EMPLOYEE-ATHLETES, ANTITRUST, and the FUTURE OF COLLEGE SPORTS.

Author:Berry, William W.
 
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INTRODUCTION 246 I. THE ANTITRUST CHALLENGE TO THE STUDENT-ATHLETE MODEL 249 A. Antitrust and the NCAA 251 1. The Sherman Act 251 2. The NCAA 252 B. O'Bannon v. NCAA 254 C. Jenkins v. NCAA 258 II. THE IMPLICIT QUESTION--ARE ATHLETES EMPLOYEES? 259 A. The NCAA's Amateurism Narrative 260 B. The Employee-Athlete Narrative 262 C. How the Narratives Drive the Antitrust Application 264 1. The Influence of Narrative on Doctrine 264 a. Defining the Applicable Market 264 b. Anti-competitive restraints 265 c. Pro-competitive justifications 265 2. The Influence of Narrative on Equity 266 III. THE ANTITRUST ANALYSIS THROUGH THE EMPLOYEE LENS 267 A. Who Funds Whom? 267 B. Time Allocation 268 C. Character of Remuneration 269 D. Revenue Generated 270 IV. A ROAD MAP FOR SAVING THE STATUS QUO 271 CONCLUSION 272 INTRODUCTION

"The term 'employee' shall include any employee, and shall not be limited to the employees of a particular employer. ..."

--NLRA section 152(3) (1)

The National Collegiate Athletic Association (NCAA) recently survived the latest "bet-the-company" challenge to its amateurism model in the Ninth Circuit's decision in O'Bannon v. NCAA. (2) Indeed, this antitrust challenge threatened the NCAA's very existence with its claim that the NCAA operates as a cartel that restrains the ability of student-athletes to participate in an open market to receive compensation for their services as athletes. (3)

The first part of the court's holding--that the Sherman Act applies to the NCAA and that the current student-athlete model is anti-competitive--sets the stage for future challenges to the student-athlete model. (4) A current class action in federal district court--Jenkins v. NCAA--aims to exploit this opening created in O'Bannon (5.)

But the Jenkins plaintiffs must overcome the second part of the Ninth Circuit's holding in O'Bannon: providing student-athletes the cost of attendance served as an adequate remedy for the antitrust violation, particularly in light of the pro-competitive benefits the court found that the current system of amateurism provides. Specifically, the court determined that the product of college football and basketball games could suffer without restraint on athletes from receiving compensation. (6)

To be sure, Jenkins is not merely O'Bannon re-litigated. The O'Bannon case began as a challenge to the use of former student-athletes' names, images, and likenesses (NILs) in EA Sports video games manufactured in partnership with the NCAA. (7) The Jenkins plaintiffs have the opportunity to develop a much more direct factual basis for their antitrust claim. (8) particularly, the plaintiffs can provide evidence undermining the NCAA's claim that the success of the economic product of NCAA football and basketball depends in significant ways upon maintaining the amateur status of student-athletes. (9) The Jenkins plaintiffs are also requesting injunctive relief, not money damages. Specifically, they seek to prevent the NCAA from enforcing its amateurism rules. (10)

This Article, however, argues that the court's decision in Jenkins will not simply turn on the application of antitrust principles but instead hinge on a deeper assumption concerning the character of the athletes themselves. Specifically, the outcome in Jenkins rests in large part upon whether the court views the athletes as employees of the university or students.

To be clear, the labor and employment law question--whether college athletes are employees--does not, on its face, speak to whether the NCAA's restraint violates antitrust law. Instead, it informs the degree to which a court is willing to alter the status quo in the name of economic fairness.

This employment law determination--implicit but unacknowledged in O'Bannon--will likely drive the antitrust outcome in Jenkins. If the athletes are employees, the anti-competitive nature of the restraint--the prohibition against receiving remuneration under amateurism rules--clearly violates the first part of the rule of reason in the application of the Sherman Act. Further, even if the court finds a pro-competitive effect in the protection of the market for college sports, the value of preventing any diminution of such a market would disappear when weighed against the complete restraint imposed by the NCAA. (11) This is particularly true when weighing the revenue in the latter market (billions of dollars annually) against the restraint (no compensation). Under this view, there must be some lesser restraint that would not destroy the market for the products of college football and basketball.

On the other hand, if athletes are merely students and not employees, then the anti-competitive restraint (cost of attendance) seems less significant when compared to similarly situated students. To the degree that student-athletes receive compensation for their participation, this provision mirrors the compensation that other outstanding students on campus might receive--full scholarships and stipends--particularly in its direct relation to the education that the university provides. (12) As such, one might argue athletes are student-athletes, not employee-athletes.

Earlier this year, the General Counsel of the NLRB expressed his view that college athletes were university employees, consistent with the regional director's opinion in the Northwestern case, despite the NLRB's ultimate decision that college athletes are not employees. (13) While this question remains at the center of the pay-for-play conversation, courts and commentators alike have not related it to the recent or pending antitrust cases against the NCAA. Instead, this argument has languished in unsuccessful labor and employment lawsuits. (14)

This Article, then, argues that rather than merely applying the relevant antitrust law, the Ninth Circuit court decisions stem from an entirely different question--whether college athletes are employees. The assumptions judges must make about to address this seemingly unrelated question will undergird their ultimate conclusions about the appropriate antitrust remedy.

Having made the implicit assumptions explicit, the Article then explores four key questions that should bear on determining whether college athletes are employees. The Article concludes by proposing that the employee-athlete question is not binary, but rather a spectrum, and provides a map for universities and administrators eager to preserve the current status quo.

Part I explains the competing arguments raised in O'Bannon and their likely application in Jenkins. Part II argues that the real question for the courts does not concern economics and markets but instead rests upon the question of whether athletes are employees. Part III frames the potential analysis of the employee question by suggesting four indicia that ought to guide this determination. Finally, Part IV provides a road map for saving the status quo in light of the employee-athlete question.

  1. THE ANTITRUST CHALLENGE TO THE STUDENT-ATHLETE MODEL

    For decades, college athletes have challenged NCAA rules, including its prohibition against hiring agents, its proscription against receiving compensation from advertisements, its penalty of loss of amateur status resulting from entering the draft, its academic rules, and others. (15) With the revenue from college football and basketball experiencing exponential growth over the past decade, (16) athletes and commentators alike have called for reform and greater benefits for college athletes. (17)

    In many cases, the athletes have not sought monetary compensation itself, but health care benefits, increased funding for food, and coverage of the full cost of attendance. (18) At Northwestern, for instance, football players attempted to unionize, with the stated purpose of achieving such benefits. (19) Similarly, Connecticut basketball player Shabazz Napier used his Final Four interviews to decry the inadequate provision of meals for college athletes. (20)

    Increasingly, however, athletes are challenging the entire model itself, arguing for compensation-- "pay for play "--and the ability to share in the profits generated by athletic competitions, particularly in the television revenue. (21) The two cases described below--one recently decided and one pending--frame this issue in terms of the Sherman Act and advance the claim that the current student-athlete amateurism model illegally violates their ability to receive remuneration in the market for the services they provide.

    1. Antitrust and the NCAA

      Before exploring the cases, though, it is helpful to frame the connection between the Sherman Act and the NCAA. The Sherman (Antitrust) Act provides that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." (22)

      1. The Sherman Act

        Under the Sherman Act, courts generally apply one of two tests--a per se test or a rule of reason test. (23) The per se test, typically used for horizontal restraints of trade, mandates a finding that the conduct in question violates the Act and focuses on the appropriate remedy. (24) The rule of reason test, typically used for vertical restraints, requires the court to conduct a balancing test. (25) The court first inquires as to whether the conduct in question restrains a particular market by limiting economic competition in that market. (26) The court then assesses whether this anti-competitive conduct in the first market nonetheless promotes competition (i.e., is pro-competitive) in another market. (27) If so, the court must weigh the effect on competition in the one market against the other, and explore whether there exist less restrictive restraints that could otherwise produce the same benefit. (28)

        With respect to athletics, the Supreme Court and other appellate courts have typically applied the rule of reason test, partially because confusion can arise with respect...

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