## Facts

- The NCAA, an association of roughly 1,100 colleges and universities, adopted legislation creating an entry-level Division I men’s basketball coaching position termed a “restricted-earnings coach.”
- The rule imposed a uniform cap of $16,000 in annual compensation for restricted-earnings coaches across Division I programs.
- Member institutions, which otherwise compete in hiring coaching labor, agreed to comply with and enforce the compensation limitation.
- A class of affected Division I men’s basketball coaches challenged the cap as a horizontal agreement among competing employers to fix the price paid for entry-level coaching services.
- The district court granted summary judgment for the coaches on Sherman Act § 1 liability and entered a permanent injunction barring enforcement of the salary-cap rule.
- The NCAA appealed the liability determination and injunction.

## Issues

1. Whether the NCAA’s restricted-earnings coach salary cap constituted an unreasonable restraint of trade under § 1 of the Sherman Act.
2. Whether the restraint should be condemned as per se unlawful price fixing or evaluated under the rule of reason given the NCAA’s coordination of intercollegiate athletics.
3. Whether asserted justifications (cost control, preserving entry-level positions, competitive balance) offset the cap’s anticompetitive effects.

## Decision

- The Tenth Circuit affirmed the summary judgment on liability and the permanent injunction.
- The court treated the rule as a horizontal maximum price restraint among competing purchasers of coaching labor.
- Applying rule-of-reason analysis, the court held the salary cap produced substantial anticompetitive effects by suppressing compensation below competitive levels and preventing member schools from competing for coaching services.
- The court rejected the NCAA’s cost-reduction rationale as an antitrust justification for a buyer cartel’s wage suppression.
- The court concluded the NCAA failed to show the cap was necessary to preserve entry-level opportunities or to maintain competitive balance, or that less restrictive alternatives were unavailable.

## Legal Principles

- Agreements among competing employers to cap compensation for a category of workers are horizontal price-fixing restraints subject to Sherman Act § 1 scrutiny.
- Even where an athletic association’s rules may require some horizontal restraints to produce intercollegiate sports, a “naked” wage restraint can still be unlawful under rule-of-reason analysis.
- Under the rule of reason, a plaintiff may establish a prima facie case by showing a restraint’s actual anticompetitive effects in the relevant labor market; the burden then shifts to the defendant to offer legally cognizable, supported procompetitive justifications.
- Cost savings achieved through collective wage suppression by purchasers of labor are not, standing alone, a procompetitive benefit recognized by antitrust law.
- A restraint is unreasonable when the defendant fails to show the restriction is necessary to achieve legitimate competitive objectives or that the objectives cannot be achieved through less restrictive means.

## Conclusion

The Tenth Circuit held that the NCAA’s uniform $16,000 cap on restricted-earnings basketball coaches functioned as horizontal wage fixing among competing schools and unreasonably restrained trade under Sherman Act § 1, warranting injunctive relief against its enforcement.


Law v. Nat’l Collegiate Athletic Ass’n, 134 F.3d 1010 (10th Cir. 1998)