Antitrust Lawsuit Challenges NCAA over Amount of Aid to Student Athletes

Mar 24, 2006

Three former student athletes have filed an antitrust lawsuit against the NCAA, alleging that the NCAA’s rule requiring its members to cover some, but not all, of a student athlete’s expenses while attending college is an antitrust violation. In essence, they are arguing that the NCAA is a collusive monopsony.
The plaintiffs — former Stanford football player Jason White, former UCLA football player Brian Polak and former University of San Francisco basketball player Jovan Harris — are represented by the Los Angeles law firms of Susman Godfrey and Blecher & Collins.
Their argument hinges on the belief that the NCAA and its membership does “not allow student athletes the share of the revenues that they would obtain in a more competitive market.”
Further, the plaintiffs suggested that through an “unlawful horizontal agreement” that the NCAA and its members “have short-changed student athletes by imposing an artificial cap on the amount of financial aid any athlete may receive in the form of an athletic scholarship, ‘grant-in-aid’ (GIA). The artificial cap on financial aid is set below the amount of the cost of attendance (COA) that any student would incur to attend the relevant colleges or universities.”
They went on to note that so-called “full” scholarships are “insufficient to cover normal and usual expenses, such as school supplies, recommended textbooks, laundry expenses, health and disability insurance, travel costs and incidental expenses.” They also noted that the NCAA has admitted that those student athletes on “full” scholarships must still cover $2,500 in “out-of-pocket expenses.”
The plaintiffs quoted a 2003 letter that NCAA President Myles Brand wrote to the Denver Post in which he suggested that he would favor the idea of “providing the full cost of attendance.”
Seeking class-action status for all past participants in football and men’s basketball at Division 1-A schools over the past four years, the plaintiffs went on to describe their objective as the elimination of the “artificial GIA cap” and to provide student athletes with aid that covers the full COA. The plaintiffs are also seeking damages based on the scholarship payments that they would have received “absent the NCAA’s unlawful agreement to impose the GIA cap.”
After defining the relevant market as the markets for major college football and men’s basketball, the plaintiffs argued that the demand for student athletes in these markets is such that, “absent the unlawful GIA cap, each student athlete in the class would have received a grant equal to the COA.”
They then sought to build a case that the GIAs awarded to student athletes “are commercial transactions that affect interstate commerce. By adopting and enforcing the agreement to cap the GIA amount that member institutions may provide student athletes, the NCAA deprives student athletes of millions of dollars in additional financial aid each year.”
Finally, they also sought to draw a parallel with Law v. NCAA, 134 F.3d 1010 (10th Cir. 1998) in which 10th U.S. Circuit Court of Appeals affirmed a district court’s decision that the salary restrictions placed on assistant coaches at the time was an unlawful restraint of trade. After a subsequent damages verdict in the coaches’ favor, that case settled for $54.5 million.
Jeffrey L. Harrison, a professor and authority on antitrust law at the University of Florida, told Sports Litigation Alert that it appeared the plaintiffs were tempering their demand in hopes of being successful.
“I think it is interesting that the plaintiffs seem to concede that they would have difficulties asking for the difference between the GIA and market value for player,” he said. “Instead they are willing to go with an actual cost cap.”
One reason is the NCAA might come back with a good pro-competitive/product necessity defense if the plaintiffs got too greedy, he said.
As it stands, the NCAA could be facing potential damages of $345 million. That number is arrived at by multiplying the 11,500 football and basketball scholarships given out each year at the specified schools by the $10,000 increase (over four years) that each would be arrived at. That number — $115 million – could be trebled to approximately $345 million.


Articles in Current Issue