Antitrust or Anti-NCAA?

This week’s EXSS Impact post highlights recent research presented at the European Sport Management Association annual meeting in Dublin, Ireland by Professor Barabara Osborne.

Why did you do this study?

Intercollegiate athletics in the United States is thriving. There are more participants, college sport fans all over the world, and money flowing to college sport through media rights and sponsorship of the National Collegiate Athletic Association (NCAA) than ever before. In fiscal 2014, the NCAA reported $989,000,000 in revenue, a record surplus of $80.4 million, and almost $708 million in net assets. This has made the NCAA a target for critics who question whether student-athletes are unfairly exploited by amateurism rules that prohibit them from profiting from their “labor”. The media has jumped on the bandwagon, fanning the “unfairness” fires, but without providing the facts or legal framework for the general public to have an informed opinion. Current and on-going litigation, such as the O’Bannon v. NCAA (2015), Jenkins v. NCAA (2014) and the consolidated complaints of In re: National Collegiate Athletic Association Grant-in-Aid Cap Antitrust Litigation (2014) have the potential to change college athletics, not necessarily for the better.

What did you do and what did you find in this study?

This is a traditional legal research study examining the current Sherman Act antitrust cases against the NCAA to determine whether the claims are valid or merely a platform to redefine the NCAA’s model of amateurism. O’Bannon v. NCAA (2015), Jenkins v. NCAA (2014) and the consolidated complaints of In re: National Collegiate Athletic Association Grant-in-Aid Cap Antitrust Litigation (2014) are analyzed by comparing past NCAA antitrust cases, focusing particularly on commercial purpose, anticompetitive behavior, and buyers, sellers and consumers in relevant markets. .

The Sherman Antitrust Act was intended to prevent large corporations from engaging in anticompetitive practices that would harm consumers. Practices such as price fixing are considered by the courts as illegal per se. However, the sport industry requires agreement among competitors in order for competition to even exist, so the court applies Rule of Reason to determine whether the alleged anticompetitive practices have an unreasonable impact on a commercial market that is not outweighed by procompetitive benefits. The court also examines whether there are less restrictive alternatives that still achieve the procompetitive purpose.

All three cases illustrate the difficult task of applying antitrust law, which was enacted primarily to regulate manufacturing, to the sport industry which defies clean identification of buyers and sellers in a relevant commercial marketplace. When student-athletes and colleges are both buyers and sellers, and fans are also consumers of college sport, defining and determining the impact on “consumers” is also problematic. Past precedent indicates a clear line of demarcation in application of antitrust law to matters that are regulatory rather than commercial in nature. These lawsuits require the court to substitute its judgment in regulating a voluntary membership national sport governing body, something that courts have historically not supported.

How do these findings impact the public?

These lawsuits have already had an impact on the future of intercollegiate athletics. NCAA Division I governance has been subdivided to allow autonomy for the Power 5 conferences to enact rules that cannot be rescinded by the other Division I members. Permissive legislation has been enacted allowing schools to offer benefits that should improve the overall student-athlete experience, including increasing the amount of a full scholarship to include cost of attendance. These advances are not without cost, both economic and from a policy perspective. Concerns have been expressed about the impact of these policies on non-revenue sports and Title IX compliance. This type of legal research assists athletics administrators in making informed decisions related to NCAA rules promulgation and policy. It also may be useful for litigators, and influential for the courts as they conduct legal research to determine the outcome of future cases.