand. Ultimately, the Court found that allowing students to receive cash payments “untethered to their education expenses would not promote the NCAA’s procompetitive purposes as effectively as a rule forbidding cash compensation.”

In O’Bannon, the plaintiffs were challenging the NCAA’s rules preventing men’s football and basketball players from being paid, either by outside sources or by the school itself, for the sale of licenses to use the athletes’ names, images, or likenesses (referred to as NIL for short) in videogames, live game telecasts, and other footage. The plaintiffs proposed three less restrictive alternatives to the NCAA rules that they were challenging related specifically to the use of revenue derived from NIL licensing and endorsements:

• Raising the grant-in-aid limit to allow schools to award stipends, derived from specified sources of licensing revenue, to student-athletes
• Allowing schools to deposit a share of licensing revenue into a trust fund for student-athletes which could be paid after the student-athletes graduate or leave school for other reasons
• Permitting student-athletes to receive limited compensation for third party endorsements approved by their schools

For the first two alternatives, the Court found that it would “limit the anticompetitive effects of the NCAA’s current restraint without impeding the NCAA’s efforts to achieve its stated purposes,” but rejected the last alternative. On appeal, the Ninth Circuit upheld the finding that allowing NCAA members schools to award grant-in-aid up to the student athletes’ full cost of attendance would be a substantially less restrictive alternative to the existing compensation rules, but vacated the judgment requiring the NCAA to allow its member schools to pay student-athletes limited deferred compensation in a trust account. Therefore, allowing students to receive NIL cash payments untethered to their educational expenses wouldn’t promote the NCAA’s procompetitive purposes as effectively as a rule forbidding cash compensation, even if the payment was limited and took the form of a trust.

Since O’Bannon, there have been numerous empirical studies conducted to show that paying college football players does not decrease fan interest in watching college football. In a similar case that has arisen, Jenkins v. NCAA, the plaintiffs hoped to establish that the NCAA’s limits on compensation for athletes violates antitrust law. The players have suggested allowing the individual conferences themselves to set compensation limits, as they claim that the current NCAA rules are anti-competitive. These plaintiffs hoped to introduce evidence that will prove that paying college athletes would not actually harm consumer demand to watch college football or men’s basketball.  Judge Wilken’s decided to stay the case, as it was very similar to the legal issues in the Grant-in-Aid case.

In the case of Grant-in-Aid, the plaintiffs are challenging the association’s cap on the grant-in-aid itself, rather than their restrictions on sharing NIL revenue (as had been done in O’Bannon). O’Bannon set forth the idea that “NCAA regulations are subject to antitrust scrutiny and must be tested in the crucible of the rule of reason,” meaning that a rule can be invalidated if a substantially less restrictive rule would further the same objectives equally well. For the plaintiffs in the Grant-in-Aid case, this means that if the defendants show that there are procompetitive justifications for their rule, as they had in O’Bannon, the NCAA will be able to prohibit its member schools from paying student-athletes cash sums unrelated to educational expenses or athletic participation.            

The plaintiffs have submitted evidence regarding two potentially less restrictive alternatives, which raised an issue of fact as to whether they showed that such alternatives would be virtually as effective as the challenged restraints. This forced the Court to deny summary judgment on the question of the two alternatives, as the defendants did not show that such alternatives were foreclosed by O’Bannon. Currently, the Court is engaging in hearing both sides of the argument and their supporting evidence. The closing argument is set for December 18^th, 2018, after which NCAA athletes hope to receive answers for their future, and the future of generations to come.

Elina Milshtein is a J.D. candidate, 2020, at NYU School of Law.