This coming Monday (April 7), the eyes and attention of every college athletics administrator, journalist, scholar, and even nerdy fans will be fixated on one event. It is not the aftermath of the women’s basketball tournament championship game to be played Sunday afternoon, nor is it the men’s tournament championship game to be played Monday night. While these are marquee events that are practically assured to have major brands and star players, their impact on the future of college athletics pales in comparison to what will occur in a Federal District Courthouse at 1 pm Eastern Time on Monday.
This is the setting for the final approval hearing for a legal settlement agreement, colloquially known as The House Settlement, regarding three separate antitrust lawsuits filed against the NCAA and the wealthiest athletic conferences, which were known at the time of the filing as “The Power 5.” This series will prepare readers for the hearing on Monday. Part I (this article) will explain the background of the House settlement and how we got here.
What is the House case?
House v NCAA is a class action lawsuit against the NCAA and the Power 5 Conferences (Pac-12, Big Ten, Big 12, SEC, and ACC). It was brought by Arizona State swimmer Grant House and Oregon (now TCU) basketball player Sedona Prince on behalf of a class of over 10,000 athletes who played NCAA Division-I sports from 2016 onward. The lawsuit alleges that the NCAA’s amateurism rules regarding athlete compensation, particularly their prohibitions on NIL activities prior to 2021, are an illegal restraint of trade in violation of antitrust laws.
Historically, NCAA rules prohibited athletes from attaining endorsement deals or monetizing their image while competing. Failure to comply with these rules meant sacrificing your eligibility to participate in NCAA sports, which is the very thing that gave many of these athletes NIL value. A particularly illustrative example of the issues these arcane restrictions created is that of former UCF kicker and YouTuber, Donald De La Haye. The short version of the story is that De La Haye created a YouTube channel where he frequently posted videos about what it was like to be a college athlete. The channel gained enough popularity that De La Haye was able to monetize it. The NCAA and UCF then gave De La Haye a choice: take down the YouTube channel, or he could no longer play football. De La Haye chose YouTube and quickly had his athletic scholarship revoked.
In the Summer of 2021, following a 9-0 loss in a related Supreme Court case (Alston v. NCAA) and a wave of state laws prohibiting the NCAA’s enforcement of its NIL restrictions, the NCAA significantly eased its restrictions regarding athlete NIL activity. A point that frequently gets lost in the college-athlete NIL debate is that the right to monetize your own name, image, and likeness is a right that everyone has. The NCAA did not grant college athletes a new right in 2021; they were simply forced to stop restricting those athletes’ existing rights.
While the NIL era combined with the transfer portal has been a boon for some college athletes, that does not help athletes, like De La Haye, who exhausted their eligibility before the new NIL rules went into effect. The lawsuit also alleges that other NCAA restrictions, such as scholarship limits, that are still being enforced, constitute antitrust violations.
The House Settlement Agreement
The prospects of losing such an antitrust case are daunting for the NCAA. If this case were to go to a full trial on the merits and the court finds that the NCAA violated antitrust laws by fixing athlete compensation at $0, the dollar figure it could be on the hook for is nearly incalculable. The gap between the theoretical NIL value of tens of thousands of athletes who contributed to a multi-billion-dollar industry and $0 is difficult to quantify, but that’s precisely what the court would try to do. Then they would triple that number, as required under antitrust law. Settling this case has always been the smart option for the NCAA.
Last May, the NCAA and the plaintiffs agreed upon settlement terms that included $2.6 billion in “NIL backpay.” This is common for a settlement; instead of going to trial, the two parties agree upon an amount of money to resolve the case. However, the House settlement attempts to go several steps further as the NCAA is also seeking injunctive relief (a legal term for protection from future lawsuits) as they attempt to institute and enforce new rules that significantly change the landscape of college athletics. These rule changes include removing existing scholarship limits and replacing them with roster limits, allowing schools to directly pay their athletes up to $20.5 million total annually, and vetting any third-party NIL deal worth over $600 through a clearinghouse to make sure it is for a legitimate business purpose and not “pay for play” in disguise. All schools in the defendant conferences will be required to adhere to the new rules, while other NCAA institutions will have to decide whether to opt-in to the new revenue-sharing system or to remain under the current regulations.
Developments Since the Agreement
A lot has happened since the initial agreement was reached. In September, Judge Claudia Wilken (who was also the trial Judge in the aforementioned Alston case) initially declined to grant the agreement preliminary approval. The two sides made some minor changes, which was enough for Judge Wilken to grant preliminary approval at the time.
The Republican Party, which is generally thought to be more sympathetic to the NCAA’s priorities, swept the November elections. That did not stop the outgoing Biden administration from issuing some troubling statements for the prospects of the House settlement, only to have them rescinded once new leadership was in place. There have been a pair of congressional hearings regarding NIL and the NCAA, but, much like hearings under previous administrations, little to nothing came out of them.
Perhaps the most notable development has been the volume of objections filed to the settlement agreement. According to Sam Ehrlich’s College Sports Litigation Tracker, at least 16 formal objections have been filed with the court, many of which have been filed on behalf of multiple parties. The objections raise significant issues such as the imposition of roster limits, Title IX and gender equity concerns, and individual damages calculations. While all of these issues and arguments have been raised in prior proceedings surrounding the settlement, the volume is noteworthy, as is the diversity of the objectors. They range from current athletes (including LSU gymnast/NIL superstar Livvy Dunne) to former NBA Players’ Association Executive Director Michelle Roberts.
The NCAA initially imposed a March 1st deadline for the schools outside of the defendant conferences to decide whether they wanted to opt-in to the revenue-sharing system. It was a strange policy choice to have schools make that decision prior to the upcoming hearing on Monday, so much so that, in a rare moment of organizational self-awareness, the NCAA extended the deadline mere hours before the initial deadline. When asked to comment on moving the deadline, the NCAA initially declined to do so, only to later explain that they did so because the membership informed them they needed more time.
While there are some questions as to the fairness of the $2.6 billion damages calculation and how it will be disbursed, former athletes who disagree with it can opt out of the settlement and preserve their right to sue. The most interesting parts of this hearing are likely to center around the proposed rule changes moving forward, which will be imposed on athletes who are not represented in the settlement. Part II will break down the revenue sharing cap, roster limits, and NIL clearinghouse proposed in the House settlement.
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