antit-trust and the ncaa (2008)

CHALLENGING THE NCAASM 405 Anti-Trust

Thursday, April 17, 14

THE QUESTION

Are big-time college sport athletes being cheated by the NCAA?

An anti-trust lawsuit filed in 2006 may give athletes their best shot at expanded benefits

Unlike past lawsuits, it steer clears from seeking pay for athletes


THE LAWSUIT

Filed by two heavy hitting Los Angeles firms on the behalf of 3 former athletes

And indirectly on behalf of all football and men’s basketball players who competed for 144 Division I universities from 2002-2010

~20,000 athletes


WHAT IT SAYS...

“While big-time college sports have become a huge commercial enterprise generating billions in annual revenues, the NCAA and its member institutions do not allow student athletes the share of the revenue they would obtain in a more competitive market...”


WHAT IT SAYS...(CONT.)

“The NCAA and its member institutions have agreed to deny a legitimate share of the tremendous profits of their enterprise to the student athletes who make the big business of big-time sports possible”

Football & Basketball players generate “billions”, and therefore should be able to afford basics like toilet paper, soap, & deodorant


WHAT DOES IT MEAN?

Trying to show the association and its members have violated federal law by agreeing to artificially suppress the value of sports scholarships the athletes receive

“Shortchanged student athletes by imposing an artificial cap on financial aid”

Usually set below the cost of full attendance non-athletic students

Money is there for coaches, facilities


WHAT’S CURRENTLY THE DEAL?

Schools limit the value of athletic scholarships to tuition to fees, room & board, and required books

What are typical college student expenses?


RAW-DEAL FOR ATHLETES?

Schools do not cover school supplies, health & disability insurance, and travel cost--aspects of a typical student’s education

NCAA claims “students” first, right?

NCAA itself values student expenses to average $2500

Should there be a cap on scholarships?


RAW-DEAL FOR ATHLETES? (CONT.)

Without a cap, “the same competitive forces that drive schools to provide coaches with million dollar salaries and build lavish athletic facilities would also compel those schools to provide athletics-based financial aid covering the full [cost of attendance].”


LET’S DO THE MATH...

Lawsuit doesn’t include exact $ value

144 colleges with 100 football and men’s basketball players x four years’ worth of alleged annual scholarship underpayment of $2500 x trebled damages under antitrust = $350 million


NCAA’S POSITION

Recent rule change allows DI colleges to supplement athletic scholarships with institutional or other financial aid

Money not based on athletic skill

Permits athletes to work part time

NCAA special assistance fund available

Does it ignore the NCAA’s right to determine what’s covered in a scholarship and to enact its own rules? (Members vote on the rules)


WHY THIS CASE IS DIFFERENT?

NCAA business practices, not rules, are in question

NCAA can’t use argument that it needs the scholarship restriction to sustain the amateur nature of college sports

Any attempt to seek payment over and above what a normal student would get would professionalize college sport


WHY IS THIS CASE DIFFERENT? (CONT.)

Lawsuit argues “restricting the value of athletic scholarships is a cost containment mechanism that enables the NCAA and its member institutions to preserve more of the benefits of their enterprise for themselves”

Lawsuit sites a 2003 statement by Myles Brand saying he favored the idea of increasing the value of a scholarship to full cost of attendance, money could come from $6 B TV contract


PAST EFFORTS TO INCREASE SCHOLARSHIPS

Defeated on the grounds of “competitive equity”--the idea that without limits on spending, wealthier sports programs would be able to outspend their smaller peers and ultimately run them into the ground, decreasing the competitiveness of the market

Once again, why is this different?

What do you think is the NCAA’s strongest argument to win this case?


NCAA ARGUMENTS?

Limiting scholarships is the only way to maintain a level playing field in terms of recruitment

Paying up to the cost of attendance will kill non-revenue sports

What’s the problem with these arguments in regards to antitrust/encouraging competition?


THE WINNER

It would increase competition among NCAA members

The Ohio State’s and Michigans may say that the true cost of attendance is 15 times that of Miami of Ohio and Marshall

But, the athlete would benefit with competition, right?


SO WHAT HAPPENED?

NCAA got scared...and have agreed to a settlement

If not approved, the NCAA could look very, very different in coming years


SETTLEMENT TERMS

Allow conferences & institutions to distribute $218M through 2012-13

Originally from Special Assistance Fund and Academic Enhancement Fund

New program, with more flexible guidelines “Student-Athlete Opportunity Fund” (SAOF)


ADDITIONAL TERMS

Creation of $10M fund that former athletes can apply for reimbursement of education expenses

3 years to apply; $500 one-time or max of $2500 per year for 3 years of education

Allowing DI schools to provide year-round, comprehensive health insurance

NCAA Membership will examine multi-year scholarships

Opinions on this?


DISCUSSION ITEMS

Will it exacerbate tensions between the richest sports programs and the “have-nots?”

Does it propel or slow down the push by college athletes to seek more money?

Does this change the NCAA’s relationship with college athletes?

Will it restart the conversation again within the membership?


STAY TUNED...

June 23, 2008


antit-trust and the ncaa (2008)

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