The Court and the Courthouse: The NCAA and The Future of Collegiate Athletic Compensation

On December 1, 2021, Brian Kelly penned a deal with Louisiana State University that made him the highest paid college coach in history — a ten-year, $95 million contract with additional longevity and performance-based incentives that could propel his earnings to over $100 million.¹ In addition to the cash compensation, Kelly’s contract guarantees him an interest-free loan of $1.2 million to purchase a house and two cars and provides him with 50 hours of travel on LSU’s private Learjet 35A every year.² Kelly’s contract not only makes him the best-paid coach in collegiate athletics but also one of the highest-paid figures in the entire sports industry. His starting guaranteed salary of $9 million in 2022 exceeds that of the NFL’s median salary of $960,000 and even the NBA’s average salary of $8.32 million, a figure heavily over-inflated by the supermax contracts earned by generational talents like Steph Curry and Giannis Antetokounmpo.³ In comparison to his peers in the big league, Kelly would be the fourth-best paid coach in the NFL, earning roughly the same salary as Super Bowl XLIV champion and longtime New Orleans Saints coach Sean Payton.⁴

As evinced by Brian Kelly’s watershed contract, college athletics have entered a realm of super-money: the National College Athletic Association — the body that governs collegiate athletics in the United States — generated $850 million in broadcasting revenue in 2021, and the Department of Education estimates that the college sports industry is by itself worth nearly $14.4 billion.⁵ Mere statistics alone indicate how commercialized collegiate athletics have become — a major industry in its own right. But these revenues are not split evenly amongst the schools and the athletes; in fact, hardly any of the money goes to college athletes at all, due to prohibitive ordinances implemented by the NCAA.

The bases for these limitations on athletic compensation center around the concept of amateurism. Though the definition of the term has evolved since its original usage in the context of college sports, “amateurism” at its core pertains to the differences between a college student and a professional athlete. As outlined by Bylaw 12 in the NCAA charter, this distinction focuses on two core features: compensation and status. Amateur status is terminated when a college athlete accepts pay or compensation for any activity pertaining to their sport; or competes, or signals intention to compete, in a non-collegiate, professional setting. The enforcement of these two principles is extremely convoluted — the articles that outline forbidden compensation take up four pages in the NCAA charter⁶ — but as tortuous as they are, they have governed the college sports landscape for 116 years.⁷ The element of amateurism distinguishes the NCAA’s collegiate product from its professional counterparts and justifies the NCAA’s plethora of restrictions as pro-competitive, thus allowing them — at least, historically — to escape the antitrust prosecution that befell professional sports leagues in the latter half of the 20th century. ⁸ Up until the 1970s, collegiate athletics governed by the NCAA were treated separately from professional sports governed by the major leagues. What changed was the scope of money that entered the playing field.

The first serious antitrust action filed against the NCAA was NCAA v. Board of Regents of the University of Oklahoma (1984).⁹ In 1981, the NCAA entered an exclusive broadcasting deal with ABC and CBS without consulting its member colleges, limiting the number of nationally televised games any school could have for a given year.¹⁰ Shortly after the deal was brokered, members of the College Football Association — an organization established to represent the interests of the major football schools — negotiated a separate, more remunerative contract with NBC, unhappy with the ABC-CBS deal’s stringent limitations on compensation and appearance. After the NCAA threatened disciplinary action against signatories of the CFA-NBC deal, members of the CFA — specifically the Universities of Oklahoma and Georgia — filed suit in the United States District Court for the Western District of Oklahoma seeking an injunction to prevent the NCAA from taking disciplinary action, which was granted along with a nullification of the ABC-CBS contract. The NCAA appealed this decision to the Supreme Court. On June 27, 1984, Justice John Paul Stevens, writing for a 7-2 majority of the Court, ruled that the NCAA’s television plan constituted antitrust behavior and violated the Sherman and Clayton Antitrust Acts.¹¹ In restraining the quantity of television rights available for sale, the Court found the NCAA created an unreasonable limitation on output and the concurrent negotiated price with ABC-CBS constituted horizontal price-fixing, both of which would traditionally be condemned under an illegal per se approach.¹²

However, while the Supreme Court ruled against the NCAA in the particular case of television contracts, they recognized that the NCAA’s product of amateur, collegiate athletics was one uniquely defined by its restraint on who could compete, and thus the NCAA had a unique authority to protect amateurism. As mentioned above, horizontal price-fixing is customarily illegal per se under Sherman; however, the Court explicitly rejected applying a per se rule in Regents, noting that “a certain degree of cooperation [collusion] is necessary” to preserve the unique qualities of collegiate sports, as opposed to professional sports.¹³ In doing so, Regents established that not all NCAA prohibitions are illegal: only those that unreasonably restrain trade or stymie competition are. Justice Stevens further noted that in protecting amateurism, “the NCAA plays a vital role in enabling college football to preserve its character, and as a result enables a product to be marketed which might otherwise be unavailable… and hence can be viewed as procompetitive.”¹⁴ Thus, even though they nominally lost, the Supreme Court’s tacit acknowledgement of the NCAA’s lawful power to mandate its own activities under the charge of maintaining a distinct, amateur product essentially signaled that, while unilateral negotiation of broadcasting deals was forbidden, the NCAA still maintained a wide bevy of power over schools within their jurisdiction.

The NCAA’s allayed loss in Regents was further tempered by subsequent court decisions that protected the association’s ability to regulate college athletics and limit economic activity within its purview. In NCAA v. Tarkanian (1988), the respondent — former University of Nevada, Las Vegas (UNLV) head coach Jerry Tarkanian — filed suit against the NCAA and UNLV in Nevada state court for allegedly violating his Fourteenth Amendment due process rights by withholding compensation from him during the investigation.¹⁵ The NCAA had ordered UNLV to suspend Tarkanian after an investigation into the school’s recruiting practices concluded the program had violated NCAA bylaws, and Tarkanian alleged that, in mandating his suspension, the NCAA had abused “state powers” and violated his Section 1983 rights.¹⁶ The Supreme Court held that the NCAA’s involvement in the events that led to Tarkanian’s suspension did not constitute “state action” as prescribed by the Fourteenth Amendment, and thus the association did not violate Tarkanian’s right to due process, dismissing Tarkanian’s claims that the NCAA acted collusively and under “state color.”¹⁷

In the wake of Tarkanian, the State of Nevada passed legislation that required the NCAA to comply with fixed procedural protocols in any NCAA investigatory processes.¹⁸ After Tarkanian was decided, Jerry Tarkanian and the UNLV were once again under investigation by the NCAA, and the former demanded that the NCAA comply with the newly passed Nevada law.¹⁹ The NCAA appealed, successfully arguing in appellate court that the state law was an unconstitutional violation of the dormant Commerce Clause and the Contracts Clause of the United States Constitution. ²⁰ In two successive cases, the doctrine of amateurism essentially affirmed the NCAA’s right to govern its member schools, granting them a level of authority and a special sanction for which other bodies would be prosecuted.

For athletes who seek compensation for their efforts on the field, it would appear as though this aforementioned judicial history sets a grim precedent. Though circumscribed, the NCAA’s restraints on athletic conduct have been upheld by courts leaning on stare decisis and protection of college sport, and the NCAA’s stranglehold on compensation restrictions have long been maintained by subsequent cases. The insuperable obstacle of “amateurism” likely forecloses any change to NCAA bylaws that would allow compensatory transactions between student-athletes and their respective institutions. But recent developments have shone light on a potential alternative.

Historically, as the above examples have demonstrated, the battle between litigants and the NCAA has typically centered around amateurism as a whole, the latter having faced constant antitrust claims against its limits on scholarship numbers, member school operations, and monopsonistic control of the student-athlete labor market.²¹ Most serious allegations of antitrust against the NCAA cartel have long been dismissed under the premise of maintaining a uniquely amateur athletic environment. Over recent years, however, a new theater has opened: the issue of name, image, and likeness (NIL). Rather than attacking amateurism as a whole (and compensation received for athletic participation), these petitioners have narrowed their focus to the right to be compensated through an individual’s right to publicity. This targeted approach seems to have borne positive results.

In the recent landmark decision NCAA v. Alston (2021), the Supreme Court affirmed that the NCAA’s restrictions on education-related benefits for student athletes violated the Sherman Act.²² Applying the rule of reason, the Supreme Court cited Regents in finding that the amateurism principle did not shield the NCAA from all compensation-related disputes. Though Alston only directly concerned the matter of education related compensation, the decision opened the door for the possibility of future court cases striking down NCAA regulations. Perhaps indicating the change in the judicial currents, Justice Brett Kavanaugh concurred to raise several questions about the NCAA’s remaining compensation rules, noting that all subsequent cases would be decided using the rule of reason framework, forebodingly adding that “there are serious questions whether the NCAA’s remaining compensation rules can pass muster under ordinary rule of reason scrutiny.”²³ Justice Kavanaugh concluded his concurrence by firmly declaring that “[t]he NCAA is not above the law.”²⁴

Sensing that Alston laid the foundation for future court challenges to their compensatory policies, the NCAA voted of its own accord to implement an interim NIL policy shortly after the Supreme Court ruling, which came into force on July 1, 2021.²⁵ A monumental decision, the interim policy effectively removed past prohibitions on athletes licensing their own NIL rights. While nominally a victory for college athletes — a group formerly prohibited from receiving any non-education-related benefits — it was not remotely close to what many expected. Rather than creating a comprehensive framework to regulate NIL within the NCAA constitution, the NCAA instead decided to not regulate NIL at all, leaving the issue of NIL-related compensation to the jurisdiction of the state, effectively a lateral transfer of responsibility from the NCAA to state legislators. For student athletes enrolled in a college or university located in a state with NIL laws already enacted — 29 in total — their respective schools will determine whether or not their NIL activities are consistent with state law; for those attending school in the 21 other states, the NCAA announced it will forbear from enforcing the infamous Bylaw 12 in altering a student’s eligibility. Outside of NIL, however, the NCAA’s other prohibitions remain in place — pay-for-play and non-academic recruiting incentives are disallowed.²⁶

What does the NCAA’s loosening of restrictions bode for the future of college athletes? For five-star or already-famous recruits, this means the opportunity to make millions before even stepping foot on a college court. Southern Utah University sports economist David Perri predicts that Zion Williamson, the college basketball phenom who went number one in the 2020 NBA draft, could have made $5 million from endorsement deals alone had the NIL policy been in place when he attended Duke.²⁷ But not every D1 player is Williamson, and not every college basketball player is D1. For most college athletes without the notoriety to command seven-figure endorsement deals, the NCAA’s interim policy puts them in an even more unpropitious position. The Scylla is the long wait until future antitrust litigation against the NCAA leads to college athletes being viewed as contracted workers under the employ of the NCAA or university and thus owed a wage — a wildly unlikely hedge given judicial precedent surrounding amateurism and the NCAA’s relinquishment of the matter to state hands. The Charybdis is the inactivity of state policymakers in guaranteeing compensation for all athletes at the collegiate level — an equally improbable outcome considering the dysfunctionality of most legislatures, especially when it comes to pecuniary matters.²⁸ In essence, all future change must be decided by legislators and not judges, a process that is not necessarily faster, nor more favorable to the student-athletes concerned. Regardless of outcome, regular athletes are unlikely to be able to earn an income commensurate with what they contribute.

Ultimately, it seems as though it will be a while before most college athletes can even make a fraction of what Coach Kelly makes today, if anything at all. Collegiate sport becomes increasingly popular and revenues continue to grow exponentially, but the athletes at the foundation of the sport continue to be left behind. While college athletes are indeed college students, leveraging their academic standing as a weapon to limit their compensation undermines the sincerity of the NCAA’s concerns. Amateurism, though important in keeping college sport the way it is today, does not preclude fairness. For the countless athletes who put in dozens of hours a week and contribute to their team’s collective success, some form of compensation is due. But while progress has to date been minimal, the judicial paradigm is changing. Hopefully, the changing judicial landscape will supplant the status quo — and perhaps the next newsworthy college contract will be one that is finally signed by a player, not a coach.

References

1. Glen West, “A Deeper Look into the Details of Brian Kelly’s LSU Contract,” Sports Illustrated, Dec. 1, 2021, https://www.si.com/college/lsu/football/lsu-contract-details-football-coach-brian-kelly.  ↩

2. Ibid. ↩

3. Barbara Bean-Mellinger, “What Sport Has the Highest Average Salary?,” Chron, Sep. 22, 2020, https://work.chron.com/sport-highest-average-salary-10203.html. ↩

4. Logan Reardon, “Who Are the Highest Paid Coaches in the NFL in 2022 Season?,” NBC Chicago, July 31, 2022, https://www.nbcchicago.com/news/sports/nbcsports/who-are-the-highest-paid-coaches-in-the-nfl-in-2021-season/2636720/.  ↩

5. Justin Byers, “College Athletes Could Earn $1.5B This Year,” Front Office Sports, Oct. 6, 2021, https://frontofficesports.com/college-athletes-could-earn-1b-this-year.  ↩

6. Refer to pages 46 through 49 of the NCAA Bylaw, starting with §12.1.1, “Validity of Amateur Status.” ↩

7. “History,” NCAA, accessed July 26, 2022, https://www.ncaa.org/sports/2021/5/4/history.  ↩

8. Originating with the Curt Flood Act of 1988 that revoked many elements of MLB’s antitrust exemption under interstate commerce, save for league expansion and franchise relocation. ↩

9. NCAA v. Board of Regents of the University of Oklahoma, 468 U.S. 85 (1984). ↩

10. Gordon S. White Jr., “COLLEGE FOOTBALL GOES TO 2 NETWORKS,” New York Times, July 31, 1981, https://www.nytimes.com/1981/07/31/sports/college-football-goes-to-2-networks.html.  ↩

11. Regents, 468 U.S. 85, 89 (1984). ↩

12. Ibid at 100.  ↩

13. Ibid at 117.  ↩

14. Ibid at 102.  ↩

15. NCAA v. Tarkanian, 488 U.S. 179 (1988). ↩

16. Tarkanian, 488 U.S. 179, 180 (1988).  ↩

17. Ibid at 203.  ↩

18. “The NCAA and Due Process: Legal Issues,” Congressional Research Service Report for Congress, Aug, 18, 2004, https://www.everycrsreport.com/files/20040818_RL32529_1edd659f78633df5048378d523a4d7d0e3d2785d.pdf. ↩

19. National Collegiate Athletic Ass'n v. Miller, 795 F. Supp. 1476 (D. Nev. 1992). ↩

20. Miller, 795 F. Supp. 1476, 1486 (D. Nev. 1992). ↩

21. Andrew Bondarowicz, “The NCAA’s Historical Challenges with Antitrust Issues and Its Current Battle for Continued Relevance,” Seton Hall Legislative Journal 45, no. 3 (2021): 595.  ↩

22. NCAA v. Alston, 141 S. Ct. 2141 (2021). ↩

23. Alston, 141 S. Ct. 2141, 2168 (2021). ↩

24. Ibid at 2169.  ↩

25. “NCAA adopts interim name, image and likeness policy,” NCAA, https://www.ncaa.org/news/2021/6/30/ncaa-adopts-interim-name-image-and-likeness-policy.aspx.  ↩

26. Ibid. ↩

27. Kurt Streeter, “Zion Williamson’s Year in College Was Worth More Than He Got,” New York Times, May 7, 2021, https://www.nytimes.com/2021/05/07/sports/ncaabasketball/zion-williamson-adidas-lawsuit.html#:~:text=title%3F,the%20buzz%20Williamson%20brought%20Duke.  ↩

28. Refer to the 2021 US state legislature report prepared by FiscalNote, a global policy-focused market intelligence firm. On average, state legislatures only had a “legislative efficiency” of 21%, meaning only 1 in 5 bills introduced ended up being enacted as law.  ↩