THE FUTURE OF COLLEGE SPORTS AFTER ALSTON: REFORMING THE NCAA VIA CONDITIONAL ANTITRUST IMMUNITY.

• Author: Grow, Nathaniel

TABLE OF CONTENTS INTRODUCTION 388 I. COLLEGE ATHLETICS AND THE NONPROFIT PARADOX 394 II. THE NCAA'S DAY OF RECKONING AT THE SUPREME COURT 402 III. DECENTRALIZATION IS UNLIKELY TO FIX THE COLLEGE SPORTS INDUSTRY 409 A. The Legal Constraints on the NCAA and Its Schools 410 B. The Likely Implications of Decentralization and Unrestrained Salary Competition for College Sports 416 IV. THE CASE FOR A CONDITIONAL ANTITRUST EXEMPTION FOR THE NCAA 421 A. The Theoretical Basis for an NCAA Antitrust Exemption 423 1. Natural Monopoly 424 2. Market Failure 427 3. Socially Desired Activity 429 B. Two Alternate Proposals for NCAA Reform 431 1. Conditional Antitrust Immunity 432 2. The "Olympic" Model 437 3. The Limited "Free-Market" Model 439 CONCLUSION 442 INTRODUCTION

Even by its own tumultuous standards, the National Collegiate Athletic Association (NCAA) (1) currently finds itself at a particularly uncertain juncture. (2) For years, the association's "amateur" model of intercollegiate athletics has been under attack, with critics highlighting the system's perceived exploitation of its student-athletes. Indeed, despite helping to generate nearly $19 billion per year in revenue, (3) the NCAA's code of amateurism has historically forbidden players from receiving any non-education-related compensation. (4) Thus, while college coaches and administrators often rake in salaries in the hundreds of thousands or millions of dollars, the players--disproportionately students of color from disadvantaged backgrounds--are, in the eyes of many, insufficiently compensated for their efforts. (5)

The NCAA's detractors have, in turn, attacked the association on numerous fronts in recent years in the hopes of forcing the industry to reform. Two of these efforts converged in the summer of 2021, presenting an unprecedented challenge to the traditional business model of intercollegiate athletics.

First, the U.S. Supreme Court released its highly anticipated decision in the case of National Collegiate Athletic Association v. Alston, an antitrust lawsuit challenging NCAA restrictions on student-athlete compensation under the Sherman Act. (6) In Alston, a unanimous Supreme Court ruled that the NCAA could not legally prevent its member colleges and universities from competing by offering current and prospective student-athletes various education-related benefits (such as laptop computers, study abroad trips, or stipends for future graduate-level study).' Although the immediate implications of the Court's opinion were relatively modest, when reading between the lines, the decision suggests that the Justices were prepared to issue a much broader rebuke of the NCAA's amateurism model had the posture of the case permitted them to do so. (8) In fact, in a scathing concurring opinion, Justice Kavanaugh went so far as to state that the "NCAA's business model [of relying on unpaid, amateur athletes] would be flatly illegal in almost any other industry in America." (9) As a result, many believe it is only a matter of time before the judiciary forces the NCAA to allow its schools to pay their athletes above and beyond the cost of their college attendance, effectively introducing a system of "pay-for-play" to college sports. (10)

Meanwhile, at the same time the Supreme Court was preparing its decision in Alston, the NCAA was attempting to fend off a series of state-level statutes enacted to provide college student-athletes with an express right to profit off of their name, image, and likeness (NIL). Following the lead of California, whose enactment of the Fair Pay to Play Act in 2019 initiated this wave of legislation, (11) by the summer of 2021, a total of twenty-seven states had passed laws forbidding any institution of higher education within their borders from punishing its student-athletes for signing endorsement contracts with third-party businesses. (12) Thus, student-athletes in these twenty-seven states were poised--for the first time in NCAA history--to be allowed to retain their college eligibility despite being compensated for their athletic abilities above and beyond the cost of their scholarships. Because many of these laws were scheduled to go into effect on July 1, 2021, the NCAA faced a looming deadline to enact meaningful reform of its compensation restrictions. (13) After failing to secure a nationwide legislative reprieve from Congress, the NCAA ultimately relented, announcing that it would allow student-athletes to receive endorsement income without restriction effective July 1. (14)

Acknowledging its tenuous legal position post-Alston--and responding to the agitation for a meaningful restructuring of the industry by countless leaders throughout college sports--the NCAA responded to these collective developments by announcing in the fall of 2021 that it would be undertaking a historic revision of its organizational constitution, along with a corresponding reevaluation of its supervisory role over intercollegiate athletics. (15) The end result of these efforts is widely anticipated to be a significant deregulation of the industry, with the NCAA ceding large swaths of its authority back to individual universities and conferences to govern themselves. (16) It is believed that such a restructuring would free the schools and conferences to more efficiently implement market-based reforms to the present system while simultaneously decreasing the industry's potential antitrust liability (by avoiding the formulation of industry-wide, mandatory rules applicable to the entire NCAA membership). (17)

Unfortunately, although the NCAA's response to the events of 2021 is quite understandable from a legal perspective, granting the most powerful athletic conferences even further autonomy to create their own rules is likely to exacerbate several troubling trends in the industry. Specifically, intercollegiate athletics is already subject to an "arms race" mentality, in which vigorous competition between athletic programs for any leg up on the playing field leads to spending patterns in which all but a handful of universities consistently lose money on their sports programs--losses that often reach into the tens of millions of dollars. (18) This phenomenon results from the industry's atypical--but heretofore largely overlooked--industrial organization and its corresponding economic incentives, in which highly competitive, nonprofit entities, unbeholden to shareholder interests, are motivated to spend every possible dollar advancing their competitive mission. (19) Not only have these incentives often resulted in extreme levels of competitive imbalance on the playing field but these overriding competitive concerns have also frequently led NCAA schools to shortchange the educational and medical well-being of their student-athletes in the pursuit of greater success on the playing field. (20)

Thus, left to their own devices, individual universities and athletic conferences will likely free their schools to compete with one another in far greater ways (both financially and otherwise), further exacerbating these concerns. Indeed, given the industry's unusual legal constraints--and its inability to collectively bargain with its players on an industry-wide basis, in particular (21)--it is doubtful that NCAA schools will be able to take the steps necessary to ensure that the coming decentralization does not result in additional deficit spending, greater deprioritization of student-athletes' educational and medical needs, or a further erosion of the industry's already questionable level of competitive balance. (22)

Consequently, this Article asserts that the time has come for Congress to intervene to help chart a sustainable course for the future of intercollegiate athletics. Specifically, it argues that the NCAA should be granted a limited and conditional antitrust exemption, laying out two potential paths for Congress to follow depending on its preferred policy outcome. Option one would effectively preserve the new status quo by providing the NCAA with an antitrust exemption allowing the association to continue to prohibit schools from directly providing cash compensation to student-athletes while nevertheless maintaining the rights of athletes to freely monetize their NIL. Thus, in effect, this first option would implement something akin to the so-called "Olympic" governance model. Meanwhile, the second option would allow NCAA schools to provide cash compensation to their student-athletes, while nevertheless granting the NCAA an antitrust exemption, permitting it to impose reasonable spending limits on this monetary competition (and other related spending). Thus, option two would help to remedy the perceived injustice of the current system while still providing the necessary safeguards to ensure that the resulting competition does not become financially or competitively ruinous.

At the same time, however, this Article cautions that giving the NCAA--at least in its current form--unchecked free reign to preside over the college sports industry on a going-forward basis would be inadvisable, as history has shown that the association's membership is often either unable or unwilling to meaningfully reform itself in order to advance the interests of its student-athletes. As a result, regardless which path Congress chooses, any resulting antitrust immunity should--at a minimum--be conditioned on the NCAA taking concrete steps to better protect and advance the rights of student-athletes.

This Article proceeds in four Parts. Part I explores the often-overlooked, unusual structural economic incentives at play in U.S. intercollegiate athletics and documents the various suboptimal effects that have resulted. Part II then provides a brief overview of the Alston litigation, explaining why the Supreme Court's decision in the case is widely expected to invite further antitrust challenges to the NCAA's amateurism model. Next, Part III considers the legal impediments...