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The NCAA lost the biggest antitrust case it has ever faced on Friday, when Judge Claudia Wilken issued an injunction in the O'Bannon v. NCAA antitrust case, stating that the college sports cartel has unreasonably restricted trade by placing limits on how much compensation schools are allowed to offer athletes.
The ruling has two major effects:
- The NCAA cannot force schools to offer scholarships that cover less than the full cost of attending the university.
- The NCAA cannot stop schools from offering recruits up to $5,000 per year in a trust fund for after their eligibility has expired.
Currently, NCAA rules prohibit schools from offering anything above a scholarship for tuition, room and board. This ruling will force the organization to allow schools more latitude to determine compensation packages than they've ever had — with competition between programs all-but-certain to drive up the amount of money top talent can command. However, while a win over the NCAA in an antitrust suit is certainly historic in its own right, the NCAA actually fared pretty well all things considered. Here's a look at what this does to college sports, and what's next.
What rules changed and what didn't
The most obvious rule change stemming from the injunction is that athletes can now get paid in some form. The NCAA has strived to keep a level playing field and keep labor costs low by forcing all schools to offer the same financial benefits to athletes.
The payment will be from part of the money that schools get for licensing athletes' name, image and likeness (NIL) rights. The NCAA had argued that athletes don't have NIL rights for live broadcasts, and that they need to sign away their NIL rights for promotional materials in order to keep from being corrupted by the money and to maintain a level playing field throughout the sport.
Wilken rejected that and said it's unreasonable for the NCAA to force every school to offer the same compensation package. She essentially implemented a $5,000-per-year scale in which schools have the ability to unilaterally choose what they want to offer recruits. However, there are restrictions that the NCAA can, and likely will, put in place: the money has to be part of a trust fund, payable after athletes have completed their eligibility, and athletes on the same team in the same class must all be offered the same amount of money.
The NCAA also cannot force schools to offer scholarships with stipends that cover the full cost of attending school. Right now, schools are only allowed to offer tuition, room and board, and they cannot help out with other cost of living expenses that athletes may be responsible for. The organization briefly supported a blanket, $2,000 stipend but then reversed itself. Under the ruling, these stipends will return, but that was already likely to happen very soon under the NCAA's new governance model.
However, there were many restrictions on player compensation that could have changed, but didn't. In somewhat of a surprise decision,Wilken wrote that NCAA rules limiting athletes' ability to receive endorsement money while they're in school is a legitimate means of improving competition. The removal of these limits could have severely limited the NCAA's control and brought more outside influence into the recruiting process, but the organization remained relatively unscathed.
How the NCAA won, despite losing
On the surface, the fact that the NCAA has to allow athletes to make money makes this seem like a really big loss. But looking at just the injunction itself, not much is going to change.
The bigger schools were already going to get the ability to give full-cost scholarships under the new governance structure. Even the payment of NIL money to athletes probably wasn't very far off. In fact, Big 12 commissioner Bob Bowlsby and West Virginia athletic director Oliver Luck supported it at a recent forum. All this really did was force the NCAA to move ahead a few years earlier than it would have liked.
Many people thought Wilken would issue broader injunction, saying the NCAA is breaking antitrust law and must stop doing what it's doing unless it reaches a collective bargaining agreement with athletes.
Wilken did find a less restrictive alternative, but as Dennis Cordell, a former lawyer for the NFL players, said, she essentially just imposed an agreement without the bargaining between the players and the league — and a favorable one for the NCAA at that.
The NCAA still controls most of its rules, and the players still have virtually no say in those rules, or any changes that might happen in the future. Could this be a signal that the NCAA should bargain? Sure. But the injunction itself does not give the perpetually reactionary organization an intense pressure to do so. More likely, we'll see further NCAA reform come from more lawsuits rather than from a system set up for bargaining over time to create a fair balance.
Why the NCAA could face more trouble
While Wilken's injunction was favorable to the NCAA, her opinion on the trial should cause reason for the organization to worry. Namely, she spent a lot of time rejecting two of its major defenses:
- She said that maintaining "amateurism" is not a legitimate rationale for implementing anticompetitive labor rules.
- She said that people don't just watch college sports because the athletes aren't paid.
Wilken was skeptical of the amateurism defense from the start, and the plaintiffs proved throughout the trial that it is not a sacred principle that justifies itself. The NCAA's definition of amateurism has changed over time, and thus, Wilken said it is not a legitimate reason to restrict how much athletes make. Simply put: You can't create your own definition for something — one that changes as you change your own rules, no less — and use that to defend yourself against antitrust law.
Wilken also called the assertion that people will stop watching college sports if athletes are paid "unpersuasive." The NCAA has often credited its success to collegiate athletics being "amateur" (unpaid), but Wilken ruled that the market is college sports, not amateur sports. People watch Alabama play football because they feel a tie to the university or the team, not because the athletes are unpaid.
But what was odd about Wilken's ruling is that while she found that the NCAA's current limits on athlete compensation are unreasonable — i.e. the product will not suffer — she did find that further compensation, such as athletes receiving endorsements, could be reasonable because it might change too much if some athletes are making a lot of money.
While that is certainly a win for the NCAA in this case, the fact that Wilken destroyed the amateurism defense is bad news for the organization. Wilken may have decided that athletes receiving endorsements is unreasonable, but another judge may set a different standard — or just blow up the whole system — and they could base that opinion off of what Wilken wrote about amateurism not being a strong defense.
What's next?
The NCAA announced that it will appeal the ruling, claiming it has not violated any antitrust laws and that its new governance model is more consistent with Wilken's view of what college sports should be. This always seemed likely, and during the trial, one of the O'Bannon lawyers even suggested that the NCAA knew it was going to lose and was objecting to pretty much everything in order to build a case for appeal.
Another route for the NCAA could be to seek an anti-trust exemption from Congress. Typically organizations need to bargain with a labor union and show some flexibility to be considered for an exemption, so it seems unlikely that Congress would permit the NCAA to stay exactly the same. But this approach does have a backing from some conservative representatives. This was evident during the House hearing on unionization and after Congressional Republicans filed a brief to the National Labor Relations Board opposing the Northwestern football players' unionization decision.
Looking ahead, the NCAA still has a difficult legal battle looming with famed sports antitrust attorney Jeffrey Kessler, who is looking to end all NCAA restraint on athlete compensation. The O'Bannon case was considered a moderate version of Kessler's case — the O'Bannon plaintiffs were fine with the trust fund idea, for example, while Kessler is out to blow up the whole system. Even after Friday's ruling, the NCAA isn't out of the woods in the repercussions from this case, or in future cases.
