Is Antitrust Going to Kill Olympic Sports?
The settlement between the NCAA, the Power Five, and the student-athletes who have long been victims of the NCAA cartel accomplishes a lot of good. But will it kill Olympic sports? Do you care?
Who doesn’t love watching the Summer Olympics every four years? I love it. And it looks like America will be wildly successful once again in the 2024 Paris Games. Enjoy it while it lasts. Today’s Competition on the Merits is about why antitrust might kill American success at Olympic sports. Perhaps that is a bit dramatic. But even if antitrust does not kill completely the development of Olympic athletes in NCAA colleges – the NCAA settlement will almost certainly maim it. Either way, Olympic sports will need to find a new way to survive and thrive.
The NCAA Breeds Olympic Athletes
I hit “publish” on this newsletter just while watching men’s gymnastics and swimming. Katie Ledecky (Stanford) is always amazing (no spoilers here in case you have not watched yet). And I’ve already got my calendar blocked off to watch as much Olympic wrestling as I can next week with Aaron Brooks (Penn State), Kyle Dake (Cornell), and Spencer Lee (Iowa) leading the way for the U.S. men’s team and Kennedy Blades (Arizona State) and Helen Maroulis (Simon Fraser) for the women. Just last night I watched America’s FAAFO Women’s Gymnastics team dominate their way to an inspiring gold medal performance led by Simone Biles, Jordan Chiles (UCLA), Jade Carey (Oregon State University), Sunisa Lee (Auburn), and Hezly Rivera (high school).
You get the point. Your favorite Olympian was probably an NCAA athlete. There are 1,221 current or former NCAA athletes competing in the Paris Olympics. Of America’s 626 Olympians, 386 are current of former NCAAers. 21 Olympic wrestlers from around the world compete in the NCAA. Heck, 131 Canadian Olympians call or called an NCAA college home. The NCAA has been the breeding ground for American Olympians for decades and is a critical part of Team USA’s success at the Olympics.
And while we celebrate American gold (and silver and bronze!) for the next few weeks in Paris, what about 2028 in Los Angeles? Or the 2026 Winter Games in Milan? There is good, and maybe very good, reason to believe that the ongoing antitrust battles between the NCAA, its member institutions, and NCAA athletes will hinder significantly America’s ability to develop Olympic athletes. And that might understate the problem. Worst case scenario? The antitrust-inspired brave new world of paid college athletics kills Olympic sports at the college level.
Let me say here and now – I’m no fan of the NCAA as an institution. I think the NCAA is a serial violator of the antitrust laws and many of the suits against it should prevail on the merits. So the following is not a commentary on the quality of those suits – but an unhappy story about collateral damage and some thoughts about what to do about it.
Why Should You Care About the Olympics?
Why should you care? There are, indeed, bigger problems in the world. Significantly bigger ones. Perhaps you do not have bandwidth to care about the plight of Olympic sports in NCAA colleges. Perhaps you do not care because you are less excited about American success at the Olympics than I am! After all, many of our readers are outside the United States. But you should care too! Brazil has 10 NCAA athletes in the Olympics, Spain has 30, New Zealand 23, Japan 10, and Germany 35!
But more generally, I am not afraid to admit I am at least a bit of an Olympic idealist. I believe in the notion of ping pong diplomacy. At least, sometimes. I believe in stories like Jesse Owens befriending German long jumper Luz Long walking arm in arm at the 1936 XI Olympic Games for all to see, including Hitler, and developing a life long friendship.
I could not say it better than President Ford did in describing the importance of the Olympics:
Broadly speaking, outside of a national character and an educated society, there are few things more important to a country's growth and well-being than competitive athletics. … For one, do we realize how important it is to compete successfully with other nations? Not just the Russians, but many nations that are growing and challenging. Being a leader, the U.S. has an obligation to set high standards. I don't know of a better advertisement for a nation's good health than a healthy athletic representation. Athletics happens to be an extraordinarily swift avenue of communication. The broader the achievement the greater the impact. There is much to be said for Ping-Pong diplomacy.
In 1972, when I received the college Football Hall of Fame award at the Waldorf in New York, I remarked on this new Chinese passion for the old American game, and I said that one day soon we would have to cope with a seven-foot Chinese Wilt Chamberlain. Sure enough, last year the Chinese had a touring team that featured some real giants, and they did all right. In five years they will be competitive. Of course, the Chinese do things we would never find acceptable in a free society. Completely regimented, state-supported, state-manipulated athletic programs are not for us. It is a matter of style as well as philosophy. But if we want to remain competitive, and I think we do, we owe it to ourselves to reassess our priorities, to broaden our base of achievement so that we again present our best in the world's arenas. From a purely political viewpoint, I don't know of anything more beneficial in diplomacy and prestige.
Amen. So let’s start at the beginning with the NCAA’s well-deserved antitrust woes, and then turn to how its recent proposed settlement might impact the landscape of college sports – and Olympic sports specifically. By the end I hope I’ve convinced you this is a big problem – and one worth solving. I’ll close with a few half-baked thoughts about that subject.
The NCAA Has Got 99 Problems (and They Are Mostly Antitrust)
The NCAA has been at the heart of antitrust controversy for decades. Antitrust students all read NCAA v. Board of Regents of the University of Oklahoma, and of course, NCAA v. Alston more recently. And the antitrust scrutiny makes a ton of sense. The very core of the NCAA, after all, is an agreement among colleges that compete with one another in the world of commercialized college sports and elsewhere that lays out the rules for when and how colleges can, and cannot, compete with one another. In other words, the NCAA is and has been a cartel.
That the NCAA is and operates like a cartel is not news. How else would one describe an agreement between rivals that limits not just whether, but also how, when, and how much, they pay their workers? Try as it might to use amateurism as a procompetitive defense to antitrust claims – the truth of the matter is that demand for college sports does not and has not turned for a long time upon whether student-athletes are compensated. But that is all a bit besides the point. As the Supreme Court recognized in Alston, as a matter of antitrust law we would never allow cartel defendants to argue that the cartel is lawful because consumers only want to buy from firms that violate the law by fixing prices. Similarly, the Court got wise to and rejected the NCAA’s claim that college sports customers prefer products with illegally compensated labor. And as antitrust observers know, the pressure on the NCAA from antitrust litigation over the past few decades has been ever-increasing as plaintiff-athletes and former athletes challenge various restrictions imposed by the NCAA. From NIL rights to scholarship dollars and athlete pay, the NCAA faces a landslide of antitrust litigation challenging various aspects of its control over college student-athletes.
As lawsuits and settlements chipped away at the NCAA’s pretextual amateurism rules – the what happens next question has always loomed large. It has been foreseeable for some time that compensation for college athletes – at least those in big revenue sports like men’s football and men’s basketball – is coming in some form or fashion. And for an equally long time, it has been largely the case that the revenue from a handful of sports has largely subsidized the rest of the non-revenue generating sports that make up college athletics programs. With that tidal wave comes a host of concerns that have been a frequent topic of conversation by college administrators, college coaches and student-athletes, and fans, not to mention antitrust commentators:
If the floodgates open to pay athletes, who will get paid? Football players? Basketball players, too? Maybe a handful of athletes in other sports who come to college with millions of social media followers or some other presence?
If the top football programs with larger budgets compete by compensating top football recruits, will athletic programs seeking profitability need to cut costs and eliminate non-revenue generating sports? I.e., without monopsony rents associated with undercompensating athletes, college sports is about to get a lot less profitable. Will the decrease in profits mean cost-cutting measures in the form of eliminating other sports programs?
Title IX imposes some constraints upon the gender balance a college athletics program must maintain in terms of equal opportunity as measured by the number of programs and scholarships available to men and women student-athletes. In a world with student-athlete compensation, what impact will Title IX have on which programs get cut and which survive?
Well, it is not just talk any more. The brave new world of college athletics is here. Or almost here. In a big year for antitrust, one of the biggest events has been the announcement that the NCAA, power conferences, and athletes in several of those lawsuits (House, Carter, and Hubbard) filed a motion last week seeking preliminary approval of a settlement agreement that would fundamentally transform the landscape of college sports.
The best commentary around on the NCAA antitrust litigation is from Mike McCann, and I encourage you to read him for the latest and greatest on all things sports and antitrust. I will not discuss those lawsuits or the proposed settlement in great detail here, but a brief summary of the proposed settlement terms will suffice to paint what is looking like a dire picture for the future of non-revenue generating sports, and in particular, Olympic sports.
The Proposed Settlement Between the NCAA, Power Five, and Plaintiffs
The parties to the the House, Carter, and Hubbard class action litigations against the NCAA and Power 5 conferences (the ACC, Big 10, Big 12, Pac 12, and SEC) filed a motion seeking preliminary approval from United States District Court Judge Claudia Wilken (who also presided over both the O’Bannon v. NCAA and Alston v. NCAA cases) for a settlement that would end those litigations. I want to just summarize the terms of the proposed settlement for now – and bracket and underscore that settlement approval is NOT a slam dunk. Indeed, in a labor-related antitrust case against the UFC, a federal judge denied settlement approval against the wishes of the parties and sent the case to trial.
But for now – let’s examine the major details of the proposed settlement to see what it does and does not do:
How Much. The NCAA and member schools must pay about $2.8 billion dollars starting Fall 2025 over the next 10 years to athletes to compensate for revenue those athletes would have received as a result of endorsements and NIL rights, plus a share of broadcast revenue.
Who Pays. The Power Five schools are on the hook for about $664 million, with non-Power Five schools paying about $1 billion, and the NCAA for the rest along with insurance payouts.
What About Compensation Moving Forward? The NCAA would adopt a compensation model allowing, but not requiring, colleges to spend $20 to $22 million annually on student-athletes. Schools would decide how to allocate those funds and the revenue-sharing cap would increase over time. The compensation would be on top of scholarships.
Yeah, But Wouldn’t It All Go to Football? Again, schools are in charge of the allotments. But most expect something like 95% of the funds to go to football and men’s and women’s basketball, leaving about 5% to be distributed across other sports.
What about NIL? Colleges would also be allowed to pay student-athletes directly for their name, image or likeness (NIL). Those payments would count against the $22 million compensation cap. Student-athletes can sign NIL deals with third parties as well. Those would not count against the cap.
Scholarship Caps? Right now, the NCAA imposes scholarship limits by sport. For example, the NCAA limited wrestling to 9.9 scholarships and 85 full-ride scholarships for football. Those scholarship dollars previously could be split up across a greater number of athletes or allocated as the school wishes. The settlement abandons scholarship limits in favor of roster caps. For example, wrestling will now have a roster cap of 30 student-athletes and the football roster cap will move to 105 student-athletes.
Who is Bound by the Settlement. Plaintiffs can opt out of the settlement and sue individually. And obviously, the settlement does not settle other antitrust (or other) lawsuits against the NCAA. And there are several, including lawsuits concerning other NCAA rules on issues such as revenue sharing, transfer rules, employment status of student-athletes, and Title IX. Expect those and more suits. At the end of the day, the NCAA remains in a cartel structure. And it will face future litigation concerning its various rules – including those agreed to in the settlement – that each involve competitors agreeing to limit or restrict compensation or other benefits to student-athletes. Expect more antitrust suits against those restraints to continue and more to challenge the settlement itself.
What Don’t We Know? A lot. For starters, whether Judge Wilken will approve the settlement or alter it in any material way. Or even send the parties back to the drawing board with instructions. We also do not know which parties will opt-out of the settlement.
What Happens to College Athletics?
That’s a hard question. And a complicated one to answer. We do not know with certainty – but the pressure on the traditional model of college athletics is going to break it. That’s a good thing in a lot of ways. The traditional model was based upon a labor cartel model that was especially well practiced at exploiting student-athletes by restricting competition. While there is a lot we do not know about what college sports will look like in the future – certainly with respect to details – a few high level observations seem appropriate.
First, the net effect of the settlement, if approved, is a tremendous surge in compensation for student-athletes playing football at major programs. There will be some increase for men’s and women’s basketball. Alabama, Georgia, Texas, and other major football programs will spend a lot of money to compete in football and continue to earn lucrative television and merchandising rights. The University of Georgia has an athletic budget of around $210 million. Georgia State’s is less than $40 million. The roster cap move from 85 to 105 means a bunch of players that would normally trickle down to rosters of lesser programs will likely concentrate in the top programs. Some have predicted the handful of universities capable of paying out football players at this level will create a separate “semi-pro” conference. I do not want to focus now on what this means for parity in college athletics. Instead, suffice it to say a lot of revenue is going to flow to student athletes in a few sports. My own prediction is that the compensation caps themselves eventually fall as violations of Section 1 of the Sherman Act. But that is a discussion for another time.
Second, that giant sucking sound you hear is revenue previously shared with non-revenue generating sports leaving athletic department budgets. The basic idea is relatively simple. The settlement channels competition between colleges into the dimension of compensating revenue-generating athletes, i.e. football and basketball players. Athletic departments are going to have to find a way to generate revenue and cut costs – just like firms in other markets. The issue is that a really easy way to cut costs is to cut scholarships from or eliminate entirely non-revenue generating sports. Sports like – you guessed it – wrestling, track and field, swimming & diving, fencing, water polo, volleyball, and gymnastics. Olympic Sports.
Groups like the Intercollegiate Coach Association Coalition – a group representing NCAA coaches of Olympic sports – have seen this dynamic coming for quite some time. They have engaged in education efforts and lobbying efforts for an antitrust exemption that carves out relief (likely in the form of required NCAA schools to maintain a certain level of commitment to Olympic sports in order to be eligible for the antitrust exemption). Here’s the key paragraph of their letter to Congress:
Relief from antitrust laws and regulations appears to be desired by the NCAA. Almost every attempt by the NCAA to regulate in the area of revenue and competition has been met with litigation and much of it has been successful. This has caused financial strain that threatens to bankrupt the NCAA and destroy the relatively level playing field collegiate sports have enjoyed. By the same token, conversations about a “football super conference” that might exist if antitrust protections are afforded are every bit as detrimental to the Olympic sports as no relief at all. Granting the exemption without concomitant protections for Olympic sports will only result in more money pouring into the revenue sports and a proverbial arms race that will force many universities to choose between cutting Olympic sports in an attempt to “keep up” with the schools that have greater resources. Relatively speaking, it won’t take much of the additional revenue to keep Olympic sports alive but it will likely mean the difference between continued success on the world stage and the relative mediocrity that plagued so many of our Olympic teams only a few decades ago.
Of course, Congress has not provided such an exemption, with or without commitments to preserve non-revenue generating, Olympic sports.
SO WHERE DOES THAT LEAVE FUTURE OLYMPIC SPORT ATHLETES?
The collision course I’ve described here between college athletics, antitrust, and support for Olympic sports does not really depend upon Judge Wilkin approving this particular settlement or not. The NCAA’s reckoning is coming one way or another in terms of compensating athletes. The settlement is an attempt to put a finger in the dam. Maybe it will work for a while, but from an antitrust perspective it is difficult to come to any other conclusion than that any limits or caps (including those in the settlement) will also violate the antitrust laws, as do any other number of restrictions still imposed by the NCAA. And we are not far from it. Remember it was just a few years ago when Stanford (yes, Stanford with the huge athletic department budget) shut down 9 Olympic sports programs during COVID in response to financial pressures. If Stanford cannot maintain those programs, there are not many NCAA schools that can.
The antitrust exemption path feels like a dead-end. Antitrust exemptions are generally a bad idea. And they are disfavored for a whole host of reasons we won’t repeat here. The NCAA has sought one without success for a very long time, including intense lobbying efforts leading up to this settlement. Perhaps a horrible future Olympiad would generate demand for a legislative effort as with the Amateur Sports Act after the United States’s poor performance in Munich in 1972. But I would not hold my breath for a legislative solution that exempts the NCAA from the antitrust laws. That is good news for student-athletes who are paid. That is probably bad news for both the NCAA and for student-athletes in Olympic sports.
Holding aside the conditional antitrust exemption, my sense is that there are two types of paths forward, broadly construed. The first is to move fast and break things. And then, well, rebuild them. The current equilibrium with Olympic athletes distributed across hundreds of NCAA institutions and dozens of sports is unsustainable. There simply are not two dozen, much less one dozen, institutions that will be able to fund Olympic sports in the new and coming pay-for-play world of college football and basketball. One response is: let’s allow member schools to compete in this new world and re-optimize. Let the market work, as they say. No doubt the next equilibrium will look completely different than the landscape as we now know it. Like most markets left free to real competition, we should expect to see firms adjust, specialize, and differentiate from one another. Perhaps a handful of schools will specialize in high level, well-compensated, football programs – with only a minimal number of other women’s sports programs sufficient to comply with Title IX (e.g. Texas and Georgia might well keep some Olympic sports programs alive). Other universities might make other choices about the combination of sports and teams they want to offer. One can imagine a world where a handful of schools give up the revenue generating sports entirely – and concentrate only on Olympic sports.
But building an “Olympic” brand is a tough choice fraught with uncertainty. It is an open question whether the private value of sustaining a non-revenue generating sports program exceeds the private cost of doing so. There is a risk that there is not a market for such programs. But perhaps there is. There is undoubtedly substantial value to the university. Providing Olympic sports on campus does help the university achieve a number of goals. Institutions adopting this strategy will give up football revenue and embark upon finding new revenue sources: NIL deals for individual athletes, corporate sponsorships and collaborations with companies interested in supporting Team USA, and so on. Who knows what this will look like. But it is almost certainly the case that it will involve a smaller number of institutions specializing and concentrating efforts on Olympic sports.
The second path is treating Olympic sports like a public good – like many nations do, while the United States has largely relied upon private funding and the NCAA. That may take many forms. What the Olympic sports need is some sort of commitment from universities to fund non-revenue generating sports. One estimate is that universities spend about $5 billion a year on non-revenue generating sports. The funding piece can, in theory, be decoupled from an antitrust exemption. The antitrust exemption is just one lever to get such a commitment done: “If the NCAA wants its exemption, its member schools must commit X% of its athletic department funding for Olympic sports.” But there are other levers. For example, most NCAA colleges receive all sorts of federal funding. And one might imagine a world where legislation requires universities receiving federal monies to allocate some amount to Olympic development. Or perhaps it would involve direct funding. A politically popular idea every four years but seemingly at no time in between.
Revealed preference seems to indicate that the market for Olympic sports is only hot every four years, if that. I say that with sadness. I am a staunch college wrestling fan – a sport that finds Division I programs constantly on the chopping block and has struggled to keep its head above water in the marketplace.
There are success stories. Tennis and the NSTA own the rights to the U.S. Open and generate several hundred million dollars per year that can be deployed to help support college tennis. But that is a rare exception. And much of the world that enthusiastically supports the end of the NCAA cartel (I count myself among them) does not yet seem to be grappling with the inevitable collateral effect on Olympic sports. Much of the response is denial: “The universities are greedy and do not have to cut costs after paying out the revenue generating sports.” But I fear even universities with large athletic department budgets face tradeoffs.
No answers between these paths today. Just some hard choices to think about.
In the meantime, let’s enjoy Simone Biles, Katie Ledecky, and Kyle Dake while we have them. Go Team USA!
