Comment: Court’s NCAA ruling may play into workers’ wages

By Eric Posner / Special to The Washington Post

The Supreme Court on Monday ruled unanimously against the National Collegiate Athletic Association in a closely watched antitrust dispute involving the compensation of student-athletes. The court held that the NCAA violated antitrust laws by conspiring to suppress some “education-related” benefits — such as scholarships for graduate degrees, the cost of tutoring and free computers — that schools might distribute to students. (Many recruited athletes already have their tuition waived and are given room and board and a few perks, and the schools wanted to draw the line there.)

The significance of the ruling goes far beyond the unique setting of college sports. The decision hints at a revival of antitrust law, and its application to an area of the economy that antitrust law has unjustly neglected: the labor market.

When employers agree among themselves to limit the wages they pay workers, that is a price-fixing (or technically, wage-fixing) conspiracy. Such an agreement enriches employers at the expense of workers who are paid below the market wage. And when wages are suppressed, fewer people take jobs, resulting in lower economic output, and thus higher prices for consumers. The employers profit at everyone’s expense.

Such agreements are supposed to be illegal under the antitrust laws. Yet beneath the fog of folklore, myth and public relations, the NCAA is little more than a device that universities have used for decades to fix the wages of the athletes who are hired to play sports before enormous audiences (at least in the case of Division I football and basketball).

In a narrow ruling, the court affirmed a trial court’s decision that held that universities cannot agree through the NCAA to restrict competition on education-related benefits. On the question of whether the NCAA can pay compensation above the cost of education (that is to say, full-blown wages or salaries), the court did not express an opinion, because the plaintiffs did not raise this issue on appeal.

But as Justice Brett Kavanaugh pointed out in his concurring opinion, the restriction on compensation above the cost of attendance is almost certainly illegal as well. The trial court had held otherwise, based on the NCAA’s claim that college sports would be destroyed if athletes were paid wages beyond educational expenses. But as Kavanaugh also noted, the NCAA’s theory of amateurism, which the court had swallowed hook, line and sinker in a case involving the organization in 1984, is baloney.

The NCAA’s amateurism justification boils down to the claim that fans will pay more to watch college sports if the athletes aren’t paid. That is, fans will value the product (athletic contests like football and basketball) more if they can think of the players as student athletes rather than pros. The trial court found little evidence for this claim, which is self-serving to say the least. But even if it were true, the law doesn’t allow firms to cartelize labor markets to please consumers. If the public prefers to eat at restaurants where servers are paid nothing but tips, restaurants aren’t allowed to agree with one another to pay servers nothing. Nor may firms cartelize markets in goods and services so that they can pay their workers high wages. The antitrust laws are based on a firm commitment to free markets.

In short, the NCAA cartel, hiding in plain sight for years, has finally been exposed. And the logic of the decision applies to other areas of the economy. In recent years, a consensus has emerged that as a consequence of lax antitrust enforcement going back decades, markets have become less competitive, resulting in higher prices and lagging economic growth. To remedy these problems, the Biden administration has made antitrust enforcement a priority, as have Democrats in Congress, including Sen. Amy Klobuchar, D-Minn., who has proposed a bill that would revive muscular antitrust enforcement. So far, the Supreme Court has been skeptical about antitrust efforts, but the unanimous decision in the NCAA case may show that the court is coming around.

Antitrust law has almost never been used to protect workers from employers who cartelize labor markets; who suppress wages through agreement, agree not to hire each other’s workers, and so on. (This decision is the first decisive victory for employees in an antitrust case before the Supreme Court in almost a century.) Lawyers and economists assumed that labor markets were competitive and that employers rarely try to cartelize them. This view began to change about a decade ago after a scandal involving allegations of an agreement among Silicon Valley tech companies, including Apple and Google, not to recruit each other’s employees. The tech companies settled a class-action suit, paying some $415 million to help make up for lost raises, but insisted they had broken no laws. Since then, the U.S. government has repeatedly expressed concern about labor market antitrust violations. In just the last year, the Justice Department announced its first three criminal indictments of employers for violating the antitrust laws by agreeing not to compete for employees.

Much of this change in attitude is due to the work of economists who have discovered that many labor markets are highly concentrated; meaning that only a few employers compete for workers. As a result, wages are suppressed below the competitive level. It appears that many mergers have further concentrated labor markets, resulting in lower wages.

Highly concentrated markets along with a demonstrated willingness among employers to enter agreements to suppress wages indicate that there is an antitrust problem that urgently needs attention. With its ruling against the NCAA, the Supreme Court has given a boost to efforts to marshal the antitrust laws on behalf of workers. The decision may be overdue. But it hints that as others in government and the private sector work to wake antitrust law from its Rip Van Winkle sleep, the court won’t stand in the way.

Eric Posner, a professor at the University of Chicago Law School, is author of “How Antitrust Failed Workers,” which will be published in August.