A federal district court granted a preliminary injunction preventing the NCAA from enforcing one of its bedrock rules—that member institutions cannot directly compensate student athletes for name, image, and likeness (NIL). For over 100 years, NCAA bylaws prohibited payments to students representing member institutions in intercollegiate games to maintain amateurism across college sports. In recent years, due largely to mounting antitrust losses, the NCAA has allowed college athletes to earn compensation for their NIL but has prohibited compensation by schools and their boosters (so-called NIL collectives) related to the recruiting and transfer process. Believing that those prohibitions likely violate federal antitrust laws and harm students, the Tennessee federal court has preliminarily enjoined the NCAA from enforcing that restriction in State of Tennessee, et al. v. NCAA, No. 3:24-cv-00033.
Why can the NFL have rules and regulations regarding free agency and a salary caps yet the NCAA repeatedly lose federal antitrust challenges for having analogous rules? The answer lies with federal labor law and the non-statutory labor exemption. To promote labor unions and the collective bargaining process, courts recognize a non-statutory labor exemption to the antitrust laws allowing for restrictions on compensation and player mobility that would otherwise be an illegal restraint on trade. Student athletes have not been traditionally characterized as employees (that may be changing); therefore, they have not been permitted to form unions or collectively bargain with the NCAA with respect to compensation and other labor issues. Accordingly, NCAA restrictions on college athlete compensation are subject to federal antitrust laws. The only silver lining for the NCAA, under the current landscape, is that its rules have not been considered per se illegal and are instead analyzed under the rule of reason. Nonetheless, unless and until the NCAA can mount an argument that its rules have a net procompetitive benefit for competition related to student athletes, it is likely to continue to lose these antitrust challenges.