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Alabama Law Review

2016

Alabama Law Review

68 Ala. L. Rev. 551

LENGTH: 10419 words

ARTICLE: AMENDING AMATEURISM SAVING INTERCOLLEGIATE ATHLETICS THROUGH CONFERENCE–ATHLETE REVENUE SHARING

NAME: William W. Berry III *

BIO:

* Associate Professor of Law and Jessie D. Puckett Lecturer, University of Mississippi. This paper developed out of a presentation to the Sports Law Section of the American Association of Law Schools at the annual AALS conference, organized by Matt Parlow. The author would like to thank the following for helpful comments on the presentation, early drafts, and the idea more generally: Matt Parlow, Matthew Mitten, Maureen Weston, Robert Illig, Roger Groves, Meg Penrose, Dionne Kohler, Alfred Yen, Gordon Hylton, Oliver Luck, and Kenneth Ferguson. The author would also like to thank Kathryn Fowler for her excellent research assistance.

HIGHLIGHT: College sports remains at a crossroads, with the NCAA's defense of amateurism facing the dual threats of increased commercialization and antitrust lawsuits. By most accounts, this current status quo seems unsustainable. As such, this Article seeks to propose a middle ground–a compromise solution–that provides greater remuneration for athletes in revenue sports in a way that would largely preserve both the NCAA and the virtues of the current system.

ABSTRACT

Specifically, this Article argues that the conferences, not the institutions, should provide compensation for student-athletes in the form of revenue sharing. Further, this Article advocates the formation of conference-athlete unions that could negotiate compensation with the conferences and use the non-statutory labor exemption as a shield against antitrust lawsuits. As such, this proposal would amend the concept of amateurism to allow for payments from athletic conferences without altering the current relationship between student-athletes and their universities.

Part I of the Article outlines the first problem–the shifting definition of amateurism–and how it creates increasing pressure on the current system. Part II explains the second problem–the anticompetitive characteristics of the current system and their vulnerability to antitrust lawsuits. Then, in Part III, the Article advances its proposal, which addresses both problems and offers a novel solution to them. Finally, in Part IV, the Article justifies this proposal demonstrating how this compromise solution can improve the situation of student-athletes without sacrificing the status quo.

TEXT:

[*552] INTRODUCTION

Progress is impossible without change, and those who cannot change their minds cannot change anything. — George Bernard Shaw n1

College athletics remains at a crossroads. For several years, an ongoing debate has raged in the media, on college campuses, and among fans concerning whether intercollegiate athletes should receive remuneration for participation in sports beyond their education-related compensation of tuition, room, and board. n2 Most of the conversation has focused on the [*553] larger principle itself–whether paying student-athletes compromises the identity of college athletics by violating the NCAA's long-held principle of amateurism. n3 The conversation treats this decision as a sort of Rubicon–a point which if passed will end the current status quo and transform college athletics from an amateur into a professional endeavor. n4

The advocates of pay-for-play cite the commercial windfall generated by the athletic contests in the form of ticket revenue, advertising, television revenue, and other contributions to the university to suggest that the professional atmosphere has already arrived. n5 Further, everyone tangentially related to the athletic contests, including sponsors, vendors, networks, coaches, athletic department personnel, and the universities, reap financial gain with the exception of the athletes who actually provide the central source of entertainment. n6

On the other side of the debate, defenders of the status quo, including the NCAA, cite the principle of amateurism as the central reason for proscribing such payments. n7 Allowing universities to compensate student-athletes beyond paying for their education and related expenses would undermine the character of intercollegiate athletics, according to such advocates. n8 Rather than financial gain serving as a by-product of college [*554] sports, pay-for-play arrangements would transform the intercollegiate sports model into a minor league in which the virtues of college sports, particularly its connection to higher education, would disappear. n9

Also threatening the status quo is increasing evidence that, at least for some, the current model compromises the quality and scope of the education received by student-athletes, particularly in revenue sports. n10 The academic scandal at the University of North Carolina n11 provides the most obvious example of academic malfeasance, but there are many other past instances where the classroom education of student-athletes has amounted to no more than a sham. n12 Participating in what constitutes a full-time job in season makes academic success a challenge even with an army of tutors employed to help students. n13 And even then, student-athletes may have a limited range of classes and majors available to them because of the requirements of their sport. The recent clustering phenomenon–where [*555] large numbers of student-athletes "cluster" in the same major–underscores this point. n14

In recent years the NCAA and its member institutions have entertained increasing compensation at the margins, while holding firm in their commitment to the principle of amateurism. These changes have included allowing universities the ability to provide student-athletes with cost of living increases that cover basic expenses falling outside the provision of room and board, and relaxing restrictions on the provision of food to student-athletes. n15 Part of the outcome of such debates internally at the NCAA has been a growing gap in views between schools that have the resources to provide added benefits to student-athletes and ones that do not. n16

Further, student-athletes, union leaders, and lawyers have sought to use legal avenues to force the issue and gain both increased benefits and remuneration. In 2014, football players at Northwestern University filed a petition with the National Labor Relations Board to form a union. n17 The stated goal of this action was not to receive financial compensation, but other welfare benefits for the student-athletes, including enhanced medical care and insurance post-graduation for injuries suffered while playing college football. n18

Similarly, former UCLA basketball star Ed O'Bannon sued EA Sports and the NCAA for using his likeness in video games without compensating him. n19 This antitrust lawsuit expanded into a class action including both current and former student-athletes and challenging all uses of student-athlete [*556] likenesses, including in television broadcasts. n20 The plaintiffs won a victory of sorts at the district court level, with U.S. District Judge Claudia Wilken finding that the NCAA's conduct violated § 1 of the Sherman Act, illegally restraining the ability of the student-athletes to participate in the market. n21 The court's remedy, however, was a paltry $ 5,000 per student per year. n22 On appeal, the Ninth Circuit Court of Appeals upheld the lower court's finding that the NCAA's conduct violated antitrust law, but struck down the remedy adopted by the lower court. n23

Another pending class action lawsuit, Jenkins v. NCAA, goes further in challenging the current system. n24 Unlike the O'Bannon case, which focused solely on the use of student-athletes' names and likenesses, Jenkins challenges the entire amateurism structure, arguing that restricting the ability of individual institutions to compensate their athletes constitutes an unlawful restriction on commerce. n25

Amidst this background, there remains the open question of whether a compromise solution exists. n26 The commercial pressures on the current system make the current model seem increasingly unsustainable. n27 The pending antitrust lawsuits, as explained below, threaten the future of intercollegiate athletics in a very real way. n28

Given that these cases can destroy the status quo, this Article seeks to propose a middle ground–a compromise solution–that provides greater remuneration for athletes in revenue sports in a way that would largely preserve both the NCAA and the virtues of the current system.

Specifically, this Article argues that the conferences, not the institutions, should provide compensation for student-athletes in the form of revenue sharing. Further, this Article advocates the formation of a conference–athlete employee relationship with student-athlete unions to enable the NCAA to use the non-statutory labor exemption as a shield [*557] against antitrust lawsuits. As such, this proposal would amend the concept of amateurism to allow for payments from athletic conferences without altering the current relationship between student-athletes and their universities.

Part I of the Article outlines the first problem–the shifting definition of amateurism–and explains how it creates increasing pressure on the current system. Part II describes the second problem–the anticompetitive characteristics of the current system and their vulnerability to antitrust lawsuits. Then, in Part III, the Article advances its proposal, which addresses both problems and offers a novel solution to them. Finally, in Part IV, the Article justifies this proposal by demonstrating how this compromise solution can improve the situation of student-athletes without sacrificing the status quo.

I. THE AMATEURISM PROBLEM

The concept of amateurism, at least as embraced by the NCAA and institutions of higher education, remains a fluid one. n29 In addition, as explained below, its current iteration has become increasingly less justifiable in the context of increased commercialism in intercollegiate athletics.

A. The Shifting Definition of Amateurism

In its purest form, amateurism contemplates that athletes perform simply "for the love of the game." n30 The distinction between amateur and professional athletes began in England during the nineteenth century, where it reflected a difference in social class. n31 The upper class sportsmen, [*558] the gentlemen, participated as amateurs without pay, while the working classes played as professionals with compensation. n32

While ameliorating the class distinction, the modern Olympic games adopted a similar distinction related to compensation. The 1956 Olympic charter's definition of an amateur is as follows: "An amateur is one who participates and always has participated in sport solely for pleasure and for the physical, mental or social benefits he derives therefrom, and to whom participation in sport is nothing more than recreation without material gain of any kind, direct or indirect." n33 At its core, then, amateurism is simply participation in sport as "recreation without material gain of any kind, direct or indirect." n34

At its founding, the NCAA adopted a similar, but even broader conception of amateurism. The 1906 NCAA Constitution identified the Principles of Amateur Sport to prohibit

[p]roselyzing [sic][t]he offering of inducements to players to enter Colleges or Universities because of their athletic abilities and of supporting or maintaining players while students on account of their athletic abilities, either by athletic organizations, individual alumni, or otherwise, directly or indirectly[; t]he singling out of prominent athletic students of preparatory schools and endeavoring to influence them to enter a particular College or University[; t]he playing of those ineligible as amateurs[; t]he playing of those who are not bona-fide students in good and regular standing[; and i]mproper and unsportsmanlike conduct of any sort whatsoever, either on the part of the contestants, the coaches, their assistants, or the student body. n35

This notion also extended to the initial eligibility requirements, which mandated that

[*559] [n]o student shall represent a College or University in any intercollegiate game or contest who has at any time received, either directly or indirectly, money, or any other consideration, to play on any team, or for his athletic services as a college trainer, athletic or gymnasium instructor, or who has competed for a money prize or portion of gate money in any contest, or who has competed for any prize against a professional. n36

In 1906, the NCAA took a position on paid summer baseball, deciding that playing in the minor leagues during the summer violated conceptions of amateurism, but left enforcement up to individual institutions. n37 This issue remained contentious, however, based largely on uneven enforcement, until the NCAA adopted a new definition of amateurism in 1916. That definition provided that "[a]n amateur athlete is one who participates in competitive physical sports only for the pleasure and the physical, mental, moral and social benefits directly derived therefrom." n38

The NCAA, however, did not enforce amateurism rules nationally until 1954, when it formed the Committee on Infractions. n39 Over time, the definition of amateurism broadened to include athletics grants-in-aid and allow recruitment of high school athletes. n40 Another major change occurred in 1974, when the NCAA modified its rules to allow athletes to compete in one sport as a professional, while maintaining their amateur status in another. n41

The modern definition of amateurism employed by the NCAA focuses on education as its conceptual cornerstone. Section 2.9 of the NCAA Manual provides:

Student-athletes shall be amateurs in an intercollegiate sport, and their participation should be motivated primarily by education and by the physical, mental and social benefits to be derived. Student participation in intercollegiate athletics is an avocation, and student-athletes should be protected from exploitation by professional and commercial enterprises. n42

The NCAA website further explains that

[*560] [a]mateur competition is a bedrock principle of college athletics and the NCAA. Maintaining amateurism is crucial to preserving an academic environment in which acquiring a quality education is the first priority. In the collegiate model of sports, the young men and women competing on the field or court are students first, athletes second. n43

Generally, the NCAA's amateurism rules prohibit contracts with professional teams, receiving a salary for participating in athletics, receiving prize money above actual and necessary expenses, play with professionals, tryouts, practice or competition with a professional team, benefits from an agent or prospective agent, agreements to be represented by an agent, and any delay of initial full-time collegiate enrollment to participate in organized sports competition. n44

The bright-line rule that the NCAA has attempted to draw, then, rests on the concept of education. n45 Funds provided in support of education, including scholarships, room, board, and most recently, cost of attendance, all fall within the concept of amateurism because they are expenditures related to education. n46

The complex nature of the NCAA rules, however, demonstrates the difficulty in both applying and policing this distinction. n47 The increasing challenge of enforcing the rules has led to a proliferation of compliance staff members, as well as controversy in enforcement. n48

B. The Conflict Between Educational and Commercial Interests

As the NCAA has settled in recent years on a definition of amateurism linked to education, the increasing commercialism of intercollegiate [*561] athletics has raised questions about the fairness of this approach. Where the environment is one where the athletic contests appeared supplementary to the educational experience, the concept of amateurism seems justified. For many of the non-revenue sports, and even in the Ivy League, which has no athletic scholarships, the concept of participation for the love of the game and for personal enrichment seems to be an appropriate characterization. n49

The reality, though, in the revenue sports of men's football and men's basketball, is that the entire enterprise has the feel of a professional economic machine. n50 One has to look no further to the level of seriousness that many fans accord to the recruitment of high school athletes as evidence that these sports go far beyond the simple joy of participation. n51

The economics reflect this reality. In most states, the highest paid public employee is a football coach or a basketball coach, with the salaries of many assistant coaches exceeding the salaries of college presidents. n52 The budget of the athletic department is by far the largest departmental budget at many universities. n53

Indeed, at many institutions, the athletic department remains deeply interrelated to the fortunes of the university. Increasingly, it operates (thanks to broad television coverage) as a front porch for the university, attracting students, alumni donors, and the general public into the university community. n54 The benefits for the university are obvious, even [*562] apart from revenue raised by the athletic department. n55 The continued success of athletic programs remains a high priority, particularly for large public institutions. n56

Further, the creation of conference-based television stations has added to the revenue for higher education institutions. n57 The SEC Network, in particular, has been quite successful, generating millions of dollars in revenue and providing widespread national exposure for its universities. n58 Indeed, almost all of the SEC football and basketball games are now televised nationally. n59

As the economic side of intercollegiate athletics continues to grow, the tension between the commercial enterprise of athletics and the goal of education embedded in the concept of amateurism continues to increase. n60 At one level, the idea that institutions and their employees, coaches, advertisers, television networks, conferences, refreshment vendors, and other involved parties all benefit financially from revenue sporting events offends notions of fairness when compared with the absence of remuneration provided to student-athletes. n61 The appearance that increasingly persists is that the universities and the aforementioned third parties benefit off of the student-athletes in a way that is exploitative and unfair. n62

The wealth gap between the coaches and the many student-athletes that come from poor backgrounds is particularly striking. n63 Similarly, university [*563] sales of athletes' jerseys seem unfair when not shared with the athletes. n64 As discussed below, the use of athletes' physical characteristics by the NCAA to create video game avatars, drawn from game film of the athletes, again supports the perception that the student-athletes do not receive fair treatment under NCAA rules. n65

Even more problematic, though, is the evidence that the educational experience of student-athletes may not be meaningful, or at the very least becomes compromised. n66 As the beacon of the concept of amateurism, the idea that student-athletes receive academic benefits from their respective institutions lies at the heart of the justification of denying pay-for-play. n67

Certainly, where academic fraud occurs, this standard appears to be a sham. n68 But even where universities follow NCAA rules, there is an open question concerning the degree to which the athletic requirements placed on student-athletes limit or compromise their academic opportunities. n69

The widespread unpreparedness for college, as evidenced by the test scores and high school grade-point averages of many athletes, particularly in the revenue sports, highlights this issue. n70 Even with tutoring, the [*564] educational prospects of such students can diminish. n71 The temporal requirements on the student-athletes make the idea that education comes first somewhat dubious in many situations. n72 Where athletics require a commitment of forty to sixty hours a week, engaging in academic matters in a robust way seems like a difficult proposition. n73

Increasingly, the pressure on students and universities to cut corners can compromise the educational experience of students. n74 Without a doubt, participation in a revenue sport can limit the academic choices of student-athletes. n75 The question is whether these demands eviscerate their choices entirely. The recent phenomenon of clustering majors at some universities suggests such compromising might occur at many schools. n76 To be sure, many student-athletes want more time away from their athletic obligations. n77

The NCAA and its member institutions are not unaware of these issues. Nonetheless, the NCAA has demonstrated its reluctance to double down on its emphasis on education, largely allowing athletic departments and coaches to dictate the schedules of student-athletes. n78

[*565] While the NCAA has made clear that most of its athletes "go pro in something [else]," n79 it has done little to ensure that universities provide the academic rigor for student-athletes, particularly in revenue sports, that the institutions often require of their other students. n80 The proxy that it uses–graduation rates–ignores the quality of education student-athletes receive. n81 Adding more robust limitations on the time spent participating in sports might make the achievement of a meaningful education a more realistic goal. n82 Instead, the appearance remains that an eligibility-at-all-costs approach prevails at many institutions. n83

C. The Northwestern Union Case

In 2014, football players at Northwestern University attempted to unionize by petitioning the National Labor Relations Board (NLRB) to recognize their election. n84 In a decision that the NLRB later vacated, Regional Director Peter Sung Ohr held that the football players are university employees for purposes of the NLRB. n85 The significance of this decision was not in its outcome–there will be no union on the Northwestern campus anytime soon–but rather arose from the language of the decision and the compelling case it made for understanding the relationship of athletes to the university in terms of employment. n86

The Director explained that the central reason the athletes attended Northwestern was to play football. n87 Education, if a reason at all, was secondary. n88 Further, he cited the economic benefit to the institution that accrued revenue of $ 235 million over a nine-year period. n89 The athletes provided the services that resulted in this revenue, working between forty [*566] and sixty hours per week. n90 In addition, the athletes received remuneration in the value of $ 76,000 per year, counting the cost of education, room, board, and books. n91 The picture he painted was clear–the intercollegiate athletics enterprise is a financial one in which universities accrue revenue from the performance of their athlete-employees.

While the NCAA and its member institutions might decry this characterization, the increasing perception makes this understanding a growing problem. And the continued economic growth of intercollegiate athletics will only serve to increase the pressure to share the wealth with the athletes.

II. THE ANTITRUST PROBLEM

In addition to an amateurism problem, the NCAA has an antitrust problem. No fewer than four major lawsuits are pending against the NCAA, challenging various aspects of its rules and structure under antitrust law. n92 In Hartman v. NCAA, the plaintiffs, a class comprised of women's basketball players, are challenging the NCAA limits on the amount of money student-athletes can receive as part of their grants-in-aid, arguing that this restriction violates federal antitrust law. n93 In Gregory-McGhee v. NCAA, football players are challenging the limits to the grants-in-aid for intercollegiate athletes, arguing that the NCAA and the Big 5 conferences have colluded in violation of antitrust law to depress the value of the grants-in-aid such that it fails to cover the cost of attendance of the student-athletes. n94 In Alston v. NCAA, the plaintiffs raise a similar claim, arguing that NCAA limits on the amount of grants-in-aid violate federal antitrust laws. n95 Finally, in Jenkins v. NCAA, the plaintiffs' antitrust challenge includes all football and basketball players, and more broadly challenges the restrictions the NCAA and its member institutions place upon student-athletes. n96

At the core of these cases is the same central claim–that the NCAA is a cartel that restricts the market for intercollegiate athletes to receive paid [*567] services. n97 All available employer institutions n98 in the market for college athletes have agreed to abide by a central set of rules that require intercollegiate athletes to maintain amateur status. n99

A. NCAA Antitrust Challenges

The NCAA is no stranger to antitrust challenges. n100 Indeed, the Board of Regents case from the 1980s has deprived it of its largest potential source of revenue–money from television rights for college football games. n101

In the early 1980s, the NCAA regulated universities through its College Football Association (CFA). n102 The CFA limited the number of times a university could appear on television and limited the number of games televised each weekend. n103 Although unthinkable in the current era of wall-to-wall coverage in which there is a game almost every night of the week, n104 the CFA system capped appearances of member institutions and prohibited them from entering into their own agreements with networks. n105

The University of Oklahoma and the University of Georgia, football powerhouses at the time, petitioned the NCAA for the right to enter into their own agreements with television networks. n106 The NCAA refused, citing the fear that televising more games could threaten attendance at college football games. n107

Georgia and Oklahoma challenged the NCAA's restrictions, arguing that they violated the Sherman Act, the federal antitrust law that prohibits [*568] unreasonable restraints of trade. n108 Specifically, the universities claimed that the NCAA restrictions constituted an anticompetitive restraint of trade. n109

Applying the Rule of Reason test, the Supreme Court found that the restraint was indeed anticompetitive. n110 The NCAA offered a procompetitive justification for the restriction–the restriction was necessary to preserve its product in the market. n111 In other words, it was necessary to restrict the ability of member institutions to appear on television in order to protect the live attendance at the football games. n112

The Supreme Court disagreed. n113 It held that this justification was inadequate because it was "not based on a desire to maintain the integrity of college football as a distinct and attractive product, but rather on a fear that the product will not prove sufficiently attractive to draw live attendance when faced with competition from televised games." n114 The proffered reason, then, was simply an argument against competition in the marketplace, not a means to promote economic competition. n115

The NCAA also lost an antitrust challenge to its attempt to restrict the salaries of restricted-earnings basketball coaches. n116 In Law v. NCAA, the Tenth Circuit held that such restrictions were anticompetitive in violation of the Sherman Act. n117 The court rejected the NCAA's procompetitive justifications, including the reduction of cost. n118

Challenges to the NCAA's eligibility rules, however, have not until recently been as successful. In Smith v. NCAA, the Third Circuit denied an antitrust challenge to the NCAA bylaw that restricted participation in NCAA sports as a graduate student at an institution other than one's undergraduate institution. n119 The court held that the rule restricted athletic competition, but not economic competition. n120 The amateur nature of [*569] intercollegiate athletics meant, according to the court, that antitrust law did not apply to NCAA eligibility rules. n121

Other cases challenging NCAA rules, including its no-draft rule and its no-agent rule, likewise did not prevail. n122 At the heart of these cases was the amateurism defense advanced by the NCAA–that antitrust law did not apply to NCAA eligibility rules because the relationship between student-athletes and their member institutions was not an economic one. n123 As discussed below, this understanding has started to shift, arguably as a result of commercial growth in college sports.

B. O'Bannon v. NCAA

In 2008, former UCLA basketball star Ed O'Bannon filed suit against EA Sports and the NCAA for misappropriating his likeness and using it in a video game without his consent and without compensating him. n124 The class of plaintiffs broadened to include current and former intercollegiate athletes. n125 EA Sports settled with the plaintiffs pictured on the video games, leaving a class action lawsuit of current athletes against the NCAA, in which the athletes sought an injunction against the enforcement of the NCAA's amateurism rules. n126 Specifically, the athletes sought the ability to receive remuneration for the use of their names, images, and likenesses. n127

At trial, the plaintiffs argued that the NCAA's amateurism rules violated the Sherman Act as anticompetitive restraints of trade in two distinct markets: (1) the college education market and (2) the group licensing market. n128 The district court held that the NCAA rules constituted price-fixing in the college education market in that they limited the ability of athletes to bargain in the market for benefits, including the full cost of attendance of their grants-in-aid. n129 As to the group licensing market, the [*570] court held tha