The US Court of Appeals for the Ninth Circuit upheld a district court injunction on Monday that blocked a National Collegiate Athletic Association (NCAA) cap on education-related benefits that member colleges may offer students playing Division I Football Bowl Subdivision (FBS) football and Division I basketball.
The decision stemmed from an appeal and cross-appeal from an antitrust action where the district court enjoined the NCAA from enforcing rules that limit the amount of education-related benefits that member schools may distribute to student athletes. Such benefits include computers, science equipment, musical instruments, scholarships, tutoring, internships and study-abroad expenses. The Ninth Circuit held that the district court properly applied the three-step Rule of Reason analysis in deciding that the rules were unlawful restraints of trade under section 1 of the Sherman Antitrust Act.
The appellate panel held that the the student-athletes met the requirements of the first step by showing that the restraints of the NCAA rules “produced significant anticompetitive effects in the relevant market” for student-athletes’ labor on the playing field/court.
After considering demand analysis, survey evidence and NCAA testimony, the district court properly concluded that only some of the NCAA rules adequately served the goal of preserving amateurism in college sports to clear the second step. Namely, rules associated with limiting above-the-cost-of-attendance payments unrelated to education, the cost-of-attendance cap on athletic scholarships, and certain restrictions on cash academic or graduation awards and incentives.
Similarly, the third step was met where the district court identified ways in which the NCAA’s objectives could be achieved in a substantially less restrictive manner. The district court properly identified a less restrictive alternative of permitting individual conferences to set limits on education-related benefits, while prohibiting the NCAA from capping such benefits across the board.
Lastly, the Ninth Circuit held that the district court struck the proper balance in holding that the injunction was not impermissibly vague and did not constitute “judicial usurpation” of the NCAA as the superintendent of college sports.
Judge Milan Smith wrote a separate concurrence to express his concerns for the current state of the antitrust law via an “unwitting expansion of the Rule of Reason inquiry” that might deprive the athletes in this case of the “fundamental protections” that antitrust laws were meant to provide. Specifically, Smith took issue with the fact that in this case that student athletes are “quite clearly deprived of the fair value of their services,” yet the current Rule of Reason related case law calls for a cross-market analysis that eliminates policy judgments by the court, which ultimately risks leaving student-athletes outside of the protections of the Sherman Act.