By Ellen J. Staurowsky, Ed.D., Professor, Sport Management, Drexel University, Senior Writer
For decades, the National Collegiate Athletic Association (NCAA) has defended restrictive business practices that undervalue and undercompensate college athletes by asserting a philosophical commitment to amateurism. In an August 11, 2017 summary judgement motion filed in In Re: National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation, the Alston and Jenkins plaintiffs attack the NCAA’s defenses on three grounds. They assert that the NCAA, its member institutions, and conference conspire to limit benefits to Division I football and basketball players resulting in anticompetitive effects and failing to yield procompetitive benefits in violation of the Sherman Antitrust Act.
“In Plain Sight”: A Conspiracy Among the NCAA, Its Members, and Conferences
In sport and other industries, it is not uncommon for competitors operating within the same sphere or space to enter into cooperative agreements that ensure profitability, create market efficiencies, and contribute to economic vibrancy. In the business of big-time college sport, these kinds of horizontal agreements are reflected in the memberships that college and universities have in the NCAA, their respective conferences, and the repressive regulations imposed upon college athletes. Articles and bylaws in the NCAA Manual that outline the obligations of membership (Article 1.3.2), required rules compliance (Article 2.8), and demands for restitution if schools allow ineligible athletes to compete (Bylaw 19.2) serve as examples of how the regulatory system sustains and maintains these horizontal arrangements.
For Division I athletes in the sports of football and basketball, the school teams they sign with compete horizontally for their athletic services. The NCAA, in concert with its member schools, pass regulations that cap the level of athletic scholarships and limit other areas of benefits athletes may receive. In turn, conferences representing NCAA member schools while also maintaining membership themselves in the NCAA, work in tandem with their interlocking partners to impose those rules upon athletes in a way that restricts, rather than fosters, competition.
According to the plaintiffs, the NCAA’s rules restraining and limiting athlete compensation results in two things: less competition for athletes’ services and an attendant diversion of competition into what they refer to in the motion as “inefficient substitutes”. In effect, the suppression in the market for athlete services and limitations on athlete compensation results in an escalation of what has come to be called the athletics arms race, where spending is funneled to an expansion of athletic facilities and where coaches and administrators are enriched through ever more lucrative salary and compensation packages.
In support of their claims, plaintiffs refer to an NCAA expert who testified that “If the injunctive relief were granted, some putative class members would be displaced…by players drawn to these institutions by increased payments” (Motion, p. 5). While the NCAA argues that such restraints are necessary in order to preserve consumer demand for amateurism, the restraints themselves prevent schools from offering more benefits to players. According to the plaintiffs, “This is the very paradigm of a significant anticompetitive restraint on competition” (Motion, p. 6).
NCAA Unable to Prove Procompetitive Justifications for Its Practices
As they did in O’Bannon et al. v. NCAA et al. (2015), the NCAA seeks to defend the capping of athlete compensation by arguing that “their amateurism rules are necessary to differentiate Division I basketball and FBS football from professional sports and thereby maintain consumer demand” (Motion, p. 7). Stated another way, the NCAA argues that amateurism is critical to distinguishing college football and basketball from professional sports. As stated by plaintiffs, “…Defendants contend that there is an unwavering bright line between ‘amateurs’ and ‘professionals’ at the cost of attendance (what the Ninth Circuit described in O’Bannon as compensation tethered to education), and that crossing the COA line by so much as one penny would destroy consumer demand for these sports” (Motion, p. 7).
Citing to testimony from Dr. Mark Emmert, president of the NCAA, the reason why athletes are not permitted to receive cash compensation above COA is that college sports “need to be of students, by students and for no other purpose than competitions among those students; not as a profession” (Motion, p. 8). Plaintiffs argue, however, that the restraints imposed on compensation by the NCAA are “not tied to any fixed, COA-based notion of amateurism” nor is there evidence to support the NCAA’s claims that consumer demand would be negatively affected by conferences or schools offering athletes benefits above cost of attendance.
In deposition testimony from Kevin Lennon, NCAA vice president for Division I governance, he admitted that the NCAA membership, “at any point in time”, can agree to change rules pertaining to the benefits considered to be incidental to participation “without violating the principle of amateurism”. Benefits incidental to participation, which have expanded over the years in nature and kind and are largely addressed in NCAA Bylaw 16, include for example things such as gift suite items1; apparel, equipment, and supplies; coverage of expenses for family members to attend certain championship events; and costs incurred by athletes competing in national championships, attending Olympic trials or national team tryouts. Other college sport officials, including commissioner of the Big 12, Bob Bowlsby and recently retired commissioner of the Southeastern Conference (SEC), Mike Slive both testified that gift suite items, which might be worth as much as $450 per item, were not related to educational expenses.
The college athlete plaintiffs in their challenge to the restraints on their compensation make the case that contrary to Dr. Emmert’s position that providing compensation above COA threatening the “collegiate model” and imperiling the principle of amateurism, the NCAA has given permission for select benefits above COA to be received by college athletes and no such threat to the consumer demand for college football or basketball has been realized as a result. Further the veil is lifted to reveal that the “unwavering bright line” that the NCAA insists must be present in order to separate college “amateurs” from “professionals” is one that can be shifted “at any point in time” and already allows for athletes to receive selected benefits above COA not tethered to education. The plaintiffs conclude that these facts “eviscerate” the NCAA’s amateurism justification.
NCAA Already Permits Athletes to Receive Compensation Untethered to Education
There are three areas plaintiffs point to in challenging the NCAA’s assertion that payments to athletes must adhere to an educational purpose. Those areas of payments include a stipend in addition to the grant-in-aid, financial support distributed through the NCAA’s Special Assistance Fund, and the tolerance the NCAA has for allowing athletes in Olympic and international competitions to receive uncapped payments.
In the aftermath of O’Bannon, the NCAA adjusted its compensation rules to allow for schools to offer athletes awards that not only included a grant-in-aid but a stipend. The stipend fills the gap between what a grant-in-aid covers, namely expenses associated with tuition, room and board, and books, and the full cost of attending college (COA). Instructively, stipends are given to athletes in cash payments with no restrictions on what athletes use the money for. Thus, some use their stipend checks to pay their own bills (cars, utilities), to lend a hand and pay bills for their families, contribute to worthy causes, and others put money away for a rainy day. College sport authorities affirm that the cash payments athletes receive from their stipends are not tethered to education.
Nor are the financial disbursements made to athletes through the NCAA’s Student Assistance Fund, a fund to which athletes may apply and receive money above COA that they may use to pay insurance premiums, purchase clothing, child care services, and other expenses unrelated to an athlete’s education. And finally, the NCAA provides for athletes competing in the Olympic Games and other international competitions to receive uncapped payments without jeopardizing their athletic eligibility.
NCAA Arbitrarily Prohibits Payments of Certain Expenses Tethered to Education
While the NCAA’s COA rules presumably are there to preserve a link between athletics and education, the plain fact of the matter is the NCAA and its members have often balked at providing benefits that are tethered to education. NCAA schools have turned away from guaranteeing post-graduate scholarships for athletes to complete undergraduate or graduate degrees at institutions of the athlete’s choice or financial support for athletes to pursue vocational training. In an especially interesting twist, while schools provide financial incentives in the form of bonuses to coaches based on the academic performance of their teams, the NCAA has avoided any financial incentives to players for degree completion or making progress toward their degrees. As noted in the motion, Dr. Emmert testified that “payments tethered to education (such as paying for post-graduate expenses) were no different than giving athletes cash or Ferraris if ‘it costs the university the same amount’” (Motion, p. 11).
NCAA’s Arbitrary & Changing Rules Do Not Promote Consumer Demand
In a reversal of position from the one taken in O’Bannon, the NCAA’s expert in this case posits that there is no fruitful way to determine if changing player compensation rules would affect future consumer demand. The plaintiff’s expert, however, indicated through survey research that an expansion of additional benefits to the college athlete class in this case would not adversely affect viewer interest in or attendance at Division I and FBS football games. Further, the plaintiffs note that in repeated questioning of the NCAA’s witnesses, decisions to alter compensation rules for athletes have been made in the absence of empirical research to study impact on consumers. In point of fact, NCAA president Mark Emmert indicated that the NCAA’s position on athlete compensation was not an economic one but a philosophical one. As a consequence, plaintiffs conclude that the NCAA’s assertion that consumer demand would decline should athlete compensation be expanded is unsupported by evidence. Further, in what the plaintiffs refer to as the “natural experiment” created post-O’Bannon, the awarding of stipends to athletes has not had an adverse effect on either sport in terms of consumer demand.
Capping College Athlete Compensation Unrelated to “Student First-Athlete Second” Objective
Contesting the NCAA’s publicized stance that adhering to its principle of amateurism is critical to preserve as its first-priority the opportunity for athletes to receive quality educations, plaintiffs point out myriad contradictions that argue otherwise. Hourly limits on participation, codified in the NCAA’s 20-hour rule (Bylaw 188.8.131.52), are regularly violated and subject to exceptions that result in athletes in the sports of football and basketball reporting that their time demands often meet or exceed 40 hours per week whether in season or out. Over the years, with schools changing conferences in pursuit of more lucrative television contracts, they have committed to more travel that interrupts academic work. Further, conference and school television deals leave them open to abruptly changing schedules to accommodate the needs of television programmers. Additionally, the NCAA itself has argued in court documents that while it claims to prioritize the role of student over that of athlete it has no duty to ensure that an athlete receive a quality education. Plaintiffs conclude, on the basis of this information, that the compensation rules designed by the NCAA and imposed on athletes do not promote an education-related objective.
After the motion for summary judgement was filed, NCAA chief legal officer Donald Remy issued a statement affirming that the principle of amateurism remains central to the NCAA’s goal of ensuring that athletes have meaning athletic and academic experiences. The NCAA is scheduled to respond in late September, 2017.
Edward O’Bannon et al. v. National Collegiate Athletic Association and Electronic Arts. (2015, September). Case No. 14-16601. Retrieved from http://cdn.ca9.uscourts.gov/datastore/opinions/2015/09/30/14-16601.pdf
In Re: National Collegiate Athletic Association Athletic Grant-in-Aid CAP Antitrust Litigation. (2017, August 18).Plaintiffs Notice of Motion and Motion for Summary Judgement. Case No. 4:14-md-02541-CW and Case No. 4:14-cv-02758-CW. Retrieved from PacerMonitor.com.
Moriarity, M. (2016, December 17). Bowl game gifts guide 2016: Which players are getting the best game swag this year? SBNation.com. Retrieved from https://www.sbnation.com/college-football/2016/12/17/13857064/bowl-game-gifts-2016
NCAA Academic and Membership Affairs Staff. (2017, August). NCAA Division I Manual 2017-2018. Indianapolis, IN: National Collegiate Athletic Association. Retrieved from http://www.ncaapublications.com/productdownloads/D118.pdf
Remy, D. (2012, August 12). Statement on the motion for summary judgement by the Alston and Jenkins plaintiffs. Retrieved from https://twitter.com/ncaastacey?lang=en 1. For those unfamiliar, gift suites are put together by event sponsors at major sporting and celebrity events. Participants are permitted to “shop” in the gift suite for items of considerable value. Examples of gift suite items offered at bowl games over the years include televisions, sun glasses, technology items (PlayStation, X-Box, iPhone, iPad), head phones, apparel, watches, houseware items, gift cards that can be worth hundreds of dollars, and in one case, a Barcalounger. While most assume players just ‘cash’ in on these items, it is often the case that they use these gifts as presents for the holidays. Morariaty (2016) provides an example of the reporting on this.