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How NCAA Can Avoid Athlete Compensation Antitrust Issues

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This article was originally published in Law360.

In the past year, laws permitting college athletes to profit off their name, image and likeness, or NIL, have gone into effect in states around the country.

The grant of that right to college athletes comes as part of a broader movement to recognize their role and enable their participation in the multibillion-dollar industry that relies on their abilities, but has led to concern among many that an unregulated NIL landscape will destroy college sports.

Although many are calling for national regulation of NIL compensation, the most well-positioned organization to implement a regulatory framework—the National Collegiate Athletic Association—faces newfound roadblocks to doing so from antitrust law. If the NCAA and its member schools come to terms with treating athletes as employees, however, a path to exemption from antitrust liability exists.

Powerful voices, like University of Alabama football coach Nick Saban, have raised concerns about what unrestricted NIL compensation means for the future of college sports. Saban has called for national regulation of NIL. In a January Sports Illustrated article, he sounded the alarm that "there will be an imbalance relative to who can dominate college football" otherwise.1

Others, like University of Mississippi football coach Lane Kiffin2 have joked that competitor schools are giving recruits millions of dollars and invoked concepts like salary caps and luxury taxes applicable in professional sports leagues.

The alleged disparity created by NIL compensation has become a hot-button issue largely because of the vacuum created in July 2021 when the NCAA—the governing body for college sports—chose not to regulate NIL.

Rather than adopt a comprehensive framework like many expected, the NCAA implemented an interim policy3 that deferred to the laws of individual states and implemented certain guidelines for college athletes, recruits, their families and member schools to follow.

The NCAA very likely understood that it had no other choice. For decades, the NCAA trusted that it was effectively exempt from antitrust scrutiny; it understood the U.S. Supreme Court's 1984 ruling in NCAA v. Board of Regents of the University of Oklahoma4 as allowing its members to agree to otherwise anti-competitive rules in the name of amateurism.

Last year however, in NCAA v. Alston, the court upended that understanding and held that NCAA rules restricting certain compensation provided by schools to athletes could be antitrust violations.5 As a result of Alston, any further attempt by the NCAA to restrict athletes' compensation was certain to spawn antitrust claims.

Part of the movement to empower athletes has also involved a push for recognition of athletes as employees of schools. In September 2021, Jennifer Abruzzo, the general counsel of the National Labor Relations Board, issued a memo outlining her position that athletes are employees under the National Labor Relations Act.6

Following on that memo, this February the National College Players Association—a group of former NCAA athletes—filed unfair labor practice charges with the NLRB against the NCAA, the Pac-12 Conference, the University of California, Los Angeles and the University of Southern California.7

Although schools and the NCAA have long resisted that recognition, employee status for athletes may be the key to solving the NCAA's antitrust problem and paving the way for national NIL rules. If athletes are employees, the NCAA can choose to take advantage of an exemption to federal antitrust laws that would otherwise not be available.

A line of cases involving the NFL and more recent rulings in a case against the National Women's Soccer League, or NWSL, chart the path forward.

Federal courts recognize an implied nonstatutory exemption to federal antitrust laws for restrictions contained in collective bargaining agreements and certain other actions that arise out of federal labor laws.8 According to the U.S. Supreme Court's 1965 opinion in Local Union No. 189, Amalgamated Meat Cutters & Butcher Workmen v. Jewel Tea Co., that exemption is intended to "[accommodate] the coverage of the Sherman Act to the policy of the labor laws," but its full contours have never been well-defined and courts disagree to some extent on its scope and application.9

Although the nonstatutory labor exemption was not developed specifically for sports, professional sports leagues have found that it provides a useful shield against liability for a variety of restrictions that would otherwise violate federal antitrust law.

The NFL in particular has survived multiple antitrust claims in recent decades—challenging fixed salaries for certain players and a rule requiring players to be at least three years removed from high school graduation to enter the NFL draft—thanks to that exemption.10

A recent case involving the NWSL—which lacked a collective bargaining agreement until February of this year—proves the value of the nonstatutory exemption in the sports context.

In April 2021, soccer player Olivia Moultrie, then 15 years old, sued the NWSL in the U.S. District Court for the District of Oregon, arguing that the league's enforcement of a minimum age rule to bar her from signing a contract and playing in the league was the result of an illegal agreement by the NWSL and its member teams to boycott athletes under the age of 18.11

Without a CBA, the NWSL explored alternative arguments, but was unable to shield its age rule from antitrust scrutiny. Although the league argued that the existence of ongoing negotiations for a first CBA and certain other pre-CBA developments brought Moultrie's claims within the nonstatutory exemption, the trial court disagreed.12 The court construed the exemption narrowly and found no examples of past cases where the exemption was applied without a preexisting CBA in place.13

The NWSL also argued, unsuccessfully, that its minimum age rule had been implemented by the league, without any agreement by its member teams, and was not the result of an illegal agreement—and that certain aspects of the NWSL's ownership and operating structure rendered the member teams and the league part of a single entity that could not conspire with itself for antitrust purposes.14

The trial court ultimately rejected all the league's arguments and held that the NWSL's age rule violated the Sherman Act, granting Moultrie a temporary restraining order and a preliminary injunction that allowed her to sign a contract to play for the Portland Thorns.15 The parties later reached a settlement allowing Moultrie to continue playing and resulting in vacatur of the trial court's decisions.

Like the NWSL, for the NCAA in a post-Alston world the only plausible shield available against antitrust liability for future rules and restrictions on NIL agreements and compensation is enshrining those rules and restrictions in a CBA.

The path to a CBA will, of course, be long and arduous. Schools will have to accept athletes' status as employees and treat them appropriately and in compliance labor laws. Serious coordination will also be necessary for athletes to successfully unionize on a national scale, a task made more difficult by the fact that athletes exhaust their NCAA eligibility after only a few years.

An incredibly diverse group of NCAA member schools—public and private, small and large, with varying academic standards—will have to learn to work together as a multiemployer bargaining unit.

In the end, both sides will also undoubtedly need to make significant concessions as part of a years-long bargaining process before a CBA is reached. Even if the sides fall short of reaching agreement, however, a good faith impasse in bargaining may also provide the NCAA cover to impose NIL rules.16

Despite the difficulties involved, the collective bargaining process would provide the ultimate opportunity for schools and athletes to shape the future of NIL compensation to their liking and level the playing field without running afoul of the antitrust laws.

Until then, those dreaming of a national framework governing NIL compensation will have to learn the hard lesson the NCAA has already recognized: after Alston, the NCAA's hands are tied.

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1 https://www.si.com/college/2022/01/09/nick-saban-thoughts-nil-kirby-smart-title-game.

2
 https://www.outkick.com/lane-kiffin-compares-recruiting-to-free-agency/.

3
 https://www.ncaa.org/news/2021/6/30/ncaa-adopts-interim-name-image-and-likeness-policy.aspx.

National Collegiate Athletic Ass'n v. Board of Regents of Univ. of Okla., 468 U.S. 85 (1984).

5
 National Collegiate Athletic Ass'n v. Alston, 141 S.Ct. 2141 (2021).

6
 https://apps.nlrb.gov/link/document.aspx/09031d458356ec26.

7
NLRB Case No. 31-CA-290326 (Feb. 8, 2022).

8
See Meat Cutters v. Jewel Tea Co., 381 U.S. 676 (1965); United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965).

9
 Jewel Tea, 381 U.S. at 689; compare, e.g., Int'l Longshore & Warehouse Union v. ICTSI Oregon, Inc., 863 F.3d 1178, 1190 (9th Cir. 2017), with Clarett v. Nat'l Football League, 369 F.3d 124, 133 (2d Cir. 2004) (disagreeing on appropriate test for application of exemption).

10
See, e.g., Brown v. Pro Football, Inc., 518 U.S. 231 (1996) (NFL's unilateral imposition of fixed salary for certain players after good faith impasse in negotiations between league and players' union); Clarett, 369 F.3d 124 (2d Cir. 2004) (NFL rule requiring players to be three full seasons removed from high school graduation to be eligible for entry draft was exempt from antitrust liability because it was a mandatory subject of collective bargaining and CBA existed between league and players' union).

11
 O.M. v. Nat'l Women's Soccer League, LLC, Case No. 3:21-cv-00683-IM, ECF 1 (D. Or. May 4, 2021).

12
 O.M. v. Nat'l Women's Soccer League, LLC, Case No. 3:21-cv-00683-IM, ECF 47 (D. Or. May 24, 2021), ECF 88 (D. Or. June 17, 2021).

13
Id.

14
Id.

15
Id.

16
See Brown, 418 U.S. at 247–48.