The Supreme Court ruled earlier today to hear NCAA v Alston, a case that questions the legality of the NCAA rules that preclude most compensation for college athletes:
The Supreme Court will hear a landmark antitrust case against the NCAA that could improve the business model for college sports by allowing colleges to compensate student athletes.
The Supreme Court said Wednesday that it will hear complaints from the NCAA and one of its member conferences over a May decision finding that the group’s player compensation limits are in violation of antitrust law.
A group of current and former players questioned the NCAA rules that prohibit athletes from accepting money or other forms of compensation. After a lawsuit in 2019, a federal judge found the restrictions to be anti-competitive and said the NCAA must allow colleges to offer educational benefits to athletes, such as graduate school scholarships, study opportunities abroad, or computers for educational purposes.
The U.S. Court of Appeals for the 9th Circuit upheld that decision earlier this year.
Economists have long argued that the NCAA rules, which prohibit the compensation of athletes, are essentially a thinly veiled cartel that includes a severe penalty, up to the “death penalty”, for handing over participants. The main difference from other cartels is that the NCAA system has better PR and has thereby managed to convince many people that they are actually serving the public interest by promoting the tradition and integrity of “student athletes” protect. Even so, I don’t know enough about antitrust law to know who should prevail on the legal issues of the case. I will leave these questions to others with more relevant expertise.
Legal issues aside, however, there is strong political rationale for ending restrictions on athlete compensation. I put it together in 2010 and 2011, building on previous work by economists David Henderson and Nobel Prize winner Gary Becker. Most of what she and I said is relevant to this day. As Henderson put it:
The NCAA operates a strictly controlled cartel whose “profits” go to colleges and trainers. It’s not just a private cartel, but one that is supported by the government. Armen Alchian and William Allen were the first to point this out in their 1964 textbook University Economics. They indicated that those colleges that decided to pay athletes would jeopardize their academic accreditation. Why do new schools feel no profit only to then attract players and compete against them by paying them? Alchian and Allen reply: “[N]o A new school could receive subsidies from the state or large philanthropic foundations without being recognized by the current accreditation group. They add, “We have finally come to the source of the value of membership in the NCAA and related organizations: subsidized education. “
One could argue, “Well, the student athletes will benefit from their skills later when they become professional professionals.” Not as the NCAA admits in its advertising [noting that most players don’t go on to professional careers].
The toughest competition for basketball and soccer players takes place at Division I level. These sports have both high game attendance – sometimes over 100,000 people attend college football games – and widespread television coverage…. Without the rules enforced by the NCAA, competition for players would intensify, especially for the big stars …
To avoid this result, the NCAA severely limits the number of athletic scholarships, and most importantly, the size of the scholarships schools can offer to the best players.
It is impossible for an outsider to look at these rules without concluding that their main objective is to make the NCAA an effective cartel that severely restricts competition between schools for players. The NCAA defends these rules by claiming that their primary purpose is to prevent the exploitation of student-athletes, to provide a fairer recruiting system that allows many colleges to maintain football and basketball programs and actively seek out and ensure athletes That the athletes become both students and athletes.
Unfortunately for the NCAA, the facts obviously do not align with these defenses.
A large number of Division I players in basketball and soccer, the two big money sports, are recruited from poor families. Many of them are urban and rural African Americans. Any restriction on the size of scholarships that can be given to athletes in these sports usually takes money away from poor athletes and their families and transfers those resources to wealthier students in the form of lower tuition fees and cheaper game tickets.
Some of my own thoughts from these previous posts:
[T]The NCAA cartel is not just a private arrangement. It is backed by the federal government, which is using the threat to refuse federal funding to force schools to comply with antitrust rules. If this federal intervention were lifted, the cartel could fall apart …
The traditional NCAA response to such criticism is that the players are “scholar-athletes” who are rewarded with education. This probably applies to many college athletes in lesser-known sports. In Division I soccer and basketball, however, the players are essentially full-time professionals. Most of them have little time to study, and many have far lower academic qualifications than regular students in their schools. Few people can do academically well when they are placed in an institution where their qualifications are well below the norm and at the same time have had to work in a demanding full-time job.
I don’t think student athletes are morally entitled to get paid to play. If nobody wants to pay to see them, I don’t mind. The reality, however, is that there is a high demand for their services which is artificially suppressed by government coercion. In fact, some schools and boosters are paying players under the table, though severe NCAA penalties loom if caught.
Another particularly annoying element of the NCAA antitrust system is the way it is surrounded by a veneer of justice. The NCAA has managed to convince the media and most of the citizens that the real bad guys are actually the schools that are trying to undermine the cartel and pay their players for something more like market prices. Few people seem to care that most athletes in need are poor minorities who are deprived of the key opportunity to create a nest egg for their future. As [David] Henderson points out that only a small percentage of them make a lot of money for the professionals.
There is a conceptually simple, albeit politically difficult, solution to this problem. The government should withdraw its support for the NCAA cartel. Universities will gradually stop pretending that Division I soccer and basketball players are mostly students and treating them for who they really are. Players are paid for their work, and they and the universities don’t have to waste time or money forcing players to attend mock classes to keep up appearances. Those with the desire and academic qualifications to do real coursework should of course be allowed to do so.
It’s also worth noting that the same universities that loudly condemn the idea of paying players often pay high salaries to coaches and sports administrators. I do not grant these people their wealth. But it seems strange to suggest that paying players a salary will somehow tarnish the academic ethos while at the same time claiming that there is nothing wrong with paying Mike Krzyzewski or Jerry Tarkanian a lot of money.
If the Supreme Court rules the NCAA, maybe things will move in the direction I advocate. It is also possible for some universities to reconsider whether it is indeed desirable for academic institutions to be so heavily involved in what is essentially professional sport.
UPDATE: It is perhaps worth noting that this is the second time in three years that the NCAA has had a major case in the Supreme Court. In 2018, the NCAA (along with the Trump administration and various professional sports leagues) was on the losing side in Murphy against the NCAA, a major victory for constitutional federalism and for protective cities.