Abstract<\/p>\n\n\n\n
This Research\nPaper will describe United States antitrust laws and how they pertain to the National\nCollegiate Athletic Association (NCAA). Through analyzing four cases (NCAA v. Board of Regents of University of\nOklahoma, Agnew v. NCAA, O\u2019Bannon v. NCAA, and Jenkins v. NCAA<\/em>) involving\nthe NCAA and their alleged antitrust violations, the reader will gain a better\nunderstanding of what constitutes an antitrust violation and how the Rule of\nReason is applied to determine such a violation. While each case revolves\naround possible antitrust violations, each case presents a unique allegation to\nwhich the Court must implement the Rule of Reason to determine whether the filed\ncomplaint is valid.<\/p>\n\n\n\n From the late 1870s through the 1920s, the United States experienced an economic boom known as the Second Industrial Revolution, or the Technological Revolution, where multiple businesses merged to form a conglomerate to gain an edge against their competition. One such conglomerate was The Standard Oil Company owned by John D. Rockefeller. While Standard Oil already owned a majority market share, Rockefeller wanted total control. He began using economic threats against his competitors to force them into a buy-out or going out of business. Realizing that conglomerates such as Standard Oil Company could gain excessive economic power, the United States Government enacted laws that collectively became known as the Antitrust Laws. Antitrust law refers to \u201clegislation enacted by the federal and various state governments to regulate trade and commerce by preventing unlawful restraints, price-fixing, and monopolies; to promote competition; and to encourage the production of quality goods and services at the lowest prices, with the primary goal of safeguarding public welfare by ensuring that consumer demands will be met by the manufacture and sale of goods at reasonable prices\u201d (Antitrust Law, 2010). At the core of these laws is the Sherman Antitrust Act which prohibits anticompetitive agreements and the formation of monopolies. Since the introduction of antitrust laws, many conglomerates such as Standard Oil have been broken up due to its monopolistic nature. And one organization, the National Collegiate Athletic Association (NCAA), has been under scrutiny of violating antitrust laws for several decades. The NCAA is a non-profit organization that regulates laws as it pertains to student-athletes who attend their membered colleges and universities. With the increase in popularity of college athletics and the associated revenues that college sports, specifically FBS football and D-1 men\u2019s basketball, have generated the past several decades, the NCAA has been accused of violating antitrust laws. In the on-going debate of whether certain NCAA rules violate antitrust laws we shall examine four cases in further detail.<\/p>\n\n\n\n NCAA v. Regents of University of\nOklahoma (1984)<\/em><\/p>\n\n\n\n In 1979, members of the College\nFootball Association (CFA), who were also a part of the NCAA, decided they\nwanted more input into how the NCAA formulated its television contract\npolicies. Instead of relying on the NCAA and its rules, regulations, and\nrestrictions, the College Football Association reached\nan agreement with NBC that did not limit when or\nhow many games they could televise. As a result, the CFA could\npotentially earn higher revenues than would be possible under the agreement put\nforth by the NCAA. The NCAA threatened to take action\nagainst any institution it deemed had violated its rules by reaching an\nindependent agreement without its consent. The CFA sued, \u201cthe case was taken to\nthe United States District Court for the Western District of Oklahoma, and a\npreliminary injunction was granted preventing the NCAA from initiating\ndisciplinary proceedings or interfering with the CFA\u2019s efforts to carry out the\nagreements set forth in its contract with NBC\u201d (NCAA v. Regents of University of Oklahoma, 1984)<\/em>. The District Court ruled that the\nNCAA violated the Sherman Antitrust Act in its new contract due to the\nconsiderable constraints set forth in it. The Court called the NCAA a \u201cclassic cartel\u201d because the NCAA attempted\nto assert total control over whom, how, and when college football could be\ntelevised. \u201cThey had an artificially high price, applied limits on production,\nand had means to punish other cartel members who do not abide with any\nconsideration as to the quality of its offerings and what games viewers want to\nsee\u201d (NCAA v. Regents of University of\nOklahoma, 1984)<\/em>.<\/p>\n\n\n\n According to the District Court, live college football was the relevant market and was restrained by the NCAAA in the following ways:<\/p>\n\n\n\n In its defense, the NCAA claimed that they wanted to protect the gate\nattendance, which they felt would be impacted by events that were televised\nwithout being under its control. It also sought to keep the competitive nature\nof college football amongst the schools. However, the District Court failed to\naccept these arguments. There was no available evidence to support the claims\nof how televised games could affect actual attendance and how the plan it\noffered helped to maintain a competitive balance. The NCAA subsequently\nappealed.<\/p>\n\n\n\n According to the Appellate Court, the restraints by the NCAA were considered illegal per se<\/em> due to its price-fixing nature. It rejected arguments by the NCAA justifying its plan as being procompetitive. The NCAA made several arguments to the Court that were ruled to have no justification. First, the Court failed to see how the plan promoted an increase in live attendance. Second, it found no reason for the plan to compete with other programs since it was already illegal per se<\/em>. They remanded the case back to the District Court, so it could modify the terms of its injunctive decree.<\/p>\n\n\n\n According to Justice Stevens, the\nNCAA\u2019s actions led to a restraint of trade. \u201cIn that sense, however, every\ncontract is a restraint of trade, and the Sherman Antitrust Act was intended to\nprohibit unreasonable restraints of trade\u201d (NCAA v Regents of University of\nOklahoma, 1984<\/em>). Judge Bork put forth that \u201csome activities can only be\ncarried out jointly. The NCAA and its members market competition in and of\nitself, and it needs certain rules and regulations that all must abide by to\nmaintain its long-held traditions and maintain the competitiveness. The NCAA is\nmarketing live college football, which is different than professional sports.\nHaving a relevant market is essential to file an antitrust suit. To preserve\nthe competitiveness, those who participate in sports need to attend class\nregularly and should not be given pay.\u201d (NCAA v Regents of University of\nOklahoma, 1984<\/em>).<\/p>\n\n\n\n The Supreme Court affirmed that the restraints were a form of horizontal fixing, and therefore violated the Sherman Antitrust Act. The NCAA essentially limited the output of live games that could be broadcasted and raised the prices to broadcast them. They also had total control over how the games were televised, which effectively created a monopoly for the live college football market. However, the Court determined that the NCAA rules were not illegal per se<\/em> because they did allow for other sports to be competitive.<\/p>\n\n\n\n Agnew\nv. NCAA <\/em><\/p>\n\n\n\n Joseph\nAgnew attended Rice University in 2006 on a one-year football scholarship. During his sophomore year he sustained an\ninjury and was unable to continue to play football. Because of his injury, Agnew\u2019s football\nscholarship was not renewed his junior year at Rice University. Since his\nscholarship was not renewed Agnew decided to appeal the decision of the\nUniversity and won. Agnew\u2019s scholarship\nwas once again revoked his senior year and Agnew was forced to pay for his\ntuition out-of-pocket. <\/p>\n\n\n\n Agnew\nsoon filed a lawsuit that began in the United States District Court for the\nNorth District of California but was requested to be transferred by the NCAA to\nthe United States District Court for the Southern District of Indiana. The\nplaintiffs filed an amended complaint with the NCAA\u2019s consent and argued a\nviolation of Section 1 of the Sherman Antitrust Act. The amended complaint was formatted as a\nclass action lawsuit and the plaintiffs challenged two of the NCAA\u2019s\nbylaws. The first bylaw prohibits any\nNCAA member institutions from granting any multi- year scholarships and sets\nthe limit to a one-year scholarship for student-athletes’ student-athletes\n(NCAA Bylaw 15.3.3.1). This bylaw\ndemonstrates a form of fixed pricing and doesn\u2019t protect the students against\nany potential financial hardships that can prevent them from finishing their\ndegree if injured. The second bylaw challenged was the cap on the number of\nathletic-based scholarships that a school could offer per sport each school\nyear. If there is a cap of athletic\nscholarships it would fail to create competition. <\/p>\n\n\n\n To\ndetermine if the NCAA\u2019s rules violated the Sherman Antitrust Act, the Court\nfollowed the three-step framework of the Rule of Reason:<\/p>\n\n\n\n In its motion to dispose\nthe claim, the NCAA disputed that the claim should be dismissed under the Rule\nof Reason for the following: <\/p>\n\n\n\n The\nplaintiffs’ suit pursued statutory provisions that can be found in the Clayton\nAct of 1914 as well as the Sherman Antitrust Act. A claim that would demonstrate a violation\nunder the Sherman Act would require as stated in Section 1 \u201ca contract,\ncombination of trust, or conspiracy, in trade or commerce… is declared\nillegal\u201d (15\nU.S.C. \u00a7 1). The plaintiffs also found that the Clayton\nAct states, \u201canything forbidden in the antitrust laws may sue…and shall\nrecover threefold damages\u201d (15 U.S.C. \u00a7 15). Plaintiffs\nclaimed that the bylaws set forth by the NCAA set a restraint in the labor\nmarket particularly for student athletes and a product market which produces\nbachelor’s degrees. Setting these\nrestraints, the NCAA would clearly violate the rights of the plaintiffs under\nthe Sherman Antitrust Act. The NCAA argues that plaintiffs’ complaint failed to\nidentify a market in which the bylaws control trade.<\/p>\n\n\n\n The\nnumber of individuals in the market for bachelor\u2019s degree includes a variety of\npeople not just individuals with scholarships for athletics. The impact that the NCAA bylaws have affect a\nvery small amount of the market since there is only a small number of athletes\nthat do not have their scholarships renewed. \nThe District Court also demonstrated a flaw in the alleged market for\nbachelor\u2019s degrees which is degrees are not automatically given upon paying\ntuition nor are the degrees guaranteed. \nThe fact remains that the NCAA must operate in an anticompetitive way to\nbe able to justify any procompetitive intention. It is widely known that many schools compete\nwith one another by offering recruits incentives and benefits. These incentives are set to be part of a\ncompetitive intention to lure athletes into a school that can result in\nfinancial gain for the school. <\/p>\n\n\n\n The\nDistrict Court granted the NCAA’s motion to dismiss on September 1, 2011. It was determined that the plaintiffs failed\nto identify a market in which \u201ctrade was improperly restrained\u201d, even if the\nplaintiffs identified that there was some type of product market for bachelor’s\ndegrees or a labor market for student-athletes it simply would just not been\nenough. In the framework of the Sherman\nAntitrust act it would have been found that those markets are not identified.<\/p>\n\n\n\n O\u2019Bannon\nv. NCAA<\/em><\/p>\n\n\n\n Ed\nO\u2019Bannon was a star basketball player for UCLA and led his team to a national\ntitle in 1995. Years after he had graduated, he noticed that a video game contained\nimages and the likeness of him and his fellow teammates from the UCLA national\ntitle team without obtaining his or his teammate\u2019s consent. In 2009, O\u2019Bannon\nagreed to be the lead plaintiff for a class action lawsuit against the NCAA and\nthe Collegiate Licensing Company alleging violations of the Sherman Antitrust Act\nand his right to publicity. O\u2019Bannon alleges that NCAA\u2019s amateurism rules\nviolated antitrust laws by restricting trade and price-fixing. To demonstrate\nthat NCAA\u2019s rules put a restraint on trade, the District Court identified two\nmarkets: the college education market and the group licensing market.<\/p>\n\n\n\n In\nthe college education market, colleges compete against one another for the best\nplayers by offering them athletic scholarships as well as other non-monetary\nincentives unique to the school such as athletic facilities, high-level\ncoaches, and quality athletic competition. The District Court reasoned that\n\u201csince very few athletes who are talented enough to play in FBS football or D-1\nbasketball opt not to attend an FBS\/D-1 school; choose to attend D-2 or D-3\nschool or compete in minor or foreign leagues; and cannot join pro leagues\ndirectly from high school, the Court concluded that NCAA\u2019s FBS football and D-1\nbasketball violate antitrust laws because there are no professional or college\nfootball or basketball leagues capable of supplying a substitute for the bundle\nof goods and services that FBS football and D-1 basketball schools\nprovide” (O\u2019Bannon v. NCAA, 2014<\/em>).<\/p>\n\n\n\n With\nrespect to the group licensing market, the Court ruled that the \u201cNCAA licensed\nrights to use names, images, and likeness (NIL) of their FBS football players\nand D-1 basketball players for a profit. Live game telecasts, sports video\ngames, game rebroadcasts, advertisements, and other archival footage all used\nplayers NILs with all profits going to the NCAA and its membered schools\u201d (O\u2019Bannon\nv. NCAA, 2014<\/em>).<\/p>\n\n\n\n Through the Rule of Reason, the\nDistrict Court found that the NCAA\u2019s rules have an anticompetitive effect in\nthe college education market but not in the group licensing market. It also\nconcluded that the rules serve procompetitive purposes. However, it determined\nthat the procompetitive purposes of the rules could be achieved by less\nrestrictive, alternative restraints and that the rules were therefore unlawful.<\/p>\n\n\n\n Absent NCAA\u2019s rules, colleges would\ncompete for recruits by offering the student-athletes compensation that would\nexceed the athletic scholarships offered by the colleges, thereby \u201ceffectively\nlowering the price that the recruits must pay for the combination of\neducational and athletic opportunities that the schools provide\u201d\n<\/em>(O\u2019Bannon v. NCAA, 2014<\/em>).<\/p>\n\n\n\n Rules\nprohibiting compensation for the use of student-athletes’ NILs are a\nprice-fixing agreement. \u201cRecruits pay for their “scholarship” with\ntheir labor and their NILs, but the “sellers” (or colleges)\ncollectively agree to value NILs at zero dollars. Under this theory, colleges\nand universities behave as a cartel – a group of sellers who have colluded to\nfix the price of their product.\u201d (Miller, 2014<\/em>)<\/p>\n\n\n\n Although the NCAA forbids its member\nschools to pay student-athletes anything beyond a fixed scholarship, it allows\nschools to spend as much as they like on other aspects of their athletic\nprograms, such as hiring top-of-the-line coaches and building \u201crecruiting\npalaces\u201d that rival and sometimes exceed, professional facilities, which\n“negates whatever equalizing effect the NCAA’s restraints on\nstudent-athlete compensation might have once had\u201d(O\u2019Bannon\nv NCAA, 2014<\/em>).<\/p>\n\n\n\n The plaintiffs were not seeking to\nREQUIRE that all schools pay their student-athletes; rather, they sought an\ninjunction permitting schools to do so. Schools that could not afford to pay\ntheir student-athletes would not have any financial obligation beyond the\nathletic scholarship, but if the university or college school is generating\nrevenue using the student-athletes\u2019 NILs, then they could<\/em> share some of the profits with their student-athletes. Judge\nWilkens found in favor of O\u2019Bannon and allowed universities and colleges, to\npay their student-athletes up to $5,000 per year, which would be placed in a\ntrust until the student-athlete leaves the school or is no longer eligible to\nplay collegiate sports.<\/p>\n\n\n\n Jenkins\nv. NCAA<\/em><\/p>\n\n\n\n In Jenkins v. NCAA<\/em>, the Court\nasks, does the NCAA violate antitrust laws by capping financial obligations to\ntheir student-athletes at the value of the cost-of-attendance (COA)? In 2016,\nthe Business Insider released a graph showing that FBS football programs in the\nNCAA generate a combined annual average revenue of $29,635,946 (Gaines, 2016<\/em>). Student-athletes make up the school\u2019s\nfootball team that lures the fans, who spend money at games which generates the\nrevenue for the schools. Therefore, a large portion of money that funds these\ncolleges and universities are generated from student-athletes playing their\nsports. When comparing the revenue generated from FBS football and D-1\nbasketball for colleges with the value of athletic scholarships the colleges\nprovide for their student-athletes, the colleges are making a huge profit.\nMartin Jenkins, along with other FBS football players and D-1 basketball\nplayers, filed a class action lawsuit with\nthe United States District Court for the District of New Jersey against the\nNCAA for violating Federal antitrust laws. They allege that the NCAA violates\nthe Sherman Antitrust Act by capping the grant-in-aid, or GIA, that the\nathletes receive or \u201cprohibit, cap, or otherwise\nlimit the remuneration that players in each of those markets may receive for\ntheir athletic services\u201d (Ingels, 2017<\/em>). The D-I athletes claim\nthat the NCAA restricts trade by capping the GIA, thereby eliminating\ncompetition in the recruiting process. The plaintiffs are seeking an injunction\nto bar NCAA\u2019s membered schools from capping the GIA of student-athletes.<\/p>\n\n\n\n When these complaints were filed,\nthe GIA was capped at the value of tuition, fees, room and board and required\ncourse books; but after the plaintiffs filed their lawsuit, the NCAA allowed their\nmembered institutions to increase their GIA compensation up to the cost-of-attendance\n(COA) of that school. <\/p>\n\n\n\n \u201cJudge Claudia Wilken of the U.S.\nDistrict Court for the Northern District of California ruled that a class of\ncollege football and men’s basketball players may proceed to trial in their\nantitrust challenge against the NCAA’s current no-pay rules\u201d (Edelmen, 2018<\/em>).\nThe plaintiffs argued that by capping the GIAs, the NCAA eliminated competition\nby inflicting an unreasonable constraint of trade under Section I of the\nSherman Antitrust Act amongst schools recruiting a specific athlete. Therefore,\nthe plaintiffs are asking for an injunction against the NCAA\u2019s GIA cap. Along\nwith the injunction, the plaintiffs are asking for additional compensation for the difference between the GIAs that have been\nawarded and the actual cost-of-attendance (COA). <\/p>\n\n\n\n The ruling in O\u2019Bannon v NCAA<\/em>\nis being used as precedent for the Jenkins case. However, the NCAA is also\nusing the ruling of the O\u2019Bannon case as a part of their defense by arguing\nthat when the Court of Appeals for the Ninth Circuit reversed the ruling on\npermanent injunction in relation to deferred compensation, they eliminated the\nchallenge presented by the plaintiffs on the current rules in the NCAA because,\n\u2018”offering [student-athletes] cash sums untethered to educational\nexpenses” was not a less restrictive alternative to the NCAA’s current\nrules under the rule of reason\u201d (Jenkins v. NCAA, 2016<\/em>). <\/p>\n\n\n\n The NCAA filed a motion for\njudgement on the previous ruling of the Ninth Circuit in the case of O\u2019Bannon\nv. NCAA<\/em> claiming that the judgement established that the schools the\nathletes have chosen to attend, are not required to pay athletes more than the COA.\nHowever, this request was unsuccessful, and the parties are set to meet for\ntrial in December of 2018. <\/p>\n\n\n\n Virtually every business, big or\nsmall, from the past, the present, and the future falls within the scope of\nFederal antitrust regulations. As businesses gain more economic power, they\nwill also experience more scrutiny from not only the Federal government, but also\nthe general public. Many major corporations such as Microsoft, AT&T, Apple,\nand as discussed, the NCAA, have gone through litigation under the scrutiny of\npossible antitrust violations. And as businesses continue to shift towards\nE-commerce such as Amazon, amendments to the current antitrust laws will most\nlikely occur to protect consumers from online businesses. However, what\nconstitutes a violation of antitrust laws can sometimes be difficult to\ndetermine. As Ayn Rand states, \u201cUnder the antitrust laws, a man becomes a\ncriminal from the moment he goes into business, no matter what he does. If he\ncomplies with one of these laws, he faces criminal prosecution under several\nothers. For instance, if he charges prices which some bureaucrats judge as too\nhigh, he can be prosecuted for monopoly or for a successful ‘intent to\nmonopolize’; if he charges prices lower than those of his competitors, he can\nbe prosecuted for ‘unfair competition’ or ‘restraint of trade’; and if he\ncharges the same prices as his competitors, he can be prosecuted for\n‘collusion’ or ‘conspiracy.'”<\/p>\n\n\n\n This Research Paper will describe United States antitrust laws and how they pertain to the National Collegiate Athletic Association (NCAA).<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48],"tags":[84],"class_list":["post-332","post","type-post","status-publish","format-standard","hentry","category-free-law-essaysbusiness-law","tag-us-law"],"yoast_head":"\n<\/s><\/p>\n\n\n\nReferences<\/h3>\n\n\n\n