Deep Dive Episode 171 – Courthouse Steps Oral Argument: NCAA v. Alston

On March 31, 2021, the Supreme Court heard oral arguments in NCAA v. Alston, a case addressing a Ninth Circuit decision holding that the National Collegiate Athletic Association’s eligibility rules regarding compensation of student-athletes violate federal antitrust law. The Court is expected to review the decision according to circuit splits and general antitrust principles.

Joshua Wright, a former commissioner at the Federal Trade Commission, joined us to discuss oral arguments and the potential implications of the case.

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Transcript

Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.

[Music]

 Nick Marr:  Well, welcome everyone to The Federalist Society’s teleforum conference call as today, April 1, 2021, we have a Courthouse Steps Oral Argument Teleforum on NCAA v. Alston. These oral arguments were heard yesterday, and it’s a pretty popular case. My name is Nick Marr. I’m Assistant Director of Practice Groups here at The Federalist Society.

 

      As always, please note that expressions of opinion on our call today are those of our experts.

 

      We’re very pleased this afternoon to be joined by Professor Joshua Wright. He’s a university professor and Executive Director of the Global Antitrust Institute at Antonin Scalia Law School at George Mason University, and himself a former commissioner at the Federal Trade Commission. So thank you very much for being with us today. Professor, I’ll hand the floor to you.

 

Prof. Joshua Wright:  Thanks, Nick. I thought what I would do to start is spend just a couple of minutes, especially for those on the call less familiar with the run up to the case to yesterday’s argument, and then I’ll share my reactions to the argument and some of my views on what’s going on and what’s likely to happen.

 

      But just a couple of minutes for a primer for those who may be just paying attention to this with the argument yesterday. I suspect there aren’t many of those on the call, but just in case. And there are enough NCAA cases running around that I think it probably makes sense for the conversation to want to distinguish one from the others.

 

      So Alston is a case about NCAA and NCAA member-imposed restraints on what they describe as education-related benefits. So it’s a challenge — O’Bannon had name, image, and likeness rights. This is about restraints imposed by the NCAA on education-related benefits, how much they spend on things that they define as education-related benefits. The Court talks a lot about computer equipment and books and things.

 

      And that distinction I lay out in the beginning because, for those of you who listened to the oral argument, there is a battle over competing parades of horribles for what happens if Alston wins, what happens if the NCAA wins. Do we get into pay-for-play and all out compensation wars for student athletes between member schools? They are dancing around the line of what the decision would mean in either direction for the college athletic system generally. Do we end up in pay-for-play? Overall, is that good, is that bad, etc.?

 

      One might listen to the argument and think those restraints were at issue. They are not. They’re sort of a narrower set, a point that Alston’s counsel made repeatedly and, I think, fairly effectively throughout the oral argument.

 

So at the district court, the court found that there might be some limited pro-competitive justification for some of the challenge restraints to the extent that they were able to preserve — able to facilitate differentiation between college sports and pro sports by preventing unlimited payments that were unrelated to education.

 

So the district court opens this window to the idea that some of these restraints might actually be pro-competitive, that there actually may be some pro-competitive differentiating features of restraints that communicate to the marketplace that this product, college sports, is different than the alternative in the pros. But the court goes on and finds that the student athletes had successfully proven that there were less restrictive means of accomplishing those ends than the restraints actually adopted by the NCAA and rules for the plaintiffs.

 

As a remedy — and I think there’s lots of discussion over the remedy in the oral argument, and I think it is an odd one, and for the antitrust lawyers on the call that will certainly find it to be odd. And I think you saw some back and forth with the lawyers and the justices in a conversation of what to make of the remedy.

 

But as a remedy, the district court enjoined the NCAA from maintaining rules that cap education-related benefits but otherwise leaving the NCAA to do its own thing. The injunction from the district court allows the NCAA to write its own rules on what related to education means. It allows the individual conferences to — sort of sets the floor, but it allows individual conferences to compete on the dimension of what education-related benefits means and impose their own more stringent caps.

 

In doing so, the NCAA chooses a number, and the number comes from somewhere in the record on valuation traditionally given to student athletes for educationally-related expenses. So somewhere — I think it’s $5,900-something, so about $6,000. And so that number entered into the injunction.

 

So bracket there for a moment. This should make the hair on the back of neck of the antitrust lawyers listening in stand up a little bit. The underlying ruling says the NCAA — there’s that Section 1 Sherman Act, case so I need an agreement between competitors. I got that. We need to find that the agreement is in restraint of trade, that is anti-competitive. And the Court says an agreement to set education-related benefits is unlawful under Section 1 of the Sherman Act, but the remedy is the setting of exactly the same. That is an odd remedy in antitrust.

 

      And that struggle, I think, comes from — if you listen to the argument, you see Justice Breyer strikes out, in particular. In my mind at the moment, you see some struggling with what happens in a world with no injunction at all here, or no limits, rather, on NCAA ability to impose limits on compensation at the schools, conferences where they had the unfettered ability to compete. Then where do we land?

 

      For folks with an antitrust background listening in, unfettered ability to compete is sort of what we do. It’s what we aim for with an injunction in an antitrust case where the plaintiff has successfully demonstrated that the restraint at issue, indeed, violates the antitrust law. The goal of the injunction is to restore the competitive outcome. It is in that light that you find the injunction here, an odd antitrust animal.

 

      And I think if you listen in to the oral argument on your own, or if you’ve done so, you see lots of struggling around with what to do. I believe it was Justice Sotomayor who at some point said, “Well, isn’t this isn’t just judicial price fixing?”  And Jeff Kessler responds to the question, I believe, and said, “No, no, no. The NCAA picked that number.”

 

Well, the Court issued the order, and the order specifies a number. And antitrust law 101 is it is no defense of a Section 1 case to say that horizontal competitors have selected a reasonable price. That’s not what we do in antitrust law. Rather than cooperating together to suppress competition, we force those institutions to compete. And that’s not what the remedy does, and so you’ve got some issues that arise in oral arguments. And I’ll return to those, but I wanted to highlight a little bit the remedy.

 

Ninth Circuit reviews the trial record and unanimously affirms the district court’s finding and its injunction. It concludes — and the second step of the rule of reason framework says in step one, the student athletes have successfully satisfied the initial burden of showing an anticompetitive effect. No surprise, the NCAA proudly says, “We defined our product to suppress wages,” and in step two says, “The district court did just fine.”

 

It credited the NCAA’s argument that some restraints are necessary to facilitate demand for what the NCAA, at least, describes as this differentiated product. It says, “Sure. If true, and you have imposed restraints that facilitate demand, if factually true, that’s okay. You can make those arguments. Those are cognizable arguments under the antitrust law. You’ve got to prove them up factually. And you have for some; you haven’t for others.” And so it says in step two, some of the challenged rules serve a procompetitive purpose, but the limits on non-cash education-related benefits do not.

 

So we end up in that setting coming to the Supreme Court and the oral arguments, which were one of my favorites to listen to out of the recent set because I think you’ve got, as sometimes happens in the sports cases, you get new sports antitrust is sometimes a different animal, and occasionally get unique tensions between the ways people feel about markets and products and how they run into Section 1 doctrine. And I think you see a little bit of that here.

 

Let me give a couple of my own observations about what I heard, and how I see the case and see things in the light of the oral argument, and highlight a couple of things that I thought were interesting. So I view the case largely — and I think both sides in the oral arguments embraced this view, at least in part, so that they may characterize it differently as about the boundaries of the limits of antitrust law in reaching product design decisions for firms. This is a big important area of antitrust law.

 

And somebody described — I’m forgetting which Justice described — excuse me, I believe it was Waxman. So he said that whether the received antitrust wisdom is courts don’t second-guess and Monday morning quarterback—I guess that’s not college sports—but Monday morning quarterback product design decisions, we review restraints after the fact. We maybe even review mergers after the fact. But we don’t do that with product design decisions. That has a special place in antitrust law.

 

And it’s true. I can cite you cases from now until the end of the call where courts have said, “Hey, product design is special, and we really don’t want Article III courts micromanaging and second-guessing product design decisions.” And the NCAA grasps on to that concept in those cases and structures its defense around it. That is a principle that exists somewhere in antitrust doctrine. And they grab onto it and they say, primarily, as their defense, “We have made what we pay our workers a feature of product design.”

 

Now, here’s where I think you get into what I view as the primary problem for the NCAA’s argument and the primary flaw in the NCAA’s argument, which ultimately, I think, will lead it to lose here. And we can have fun talking about vote counts later. But I think they lose here for the following reason, that — let me break this into two different observations and tie that into the oral argument.

 

One of the observations is that the play for that product design principle that is in antitrust law are largely Section 2 cases. They’re largely monopolization cases. They are cases about what a single firm does to design its product. It is really difficult to win an antitrust case alleging that a single firm, even one with monopoly power, has designed a product in a way that you don’t like. You’ll see this with respect to, oh goodness, there were investigations — the FCC closed investigations in Google Search back in 2015 about the order of search results.

 

There is a robust, longstanding principle that a single firm gets to design the product the way it wants. It doesn’t it to be interoperable. It doesn’t want it — they don’t want to sell just to a rival, refusal to deal law. Within the bounds of antitrust law, plaintiffs can win, but it is rather difficult. And courts are reluctant to redesign the product and say, “Hey, listen, a firm that has been successful with a product for which there has been consumer demand, let’s second guess, and go in and say, ‘You should have designed it differently.'”

 

The problem is this is not a monopolization case. This is a case where, instead, the NCAA finds itself not making an argument like Google Search, you know, we design the product the way we like. The argument they are making is that they got together with the NCAA as a collection of competitors that got together and said, “We are going to make a product for which the core future is an agreement between rivals to suppress wages below the competitive level.” That, I think, is different in kind, not just degree, from the type of product design cases from which the differential principle in antitrust law was birthed. It is quite different.

 

And what they’ve done is they’ve said the core product design feature of amateurism is not just low wages; it is an agreement between competitors, an agreement that would otherwise be a Section 1 violation. And Jeff Kessler leads with this point. He says, “In any other context, this would be a per se antitrust violation. It may be a felony, may be pursued criminally. But it’s being treated here, historically, for different reasons, and so we’ll live with the rule of reason. But let’s not make any qualms about the fact that this is an agreement between rivals that otherwise probably would be, per se, unlawful. We live with the rule of reason. We won under the rule of reason, factually.”

 

The lower court said, “Hey, NCAA, if you can prove up that these restraints actually improved competition, you can have some of them.” But they lost on this one, and so here we are.

 

I do think that clinging to the product design defense — the defense that we allow firms leeway in antitrust law to design the products and go compete. And it’s a defense that’s been successful in a lot of settings, again, primarily monopolization law settings where the plaintiff is a rival or a customer who would like the product designed differently in some way.

 

This is quite different. This is a distinction where the NCAA, I think, creatively, but I think ultimately unsuccessfully, is playing a little bit fast and loose, maybe a lot fast and loose, with that product design principle to say it is an agreement between rivals that would otherwise violate the antitrust laws. That is the core product design feature.

 

That leads into a whole bunch of other arguments, but I want to begin with highlighting the limits of that principle as it exists currently in the doctrine. There are other attempts to grapple with that principle, and I largely read a lot of the oral argument through the lens of trying to grapple with the NCAA’s attempt to do something creative with that principle.

 

For example, Justice Gorsuch starts with and returns to the idea of monopsony power in his questions. He says, “Well, wait a minute. Isn’t what’s different here –?” He goes to joint venture law where this product design principle exists. He goes to joint venture law and he says, “Well, if we need the joint venture to have a product exist, we let people design the venture how they want. But isn’t this different because –?” And he attempts to distinguish through the presence of monopsony power. He says, “Well, they’ve got monopsony power, and so isn’t that different? Where we have joint ventures and there’s not market power, well, that power design principle is fine, and great, and pro-competitive, and consistent with the purposes of the antitrust laws. But isn’t monopsony power what makes it different?” And I think that’s 75 percent of the way there.

     

The next question to ask — and others get at this, in particular. I particularly enjoyed Justice  Kagan’s line of questioning, and Justice Kavanaugh, as well. The reason why Justice Gorsuch is worried about monopsony power here is because there is an agreement between competitors. The source of the monopsony power is an agreement between competitors to suppress wages. It seemed like, in that agreement — let me make two points about that.

 

Justice Thomas was attracted to this line of thinking with Justice Gorsuch. He started by asking, “Hey, what happened — what about the coaches? You said the core product design feature is an agreement to suppress wages, but why does that only apply to the players? What happened to coaches’ salaries?”, knowing darned well that they had ballooned. And Waxman answers at some point to say, “Well, yeah that’s right. If we don’t have the restraints, look what happened to coaches’ salaries. Salaries will balloon and the sky will fall because that’s going to turn these people, these student athletes, into professionals, and they’re going to spend less time studying,” or the parade of horribles goes there.

 

For my antitrust lawyers that are listening, try to do that argument in a non-sports context, or even a non-labor market context. It’s essentially an argument by the defendant in this Section 1 case that said, “Yes, you are darn right. Our agreement suppresses wages.” We know this because in areas where we did not suppress wages, wages were not suppressed. This is not something you would be committing malpractice as the defendant in a Section 1 argument making that argument.

 

Now, the context, I’m certainly not suggesting it was a core argument for the NCAA to make because it sports antitrust laws operated so differently. And it is the concept of amateurism and the way that the Court has clung to it in earlier cases that opens this line of defense and makes it plausible, in my view, plausible, and ultimately unconvincing and unpersuasive. But that’s where that line of questions comes from.

 

But you have right there on the sleeve of the defendant wearing the patches that say, yes, our restraint suppresses wages, and that’s good. The problem is the rest of antitrust law says that’s not good. And so there’s this struggle of whether amateurism or the ideal of college sports is enough to turn that part of antitrust law on its head. You see some element of that discussion in the questions that come from Justices Kavanaugh and Kagan who, I think, both very directly and in fairly pointed language — and Justice Kavanaugh invokes a concept that lies in a lot of Supreme Court doctrine post-1980s that say, “We do substance over form. We’re not going to allow the antitrust laws to give cover to a cartel agreement to exploit workers.”

 

And what he means there is using the cloak of amateurism or the label of amateurism might get you something, given the past cases, but it doesn’t get you a different set of antitrust rules and a horizontal conspiracy to suppress wages that is, and would otherwise be, a violation of Section 1 of the Sherman Act. Justice Kagan, I think, led that line of questioning, and I thought it was the highlight of the oral argument, for what it’s worth.

 

Justice Kagan hit the $64,000 question right off the bat. She gives a long speech about—not long, 20 seconds—about, “Goodness, counsel for the NCAA, you make this amateurism stuff sound fairly high-minded. But what if I don’t care about the history here or what amateurism used to be? And it’s different. You’re paying coaches with the –.” They talked about the strength coaches making $700,000. “Isn’t it different now? But more importantly, isn’t this just an agreement between rivals to suppress wages, at its core?” And I think that’s where the rubber hits the road line of questions from Justices Kavanaugh and Kagan are really what the case is about.

 

My own view is, under standard antitrust principles, the answer is yes. It’s plainly a Section 1 violation. And will the justices take the invitation to say, “But amateurism is different.”? And this has been the classic struggle in Section 1 NCAA-related cases for a really long time, which  gives the justices prior decisions and rules of the road to grapple with. But I also think it gives plenty of room to write a decision that both respects conceptually that the NCAA has the right and ability to have a differentiated product in pro sports, it can set all kinds of rules, but what it’s not allowed to do is what everybody else isn’t allowed to do under Section 1, which is agree with competitors to fix prices, including the price of labor.

 

One last point that I think I will — I’d like to highlight because I thought it’s fascinating. You get all sorts of defenses in sports cases generally but with the NCAA specifically that you really don’t see in other areas. And I thought one other really fascinating area of questioning to highlight — and I thought Amy Coney Barrett’s questioning on this in particular, and Justice Sotomayor as well, and I think a little bit from Justice Kagan, touched on the issue of —and I’m going to return to this product design point—on the point of who gets to decide what amateurism is.

 

And so, if going back a step — as I’ve just finished saying, unless you think amateurism is really special in some way where it turns some basic antitrust principles on its head, I think this is a pretty—I hesitate to use the word easy—it’s a pretty straight forward case for the plaintiffs. But you can see some minds open on the idea that maybe amateurism is that different or that special. And so we have the final question about what that means and what would that look like.

 

And I think one of the really interesting aspects of the oral argument, and one I’ll highlight in case anybody’s interested in talking about it in the questions, is the “who decides?” part. And I found the NCAA’s argument a little bit troubling in this regard. So the argument — back up. In antitrust 101, when we think about the how we adjudicate restraints of trade under the rule of reason, I think the standard is whether they — the Chicago Board seminal standard is whether they ultimately suppress or promote competition.

 

And we used to think about that through economic analysis. Do they increase consumer welfare? Does output go up? Does quality go up? Are consumers made better off? And the NCAA says, “Well, look, we know that the restraints are pro-competitive because the product exists and has existed for a long time.” It’s a little bit of a moving of the goal post. The case is about the particular restraint — whether the particular restraints promote or suppress competition. And the defense is, our whole product is, on net, good. And a little bit of a misconnect, and a misconnect that in a different type of antitrust case, I think you’d jump on right away, where adjudicating the effect of the restraint, not of the product as a whole.

 

And the NCAA’s move is, well, we need some restraints to have the product as a whole, but what about this one? And this is where this move comes in. And they say, “Well, our product is amateur sports, and we’ve defined amateur to mean we get to suppress the wages to a level that we feel is consistent with our definition of amateur.” The problem is that it’s not a contract interpretation case where firms get to commit to their own lexicon and judges defer. It’s not a contract interpretation case. It’s a case about interpreting the Sherman Act. And the Sherman Act sets a backdrop of rules that tell us how to evaluate the restraints that, frankly, don’t really care about if the NCAA feels like — has strong feelings about what the word amateurism means or how they define it.

 

These core principles for evaluating agreements are whether they suppress or promote competition. If I went in any other market, and I said, “I would like to compete in the athletic shoe market. And the way I would like to do that is I am going to conspire with other shoemakers to keep the price of labor down. And we will, because of that, be able to sell our shoes more cheaply, or make more shoes, or better shoes. Or maybe there’s just a bunch of consumers who like buying shoes knowing they were made with cheap labor.” It would be a silly argument to make in that case, that consumers want the wages suppressed. I think that that probably just isn’t true, factually.

 

But just thinking about it as a legal concept without regard to whether it’s factually true, which I doubt, what we would say in the normal context is what you’ve done is committed a Section 1 violation. You can’t compete that way. Antitrust places all sorts of limits on the way that you compete, and some of those limits are gray and fuzzy. This one is not. This one is you cannot agree with your competitors to fix prices in order to compete more effectively in a market. That’s not something you can do. It’s a longstanding principle.

 

I think about cases way outside of the antitrust context. I think the DOJ brought a case against Apple. And this was its e-book case. And the defense was, in large part, “Hey, we, Apple –.” Apple was alleged to be the hub in a hub and spoke conspiracy between publishers. And the defense was something along the lines of, “We need the agreement between publishers to solve a collective action problem. If all the publishers will come on with Apple and adopt our model, we’ll be able to compete with Amazon and the selling of books. We’re worried Amazon is charging prices that are too low.”

 

And the publishers are worried that this is bad and so they enter into a conspiracy with Apple as the hub, and they say, “This is to make us compete more effectively against Apple.” And they lose. They lose in a relatively straightforward way, in large part because the plain and simple limit in antitrust that any of the publishers could have agreed individually to work with Apple, but what you can’t do is enter into agreements with competitors to fix prices, or output, or business models, to claim you more effectively compete elsewhere.

 

I think that this runs into that bedrock principle. I think you will see the justices struggle with the appeal to amateurism. Justice Breyer in particular stands out as — “But the product is really special,” he says at some point. I think you will find attempts to struggle. And if the violation of the antitrust laws, I hear, were not so plain, I think it would be a much tougher case. But this is, at its core, something that is, was, and has been a plain, vanilla, hornbook violation of the antitrust laws for a long time.

 

The attempts to get around that concept by making it a product design case, I think, are incredibly creative, but ultimately failed to persuade me, and my guess is, from the line of questioning, will fail to convince more than maybe one or two justices that there’s anything else going on here other than an attempt to dress up or disguise an agreement that would otherwise violate Section 1 of the antitrust laws as an element of product design. I don’t think that the antitrust laws in the modern cases interpreting Section 1, or the rest of the antitrust laws for that matter, embrace the principle that the core substance of Section 1 can be avoided in that way.

 

 I’ll stop there. I’ve got a bunch of other stuff I wrote down. But I talked longer than I thought I would, so I will stop there and am happy to talk, answer questions, or hear what you think.

 

Nick Marr:  Thanks very much, Professor, for that great overview. We’ve got a caller queued up already.

 

Caller 1:  Thank you. I was wondering whether any of the briefing at any stage of the case addressed the issue of amateurism’s long and very sordid history. It has been used, especially a long time ago both in the United States, intercollegiately [sic], and in the Olympics and places like that to, for example, keep out poor folks and especially non-white folks as competitors. And therefore, I found the different products based on amateurism to not only be silly for reasons that you pointed out, but also to be basing it on something that is really, in many ways, very distasteful when examined more carefully.

 

Prof. Joshua Wright:  It’s a great question. I know they had a ten day trial in this thing. And I’m not sure whether any of that evidence—and I think your description of the history is an accurate and fair one—made it into this record. I know it has made it into the record of the other NCAA cases, O’Bannon and the like. So I would be surprised if it were not somewhere in the record here.

 

      And I found Justice Kagan’s reaction to some of the historical arguments to be — certainly, the one that I was most sympathetic to, which was, look, the history is — largely, when the NCAA invokes the history, it is for the point — at least in the oral argument, it was invoking the history for the point that the product has been on the market — the product survived the market test. Mr. Waxman kept saying, “We know its competitive because the product exists and has existed for a long time.”

 

And I think that was a little too slick for my tastes in the sense that it evaded the question of that consumer’s value A product is different from saying that this restraint is pro-competitive. Those are different things. And Justice Kagan’s approach was, “Well, forget your history.” And I think she makes an allusion to this in the argument. I do think she made a reference to the history can cut both ways, or can it cut the other way, as well. I’m not sure if that was a reference to the part of the history that you’re talking about.

 

So the punch line is I’m not sure if that was on the record with respect to these restraints, but it certainly has been in the backdrop of all of the policy discussion around this, but also, I think, in previous litigation.

 

Caller 1:  Thank you. Could I ask a quick second question? A shorter one?

 

Prof. Joshua Wright:  I don’t make the rules. Go for it.

 

Nick Marr:  Go right ahead.

 

Caller 1:  Why do you think the Court took the case since athletes are gradually starting to win them now? I’m not — I haven’t followed it closely to know whether or not there’s a split in the circuits or not. Is it perhaps because the Court wants a more — either to advance the process significantly or because it wants a more black and white and more satisfying solution like eliminating all the limits?

 

Prof. Joshua Wright:  It’s a good question. I can give you my guess, and that and five bucks gets you a cup of coffee, but I’ll tell you anyway. What I was listening for during the argument was a third possibility. And as an antitrust academic who advocates and teaches this stuff, the one I was kind of hoping for was that you had a Supreme Court interested in cleaning up some of the underlying Section 1 doctrine, the rule of reason framework and burden shifting. And the less restrictive alternative cases, if you read them, are a dead awful mess. They play a big role here. So I was hopeful in listening for some desire to do that. I heard none of it.

 

      So I’m left with a similar but smaller set of possibilities. And I think here one idea, at least, is that the likelihood that you get a split in the — you now will have a suit over every restraint ever and every change of rules from the NCAA. The suits are going to keep coming. The NCAA is going to be found to have an agreement in violation of Section 1, and we’re going to have a bunch of injunctions doing a bunch of different things. So I think the idea that you have an unholy mess anticipated in the lower court decisions certainly played some role, and why I would want to take the case if I were a member of the Supreme Court.

 

      Not that you have a plain split yet, because the student athletes are starting to win. Give them a chance to revisit Board of Regents. I was hopeful that chance would open the door to some more general Section 1 cleanup. And like I said, I just didn’t hear any of that. But my best guess is, like you said, the plaintiffs are winning these, and there’ll continue to be more. And I do think that that opens the door to a situation where — clearly, a lot of the justices were projecting, “We care about — the product is special,” and all of that, and maybe you want to fast-forward to the end game a little faster here.

 

And that reminds me, in the oral argument you had—I did find it odd—you had justices really interested. They used the phrase “antitrust endgame.” I’m going to now have to write a paper with that title. I don’t know what it will be about yet. But they did this antitrust endgame — is it going to Congress? Are we going — lots of things outside of the metes and bounds of the question presented about what was going to end up happening. Probably a third of the argument was either parade of horribles on either side about implications, and that happens in these arguments. But a lot of, are you going to sue again? What are you going to sue about? If the comp raises to 5,900 to 8,000? If there’s a new survey, are you going to sue again? What’s going to happen in Congress?

 

So my best guess, that’s at least consistent or colorable because it’s consistent with the existing evidence. It’s something like anticipated holding mess and maybe a split, who knows, but sort of fast-forwarding the end game.

 

Caller 1:  Thank you.

 

Prof. Joshua Wright:  You’re welcome.

 

Nick Marr:  We’ll go to our next caller now.

 

John Fortin:  Hello, Professor. This is John Fortin, one of your former student at George Mason. It’s somewhat along the same lines as the follow-up question, and I’m actually going to ask  you to engage with it fully. If I’m listening to your description and idea of the Court’s holding, you kind of think that the Court is not going to completely overturn the NCAA v. Oklahoma holding with regards to amateurism.

 

      And if that’s right, are you thinking that NCAA v. Oklahoma and the BMI cases are your two, seminal, really good defense cases for rule of reason analysis? I’ve created something new with amateurism and with the catalog of songs under the BMI case. Are you thinking that there’s chinks in the armor in this with this case, and that this line of reasoning is going to finally fall, and we’re not going to carve out exceptions, I think, is really the best way to ask the question?

 

Prof. Joshua Wright:  That’s a great question, John. And good to hear from you. I don’t think they’re going to overturn BMI or NCAA. I don’t think any of that is going to happen. I think the best way to read my skepticism of the NCAA arguments on that front is skepticism about the claim that the restraints, divided into two pieces, that it is factually true that the restraints are necessary to have the product. I think a line of cases that say if you enter into some restraints that facilitate creation of a new product that facilitate entry, that that is an antitrust good. I think that line of cases is safe and secure and not going anywhere.

 

What you have here is an attempt to say that a particular restraint is necessary to create the product. I think the right question — one, I think you’re hearing from me skepticism that that claim is factually true. And, in fact, they lost on the facts in the lower courts on that claim. But the legal avenue for defendants in Section 1 cases to say the restraint is reasonably necessary in the creation of a new product, I think that’s safe and sound.

 

I do think what this adds is closer to — there’s lots to talk about the case with Board of Regents and BMI for good reason. I think in some ways, the case is much closer to the Professional Society of Engineers in the Section 1 cannon in the sense that case sets — in Professional Society of Engineers, the per se violations for — you have an ethical, you have a joint venture, a society of engineers that sets an ethical code for its members. And the ethical code for its members restricts the ability to compete and sanctions them for competing.

 

And the defense was, “Yeah, but, goodness, if engineers compete on price, then quality is going to fall, and buildings are going to fall on heads.” And the court says, “Stop that. That’s not what we do in antitrust law. The antitrust laws are built on the premise that competition is good, and it’s just not cognizable. You are not allowed to stand up in court as an antitrust defense and say competition is bad.”

 

My reading of this case is closer to that. My reading is where the Court is going is not that Board of Regents or BMI — those defenses are available to defendants, but what’s off the board is the argument that the restraint is necessary to create the product only because I’ve defined the product to be something that requires an agreement to suppress wages. That is a circular dance that says the design of my product requires a felony, and so it’s not a felony when I do it because I define the product that way. I think that’s off the table.

 

And, to me, that’s the easiest way to write this. And the easiest way to write this is as an extension of professional engineers. I don’t think that because of the history here, that’s — yeah, go ahead.

 

John Fortin:  That was really going to be the follow up question, since the last caller got to follow up, so the still joint venture prong of we like synergies in industry, but we don’t like when that synergy excludes. And I think that that’s really what you’re saying you think the whole thing’s going to be, which I think is the correct answer, or it should be the correct answer. But what do I know? And so to that, thank you very much for answering my question.

 

Prof. Joshua Wright:  Yeah. My pleasure.

 

Nick Marr:  Okay. Thank you very much for that question, caller. We don’t have any questions in the queue right now. But in the meantime, Professor, I’ll send it back to you if want to touch on anything you didn’t get to touch on, or if you want to close this afternoon.

 

Prof. Joshua Wright:  I’m happy to close if there are no other questions. I think it’ll be really interesting. I do think, like I told the last caller, the easiest way to do this is to say to the extent that it is true that amateurism promotes consumer demand and consumer welfare, you can make arguments under the antitrust laws à la Board of Regents. You can certainly make arguments that amateurism promotes consumer welfare.

 

The arguments have to be true. They have to be true. And you can go and you can have fights over the evidence over whether the restraints promote or suppress competition. And to the extent it is true that amateurism helps successfully differentiate the product from some other product and consumers benefit from that competition, that’s something that’s cognizable under the antitrust laws. It was yesterday; it is today. You can do that, and we’ll have fights about that over the merit. That sign that leaves Board of Regents intact. It’s not an attack on amateurism, etc.

 

I think all of that stays. I think what goes, and the easiest way to write it — and you give that to Justice Breyers and others who want to make sure we’re not eating amateurism in the opinion. But you say those defenses, one, have to be true. They weren’t in the court underneath, or at least that was the record. And two, we take off the table that what’s allowed is to say the product feature that the restraint facilitates, the one I’m pointing as pro-competitive, requires—actually, doesn’t require—is defined by a conspiracy that would otherwise violate the antitrust laws.

 

If I started selling my tennis shoes on the basis that they were built on the back of an antitrust violation — if you look, it’s a crazy market. People like all kinds of weird stuff, and maybe people like to know I was breaking the law to make the shoes. So I tell them I have entered into Section 1 conspiracies to make these shoes. And that is true, and people buy the shoes because of that. I would expect to lose my antitrust case.

 

And I think that’s a caricature of an example, but I think that that ultimately is what you’ve got going here. The antitrust laws do not contemplate or allow, so far as I read them, an antitrust defendant in a Section 1 case to say, “Look, I’ve got this neat product characteristic. The neat product characteristic is the violation of the law, but because I successfully sell the product, antitrust analysis of the restraint changes.” I just don’t think that that’s a proposition of law.

 

I think in a normal case that wasn’t about college athletics — it’s a 9-0 opinion, and it’s a slam dunk. I think we’re not writing on a blank slate, so I think you may get a couple of different opinions. But I think you’ll get overwhelming agreement on the fact that you’ve got a Section 1 violation that you’ll get Board of Regents intact and that, largely, the rest of the opinion will be about the non-cognizability of arguments that you can define the product feature as a violation of the law.

 

Nick Marr:  Alrighty. Well, thanks very much, Professor. And on behalf of The Federalist Society, I want to offer our sincere thanks for the benefit of your valuable time and expertise today. It was a great program, very thorough, and I’m sure our audience will walk away knowing a lot more about this.

 

And thank you also to our audience for calling in, for your great questions. Just as a reminder, we welcome your feedback by email at info@fedsoc.org. Also, be checking your e-mails for announcements about upcoming Teleforum calls that are also listed on our website. So we’ll have more of these oral argument coverages, and there are a couple of cases that the Supreme Court ruled on this morning. We’ll have those scheduled, hopefully, in the next week, so check back in for more information about those. 

 

But until next time, thank you all for joining us today. We are adjourned.

 

[Music] 

Joshua D. Wright

Executive Director

Global Antitrust Institute, Antonin Scalia Law School, George Mason University


Antitrust & Consumer Protection

Federalist Society’s Corporations, Securities, & Antitrust Practice Group

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