NCAA Wins Again as Court Finds Transfer Rule Is ‘Presumptively Procompetitive’

Mar 17, 2017

A federal judge from the Southern District of Indiana has handed a victory to the NCAA in a case in which it was sued by a Division I football player, who claimed that the NCAA’s rule requiring him to sit out a year if he transfers to another Division I school violates antitrust laws.
In ruling for the NCAA, the court found that the transfer rule, as an eligibility bylaw, is presumptively procompetitive and thus does not violate Section 1 of the Sherman Antitrust Act.
Plaintiff Peter Deppe was a punter who was recruited by several Division I FBS institutions. Ultimately, he accepted an offer to play football at Northern Illinois University. But when his prospects for playing time appeared to be limited, Deppe decided to transfer to the University of Iowa, where he claimed he was promised an opportunity to compete for the starting job.
In September 2015, Deppe’s parents contacted the NCAA regarding whether Deppe would be eligible to play in the fall of 2016. The NCAA indicated that, because Mr. Deppe sought to transfer from one school to another, NCAA rules mandated that he would be ineligible for athletic competition for one year. After being admitted to Iowa for academic purposes, Deppe was passed-over for another punter who had immediate eligibility and was not pursuing a waiver.
However, the transfer rule stipulated that he spend a season in residency before he would be eligible to play. Unwilling to wait, Iowa recruited another punter, who was immediately eligible.
Deppe sued, claiming the NCAA’s limitation on football players’ ability to transfer to another Division I football team is “anticompetitive” and “an unlawful restraint on fair competition” in violation of the Sherman Act.
“The NCAA’s current draconian rules bar college-athletes from a fair working environment — the same level playing field afforded to those players’ coaches — and prevent players from taking full advantage of their potential athletic and academic options,” Steve Berman, managing partner of Hagens Berman, said at the time. “The NCAA maintains that its rules exist for the sake of fair play, but the NCAA’s regulations that it forces upon college-athletes restricting transfers are blatantly unfair.”
The NCAA filed a motion to dismiss, pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1).
In considering the arguments put forth by the parties, the court gave great deference to the “virtually identical” arguments put forth in Pugh v. National Collegiate Athletic Association, 2016 WL 5394408 (S.D. Ind. 2016), which was decided in September 2016. “The parties here are both respective counsel for the parties in Pugh and both acknowledged at oral argument that there are no legal issues that distinguish this case from Pugh, and that the cases’ factual differences do not impact the court’s determination on this issue,” wrote the court.
“The court concludes that its determination in Pugh remains unchanged, and the result is the same in this case. The NCAA argues persuasively that the challenged ‘year-in-residence’ eligibility bylaw is presumptively procompetitive and, therefore, does not violate the Sherman Act.
“The Sherman Act applies to NCAA regulations. Agnew v. National Collegiate Athletic Association, 683 F.3d 328 (7th Cir. 2012). However, ‘most of the regulatory controls of the NCAA are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive because they enhance public interest in intercollegiate activities.’ Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 117 (1984); Agnew, 683 F.3d at 341 (also noting that challenges to ‘procompetitive’ NCAA bylaws are properly dismissed during the motion to dismiss stage).
“As this court concluded in Pugh, when considering a challenged bylaw, the Seventh Circuit has stated that the ‘question to be answered’ is whether the challenged NCAA bylaw is ‘presumptively procompetitive’ id. (noting that this threshold question is the ‘first-and possibly only-question’ and indicating that, if the question is answered in the affirmative, there is no need for the court to conduct a ‘Rule of Reason’ analysis of the challenged bylaw). Justifying the procompetitive presumption for certain NCAA regulations, the Seventh Circuit explained that ‘a certain amount of collusion in college football is permitted because it is necessary for the product to exist. Accordingly, when an NCAA bylaw is clearly meant to help maintain that revered tradition of amateurism in college sports or the preservation of the student-athlete in higher education, the bylaw will be presumed procompetitive, since we must give the NCAA ample latitude to play that role. Id. (citing Bd. of Regents, 468 U.S. at 117).
“The NCAA bylaw which Mr. Deppe challenges directly relates to eligibility. The challenged ‘year-in-residence’ bylaw is listed in Article 14 of the NCAA Division I Manual, which is entitled ‘Eligibility: Academic and General Requirements.’”
With this in mind, the court concluded that “Agnew instructs that eligibility bylaws such as this one are presumptively procompetitive and do not violate the Sherman Act. Agnew, 683 F.3d at 343 (‘most-if not all-eligibility rules…fall comfortably within the presumption of procompetitiveness afforded to certain NCAA regulations’); see also, Smith v. Nat’l Collegiate Athletic Ass’n, 139 F.3d 180, 185-86 (3rd Cir. 1998) vacated on other grounds by Nat’l Collegiate Athletic Ass’n v. Smith, 525 U.S. 459 (1999); McCormack v. Nat’l Collegiate Athletic Ass’n, 845 F.2d 1338, 1344-45 (5th Cir. 1988) (concluding that the eligibility rules ‘do not violate the antitrust laws’ and noting that ‘the eligibility rules create the product [of college football] and allow its survival in the face of commercializing pressures’).
“Accordingly, because the challenged bylaw is directly related to eligibility, it is presumptively procompetitive and no further analysis under the Sherman Act is required. See Agnew, 684 F.3d at 341.”
Deppe v. NCAA; S.D. Ind.; Case No. 1:16-cv-00528-TWP-DKL; 3/6/17


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