The decision yesterday by Florida Governor Ron DeSantis to approve an amendment to the state’s name, image and likeness law governing college athletes that facilitates college involvement in the NIL process represents yet the latest sign that the NCAA cartel, which prevents colleges from economically competing to recruit college athletes, is falling.
Cartel theory is one of those terms that sounds complicated in theory, but actually is quite simple. In a capitalist economy, individual businesses are supposed to compete against each other to produce the best products and hire the best labor. However, on occasion, the businesses in an industry do not compete against one another as expected, but instead they combine to set the price of a good or the cost of labor. When competitors work together in this manner, it is known as a “cartel.”
There are a few famous cartels in the business world outside of the college sports cartel. For example, OPEC, which is perhaps the most famous cartel in the world, collectively sets the price of gasoline.
For the most part, however, economic cartels do not last in perpetuity. This is because most economic cartels are illegal under U.S. antitrust law, as they restrain trade to the detriment of consumers. And, without an antitrust exemption, most cartels are internally unenforceable.
The above economic theory of cartels thus leads us to the interesting situation of the NCAA’s restraints on college athlete compensation, and Florida’s recent amendment of its NIL laws. To be clear, in economic terms, the NCAA is a simple cartel because the NCAA’s Principle of Amateurism, in nature, serves as a rule to prevent colleges from compensating their athletes. Absent such a rule, many colleges would offer salaries to the most desirable college athletes to recruit them to their school because doing so would maximize their own revenues.
The glue that has historically held the NCAA cartel together has been its threat to ban any member college that paid its athletes. The NCAA has even enforced this threat at least once in recent history: against SMU football. Yet, it has long been doubtful whether the NCAA could ban a member college for compensating its athletes, and the Supreme Court’s 2021 decision in NCAA v. Alston made unequivocally clear that the NCAA is not above antitrust law.
Thus, today, the only real thing separating colleges from directly participating in the business sense with NIL collectives that provide compensation to their athletes is state law forbidding as much.
As such, the NCAA cartel is likely to only survive in the long run as long as each individual state passes a law to prevent colleges from compensating their athletes. But, without knowing that every other state will do the same, it seems economically imprudent for any single state, or even a collection of states, would restrict their own market actors. Even leaving aside the ethical qualms of doing so, restraining in-state colleges from attempting to align economic resources with elite college athletes would place in-state colleges in an inferior position for recruiting these athletes.
With the glue sticking together the NCAA cartel coming undone first by California’s passing of the Fair Pay to Play Act and more recently by the Supreme Court’s dicta in Alston, states that pride themselves on having elite college sports teams today want to facilitate their colleges’ ability to use free markets to recruit elite athletes . Hence, DeSantis, seeking to maximize the competitiveness of Florida colleges in intercollegiate athletic markets, not surprisingly signed into law House Bill 7B, which amends Florida’s existing NIL law to allow schools to be directly involved in facilitating compensation for college athletes.
It seems hardly the case that DeSantis signed recent amendments to the Florida bill based on kindness in his heart and wellbeing about specific, low-income athletes.
Nevertheless, for those of us who believe in capitalism and free markets, Florida’s decision to amend its NIL rule to facilitate its state colleges existing the cartel marks another important step in the right direction.
And, incidentally, for those of us concerned with issues of labor equity and social justice, the amendment of Florida’s NIL bill, perhaps not by design but certainly in result, facilitates opportunities for elite college athletes—many of whom are from low-income families and of ethnic minorities—to bargain more effectively to secure for some of the fruits of their labor in the highly commercialized space of college athletics.
Marc Edelman (Marc@MarcEdelman.com) is a Professor of Law at Baruch College’s Zicklin School of Business, Sports Ethics Director of the Robert Zicklin Center on Corporate Integrity, and the founder of Edelman Law. He is the co-author of “Reimagining the Governance of College Sports After Alston” and “The Collegiate Employee-Athlete,” among many other articles of legal scholarship.
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