Court Opts for ‘Rule of Reason’ Analysis in MIBA-NCAA Case

Nov 1, 2004

A federal judge in the Southern District of New York has denied a plaintiff’s motion for summary judgment in a case where the plaintiff, the organizer of the post-season National Invitational Tournament, claimed that the NCAA violates antitrust laws with its requirement that member schools must participate, if invited, in the NCAA Division I Men’s Basketball Championship Tournament.
The key determination in the case was the court’s decision to review the NCAA’s Commitment to Participate rule under the “rule of reason” and not the “per se” analysis, which the plaintiff had sought.
The plaintiff in this case is the Metropolitan Intercollegiate Basketball Association, which is owned by New York University, Fordham University, Wagner College, St. Johns University and Manhattan College.
Since the late 1930’s, MIBA has conducted the Postseason NIT. While initially the NIT was on even footing with the NCAA’s post-season tournament in terms of stature, its position began to erode in the 1980s when the NCAA rapidly expanded the field of participating teams and revised the aforementioned Commitment to Participate Rule.
Filed in 2002, MIBA’s suit alleges that some of the NCAA’s rules are unreasonable restraints of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. In addition, the plaintiff claimed that the NCAA uses the rules affecting postseason competition to achieve or attempt to gain monopoly power in the market for Division I men’s college basketball tournaments, in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. The complaint also asserts a common law claim of tortious interference with contract. MIBA moved for summary judgment on the issue of liability on claims two and three, which challenge the rules affecting postseason play under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2.
MIBA seeks summary judgment only on the Commitment to Participate Rule, which states: “Eligible members in a sport who are not also members of the National Association of Intercollegiate Athletics will participate (if selected) in the NCAA championship or in no postseason competition in that sport.”
In its analysis, the court found that the Commitment to Participate Rule does constitute an agreement among the NCAA member institutions and subjects the NCAA to § 1 scrutiny.
“MIBA argues that the Commitment to Participate Rule should be condemned as illegal per se because it is an agreement among the NCAA and its competing member schools to boycott any competing postseason tournament whenever a team is invited to the NCAA Tournament,” wrote the court. “The NCAA argues that the application of the per se rule is not appropriate.”
While the courts conceded that certain types of restraints of trade are so inherently anticompetitive that they are per se invalid under § 1 of the Sherman Act, 15 U.S.C. § 1, the controlling case that applies to this motion dictates a “Rule of Reason ” analysis.
“In National Collegiate Athletic Association v. Board of Regents, 468 U.S. 85, 100, 82 L. Ed. 2d 70, 104 S. Ct. 2948 (1984), the Supreme Court declined to apply the per se rule to the NCAA’s television broadcast plan which restricted the total number of college football games which could be televised and the number of games any single college could broadcast,” wrote the court. “This decision was made despite the fact that the plan clearly limited output by restraining the quantity of television rights available for sale and fixed the price at which institutions could sell the rights, restrictions which are usually considered hallmarks of unreasonable restraints of trade. Id. at 99-100.”
That court cited the “essential” need for some horizontal restraints in the industry.
“What the NCAA and its member institutions market in this case is competition itself–contests between competing institutions. Of course, this would be completely ineffective if there were no rules on which the competitors agreed to create and define the competition to be marketed. A myriad of rules affecting such matters as the size of the field, the number of players on a team, and the extent to which physical violence is to be encouraged or proscribed, all must be agreed upon, and all restrain the manner in which institutions compete. Id.”
That opinion resonated with the present court, which noted that “at a minimum, the rule’s possible pro-competitive effects (of the rule) must be examined. See, e.g., id. at 103.
Thus, it held that MIBA “is required to meet its burden under the full rule of reason analysis to show the anticompetitive effects of the rule.”
Turning to MIBA’s Motion for Summary Judgment under Sherman Act § 2, the court found that a material question of fact remains “as to whether the Commitment to Participate Rule was enacted with the specific intent of suppressing competition from the NCAA Tournament’s competitor.”
Thus, it denied that portion of the motion for summary judgment as well. MIBA v . NCAA et al.; S.D.N.Y.; 01 Civ. 0071 (MGC); 9/30/04
Attorneys of Record: (for plaintiff) Jeffrey L. Kessler, David G. Feher, Julie D. Wood and David Schepard of Dewey Ballantine LLP, in NewYork, N.Y.; Bruce S. Meyer and Renee M. Fishman of Weil, Gotshal & Manges LLP, in New York, NY. (for defendants) Gregory L. Curtner, Kimberly K. Kefalas, Atleen Kaur and Eric McLand of Miller, Canfield, Paddock & Stone, P.L.C., in New York, NY.


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