Wednesday, October 13, 2021

A Miser’s Rule of Reason: Student Athlete Compensation and the Alston Antitrust Case

A Miser’s Rule of Reason: Student Athlete Compensation and the Alston Antitrust Case

 

Herbert Hovenkamp

University of Pennsylvania Carey Law School; University of Pennsylvania - The Wharton School; University College London

Date Written: July 6, 2021

Abstract

The unanimous Supreme Court decision in NCAA v. Alston is its most important probe of antitrust’s rule of reason in decades. The decision implicates several issues, including the role of antitrust in labor markets, how antitrust applies to institutions that have an educational mission as well as involvement in a large commercial enterprise, and how much leeway district courts should have in creating decrees that contemplate ongoing administration.

The Court accepted what has come to be the accepted framework: the plaintiff must make out a prima facie case of competitive harm. Then the burden shifts to the defendant to produce a justification and, if it produces one, the plaintiff will have a chance to show a less restrictive alternative. While the Court has articulated this three-stage inquiry several times, it has almost always loaded all the important proof requirements into the first stage, with the result that plaintiffs nearly always lose. This is an irrational approach to decision making that reflects a deep anti-enforcement bias. In Alston, however, the plaintiffs finally broke out of that box, but only because the practice itself was a nearly naked cartel. So is the Court now ready to develop a more enforcement-neutral approach to antitrust’s rule of reason?

Most rule of reason cases do not involve naked or nearly naked cartels. They are concerned with production or research joint ventures, standard setting, or other agreements whose effects are more complex. Alston was the unique rule of reason case in which the challenged practice was close to a naked cartel. In any other setting it would have been governed by the per se rule but for an idiosyncratic history that compelled the rule of reason.

If plaintiffs can successfully navigate the “three-step” rule of reason case only when the challenged restraint is little more than collusion, then the rule of reason is not doing its job. In most rule of reason challenges, including those brought by the government, the plaintiff’s prima facie case depends on market evidence that supports reasonable inferences of competitive harm. By contrast, when the burden shirts, the defense typically depends on evidence about its own conduct and the rationales for it. In terms of decisional quality, cases that raise an inference of competitive harm will be more accurately resolved at the second stage rather than the first one. This does not mean that trivial claims or claims against firms that clearly lack power should go forward. It does suggest, however, that at the first stage the plaintiff should bear a smaller burden.

https://lawprofessors.typepad.com/antitrustprof_blog/2021/10/a-misers-rule-of-reason-student-athlete-compensation-and-the-alston-antitrust-case.html

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