The U.S. Department of Justice filed a statement of interest Friday to express “concern” that the NCAA’s proposed settlement to resolve the House, Carter and Hubbard antitrust litigations “may not” remedy the alleged antitrust violations.
While the statement offers detailed critiques of the settlement, the DOJ waiting until the last full workday before president-elect Donald Trump is sworn into office will likely discount its influence over the presiding judge, U.S. District Judge Claudia Wilken. That is especially true since the DOJ under Trump’s nominee for Attorney General—former Florida AG Pam Bondi—might disagree with the critiques and order Friday’s statement of interest be withdrawn or amended. Had the Biden administration offered these critiques last year, particularly before Wilken granted preliminary approval in October, they would likely have been more influential. Now they arguably appear like parting shots.
As to the critiques’ substance, the DOJ primarily takes aim at the proposed payment cap to athletes. In addition to paying damages of roughly $2.7 billion to different groups of former athletes in recognition of lost opportunities in video games, NIL and broadcasts, the settlement contains an injunctive relief provision that will allow colleges to pay athletes 22% of a defined formula for averaged shared revenue. The gist of it: colleges can elect to pay athletes in their program about $21 million total, and the payments would reflect media rights, ticket sales sponsorships and school use of NIL.
The DOJ finds what it terms “the Salary Cap Rule” problematic since it is an artificial number that doesn’t reflect the free market. In a setting without a cap, a big-time school like Alabama or Texas might pay athletes far more than $21 million. After all—top, deep-pocketed programs could get into bidding wars for five-star athletes, which would lead to more and better offers. Also, athletes at some top programs provide more than $21 million in value and would be paid more in a market without a cap (or with a higher cap).
There’s an important antitrust and labor law component at stake. A salary cap imposed by competing businesses (such as college sports teams) on earnings opportunities of the athlete services they seek to buy (they try to buy the performance and NIL of top high school recruits and transfers), and a cap that is not collectively bargained with a players’ association, is problematic under the Sherman Act. The cap would be a blanket restraint of trade. There is also no players’ association in college sports because college athletes are not (at this time) employees and unions can be formed by employees only. In a world where college athletes were unionized, the union and the NCAA could rely on the non-statutory labor exemption, which embodies a series of U.S. Supreme Court decisions that grant an antitrust immunity to workplace rules when they primarily impact wages, hours and other working conditions and are borne through bargaining.
The DOJ is also dismayed by the 10-year period for the settlement, worrying “the NCAA may attempt to use the cap’s incorporation into a court-approved settlement as a shield against future antitrust actions seeking more complete injunctive relief.” The DOJ references NCAA counsel informing the DOJ that the association retains the right to use the settlement against potential antitrust litigation.
In addition to the lateness of this filing and the fact that Trump’s DOJ isn’t bound by it, it is also important to remember that a settlement reflects a give-and-take. As their attorneys have implied during court hearings, the NCAA and the power conferences wouldn’t have agreed to settle if the result was an unrestrained free market for college sports. The $21 million cap reflects that bargain. It is a cost control that made a settlement sensible for the NCAA and its president, Charlie Baker. It also made sense for the players’ attorneys. They might have won the cases and forced a free market, but the litigation would have been tied up in appeals for many years.
They might have also lost, which is a point that is often overlooked—just because Wilken found the NCAA’s defenses unpersuasive, doesn’t mean a jury would. As I wrote last fall, there’s a logical reading of the U.S. Supreme Court’s ruling in NCAA v. Alston—which concerned not NIL or money to play sports, but payments for college athletes’ education-related expenses—that suggests the NCAA might defeat the House, Carter and Hubbard plaintiffs at the U.S. Supreme Court.
It’s worth noting that Wilken granted preliminary approval of the settlement last October despite the filing of a comprehensive, multifaceted objection raised by seven former and current D-I athletes. Represented by Hausfeld LLP, the athletes raised eight arguments, including that the settlement is too low by $3.8 billion, conflicts with NIL laws in Virginia, Texas and other states that bar the NCAA from enforcing NIL rules, and that the salary cap of 22% on revenue “has no reasonable basis” and is dramatically less than the roughly 50% revenue split to athletes in the major pro leagues, where there is collective bargaining. If Wilken wasn’t swayed by those arguments in October, there’s a good chance she won’t be swayed by a retelling of them by others this year.
The DOJ’s statement of interest comes a day after the Department of Education published a fact sheet opining that Title IX applies to NIL payments by a college. The fact sheet is not law, is not owed deference by courts and as U.S. Senator Ted Cruz (R-Texas) noted, could, like the DOJ’s statement of interest issued on Friday, be reversed by Trump as soon as Monday.
