Publication
The NCAA’s Continued Antitrust Battles
By: Joe Layzell and Kevin Walton
The Ruling
It’s bowl season, but that won’t stop Vanderbilt quarterback Diego Pavia from celebrating his own personal victories. On December 18, 2024, Judge William L. Campbell entered an Order granting Pavia’s Motion for Preliminary Injunction in the U.S. District Court for the Middle District of Tennessee. Pavia successfully obtained a ruling enjoining the NCAA from enforcing NCAA Bylaws 12.02.06, which limits a college athlete to four years of competition. Under the rule and the associated provisions, an athlete has five years to engage in four seasons of athletic play.
Pavia achieved a high level of success this year — helping Vanderbilt defeat both Alabama and Auburn — but this was his fourth and final year of competition under the NCAA Bylaws. Before attending Vanderbilt, Pavia played the 2022 and 2023 seasons at New Mexico State University, another Division I institution. Before his Division I career, Pavia played for New Mexico Military Academy, junior college (JUCO), for the 2020 and 2021 seasons. Due to the COVID-19 pandemic, the NCAA issued a blanket waiver for the 2020 season, so that season did not count against any athlete’s eligibility. Thus, Pavia was able to play college football for five seasons with the waiver, but 2024 was slated to be his last under the existing NCAA rules.
Facing the end of his collegiate career, Pavia sought to continue his success and get another year of eligibility. Pavia alleged that the NCAA’s rules violated the Sherman Act by counting the 2021 season against his four years of eligibility. Central to his argument was that his JUCO career should not reduce his NCAA Division I eligibility, in part because JUCOs are not NCAA member institutions — they are regulated by a separate entity. Ultimately, the Court agreed and enjoined the NCAA from enforcing its eligibility rules against Pavia for the 2025 season.
While the NCAA is not a rookie when it comes to antitrust challenges, the Court broke new grounds in its opinion. As the Court stated, Section 1 of the Sherman act “[b]y its plain language” applies “only if the rule is commercial in nature.”1 “[T]he analysis must focus on the [challenged rule] itself and not NCAA as a commercial entity.”2 “To succeed under Section 1 of the Sherman Act, Plaintiff must show that the NCAA ‘(1) participated in an agreement that (2) unreasonably restrain[s] trade in the relevant market.’”3 The relevant market for this analysis was the labor market for college football.
Previously, the NCAA was able to couch similar rules as academic, not commercial, keeping them outside the scope of the Sherman Act. However, Pavia argued, and the Court agreed, that name, image, and likeness (NIL) compensation pushed the eligibility rule from an academic nature to a commercial nature. The Court reasoned that NIL changed the landscape of college sports because it made college sports commercial in nature. By restricting eligibility, the rule became commercial in nature because it regulates who can play. Thus, the Sherman Act applied.
Once the Sherman Act applies, the rule of reason comes into play. The rule of reason is a three-prong burden shifting test whereby (1) a plaintiff has the initial burden to prove the rule has a substantial anticompetitive effect; if successfully proven, a defendant (2) has the burden to show a procompetitive rationale for the restraint; and if the defendant is successful, the burden shifts back to the plaintiff to (3) demonstrate the procompetitive efficiencies could be reasonably achieved through less competitive means.4
The Court concluded “the eligibility bylaws induce potential football players to attend NCAA institutions rather than non-NCAA institutions even when non-NCAA institutions, such as junior colleges, might be in their best interest. Therefore, the rule harms student athletes when they are making decisions on whether to attend a junior college or an NCAA institution.”5 Facing the burden of showing a procompetitive effect, the NCAA argued the benefits are “(1) preserving intercollegiate athletics as a unique offering to many prospective and current student-athletes, expanding output; and (2) enhancing the experiences of student-athletes, improving the quality of output.” By this, the NCAA explains that it contends the challenged rules: (1) preserve intercollegiate athletics as a unique offering; (2) increase the number of students who compete in Division I football; (3) improve the quality of the student-athlete experience; and (4) foster better alignment between athletics and academics.”6 The Court found each of those reasons pretextual, but even if they weren’t, Pavia offered a reasonable alternative. Instead of starting the eligibility clock when a person enrolls at an accredited institution, it could start when a person enrolls at an NCAA member institution.
Whether the Court Went Out of Bounds
While the order is limited to Diego Pavia, it breaks new grounds by considering the effects of NIL for antitrust challenges against the NCAA. The decision adds to the volatile landscape of college sports and follows the trend of federal courts’ increasingly favorable treatment of antitrust challenges against the NCAA. Notwithstanding the Court’s methodical approach to the antitrust issues, the analysis raises significant questions.
The primary question is why the Sherman Act applies to the NCAA and college athletes. “The purpose of the Sherman Act is ‘the promotion of consumer welfare.’”7 That is why “‘Congress designed the Sherman Act as a consumer welfare prescription.’”8 “[B]ecause the Sherman Act’s concern is consumer welfare, antitrust injury occurs only when the claimed injury flows from acts harmful to consumers.”9 Interestingly, the Supreme Court’s requirement for a harm to consumers in the relevant market, when applying the rule of reason test is not addressed here. In 2018, the Supreme Court stated “[t]o determine whether a restraint violates the rule of reason, the parties agree that a three-step, burden-shifting framework applies. Under this framework, the plaintiff has the initial burden to prove that the challenged restraint has a substantial anticompetitive effect that harms consumers in the relevant market.” However, the portion “that harms consumers in the relevant market”10 was omitted in both the Supreme Court’s opinion in NCAA v. Alston and the Court’s Order here.
While the consumer harm requirement was omitted, the court still addressed an adverse effect on consumers after identifying the labor market for college football athletes. It stated, “[t]he effects on the labor market also cause downstream effects for consumers of collegiate athletics because the restriction on the eligibility of former junior college student-athletes to compete at the Division I level harms the competitiveness of the teams by limiting the number of years these players can compete at the Division I level.”11 This attenuated connection blurs the line between antitrust concerns and labor disputes. It seems contrary to the purpose of the Sherman Act to continuously allow college athletes to litigate their disputes with the NCAA under the guise of an antitrust claim. Consumer demand for college football existed before NIL and the analysis should focus on how the NCAA rules effect consumer demand. The Court emphasized the change NIL brought to college sports. But the Court should also recognize that the realities of the situation address the issues as what they are — labor disputes. “Whether an antitrust violation exists necessarily depends on a careful analysis of market realities.”12
An interesting comparison to the application of the Sherman Act to college athletics is social media. In college athletics, the NCAA governs academic institutions and the athletes, but college athletes play for their respective institutions in the league governed by the NCAA. Like the NCAA, social media companies are a platform for users. Users are not posting for the social media company, but for their respective accounts. Recently, social media influencers have taken a large presence on social media platforms and monetized their use. But, each social media company has a terms and conditions section that governs how a user may interact on the social media platform. Considering the similarities of a college athlete’s NIL marketability and a social media user’s monetization of their online presence, could influencers bring an antitrust claim against social media companies if the terms and conditions go too far?
Regardless of the issues in applying the Sherman Act to the case, the Court left many other important aspects and realities for another day.
- First, an athlete can monetize their NIL because the market has determined it has a value. Division I schools have more NIL opportunities because the market has determined their platform is more valuable. The likely reason for this is because, in most cases, the talent level is higher at Division I schools, creating more and better competition. Thus, while a JUCO athlete is not prohibited by rule from obtaining the same NIL deal as a Division I athlete, the market has determined not to provide those same opportunities in most circumstances. However, that is not always the case. Deion Sanders recruited Travis Hunter, the top ranked prospect in the 2022 recruiting class, to play at Jackson State. While there, he still had multiple NIL opportunities even though Jackson State is not a Football Bowl Subdivision (FBS )school and was a lesser-known program.
- Second, in most scenarios, talent is central to what opportunities a college athlete has. An athlete’s talent level usually determines where that athlete can compete, unless there are academic shortfalls or other limitations. In those situations, an athlete does not have the choice to play at a Division I school because permissible academic or other non-commercial rules bar participation. As the Court recognized, Pavia went to JUCO because he did not have any “offers to play Division I football.”13 However, the Court reasoned “the eligibility bylaws induce potential football players to attend NCAA institutions rather than non-NCAA institutions even when non-NCAA institutions, such as junior colleges, might be in their best interest.”14 That reasoning ignores the reality that most players who go to a JUCO do so because they are not yet talented enough to compete at the Division I level, or some other circumstance prohibits them from doing so.
- Third, the Court’s reasoning that athletes attend NCAA institutions over non-NCAA institutions, when non-NCAA institutions might be in their best interest, appears to contradict other justifications in the Order. If a JUCO is in an athlete’s best interest, they likely are not at the skill level to compete at the Division I level. If an athlete is not at the skill level to compete at the Division I level, they likely would have minimal NIL opportunities if they were at a Division I school. Just because an athlete attends a Division I institution does not mean that athlete will get an NIL deal or even play in games. NIL opportunities are not automatic, especially the more substantial ones, and an athlete is not guaranteed playing time.
- Fourth, JUCO actually enhances an athlete’s NIL opportunity. As the Court stated, “Division I programs use the transfer portal to fill roster spots for the next season.”15 If an athlete is not talented enough to compete at a Division I institution fresh out of high school, JUCO provides the opportunity to develop and reach the level necessary to perform there. After developing and performing at a high level in JUCO, an athlete attracts recruiters and NIL opportunities that would have otherwise been available. Thus, an athlete could leverage a higher value over two years than they might have over four.
- Fifth, if the Court is considering the effect of NIL, it should also appreciate the changes the transfer portal brings. An athlete is not required to stay at a JUCO or any other institution they attend. They can transfer after any season to any other institution. There is an inherent cost-benefit analysis to that decision, as with any decision, and that does not make an eligibility rule anti-competitive.
- Sixth, JUCO can increase an athlete’s marketability, allow an athlete to meet Division I academic requirements, or otherwise come in compliance with the NCAA’s permissible non-commercial rules. That benefit opens the door for someone who might otherwise never have the opportunity to play for a Division I school.
- Seventh, the Court’s determination that the NCAA’s procompetitive rebuttals were pretextual disregards how the rules came about in the first place. The NCAA, through multiple lawsuits and state legislation, was forced to change its rules. Alston required the NCAA to permit NIL. Even this ruling caused the NCAA to grant a waiver to athletes in a similar situation as Pavia while appealing the ruling.16 Without much choice, the NCAA adopted rules to comply with Court orders. The NCAA’s compliance with those orders does not make their reasoning in this case pretextual.
- Lastly, the Court seemed to consider the negative commercial effects of the four-year eligibility rules, but none of the positives. There was legitimate consideration of the harm Diego Pavia faced, but not much consideration of the harm to other college athletes. For example, by enjoining the enforcement of the NCAA’s four-year eligibility rule, the court necessarily expanded the amount of eligible athletes and thus reduces the opportunity for a finite number of positions. Thus, non-JUCO athletes are harmed because they might now lose out on a spot to a JUCO player who still has four years of eligibility and the development of playing at a JUCO. The JUCO players benefit, but college athletes suffer as a whole.
In sum, it could be argued that the Court inserted itself and made a policy decision for a private organization rather than enforce the Sherman Act. The Court latched onto Pavia’s arguments, without considering the broader implications of its ruling. Additionally, the Court’s narrowing of the enjoinment just to Pavia does little to stop the floodgates as the NCAA has already responded with a waiver to athletes in a similar position.
The opinions expressed are those of the author, and not necessarily the firm or their colleagues.
Footnotes
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Order, at 9 (quoting Worldwide Basketball & Sports Tours, Inc. v. Nat’l Collegiate Athletic Ass’n, 388 F.3d 955, 958 (6th Cir. 2004)).
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Order, at 9 (quoting Bassett v. Nat’l Case Collegiate Athletic Ass’n, 528 F.3d 426, 433 (6th Cir. 2008)).
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Order, at 9 (quoting Nat’l Hockey League Players’ Ass’n v. Plymouth Whalers Hockey Club, 325 F.3d 712, 718 (6th Cir. 2003)).
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Nat’l Collegiate Athletic Ass’n v. Alston, 594 U.S. 69, 97 (2021).
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Order, at 16.
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Order, at 17–18.
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PLS.Com, LLC v. Nat’l Ass’n of Realtors, 32 F.4th 824, 832 (9th Cir. 2022) (quoting GTE Sylvania Inc. v. Cont’l T.V., Inc., 537 F.2d 980, 1003 (9th Cir. 1976)).
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Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Oklahoma, 468 U.S. 85, 107 (1984) (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979)).
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Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1445 (9th Cir. 1995).
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Ohio v. Am. Express Co., 585 U.S. 529, 541, 138 S. Ct. 2274, 2284, 201 L. Ed. 2d 678 (2018)
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Order, at 16.
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Nat’l Collegiate Athletic Ass’n v. Alston, 594 U.S. 69, 93 (2021)
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Order, at 6.
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Order, at 16.
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Order, at 20.
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https://www.espn.com/college-football/story/_/id/43131557/ncaa-division-board-grants-waiver-former-juco-players-appealing-diego-pavia-injunction
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