A short treatise on amateurism and antitrust law: why the NCAA's no-pay rules violate section 1 of the Sherman Act.

Author:Edelman, Marc
Position:National Collegiate Athletic Ass'n
 
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ABSTRACT

The National Collegiate Athletic Association (NCAA) oversees nearly every aspect of the $11 billion college sports industry. Its powers include scheduling championship events, determining eligibility rules, entering into commercial contracts, and punishing members that refuse to follow its authority. In recent years, some NCAA members have become increasingly wealthy grossing annual revenues upwards of $100 million per year. Yet the NCAA's rules still deprive these members of the opportunity to share their wealth with student-athletes.

This Article explains wily the NCAA's "no-pay" rules violate section 1 of the Sherman Act. Part I introduces the NCAA, its principle of amateurism, and its traditional enforcement mechanisms. Part II provides a brief overview of section 1 of the Sherman Act--the "comprehensive charter of economic liberty" in American trade. Part III explains wily the NCAA's no-pay rules constitute both an illegal form of wage fixing and an illegal group boycott. Part IV then explores eight lower court decisions that incorrectly held the NCAA's eligibility rules were noncommercial and thus exempt from antitrust scrutiny. Meanwhile, Part V analyzes four additional lower court decisions that misconstrued the NCAA's eligibility rules as procompetitive under a rule of reason analysis. Finally, Part VI concludes that even if a court were to find that competitive balance is a reasonable basis for upholding certain no-pay rules, such rules still should not be promulgated by the NCAA, but rather by individual conferences.

CONTENTS INTRODUCTION I. THE NCAA, ITS PRINCIPLE OF AMATEURISM, AND ITS INTERNAL ENFORCEMENT MECHANISMS A. The NCAA B. The NCAA's Principle of Amateurism and Its Enforcement C. How Fear of the "Death Penalty" Has Chilled Student-Athlete Pay and Destroyed the Free Market for" College Athletics to the Detriment of Consumers II. AN INTRODUCTION TO SECTION 1 OF THE SHERMAN ACT A. Overview B. Threshold Requirements C. Competitive Effects Analysis III. ANALYZING THE NCAA's NO-PAY RULES UNDER SECTION 1 OF THE SHERMAN ACT A. Challenging the NCAA's No-Pay Rules as Illegal Wage-Fixing Restraints B. Challenging the NCAA's No-Pay Rules As an Illegal Group Boycott 1. The Seminal Case: NCAA v. Board of Regents 2. Other Instructive Supreme Court Opinions IV. WHY LOWER COURT DECISIONS FINDING THE NCAA's ELIGIBILITY RULES TO BE NONCOMMERCIAL ARE EITHER INAPPOSITE OR WRONGLY DECIDED A. A Brief Discussion of the Eight Lower Court Decisions Finding the NCAA Eligibility Rules To Be Noncommercial B. Why Each of These Eight Cases Was Wrongly Decided V. WHY LOWER COURT DECISIONS HOLDING THE NCAA ELIGIBILITY RULES TO BE PROCOMPET1TIVE ARE SIMILARLY MISGUIDED A. Cases Finding the NCAA Eligibility Rules Are Procompetitive B. Why Each of These Four Cases Was Wrongly Decided VI. WHY CLOSER GAME SCORES CANNOT SAVE THE NCAA NO-PAY RULES, BUT MAY SUPPORT PRESERVING SUCH RULES ON CONFERENCE-BY-CONFERENCE BASIS CONCLUSION INTRODUCTION

the National Collegiate Athletic Association (NCAA) oversees nearly every aspect of the $11 billion college sports industry. (1) Its powers include scheduling championship events, determining eligibility rules, entering into commercial contracts, and punishing members that refuse to follow its authority. (2) In recent years, some NCAA members have become increasingly wealthy grossing annual revenues upwards of $100 million per year. (3) Yet the NCAA's rules deprive these members of the opportunity to share their wealth with student-athletes. (4) Instead, the NCAA and its leaders hide behind a "veil of amateurism" that maintains the wealth of college sports "in the hands of a select few administrators, athletic directors, and Coaches." (5)

Although the NCAA rulebook has long evaded legal scrutiny, courts are finally beginning to overturn certain aspects of the NCAA's rules that are deemed to be anticompetitive. For example, courts have struck down the NCAA's nationwide limits on televised football broadcasts and its caps on assistant coaches' salaries. (6) Nevertheless, the need to reform the college athletics industry extends far beyond these areas. It is not just the outer fringes of the NCAA rules that violate antitrust law: it is the whole shebang.

This Article explains why the NCAA's no-pay rules violate section 1 of the Sherman Act. Part I introduces the NCAA, its principle of amateurism, and its traditional enforcement mechanisms. Part II provides a brief overview of section 1 of the Sherman Act the "comprehensive charter of economic liberty" in American trade. (7) Part III, applying precedent from the Supreme Court and the Tenth Circuit, explains why the NCAA no-pay rules constitute both an illegal form of wage fixing and an illegal group boycott. Part IV then explores eight lower court decisions that incorrectly held the NCAA eligibility rules were noncommercial and thus exempt from antitrust scrutiny. Meanwhile, Part V analyzes four additional lower court decisions that misconstrued the NCAA eligibility rules as procompetitive under a rule of reason review. Finally, Part VI concludes that even if a court were to find that competitive balance is a reasonable basis for upholding certain no-pay rules, such rules still should not be promulgated by the NCAA, but rather by the individual conferences.

  1. THE NCAA, ITS PRINCIPLE OF AMATEURISM, AND ITS INTERNAL ENFORCEMENT MECHANISMS

    1. The NCAA

      The NCAA is the "dominant trade association" of American colleges that compete in intercollegiate sports. (8) It comprises

      approximately twelve hundred member schools that participate in ninety-five different active athletic conferences. (9) Its mission is to promulgate playing rules, host championship events, enforce standards of academic eligibility, and promote the general growth of college athletics. (10)

      The NCAA was first chartered in 1905 by trustees of sixty-two colleges as a forum to discuss health risks in college sports. (11) But by the end of World War II, the NCAA had expanded its reach into hosting sporting events and setting eligibility rules. (12) In 1948, the NCAA introduced its first written code to govern members' recruiting practices and financial aid payouts. (13) Then, four years later, the NCAA replaced that code with a broader set of rules to govern membership, infractions, and punishment. (14)

      Today, the NCAA operates pursuant to a formal constitution and bylaws that are voted upon by its members. (15) In addition, NCAA members vote annually on committee members to "direct policy between [annual] conventions." (16) As a condition of membership, all NCAA colleges must agree to abide by the association's written rules, as well as by its committees' decisions. (17) Members do not have the chance to opt out of rules based on their financial preference, nor do they have the right to opt out on moral grounds. (18)

    2. The NCAA's Principle of Amateurism and Its Enforcement

      One area in which the NCAA establishes rules pertains to the amateur status of student-athletes. The NCAA's principle of amateurism, as drafted and approved by its membership, states that "student-athletes shall be amateurs in intercollegiate sport, and their participation shall be motivated by education and by the physical, mental and social benefits to be derived." (19) As such, the NCAA bylaws limit the quantity of student-athletes' financial aid to an amount "set by the Association's membership." (20) In addition, NCAA bylaws prohibit student-athletes from accepting remuneration in any form based on their status as athletes. (21)

      In modern times, the NCAA works tirelessly to enforce its principle of amateurism. (22) One way that the NCAA enforces this principle is by levying penalties against members that provide student-athletes with benefits beyond the NCAA-permitted amount. Such penalties may include fines, the loss of television appearances, or revocation of the opportunity to compete in postseason games. (23) In addition, the NCAA's most severe penalty--colloquially known as the "death penalty"--empowers the association to shut down any repeat violator's athletic program during regular-season competition. (24)

      Since the NCAA first established its death penalty in June 1985, the association has only enforced the sanction once, against Southern Methodist University's football team during the 1987 athletic season. (25) This sanction resulted in Southern Methodist University's dramatic loss of football-related revenues, not only for that particular season but also for many years that followed. (26) The economic annihilation of Southern Methodist University's football program continues to serve as a powerful deterrent against other colleges paying their student-athletes. (27)

    3. How Fear of the "Death Penalty" Has Chilled Student-Athlete Pay and Destroyed the Free Market for College Athletics to the Detriment of Consumers

      In recent years, most NCAA members have fully abided by the NCAA's principle of amateurism, even though it has meant that college athletic directors and coaches earn millions of dollars while their student-athletes continue to live below the poverty line. (28) Even in the cases in which a particular athletic director or coach has wanted to improve his athletes' standard of living, the NCAA amateurism bylaws serve as an impediment. (29) For example, in June 2011, seven Southeastern Conference football coaches proposed designating a share of their multimillion-dollar salaries to establish stipends of $300 per game for their student-athletes. (30) However, superiors at each school nixed the stipend plan in fear of the NCAA's rebuke. (31)

      The NCAA's continued failure to allow colleges to make independent business decisions about student-athlete pay hurts not only the student-athletes but also the college football consumers. (32) For example, if the seven Southeastern Conference colleges had not quashed their coaches' stipend plan, those colleges would have been able to use...

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