Law School Case Brief
In re NCAA Ath. Grant-In-Aid Cap Antitrust Litig. - 375 F. Supp. 3d 1058 (N.D. Cal. 2019)
Restricting non-cash education-related benefits and academic awards that can be provided on top of a grant-in-aid has not been proven to be necessary to preserving consumer demand for Division I basketball and FBS football as a product distinct from professional sports. Where challenged NCAA rules have severe anticompetitive effects and student-athlete are harmed as a result of the challenged rules, the rules violate federal antitrust laws because the rules deprive student-athletes of compensation that they would otherwise receive for their athletic services.
Plaintiffs, who were current and former student-athletes who played men's Division I Football Bowl Subdivision (FBS) football and men's and women's Division I basketball, challenged the set of National Collegiate Athletic Association (NCAA) rules that limit the compensation they may receive in exchange for their athletic services. Plaintiffs contended that these limits on compensation, which are set and enforced by agreement of defendants, violated federal antitrust law, because Plaintiffs would receive greater compensation in exchange for their athletic services in the absence of these artificial limits. The defendants responded that the limits were procompetitive for two reasons. First, the limits helped preserve the demand for college sports because consumers value amateurism as defendants define it. Second, the rules promoted integration of student-athletes into their academic communities, which in turn improved the college education they receive in exchange for their services.
In an action by collegiate student-athletes challenging NCAA rules that limited the compensation they may receive in exchange for their athletic services, did the rules violate federal antitrust law because plaintiffs would receive greater compensation in exchange for their athletic services in the absence of the purported artificial limits?
The United States District Court for the Northern District of California found that the NCAA did restrain trade in the relevant market, affecting interstate commerce, and that the challenged limits on student-athlete compensation produced significant anticompetitive effects. The Court further held that the only procompetitive effect that defendants established, namely preventing unlimited cash payments, unrelated to education, similar to those observed in professional sports, could be achieved through less restrictive means. Specifically, the Court found that an alternative compensation scheme that would allow limits on the grant-in-aid scholarships at not less than the cost of attendance and limits on compensation and benefits unrelated to education, but that would generally prohibit the NCAA from limiting education-related benefits, would be virtually as effective as the challenged rules in achieving the only procompetitive effect that defendants have shown here. The only education-related compensation that the NCAA could limit under this alternative would be academic or graduation awards or incentives, provided in cash or cash-equivalent. The Court declared that the limit imposed by the NCAA could not be less than its current or future caps on athletics participation awards and allowing each conference and its member schools to provide additional education-related benefits without NCAA caps and prohibitions, as well as academic awards, will help ameliorate their anticompetitive effects and may provide some of the compensation student-athletes would have received absent Defendants' agreement to restrain trade. Restricting non-cash education-related benefits and academic awards that can be provided on top of a grant-in-aid has not been proven to be necessary to preserving consumer demand for Division I basketball and FBS football as a product distinct from professional sports. The Court entered a separate permanent injunction barring the restraints that were found to be overly and unnecessarily restrictive.
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