This is a transcript of a discussion on the Herbert Smith Freehills, Bettor's Verdict Podcast that first aired on July 7, 2021. The transcript has been edited for length and clarity. The entire discussion can be found online.
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STEVEN JACOBS: Welcome to the Bettor's Verdict, a Herbert Smith Freehills podcast on gambling law, sports law, and crypto law. Today, I am thrilled to have back on the pod my former professor from the Gabelli School of Business at Fordham University, Mark Conrad, who will discuss NCAA v. Alston,
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a case regarding the NCAA's longstanding limits on compensation for college athletes.
MARK CONRAD: This has been a long-running case. This case was first filed eight years ago on behalf of a group of student-athletes that sought a major reform of the NCAA rules, particularly the restrictions on both compensation and educational expenses.
STEVEN JACOBS: What were the rules?
MARK CONRAD: Well, those rules are basically that the amount of scholarship money is limited to a certain formula. It can exclude certain aspects that may be involving computers or maybe certain internships, or maybe a year of graduate school, you know, fairly minor restrictions in the scheme of things. Then there were restrictions on general compensation like salaries, endorsement deals, coaching, and teaching beyond what one does as a student-athlete, and this complaint was a wholesale challenge. By the time it got to the district court out in San Francisco, the district judge had focussed more on the educational portion, the portion of the educational expenses, and ruled those restrictions were illegal under the antitrust law but upheld some of the others.
So this was not a complete victory for the student-athletes on the district court level, but the decision did say that the NCAA is subject to antitrust law and could be challenged on antitrust law because these policies apply to all schools that were members of the NCAA.
STEVEN JACOBS: When you say the first sections were minor, what you mean is they were very restrictive, correct?
MARK CONRAD: They are very restrictive in one sense, but in terms of dollars and cents, the educational restrictions were not that huge. They were probably in the $5,000 range, and that was what the district court looked at, so it was something that could be liberalized. The district court said that the restrictions on educational expenses were simply to allow it to be justifiable. But, and this is the big but, the court upheld some of the others. The NCAA appealed, and so did Austin and other members of the class.
STEVEN JACOBS: What is the legal theory? Why wouldn't the NCAA be able to do what they want? They are a private business.
MARK CONRAD: They are a joint grouping of a number of universities that make policy as one. And the policies are binding in every college and university that is a member of the NCAA, which is basically the great majority. And they control college athletics, and basically they are limiting free choice on the part of students and of schools to decide what kind is going to be the best for them. So it is like you are looking at a series of 1,200 businesses with the same kind of restrictions on the people who may work in their businesses or be associated with their businesses, and that opens the issue of antitrust law, which basically prohibits agreements of two or more that unreasonably restrain trade and interested commerce.
Well certainly there are two or more in agreement here, there are 1,200 based on the rules and up through three divisions, and also these were uniform—there was no choice—so it is not like a student would get into School A that would say we will give you more of these expenses than School B if it was completely standardized and it diminished the value of many college athletes.
STEVEN JACOBS: So for the nonlawyers out there, why is it a problem for the business to restrict trade? What is the policy behind these antitrust concerns?
MARK CONRAD: Well, it's consumer choice. First, consumers want more free choice, that is one big general concern. The second concern is the labor force because if you think of college athletes in the sense of performing some kind of labor or duties, you know their rights are considerably restricted from making choices based on what their opportunities could be. If somebody is a talented student-athlete and arguably wants to give tennis lessons for $20 an hour, they were prohibited from doing that.
If they wanted to make an endorsement deal, they were prohibited from doing that. They would lose eligibility to compete, and the rules could be very, very particular.
Jeremy Bloom gave up a huge endorsement deal—he was a skier—to play football at the University of Colorado a number of years ago even though mogul skiing and football have nothing to do with each other and mogul skiing is not an NCAA sport, but he was deemed a professional.
If someone is talented at what they do, why can't they earn extra compensation for doing it? It is the last vestige of amateurism in the world. The Olympics ended this notion decades ago, but the NCAA clung to this longer than they should have, and ultimately they got burned by the Supreme Court.
STEVEN JACOBS: Oh, wait, you said that the Olympics ended this policy decades ago. What do you mean by that?
MARK CONRAD: Well at one time, to be in the Olympics, you had to be an amateur. You could not be a professional athlete, and you could make no money. Jim Thorpe was stripped of his medals because he played semi-professional baseball for a small amount of money which had nothing to do with what he got his medals in, and he was stripped of them. It was a strict rule in the Olympics until the 1980s when people woke up and said this really makes no sense, and it will not hurt the product if you allow professionals to compete in the Olympics. And the international sports bodies generally regulate the specific rules regarding that, and there are some variances within those bodies. But still, more than likely than not, you have professionals, and anybody watching the Olympics sees that. You know these athletes get endorsement deals. The basketball players who play in the NBA, the hockey players that play in the NHL (when the NHL players were competing), so there is really no distinction like there was. But in college sports in the United States there was that distinction because the idea was you wanted to make a clean slate for everybody. You didn't want certain colleges with more money fattening up the talent by offering more goodies and there was a certain logic behind that at the time.
But right now, because big-time college sports is such a big business and the NCAA is getting billions on rights fees from basketball, the conferences are getting billions on rights fees for college football. People pack in these stadiums, paying a lot of money to watch these athletes play, and the athletes got nothing. They got nothing. Everybody else made money. You know, the broadcasters made money, the stadium operators could make money, the conferences made money, the NCAA made money. Meaning money coming in, even the sportswriters made money, the broadcasters made money, but the student-athletes didn't. They didn't, and they are the folks that people watch. Of course, the coaches make lots of money.
STEVEN JACOBS: Yeah, for sure. I remember there was a college basketball player named Ed O'Bannon who was a very popular and great college player but didn't really make it in the pros, and I recall he was involved in a lawsuit a while back about this. But I guess it wasn't sufficient to change the tides.
MARK CONRAD: Well, that's a little different, and that was a different tack, and that was not the subject of this Supreme Court ruling. That's been another issue that we can get into, but if you want, we can talk about the ruling first and then get into the issue that O'Bannon was arguing.
STEVEN JACOBS: Yeah, let's talk about this case. So you said the district court found in favor of the athletes, but it wasn't completely.
MARK CONRAD: More or less, yes.
STEVEN JACOBS: But it wasn't completely.
MARK CONRAD: They found more in favor but not totally. The athletes' side was not that happy because of a lot the restrictions stayed. Both sides appealed it to the Ninth Circuit Court of Appeals, which made a certain amount of sense. Both sides were not happy, they made certain points, so it goes to the Ninth Circuit. The Ninth Circuit essentially affirms the district court and is not changing anything. Then, the NCAA makes an appeal to the Supreme Court, and this is something I could not figure out. Even at the time, I said, why are they doing this? Because they won a reasonable victory here.
STEVEN JACOBS: What was their reasonable victory before we move on?
MARK CONRAD: The reasonable victory is that many of the restrictions on the compensation rules were upheld.
STEVEN JACOBS: So college athletes still can't be paid under the Ninth Circuit?
MARK CONRAD: That's right, as of that time, they still cannot be paid, although that could change. But they couldn't be paid based on the district court's rulings. Those restrictions stayed in place, so I wondered why the NCAA would take this risk.
STEVEN JACOBS: What is the risk?
MARK CONRAD: Well the risk that the Supreme Court ruled in a sense what they ruled, and in particular, what Justice Kavanagh wrote in his concurring opinion was exactly the nightmare that they find themselves in right now.
To listen to the entire converation, you can visit the Bettor's Verdict Podcast.
