To quote a popular singer from our college days, David Gray, “it’s all over bar the shoutin’” for the NCAA, colleges, and TV networks taking advantage of college athletes. Whether it’s further litigation, federal legislation, market forces, unionization, Jim Harbaugh’s advocacy, or something else, college athletes will be paid the market price of what they provide in the next 5 years. It started with litigation over a video game, then state NIL legislation, then U.S. Supreme Court slapped the NCAA in Alston, the NLRB piled on, and now the DOJ is looking to say it’s doing something about the NCAA’s random rules regarding college athletes transferring schools.
The Origins of Legal Challenges
Where did this tsunami of legal battles against the NCAA come from? It came from technological advances in broadcasting football games.
The Cable TV Revolution
In the mid-80’s, cable TV allowed Americans to watch more than 3 college football games per Saturday, which allowed more advertisements to be placed during football games. Before then, college athletics barely made any money. But, with this technological advance, more money was paid to the conferences, who pay the schools, who had surplus revenue. Since it would look weird for college athletic departments – as non-profits – to have earnings far in excess of their expenses, they started looking for ways to spend the money without paying the talent (i.e., the college athletes). So coaching salaries went up 10x in the 80’s.
The Internet Boom
Then came along the Internet in the early 2000s, and things got crazy. The Internet, with its zero-cost digital reproduction, allowed an unlimited amount of games to be played via streaming services like Hulu. So, the number of advertisements skyrocketed. And the conferences and schools were flooded with revenue. Again, coaches’ salaries went up another 10x. But there was still excess revenue, so colleges went on facility spending sprees, like LSU’s $28 million locker room. Not to be outdone by their neighbor, Alabama built a $288,000,000 football facility. Yes, a non-profit spent over ¼ billion dollars for 125 people to just prepare to play football; this was not the cost to build a new stadium.
NCAA’s Antiquated Model
At the same time, the governing body of this industry, the NCAA, mandates that the talent get no more benefits than they had before the ‘80s. How – in a capitalist economy – does that fly? After all, college athletics, like professional athletics, is entertainment, which is just another industry sector of our market-based economy.
Legal Challenges Emerge
So, in December 2023, seven states sued the NCAA in federal court in West Virginia. That suit claims that the NCAA’s transfer rule violates antitrust laws. It asserts that the rule unjustifiably restricts college athletes’ ability to freely participate in the market for their labor. The NCAA’s transfer rule requires athletes, who previously transferred between Division I schools, sit out a year before they can compete in games with their new college team.
After developing FoMO, the U.S. DOJ, Minnesota, Mississippi, Virginia, and Washington D.C. joined the existing plaintiffs (Colorado, Illinois, New York, North Carolina, Tennessee, West Virginia, and Ohio) in an amended complaint in the federal West Virginia lawsuit. This collective effort – of 10 states, the District of Columbia, and the DOJ – reflects a widespread challenge to the NCAA’s transfer rule. It also signals another chink in the NCAA’s armor “defending amateurism.”
The DOJ’s Involvement
While the NCAA argues that its transfer rule is intended to safeguard the amateur model of college sports and prevent the poaching of athletes, the lawsuit contends that, in reality, the NCAA’s transfer rule is causing more harm than good. The plaintiffs argue that the restriction imposed by the transfer rule hinders athletes’ opportunities to fully engage in the labor market, thereby negatively impacting their career prospects and potentially violating antitrust laws in the process.
So yes, the DOJ is now involved in fighting the NCAA’s transfer rules. They will win because there is no justification for saying unpaid college athletes have to go to time out for a year if they already transferred colleges.
Justice Kavanaugh’s Critique
But our view is not novel, as Justice Kavanaugh cogently foreshadowed this in Alston:
“the NCAA’s business model of using unpaid student athletes to generate billions of dollars in revenue for the colleges raises serious questions under the antitrust laws. In particular, it is highly questionable whether the NCAA and its member colleges can justify not paying student athletes a fair share of the revenues on the circular theory that the defining characteristic of college sports is that the colleges do not pay student athletes. And if that asserted justification is unavailing, it is not clear how the NCAA can legally defend its remaining compensation rules …
… traditions alone cannot justify the NCAA’s decision to build a massive money-raising enterprise on the backs of student athletes who are not fairly compensated. Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. And under ordinary principles of antitrust law, it is not evident why college sports should be any different. The NCAA is not above the law.”
When Do you Think College Athletes Will Start Being Paid?
The DOJ’s efforts in the federal West Virginia lawsuit are just another domino that will fall against the NCAA and colleges on the path to ensuring that people who provide a service are compensated for their work. The only question left is when, in the next 5 years, will college athletes start being paid?
Click on your prediction:
Update
Since our publication last week, there have been two major developments in the push to allow college athletes to be paid for their talent and work:
- Tennessee and Virginia sued the NCAA for antitrust violations related to Name Image and Likeness in federal court on January 31, 2024.
- A local National Labor Relations Board regional office ruled that Dartmouth basketball players are employees of that school for purposes of unionizing on February 5, 2024.
There are now 3 cases by state and federal governments challenging the NCAA’s restrictions on college athletes being paid as employees. This pushes up our predicted date of when college athletes will be paid as employees to August 2025 (from 2026).
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For more information regarding the content of this article, reach our to KJK Attorneys Samir Dahman (SBD@kjk.com) or Scott Norcross (SAN@kjk.com).