In 2021, the U.S. Supreme Court ruled that the NCAA and its conferences violated the Sherman Antitrust Act in NCAA v. Alston, by capping college athletes’ ability to receive educationally related financial benefits. The Sherman Act prevents otherwise competing entities (such as individual universities) from entering into agreements with each other that unduly restrain competition in a particular market. In Alston, the relevant antitrust market was college athletes’ athletics services.
Generally, academic institutions compete amongst themselves for these services. But for an agreement between them not to pay the players (i.e., the NCAA rules prohibiting pay-for-play), each individual school could offer a more substantial financial package in exchange for playing services. The NCAA’s restrictions challenges in Alston capped the financial benefits that collegiate athletes could receive from their universities. Because the NCAA’s restrictions lacked sufficient pro-competitive justifications, they were found to be unnecessary to furthering the NCAA’s goal of preserving amateurism.
Conference Realignment and Antitrust Issues
In the wake of the Alston decision and the NCAA passing sweeping changes to its name, image, and likeness rules, the NCAA’s Division I is experiencing major conference realignment, which could potentially bring further antitrust scrutiny. It is evident that before the recent conference realignment proposals, and decisions to follow through, that the “Power 5” had a substantial market share, particularly in the college football market. Now, with the recent conference realignment, the new “Power 4” member conferences (the SEC, ACC, Big Ten, and Big 12) will have even more market control.
This creates the potential for compensation restrictions to be challenged again. Collegiate athletes could potentially challenge these restrictions by arguing the conferences have enough market share to fix athlete compensation. Particularly looking at NIL rules and rules prohibiting direct pay-for-play from universities, these restrictions could be challenged under antitrust law and could be stricken down if there is a finding of unlawful restraints of trade.
In addition to potential antitrust arguments bolstered by recent conference realignment, college athletes have a substantially stronger argument in favor of an employer-employee relationship between athletes and their universities. There are currently two legal actions currently pending that are considering this issue. First, an Unfair Labor Practice charge against USC, the Pac-12, and the NCAA is claiming the parties violated the National Labor Relations Act (NLRA). Second, a case pending in the U.S. Court of Appeals for the Third Circuit is considering whether collegiate athletes are employees under the Fair Labor Standards Act (FLSA).
When looking at conference realignment, considering in particular the handful of former Pac-12 institutions that now must travel from the west coast to the Midwest and east coast for Big Ten conference games and vice versa, there is substantial support for the argument that this mirrors more of a national and NFL-like travel model. Of course, conference realignment decisions are largely centered on media revenue interests. With such a focus on commercial interests and the inevitable increase in travel without focused regional dynamics, there is a substantially stronger argument that weighs in favor of athletes, who are arguing that there is a professional model now in place.
If athletes are able to successfully bring forward antitrust or labor law claims, there may be newly created tax issues. As it stands, collegiate athletes are seen as amateurs. They receive a scholarship in exchange for their athletic performance, which is not taxable. With the possibility that athletes will be seen as employees who are getting paid (by their institutions and not collectives), college athletes will likely have a substantially increased tax burden. Moreover, there is the potential for college athletics program revenues to no longer be accumulated tax-free. With Congress considering passing legislation that may broadly effect college athletics—including reform related to NIL and athletes’ employment status—there is a possibility that the universities and NCAA may not be able to operate without any tax liability.
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