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America’s Supreme Court paves the way for college athletes to get paid

AMERICAN COLLEGE sport is a lucrative business, raking in $18.9bn in 2019, up by 65% from a decade earlier. Prominent coaches and athletic directors routinely command seven-figure salaries; universities receive millions of dollars from television and apparel sales. The players, however, receive no compensation beyond their scholarships. Rules set by the National Collegiate Athletic Association (NCAA), which governs college sport, dictate that the athletes are amateurs, and hence ineligible for compensation beyond scholarships covering tuition and room and board. A unanimous decision by the Supreme Court on June 21st could change that.

For decades the NCAA has argued that being paid would undermine the sanctity of college athletes’ endeavours. But America’s highest court has decided that the NCAA’s restrictions on “education-related benefits”, such as computers, internships and graduate-school scholarships, violated American antitrust laws. The Supreme Court reasoned that the NCAA’s rules on compensation meant that colleges were in effect colluding to suppress the wages of college athletes. Justice Brett Kavanaugh added a separate opinion inviting broader challenges to the NCAA’s compensation rules. “The NCAA’s business model would be flatly illegal in almost any other industry in America,” he argued. “Movie studios cannot collude to slash benefits to camera crews to kindle a ‘spirit of amateurism’ in Hollywood.”

The Supreme Court’s ruling does not mandate that colleges must pay their athletes, only that they cannot collude with each other to drive down athletes’ wages. But establishing that the NCAA cannot ignore antitrust laws could markedly change the university athletic system. Without the NCAA’s restrictions on pay, individual colleges will be able to decide for themselves what sorts of benefits they want to provide for their players. This could potentially lead to a more competitive market for college athletes. Such a scenario, although beneficial to the athletes themselves, raises a number of thorny issues for the college-sports industry as a whole.

For one thing, richer colleges will be able to offer better benefits to potential recruits than their poorer rivals. Big universities with well-funded athletics departments already have their pick of the litter when it comes to selecting high-school athletes. This is because they can provide superior coaching and better exposure to professional scouts. They would look even more attractive if they could also offer better financial compensation or more generous health-care benefits. This risks further entrenching rich-college dominance in sports.

Moreover, colleges that opt to pay their players would need to consider how to allocate their athletics revenue across their different sports teams. Although men and women play 24 different sports at the college level, only two—men’s basketball and men’s American football—bring in any significant revenue. Currently athletes who participate in less popular sports, such as tennis or fencing, are in effect subsidised by basketball and American-football players. Federal law currently prevents colleges from discriminating based on sex. Would colleges have to offer members of the women’s swimming team the same benefits as male basketball players?

Establishing that the world of college sports is subject to antitrust regulations could also potentially lead to direct compensation in the form of salaries. A working paper published last year by Craig Garthwaite of Northwestern University and three other economists imagines what college athletics would look like if it operated as a free market. It finds that college stars would be paid substantial sums. Assuming that these athletes, like their professional counterparts, receive half of the revenue they generate in the form of broadcasting deals, ticket sales and the like, male college players of American football and basketball on average would earn $360,000 and $500,000 a year each respectively.

The Supreme Court’s decision all but guarantees that the NCAA will face further legal challenges. On July 1st new laws will come into effect in six states, granting college athletes the ability to earn money based on use of their names, images and likenesses. College-basketball players, for instance, will be able to receive payment to appear in video games or car commercials. The NCAA has maintained tight control over college sport in America since it was founded in 1906. After more than a century, it is at last losing its grip on the ball.