BIG STAKES ANTITRUST TRIAL: IN RE NATIONAL COLLEGIATE ATHLETIC ASSOCIATION ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIGATION

Edited by Aaron M. Sheanin¹

PANELISTS:

• For the Plaintiffs: Jeffrey L. Kessler, Winston & Strawn LLP; and Daniel A. Rascher, Ph.D., OSKR, LLC
• For the Defendants: Jeffrey A. Mishkin, Skadden, Arps, Slate, Meagher & Flom LLP
• Moderator: Aaron M. Sheanin, Robins Kaplan LLP

I. INTRODUCTION & OVERVIEW

In the landmark trial, Alston v. National Collegiate Athletic Association,² a class of NCAA Division I basketball and football players brought suit under the Sherman Act to challenge the NCAA rules limiting the level of financial aid and benefits that student athletes may receive.

Post-trial appeals resulted in a unanimous decision by the United States Supreme Court, affirming the class plaintiffs’ victory.

Our panel discussed litigation strategies; the history of antitrust litigation against the NCAA; the emergence of state statutes allowing student athletes to earn money in connection with the licensing of their name, image and likeness; and what the future holds in store for antitrust and college athletics. Each of the panelists played a critical role in the Grant-in-Aid litigation.

Jeffrey L. Kessler is the Co-Executive Chairman of Winston & Strawn LLP and the Co-Chair of Winston’s global antitrust and competition practice and sports law practice group. He served as co-lead trial counsel for the class in the Grant-in-Aid litigation. He has also represented classes of NBA, NFL, MLS, and USWNT players; the NFL, NBA, MLB, and NHL players associations; and many individual athletes.

Jeffrey Mishkin, Of Counsel at Skadden, Arps, Slate, Meagher & Flom LLP and the head of Skadden’s sports practice for the last 21 years, represented the NCAA in the Grant-in-Aid litigation. Previously, he was the executive vice president and

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chief legal officer of the NBA, where he oversaw every aspect of the league’s legal affairs. Since joining Skadden, Mr. Mishkin has represented the PGA Tour, the NFL, the NHL, MLB, the NCAA, and the United States Tennis Association.

Dr. Daniel Rascher, a partner at OSKR, LLC, is an economist specializing in antitrust and competition analysis in the sports industry. His clients have included organizations involved in the NBA, the NFL, MLB, the NHL, the NCAA, and other sports-related matters. Dr. Rascher provided trial testimony for the class plaintiffs in the Grant-in-Aid litigation. He served as a consultant in the White case and as the class expert in the O’Bannon case,³ which respectively challenged the NCAA’s athletics-based scholarship and name, image, and likeness ("NIL") rules.

II. HISTORICAL & LEGAL CONTEXT

MR. SHEANIN: I’d like to start with the historical and legal context.

In 1984, the Supreme Court issued a decision in NCAA v. Board of Regents of the University of Oklahoma.⁴ That case involved the NCAA’s rules restricting the ability of its member schools to televise football games.

The Supreme Court’s decision stated that "[t]he NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports," and that "the preservation of the student athlete in higher education adds richness and diversity to intercollegiate athletics and is entirely consistent with the goals of the Sherman Act."⁵

So how did we get from Board of Regents in 1984 to Alston in 2021, which successfully challenged the NCAA’s defense that its rules preserved amateurism? I’d like to hear first from Jeffrey Mishkin.

MR. MISHKIN: Thank you, Aaron.

Good afternoon, everyone.

Once the Supreme Court had decided to hear the Alston case, one of the key legal issues was inevitably going to be how today’s Supreme Court would read the decision of 37 years ago in Board of Regents.

Now we all understood and recognized that the issue in Board of Regents was not the legality of the NCAA’s amateurism rules, but instead, that case had to do with limitations on telecasts of college football games. The Supreme Court, in 1984, found those restraints on telecasts to be a violation of the antitrust laws.

But in the course of that decision, the Supreme Court really went out of its way, in very clear language, to say that it would be procompetitive and lawful for the NCAA to have rules like a prohibition on "pay for play," that is, rules that maintain a distinction between amateur collegiate sports on the one hand and professional sports on the other.

And that would be procompetitive because maintaining a distinction between professional sports and collegiate sports created a different product and gave consumers choice, both of which are well-recognized procompetitive justifications.

Now again, we all understood that was not the holding of Board of Regents, but at least several circuits following Board of Regents, and in particular the Seventh Circuit—a pretty good antitrust court—took that language quite literally. As recently as 2018 in the Deppe case,⁶ the Seventh Circuit held that if an NCAA rule was intended to maintain a distinction between collegiate sports and professional sports, then that rule was presumptively lawful and any antitrust challenge to such a rule should be summarily rejected and dismissed at the motion-to-dismiss stage.

So it appears to us that the Seventh Circuit cases were based largely, if not entirely, on the understanding that Board of Regents was applying a "quick look"—that is, an antitrust shortcut to uphold the legality of NCAA eligibility rules without the

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need for a full rule-of-reason trial. That essentially is what we asked the Supreme Court to hold in Alston: that Board of Regents meant that a challenge to an NCAA rule that was designed to preserve the distinction between collegiate and professional sports—such as the "no pay-for-play" rule—could and should be dismissed on a quick look.

But as you all know, today’s Supreme Court was not buying it. Justice Gorsuch, writing for a unanimous court, said that the NCAA’s amateurism rules were not at issue in Board of Regents. That was true. And he said that what the Court in that case had to say about the NCAA’s amateurism rules was said only in passing; it was not intended to, and did not, bind future courts in any way.

In any event—and I think most importantly—Justice Gorsuch said the nature of college sports, and the market and the economics of college sports, have changed substantially since 1984. Based on the realities of today, the Court said that the NCAA was not entitled to a quick look or any other antitrust shortcut, and would have to defend any of its rules in any case brought under the antitrust laws. There would have to be a full rule-of-reason analysis and a trial.

And that, in summary form, is how we get from Board of Regents to where we are today.

MR. SHEANIN: Thanks, Jeff.

So about a year ago I recall Jeffrey Kessler saying in a panel that he didn’t think Alston was worthy of Supreme Court review. You may have slightly different views on that at this point. So I want to give you the opportunity to air them and see if you have any additional thoughts on how we got here from Board of Regents to Alston.

MR. KESSLER: Thank you, and welcome everyone.

I thought Jeff’s summary of what happened in Alston is entirely accurate, so I’m not going to add a word to what Jeff has said about that.

I think he accurately described why the nine members of the Supreme Court concluded that the NCAA could not read Board of Regents any longer as creating some type of shortcut, or some type of special treatment. Instead, all that Board of Regents meant was that in dealing with these amateurism restrictions, the full-blown rule of reason would be applied. We had a full-blown rule-of-reason trial and they lost, and the Supreme Court said that the judge properly conducted that trial without legal error—which is what the Ninth Circuit found—and therefore the verdict would be affirmed.

In terms of the question as to our opposing cert., we did. Our position was that what the Ninth Circuit had decided was exactly right, which is that the full-blown rule of reason should be applied and that this was really a fact-based determination by a trial court, and therefore it did not present the type of fundamental legal issues that would ordinarily require cert. review.

We made that argument because our goal was to preserve the victory the players had won. Obviously if cert. was denied, that victory would have been preserved and we would have gone on to argue that the Ninth Circuit was correct.

In retrospect, you know, we always look back in history. Obviously from a players’ standpoint, we’re delighted the Supreme Court granted cert. because, as a result of the Supreme Court so strongly affirming the Ninth Circuit’s decision and making it so clear that Board of Regents could not be read as creating some type of presumption of legality, that argument could no longer be made by the NCAA in any circuit.

So it’s no longer possible for the NCAA to say, well, the Ninth Circuit got it wrong but the Seventh Circuit got it right. The Supreme Court, in effect, resolved that argument in favor of the players, and I believe that’s had profoundly positive consequences for the players right now on a whole host of issues.

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On both sides you could apply the old adage that sometimes you wish for something and it turns out you would have preferred the other. I’m happy cert. was granted. I suspect the NCAA would have preferred that cert. not be granted, if it knew what the outcome was going to be in advance.

III. THE CHANGING ECONOMIC LANDSCAPE

MR. SHEANIN: Jeffrey Kessler, you mentioned a whole host of outcomes that you think are favorable to players, and I do want to get into them in a little bit.

Jeffrey Mishkin mentioned that Justice Gorsuch discussed the changing nature of the market for college sports and the economics of it. So Dan, I’d like you to weigh in on the discussion here.

How has the economic landscape for college athletics changed over the last 37 years, and how did that economic evidence play out at trial before Judge Wilken?

DR. RASCHER: Yeah, that’s a great question and a great point. Let’s dial back to the mid-1980s with the restriction on the number of games on television that the NCAA had imposed itself—that’s sort of the point of the Board of Regents case. What we now call FBS⁷ programs—they were Division I-A programs then—were generating around $7 million in revenue for each athletic department on an annual basis. Today that’s approaching $100 million dollars.

So the market has grown drastically. The total revenues being generated in Division I athletics exceed $15 billion per year. The Regents decision really helped with some of that, with the proliferation of games on television.

Over 80 schools have joined Division I. So, again, you’ve seen that increase in demand to be in Division I.

And the schools, the conferences, the NCAA, and their partners found creative and innovative ways to increase revenue and different revenue streams. Media has come in and increased those revenue streams even more.

And so when we step on to campus, we see what we call the "front porch effect" or the "Flutie Effect,"⁸ which is the athletic department’s ability to affect the rest of campus. We’ve seen that grow. So these universities are interested in using athletics as a marketing arm, as the "front porch," as a way to bring alumni back into the fold. Again, that demand to be in Division I continues to grow.

At the same time, switch over to the athlete side of the market, and the athlete’s value has continued to grow this entire time. But we’ve had the cap, right? We’ve had the cap on the size of the scholarships and so forth, including on the athlete’s ability to earn money even outside of campus.

When you have that cap, and you’ve got the forces pushing up against it in terms of increased demand and revenue, you get what we’ve seen, which is non-price competition. That started to grow over the last few decades. The schools started to compete in facilities, coaches, and other things that would get the athlete to come to school, because they couldn’t offer the athlete money directly.

As we go through the White, O’Bannon, and Alston cases, and then all the changes the NCAA has made throughout the years, more freedom and equity have been gained by the athletes incrementally, as each of these steps has taken place.

Now, we’ve reached a point where the athletes are able to, through social media and other forums, grow their own brand. That leads to a discussion of name, image, and likeness. So each of these steps has changed.

The big question on the table in Alston and O’Bannon and even in White, was the idea of consumer demand: How important is the notion of athlete compensation to consumer demand?

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And I’ll just say that to the extent that it was important in the mid-1980s—and I’m not convinced that it was necessarily even that important then—that importance has lessened. We know that’s the case, because we’ve seen these incremental gains that the athletes have gotten in their pockets, and we haven’t seen a diminishment of the demand for the product.

MR. SHEANIN: I’m going to turn it to the lawyers on the panel and see if either of you want to weigh in on the economics.

MR. MISHKIN: You know, there’s just no escaping it that the economics had, at the very least, an emotional impact, especially because before the advent of the NIL,⁹ the athletes were limited to their scholarships. Those scholarships were not insignificant, but to many people, understandably, they were not sufficient given how much money was being earned by others.

I don’t know that the antitrust analysis really should have been affected by these changes, but it clearly was.

Remember that Judge Wilken’s decision in Alston was that maintaining a distinction between professional and collegiate sports is still a procompetitive justification. I don’t know what the evidence will be in the next case. But in Alston, which was ultimately affirmed by the Supreme Court, the law today still is that maintaining that distinction between collegiate and professional sports is procompetitive. Judge Wilken found that the evidence in Alston supported the idea that that distinction was procompetitive.

Where Judge Wilken disagreed with the NCAA was in how you make that distinction. What rules are necessary or appropriate to distinguish between collegiate and professional sports? She found that the NCAA couldn’t limit any payments that were related to education, because consumers wouldn’t care. If student athletes in colleges were getting money or benefits for education-related purposes, then consumers are not going to view that as professional sports.

Going forward now, every case is a new case. The record’s going to be a new record. I have no doubt that the continuing evolution of the economics—and perhaps continuing changes in perception of how important it is or isn’t that there be a big distinction between collegiate and professional—will continue to evolve. We’ll have to see what the record in the next case tells us.

MR. SHEANIN: Jeffrey Kessler, do you have anything you want to add?

MR. KESSLER: So I think the change in economics is not just in the size of the pool of money. Obviously the money is greatly higher, and I think that had an influential effect, but it also had to do with the character of how these sports are conducted—at least talking now about Division I basketball and FBS football, which were the two sports that we’re focused on.

Thirty-seven years ago, in Board of Regents, I think there was still a concept in the Supreme Court dictum that having a Division I basketball team was like having the student newspaper. It was an extracurricular activity that was just part of being a student on campus.

What became clear 37 years later to all nine justices of the Supreme Court is that at least for these schools and these sports, they had become gigantic businesses. There was no question about that. You look at a school like the University of Texas that had formed its own TV network called Longhorn TV; you look at the University of Alabama, where the strength and conditioning coaches were making $550,000 a year, which is more than the president of Alabama was making for the whole school; and you couldn’t help but say these are gigantic commercial enterprises. They are commerce. They weren’t extracurricular activities anymore.

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Once you looked at that transformation, it’s easy to see now that the athletes are in fact labor and that this is a labor market. If you’re looking at a labor market, you start to look, as the Supreme Court did, with extraordinary skepticism as to why these employers in effect should be able to generate this money in these commercial enterprises off the backs of labor, while agreeing not to pay them for that labor or not paying above the cost of attendance scholarship, which was their agreement at the time.

So I really think it was that transformation as to how this all has evolved that greatly altered the judicial perception of the NCAA.

And the irony here is that this all in part was a result of the competitive forces unleashed in Board of Regents. It is precisely because the TV restrictions were struck down that you started to see the explosion of revenues and games on different outlets in the top level of football, which helped speed along the creation of these big commercial enterprises that just happened to be run by schools.

MR. MISHKIN: Well, this is not the first time Jeff and I have debated or discussed these issues.

Look, there is no doubt that the amounts of money that are coming into the top, top football programs, maybe 25 or 30 of them—and I don’t think that entirely defines college sports—affects how much time athletes have to spend.

I think the issue is still open, though, as to whether consumers really no longer care at all about a distinction between professional sports and college sports. As Jeff just described it, there really isn’t much distinction. I mean, Jeff would describe the students on campus as employees, exactly as the employees of an NBA team would be, and I’m just not sure that we’re there yet. Maybe we’re closer. I give you that, we are closer than we have been.

But these are still universities. Wholly apart from consumer interest in this, I don’t know whether these universities are ready to simply divorce themselves from the idea that their athletic departments are part of their overall educational mission, and that the universities really are now on the verge of just sponsoring professional teams.

Jeff’s heard me use this example before. What if Harvard decided, "Yeah, I just really want the best football team I can have," and so Harvard takes a part of its endowment and buys the Patriots? Why not? Why fool around? Let’s buy the Patriots and we’ll call it "Harvard" because we want people to think that somehow it’s connected with Harvard. But these are not students, not part of the student body. These are just the athletes, the employees that Harvard wants to employ to go out there and play football.

Is that really where we’re headed, to a complete divorce between the educational setting here and that mission, and producing professional sporting events?

We’re getting closer, I understand it, but I’m not sure we’re there all the way.

MR. SHEANIN: Jeff just raised the question of whether consumers really care about the distinction between college and professional sports. Dan, my guess is you’ve probably done some analysis on that.

Do you want to weigh in there?

DR. RASCHER: What makes college sports distinct from professional sports is that they’re college students, attending class. The New England Patriots are not an apt analogy, simply because those athletes wouldn’t necessarily be part of the Harvard student body, right? So we currently have the best high school players coming in and playing in college, which means we do have the best players at that stage. They can’t even go into the NFL directly, but they are attending classes and representing their universities.

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What makes it unique is that they are college students, and I think the question on the table is whether individual schools or individual conferences decide, "Hey, we’re willing to pay more to the athletes. We would like to do more for them. We’re recruiting. We would like to get the ones that we want, and so we’re willing to pay more."

And I think a related question is, would the fans care about that? Or to what extent would they care about that? Or what is the sort of level that they might care about that?

I would just say, historically, at each of these times we’ve seen more money come into the system, go into the hands of the athletes, and we haven’t seen a diminishment in demand.

And we see that right now with name, image, and likeness—I know that’s not a perfect analogy to having the schools pay them and I’ll give you that, Jeff—but we see that pay happening, and we’re not seeing an uproar or a decline (at least I haven’t seen any) in terms of the fans’ perception of college sports.

IV. THE MARKET FOR COLLEGE ATHLETES’ NAME, IMAGE, AND LIKENESS

MR. SHEANIN: Well, you just raised name, image, and likeness, so let’s talk about that for a little bit.

Even before Alston reached the Supreme Court, various states were enacting laws that would allow college athletes to be compensated for the use of their name, image and likeness. That started with California’s Fair Pay to Play Act, which was enacted in 2019 but has yet to go into effect, and now other states have gone through it too.

Where is the market for a college athlete’s name, image, and likeness, and what do you anticipate those markets to look like in the future?

I want to start with you, Dan, because you’ve probably gotten more focused on this than the rest of us.

DR. RASCHER: It’s a great question. I think it’s rare that we get to see a market start right in front of us. There are similar markets happening and so we see name, image, and likeness kicking off on a particular date. Again, I think that that’s fairly rare, but very interesting.

So on July 1, 2021, the athletes were allowed to go out and market their right of publicity. Many of them did so on that first day and in those ensuing weeks. You know, I don’t think we’re at an equilibrium. I think it’s going to take some time. I don’t know exactly how long as I sit here, but there’s more innovation and more growth. As the brands figure out how to use the athletes, the athletes figure out how to market themselves, and the schools figure out what they’re able to do, I think we’ll see the maturity of the market.

We’re already seeing these platforms form. INFLCR, Opendorse, Learfield—which was already in the business—and Icon Source are now jumping into the platforms. So the platforms simply bring the brands and the athletes together and help them form marketing deals or endorsement deals.

Schools are trying to get the best athletes that they can, which they’ve been doing this whole time with fancy facilities, high paid coaches, etcetera. Now they are trying to help their athletes do well in the NIL market so they can go out to their recruits and say, "Hey look, our athletes are doing great. They’re making a lot of money for their name, image and likeness. You know, come and play at our school."

I just saw a new sizzle reel that was out yesterday for LSU, and that’s what it’s saying. You know, it’s 180 degrees from what we used to see when they were against those payments. Now those schools are like, "Yes, look at how well our athletes are doing, compared to other athletes."

And then the next step in the maturity—and we’ve only been doing this a few months—but the next step that we’re starting to see is these entities are forming that are sort of next to campus. I don’t mean that in the physical sense. These entities that

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are associated with a particular athletic department are allowing fans, boosters, alumni—anybody—to donate money into these entities, and then these entities pay the athletes to do marketing for the brands that have partnerships with the entities. It’s allowing folks to put money into the pool for the athletes at the school that they care about, and then there are brands associated with it so the athletes can market it.

That’s an interesting response to the cap on the ability for the schools to directly bring the athletes in and sign them to name, image, and likeness deals. I think you’re seeing that in Florida, South Carolina, North Carolina, and a number of places.

And then let me just give a quick update on the latest numbers. A couple days ago, two of these platforms, Opendorse and INFLCR, came out with some publicly available data. The average for INFLCR are a little over $1,000 per transaction. For Opendorse it’s around $700 per transaction. The averages are much higher than the medians, which gives us some insight that there are a number of very large deals happening with athletes, and then there are lots and lots of athletes earning some money.

Much of this is in football, men’s and women’s basketball, although certainly not all of it. Much of the use of it is through social media postings. So that seems to be the way that the brand wants to use the athletes at this point.

And the group licensing bit is starting to grow. There are companies like Brandr Group and OneTeam Partners associated with the NFL, NBA, and Learfield, and others who are putting together these group licensing deals which could lead to the return of the video games. Every student I have is always asking about the video games. "What happened to the video games? I used to love the video games."

So I think we’re seeing the maturity of the market, and I’m actually quite impressed how quickly it’s moving forward. But I think it’s going to take some time for us to really see what it’s going to look like in the end.

And then final point—the joint product—I think that’s where the equilibrium wants to go. The athlete’s name, image, and likeness and intellectual property, the school’s intellectual property, and the joint product. That’s what the brands want.

I think in the end, the brands, the schools, and the athletes are going to find a way to be able to deliver that, and we’re seeing a little bit of that with the group licensing already.

Group licensing, I think, is really quite interesting and whether that makes more sense than the individual license. I’d say it’s more of a combination.

MR. SHEANIN: Jeffrey Kessler, do you have any thoughts about the group licensing versus individual licensing? Do you have any idea as to which is going to wind up being better, or which direction the market is going to go?

MR. KESSLER: So I don’t think there’s a "better."

I think there are a lot of different things going on in markets. Markets yield great results and we’re seeing it for different people.

So if you are a swimmer or a gymnast or a volleyball player, these individual social media deals are fantastic for you.

This is particularly true in women’s sports. They are giving opportunities to people who have great fan followings in not-high-revenue sports, to be able to monetize those outcomes.

For example, there are gold medal winners in those sports this year who were able to go back to school and also be students.

And by the way, where I disagree with Jeff is that, while I’m not in favor of anyone in college sports acquiring the Patriots, I do believe the restrictions on the athletes being students is a valid restriction. I do think that distinguishes college sports.

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What doesn’t distinguish it is whether the athletes are compensated or not, but I think their being students is important. It lets these athletes go back to being students and pursuing their education, as opposed to giving up on school because they now can monetize their Olympic experience, but couldn’t do so if they went back to school before, because they wouldn’t have been able to play on these collegiate teams and earn any income.

So I think those social media deals are very important. There is depth and scope in these social media deals, even though the individual numbers may not be very high. It may be $1,000 here, $1,000 there. But that’s going to add up to where these individual students, I predict, are going to get $5,000 to $10,000 a year from that type of social media and similar NIL activity, which would be great for them.

The group licenses will primarily have their first value in the big-revenue sports. There is going to be a tremendous demand to get back that EA¹⁰ video game that’s been alluded to, and I predict by a year from now you will see that EA video game and the athletes in the college football video game. There will also likely be an NCAA Division I basketball game. The NCAA itself will probably end up licensing the NCAA tournament into that, separate and apart from the schools. You will then have a joint D1 basketball product, and consumers will get what they want, and the athletes will get reimbursed there.

You’re also going to see group licensing by individual prominent schools. There’s a market for jerseys from North Carolina for their basketball team to match the uniforms and the player names, just like there are for professionals.

People already started to develop that business for former student athletes because they were not limited by the NCAA rules anymore. The NCAA couldn’t go after the former athletes because they were gone from the schools.

Now the current athletes are going to get similar deals. Let’s keep in mind that the reason this is all so transformative is that most college athletes in any of these sports will never play in the pros. Even on the most successful teams—Alabama football—you will have maybe five percent of its roster that will have a long NFL career. Ninety percent won’t even have an NFL career, five percent will get in and will be there a year or two, and maybe five percent will have more than three or four years in the NFL, from the best dominant college football program in the country.

So imagine what that is for the rest. In many of these other sports, there aren’t always high revenue opportunities.

So this is the chance for these athletes, and particularly in the highest revenue sports, they are largely students of color and they frequently come from communities where this additional compensation can be life-changing for them and their families. This is a real big deal for these athletes, and competition is achieving this.

MR. SHEANIN: Jeffrey Mishkin, do you agree competition is achieving all of these things?

Are you concerned about it?

MR. MISHKIN: With all of this ability to earn money—and I am not gainsaying—it’s a hugely important development.

Do I have any concerns about it?

I do think that the more the focus is on all of these potential incredibly lucrative business deals, this issue of whether these athletes are students or not is important. The general counsel of the NLRB just took the NCAA to task for daring to continue to use the term "student athletes," because, no, no, they’re not—they’re employees and as employees, everybody’s earning as much as money as possible. So that’s happening. I’d rather talk about the importance of this in terms of the NCAA’s future

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role here and what it’s going to be doing or not doing here.

Obviously the sea change that’s occurred, you can see it. Signing autographs or making use of your NIL used to be the quintessential no-no to the NCAA. That was pay for play—you know, Johnny Manziel, pay for play.¹¹

But now the NCAA endorses NIL. How did that happen? Well, it happened through a number of channels, but one of the most important is a dilemma that the NCAA was faced with, which was one of the most important features of NCAA rules: If a non-athlete student is permitted certain benefits or the ability to get certain payments, athletes must be given the same right. That’s central to the NCAA.

So when non-athlete students began making money on the Internet as influencers or bloggers, they weren’t getting paid for play. They weren’t playing. They’re not athletes.

So the NCAA began to reason, "Well, then there must be some way of making a distinction here between student athletes who are not getting paid to play their sports, and all students at a university who can make money on their name, image, and likeness."

And I think that this is going to be a difficult needle to thread, to try to maintain that separation between earning lots and lots and lots and lots of money on your name, image, and likeness but not getting paid to play.

I’m not deeply involved in this so I’m not really speaking out of school. There’s a new constitution floating around for the NCAA, and it draws this exact distinction. It reiterates that the no-pay-for-play rule is critical. We’re trying to maintain the distinction between professional and collegiate sports, but NIL is fine.

And I think that is going to be a very difficult line to walk. You’ve got real students who are pursuing their education, with the ability to make lots and lots and lots of money if they’re in the right position. They’ve got the right followers on Instagram. And yet, being "real students" when again the entire notion of student athlete is under such attack, there are many people who say we’re not even allowed to use that term.

So we are in interesting and absolutely unsettled times right now.

V. ANTICIPATED LEGAL CHALLENGES TO THE NCAA’S COMPENSATION RULES

MR. SHEANIN: I want to go back a little bit to the trial and appellate decisions. In affirming Judge Wilken’s decision, the Ninth Circuit said it struck "the right balance between crafting a remedy that prevents anticompetitive harm to student athletes, while serving the procompetitive purpose of preserving the popularity of college sports."¹² That was fully affirmed by the Supreme Court, but then Justice Kavanaugh wrote his sharply worded concurrence in which he voiced concerns about the legality of the NCAA’s remaining compensation rules.¹³

I think that part of the animating feature of Justice Kavanaugh’s concurrence dealt with the labor questions that both of you, Jeff Mishkin and Jeffrey Kessler, have discussed here today.

So what doors do you think the Supreme Court’s decision and the Kavanaugh concurrence opened, with respect to further legal challenges to the NCAA’s compensation rules?

I’ll start with Jeffrey Kessler on that.

MR. KESSLER: So how I read Justice Kavanaugh’s concurrence is that, at least in his view, he was articulating something that is not a separate point from the majority decision. He was stating: "This is what I believe are the implications of the majority decision." If you read through what he’s saying, he’s indicating that the majority decision has taken away—which I think is correct—the ability

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of the NCAA to argue that NCAA schools should be treated any differently as a business when they operate a business. When college teams are operating businesses like this, they’re subject to the normal antitrust laws. He ends up by saying the NCAA is not above the law.

I got asked this quite a bit by the justices, not only by Justice Kavanaugh. He noted that we didn’t press on appeal a challenge to the part of the relief we lost, which was against the compensation restrictions that weren’t education-related.

That issue wasn’t before the Court. The majority opinion noted that as well. In fact, there were a number of justices who seemed willing to consider that that was an error by the courts below, but recognized that this issue of additional relief was not presented to the Supreme Court.

So yes, I view the forcefulness of the nine-nothing opinion, plus the concurrence, as leading to a future judicial questioning of a whole variety of other NCAA restrictions.

Right now we have a new case, House v. NCAA.¹⁴ It’s a class action that hasn’t been certified yet, but a putative class action that is not only challenging the previous NIL restrictions—the ones that the NCAA has now suspended—but is also challenging the one’s that they have maintained. Principally there are two remaining NIL restrictions by the NCAA, and I think the more profound one is the NCAA’s restriction that the schools cannot compensate the athletes for NIL.

In other words, they’ve lifted it for third parties but the schools cannot acquire those NIL rights and bundle them, as Dan was talking about.

This becomes very significant in broadcasting. The reason is that in the professional sports, in the NBA and the NFL and the NHL and Major League Baseball, if you look at the TV contracts, the leagues all tell the television networks that they are delivering all of the NIL rights of their athletes for use in broadcasts. If you look at the collective bargaining agreements and the player contracts in professional sports, those rights are transferred from the players to the leagues, for the purposes of using them in the games. In other words, it’s part of the consideration.

And of course in exchange for that, the players get all the benefits and things they get in their collective bargaining agreements. It’s part of the quid pro quo that’s exchanged.

In the NCAA, if you look at their TV agreements, they do the same thing in transferring athletes’ NIL rights for broadcasting, but do not pay for them.

The NCAA conferences warrant to the broadcasters that they’re delivering any needed player NIL rights for the broadcasts. Jeff Mishkin is right that the NCAA only does the Final Four for basketball, the tournament contracts. All the other Division I basketball and all the FBS football broadcasting contracts are done by individual schools or by the conferences.

If you look at those broadcast agreements with the individual schools or conferences, they convey rights and warranties to the networks regarding NIL. But the NCAA rule says you can’t purchase those rights for the athletes.

So the athletes’ NIL rights for broadcasts are being taken for zero compensation, but yet are being presented to the networks for their broadcasts. Our view is that some significant part of the compensation for those broadcast agreements—not all of it—but some significant part is due to the NIL rights of the players.

So that’s an issue that’s going to be litigated and determined in House, and we’ll see how that works out. We believe strongly that the Supreme Court’s decision lends lots of strength to challenging that restriction.

And finally I would note there’s another very interesting legal issue for all the antitrust scholars who are watching this call: In the Ninth

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Circuit decision, there was also a concurrence.¹⁵ The concurrence in the Ninth Circuit raised this interesting issue as to whether or not a procompetitive effect under the rule of reason has to be shown in the labor markets that are being restrained, as opposed to in the output market for the games, which is basically how it was argued and presented by the economists for the NCAA in Alston.

Again, that was not an issue we raised in Alston. The Supreme Court had amicus briefs on that issue, and asked about it during oral argument. Were we making that argument? No, we had never raised it below, so that was not before the Supreme Court. So it’s another one of these open legal issues, and the Supreme Court noted that this was an issue that it was not reaching.¹⁶ But the Supreme Court did not indicate it was rejecting the point. It’s just open, so we don’t know where the Supreme Court would come out on that issue.

Well, we are pressing that issue in House, so we may also get a determination as to whether or not any procompetitive justification—this idea that the NCAA is selling a product in an output market and that we should look there for the justification—is legally sufficient, or whether the NCAA will have to show offsetting procompetitive effects in the labor market and balance those effects into one market. This is a very interesting and important issue. It’s been discussed in the Supreme Court in the past, particularly in its Topco¹⁷ decision, as to which markets you look to in order to balance competitive effects, and we may get a lot of learning on this issue in House going forward.

MR. SHEANIN: Jeff Mishkin, do you think we’re headed for endless litigation, or do you think there’s an endgame?

MR. MISHKIN: "Endless" sounds a bit apocalyptic. But look, the NCAA has been in nonstop, continuous—not continual, continuous—major antitrust litigation since 2008, without a day off. And here we are in almost 2022. Jeff’s got his new House and Oliver¹⁸ cases. You can bet that’s going to take the NCAA into the mid-2020s, with really no end in sight. And the Supreme Court has said, look, the antitrust laws are the antitrust laws. All American businesses have to deal with them.

But for a regulatory body whose job is to make regulations and govern college sports to be told, as the NCAA has been, for better or worse, that every time you regulate, you are creating new facts and therefore, opening yourself up to another interesting, fascinating antitrust litigation, I think there are consequences of that for the NCAA. It is not sustainable for a regulatory body to face this kind of enormous burden and expense simply by doing the normal regulating.

So I think where this is headed is the NCAA has got to become quite reluctant to spend a lot of time regulating. I think you’ll soon see an effort to decentralize decision-making down to the division or the conference level. That is going to raise a whole lot of other new antitrust issues.

So as I said, endless litigation? Endless is a long time, but we are certainly nowhere near the end of the kind of litigation that’s going to be going on in college sports. If there is an easy endgame here, I don’t see it.

MR. KESSLER: So I actually do think that’s the possible endgame here. We actually advocated in Alston that what should happen is the NCAA should get out of the business of regulating compensation and benefits altogether. They shouldn’t be in that business. Actually, that’s a business nobody asked the NCAA to get into.

When the NCAA started, President Theodore Roosevelt asked a number of football schools to regulate the safety of the sport—which, by the way, no one objects to. The NCAA should do more in that safety area.

No one would object to the NCAA continuing to have educational standards, and the NCAA can do more in that area.

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It’s the compensation and benefits part of the NCAA regulations that have raised all these antitrust problems. What we have advocated is that those determinations about compensation and benefits should go to individual conferences because the conferences can compete with each other to determine the outcome. The conferences are really different leagues, if you will, and the competition among conferences would assure a competitive market outcome, while letting each conference pay attention to its own needs and resources.

No one believes, frankly, that the compensation and benefit programs at Harvard, to use Jeff’s analogy, should be the same as the programs in Alabama because they’re different economic animals. In Alabama, football generates—this is not the number—but something like $160 million. It’s something in that neighborhood for the Alabama football program. In Harvard, it’s a negative number. By the way, the Ivy League doesn’t allow even athletic scholarships, and no one’s challenged that because it’s a different model economically.

So if you had the individual conferences deciding what to do, we think you’d end up with competitive market outcomes and not all conferences would be the same.

Where it is a big business, the athletes should all realize the gains of that big business. Where it’s an extracurricular activity, like all of Division III, for example, you’ll have a very different result.

Under no circumstances, though, is there any rationale for even in Division III, in my view, restricting the marketing of individual names, images, and likenesses by the athletes.

And that goes back to Jeffrey’s principle. Allowing all students to monetize their NIL rights is independent of any issues regarding the different revenues of the sports. It’s the same way you let other students, not athletes, at those schools be individual entrepreneurs that go on the Internet and earn social media revenues. There’s no reason to restrict athletes in any of these sports, in terms of marketing their NIL rights. That is an area I think transcends whatever the revenues may be that are coming in to the schools.

DR. RASCHER: If I could just throw a minute in there. So on the decentralization point that both Jeffreys brought up, my business partner, Andy Schwarz, and I wrote an article in the year 2000 on that exact topic in college sports, the idea being that down at the conference level, the conferences could choose what to do and they could deal with their own consumer demand issue about, "Gee, if we paid too much, are our fans going to stop watching? So let’s figure out what that area is."

And that may vary among different conferences. Someone might bring up the competitive balance issue, but what we’ve already seen is that the Alabamas and Clemsons are great every year, and some of the other schools are not. So there’s not a lot of competitive balance that needs protection.

And so again, letting the conferences decide, I think takes the NCAA out of the equation and maybe stops that endless row of lawsuits.

MR. SHEANIN: I want to give Jeffrey Mishkin the last word on this. Any closing thoughts?

MR. MISHKIN: I’m not sure that simply devolving the authority down to the conferences is going to be the end of antitrust litigation. Even though Jeff Kessler has said he doesn’t think the SEC¹⁹ has market power, I’m not sure that given the ability to be creative in litigation, there will not be other plaintiffs’ lawyers who will take the arguments that have been made against the NCAA and just bring them right down to the conference level, claiming that this conference is too big or these two conferences got together.

So anyway, I hope there’s an endgame. I don’t mean to deprive Jeff of any litigation for the rest of this millennium, but I think that getting out of the antitrust soup here is going to be very, very difficult.

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MR. SHEANIN: I want to thank everybody for what has been a really spirited discussion. There’s so much more that we could be talking about. I truly appreciate having all of you participate in this today. Thank you so much.

——–

Notes:

^1. Aaron M. Sheanin is Partner with Robins Kaplan LLP, a member of the Executive Committee of the CLA Antitrust and Unfair Competition Law Section, and the Co-Chair of the 2021 Golden State Antitrust and Unfair Competition Law Institute.

^2. See In re Nat’l Collegiate Athletic Ass’n Athletic Grant-In-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058 (N.D. Cal. 2019), aff’d, 958 F.3d 1239 (9th Cir. 2020), aff’d sub nom. Nat’l Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141 (2021).

^3. White v. Nat’l Collegiate Athletic Ass’n, No. 06-999 RGK (MANx) (C.D. Cal.); O’Bannon v. Nat’l Collegiate Athletic Ass’n, No. 09-cv-3329 CW (N.D. Cal).

^4. Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85 (1984).

^5. Id. at 120.

^6. Deppe v. Nat’l Collegiate Athletic Ass’n, 893 F.3d 498 (7th Cir. 2018).

^7. NCAA Division I Football Bowl Subdivision.

^8. Named after Boston College quarterback Doug Flutie.

^9. Name, image, and likeness.

^10. Electronic Arts Inc.

^11. In August 2013, the NCAA and Texas A&M suspended Heisman Trophy-winning quarterback Johnny Manziel for one-half of a game for violating the NCAA by-law that precluded college athletes from allowing their name, image, or likeness to be used for commercial purposes.

^12. In re Nat’l Collegiate Athletic Ass’n Athletic Grant-in-Aid Cap Antitrust Litig., 958 F.3d 1239, 1263 (9th Cir. 2020).

^13. Nat’l Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141, 2166-69 (2021) (Kavanaugh, J., concurring).

^14. House v. Nat’l Collegiate Athletic Ass’n, No. 20-cv-03919 CW (N.D. Cal.).

^15. Grant-in-Aid Cap, 958 F.3d at 1267 (Smith, J., concurring).

^16. Alston, 141 S. Ct. at 2155.

^17. United States v. Topco Assocs., Inc., 405 U.S. 596 (1972).

^18. Oliver v. Nat’l Collegiate Athletic Ass’n, No. 20-cv-04527 CW (N.D. Cal.).

^19. Southeastern Conference.

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