NCAA Athlete Ruling: Anti-Trust Reform Is Now The Norm

A huge day for monopoly, monopsony and other words that will kill the SEO for this post.

The Supreme Court ruled against the NCAA’s student athlete compensation structure on Monday. Though the unanimous verdict was narrow — it only affects relatively minor benefits students can receive while at school — it sure looks as though a sea change has already taken place at the Court, and the days of athletes going unpaid in big-ticket college sports are numbered.

Players, coaches, boards of trustees and governors are going to be spending a lot of time thinking about how to restructure higher ed funding in the coming months. But the implications of the case go well beyond student athletics, reaching into the far corners of labor law. The most stunning language released by the Court yesterday was not from the 9 - 0 majority opinion, but a scathing concurring opinion from conservative Justice Brett Kavanaugh that reads like a missive from The Intercept:

“The bottom line is that the NCAA and its member colleges are suppressing the pay of student athletes who collectively generate billions of dollars in revenues for colleges every year. Those enormous sums of money flow to seemingly everyone except the student athletes. College presidents, athletic directors, coaches, conference commissioners, and NCAA executives take in six- and seven-figure salaries. Colleges build lavish new facilities. But the student athletes who generate the revenues, many of whom are African American and from lower-income backgrounds, end up with little or nothing.

….

To be sure, the NCAA and its member colleges maintain important traditions that have become part of the fabric of America—game days in Tuscaloosa and South Bend; the packed gyms in Storrs and Durham; the women’s and men’s lacrosse championships on Memorial Day weekend; track and field meets in Eugene; the spring softball and baseball World Series in Oklahoma City and Omaha; the list goes on. But those traditions alone cannot justify the NCAA’s decision to build a massive money-raising enterprise on the backs of student athletes who are not fairly compensated. Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. And under ordinary principles of antitrust law, it is not evident why college sports should be any different. The NCAA is not above the law.”

What gives Kavanaugh’s opinion so much weight is his reliance on a concept called “monopsony” — the most powerful weapon for labor rights in the anti-trust arsenal, developed in the early 1930s by a radical British economist named Joan Robinson, who I recently wrote about for The New York Times.

In the textbook economic theory of Robinson’s day, monopoly was understood to be a social curse inflicted by an oversized producer. If somebody controlled too much of the oil market, for instance, they could fix prices at ridiculously high levels, immunized from the competitive pressures of the market that would ordinarily drive prices down.

Robinson turned this around. What if the buyer of a product became too big? This wasn’t just a clever technical innovation. Robinson was a political radical who wanted to take aim at the prevailing enthusiasm for laissez-faire economics in Britain and advance the interests of working people. By focusing on buyers, Robinson established that a gargantuan buyer of labor could require and receive outrageously low prices for the services of workers.

When I say Robinson’s politics were radical, I mean they were radical, particularly in the 1960s, when she defended Mao Zedong and China’s Cultural Revolution. Robinson wasn’t Maoist in the 1930s, of course, but she was no Brett Kavanaugh, either.

So how did a doyen of the Chevy Chase Republican establishment become a monopsony guy? And what does that mean for labor policy?

I think a close read of Kavanaugh’s opinion shows that while he’s comfortable using the concept, he understands monopsony as a pretty unusual state of affairs. He never says so explicitly — but it fits the general feel of his commentary. Part of the reason the NCAA’s behavior is so outrageous and so deserving of vitriol from a Supreme Court Justice may be that Kavanaugh perceives it as a unique stain on the American economy.

That is not the way Robinson thought about monopsony. To her, monopsony existed to varying degrees in all labor markets. There were really, really bad monopsony problems and kinda sorta bad monopsony problems, but almost nowhere would anyone fine a genuinely competitive market for labor. When Kavanaugh writes that monopsony is “a textbook antitrust problem because it extinguishes the free market in which individuals can otherwise obtain fair compensation for their work” — the key word is “otherwise.” For Robinson there was never a place where workers could “otherwise” obtain a fair wage. The question was how much they were being ripped off.

Establishing labor policy as an antitrust issue was a big deal. A lot of economists who hated Robinson’s guts thought she deserved a Nobel Prize for it. As a policy tool, it has tremendous potential. If you side with Robinson here, you’d need some kind of very active employment regulator to be working around the clock monitoring wages and pushing them up. But a conservative can accept the general framework — monopsony is bad — and then establish a very high threshold for monopsony misconduct, thus ensuring that almost nobody ever wins a monopsony case. The NCAA is pretty low-hanging fruit, after all. Student athletes don’t get paid any wage whatsoever.

Still, I think it would be silly to see Kavanaugh’s opinion as anything other than a victory for the anti-trust reform movement. Brett Kavanaugh is not about to reinvent himself as Bernie Sanders, but a progressive school of thought has successfully established an intellectual framework that can actually win over a conservative Justice who has an almost comprehensively awful labor record (from a progressive standpoint, of course).

Appeals to monopsony can’t solve all or even most of America’s labor problems — we need a ton of public investment and a new social contract between the corporation and society, among other things — but Kavanaugh just established them as an essential tool. Lina Khan’s FTC has a tremendous opportunity.