By Dr. Michael A. Ross, Ph.D.
In early December, the following seven states brought forth legal action against Bylaw 14.5.5.1, more commonly referred to as the Transfer Eligibility Rule, instituted and upheld by the Defendant, the National Collegiate Athletic Association, or NCAA – Ohio, Colorado, Illinois, New York, North Carolina, Tennessee, and West Virginia. The previously highlighted Bylaw requires a one-year delay in athletic eligibility for certain collegiate athletes who are transferring between NCAA member institutions in addition to what the Plaintiff States deem unjust requirements that restrain said athletes from engaging in the market for their labor as other NCAA Division I athletes are permitted to do. The legal action, on behalf of the Plaintiffs, seeks declaratory and injunctive relief against the Defendant on the grounds that a violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.
It is not a groundbreaking revelation that the realm of collegiate sports has become big business for virtually all stakeholders involved within its reach and overall influence. The competitive nature of the contests many participate in, and even more consume, offer fandom and entertainment unparalleled by many other opportunities within this similar space. While the on field or on court competitions are easily the most recognized and championed forms of competition surrounding collegiate sport, a just as competitive environment exists between the universities and their stakeholders to recruit and retain student athletes to be a part of their own athletics programs. With the reach and influence of the NCAA in mind, it is logical that a governing body such as the NCAA must implement rules and regulations that promote safety and longevity of those who they are charged with. However, this legal action put forth by the Plaintiff insists that some of the rules and regulations implemented and upheld by the Defendant are directly against the nation’s antitrust laws which are premised on the belief that market forces provide the best overall outcomes.
The main rule in question, as put forth by the aforementioned legal action, is the transfer eligibility rule which restricts the eligibility of collegiate athletes who transfer between Division I schools. The NCAA insists the intent of this rule is to promote the academic well-being of the athletes while also assisting in the preservation of the organization’s amateurism model. The Plaintiff makes light that the intention, as set forth by the Defendant, is questionable in its application and effectiveness while also stating “the Transfer Eligibility Rule is a no-poach agreement between horizontal competitor member schools that serve to allocate the market for the labor of NCAA Division I college athletes.” Such an agreement would directly violate the Sherman Act. The Plaintiff furthered their stance by making light that no comparable restrictions are placed on students with academic or music scholarships or even on coaches or administrators that would restrict them from moving among institutions as they pleased.
It should be made known how the rule is applied as it currently exists. While the Transfer Eligibility Rule requires a year of academic residency before a transferring Division I collegiate athlete is eligible for NCAA athletic competition, it does offer some leniency throughout this process meant to benefit the student athlete. A collegiate athlete is exempt from this process for a first-time transfer and a discretionary wavier process is available for athletes who decide a second transfer is necessary, but the rule as previously described is the standard for Division I athletes who do decide to transfer a second time. The Plaintiff extends their stance by insisting that a loss of a full year could have detrimental and long-term effects for both student athletes and potentially programs as well. By essentially losing 20% of their total eligibility, collegiate athletes fail to receive the full benefits offered to those who participate in NCAA Division I athletics. Because of this restriction, the Plaintiff furthers this by insisting collegiate athletes are hesitant to seek out opportunities at universities that may exist as a better match for them and their needs and/or opportunities.
While acknowledging that the NCAA is an association of member institutions that are in competition with one another to attract revenues, fans, collegiate athletes, and other viable means, the Plaintiff insists the NCAA has “enacted and enforced anticompetitive rules and policies that act as an unlawful barrier on the ability for certain college athletes and universities to compete against each other.” Elaborating on their intent brought forth against the Defendant, the Plaintiff States “bring this action to put a stop to the Defendant’s unjustified overreach into the lives and careers of college athletes, to prevent the unjustified anticompetitive restriction on universities who seek to compete for all college athletes, and to restore freedom to economic opportunity.”
It should be made known that the Plaintiff States are granted authority to bring actions for injunctive relief under federal antitrust law. They are recognized as having quasi-sovereign interests in protecting their citizens, including but not limited to college athletes and consumers of collegiate sports, from economic harm and simultaneously ensuring that their economic and labor markets are not suppressed by unjustified restraints of trade. It should also be recognized that the Defendant and its member institutions are charged with creating, adhering to, and upholding all regulations and policies as implemented by the Defendant and its Constitution and Bylaws. Essentially, failing to adhere to the established rules and regulations as set forth by the NCAA can result in a multitude of varying repercussions. Following and adhering to these rules and regulations permits college athletes and their institutions to continue their participation at the highest level of collegiate athletics and maintain their NCAA membership status. The importance of this is highlighted by the Plaintiff while stating the following:
There are zero practical alternatives that can provide the unique combination of attributes offered by Division I NCAA athletic schools: (i) the ability to exchange athletic services for the payment of the partial or full cost of an education plus room and board, (ii) high quality academic educational services, (iii) top-of-the-line training facilities, (iv) high quality coaches that will best be able to launch players to professional careers, (v) national publicity through national championships and nationwide broadcasting contracts, (vi) opportunities to profit from name, image, and likeness (“NIL”) agreements, and (vii) competition at the highest level of collegiate athletics.
As it currently exists, each division within the NCAA is charged with maintaining its own legislative process for adopting Bylaws in which some Bylaws exist as division specific while others may transcend all three divisions. Specifically, the Division I Council is comprised of representatives from member institutions and conferences who are charged with maintaining and reviewing legislative matters as they pertain to the Division I realm. Addressing the Transfer Eligibility Rule specifically, currently the athlete must initiate the transfer process by notifying their current institution during a designated time for their respective sport that they intend to transfer. Once this has taken place, the current institution must list the athlete’s information into the national transfer database, also known as the transfer portal. For reference, 21,685 college athletes were listed in the transfer portal as of September 12, 2023. As previously stated, first time transfer or applicable waivers approving a second transfer allow for immediate participation, but those who are transferring a second time and were not approved through the waiver process must adhere to the one year of academic residency requirement. During this time, college athletes are permitted to practice and engage in all team activities excluding those of game day participation. Violating such requirements falls under the NCAA Bylaws commonly recognized as the Rule of Restitution. The Plaintiff insists that due to the coexistent and commercial nature that exists among college athletes and NCAA member institutions and the effect these interactions have on college athletes and those who consume collegiate athletics, the Defendant’s enforcement of the Transfer Eligibility Rule falls within the purview of the Sherman Act. Reinforcing this notion, the Plaintiff plainly states that the “Transfer Eligibility Rule’s anticompetitive effects within the sport-specific markets for labor of NCAA Division I college athletes far outweigh the pretextual procompetitive benefits, and the Rule is an unreasonable restraint of trade that cannot survive rule of reason analysis.”
The two labor market groups broadly affected by the Rule within the NCAA Division I athletics realm are the (1) athletic services in men’s and women’s Division I basketball and football bowl subdivision (FBS) football and (2) athletic services in all other men’s and women’s Division I sports, wherein each athlete participates in their sport-specific market. This relationship exists as college athletes compete on behalf of the institutions and their athletic programs while said institutions essentially secure the labor of college athletes through in-kind benefits. With the advancement of NIL opportunities, this relationship now includes significant individual earning potential for top caliber athletes across the already established labor market created by the NCAA and its member institutions. Despite the evolution of NIL agreements and advancement of financial opportunity surrounding collegiate sports, the NCAA maintains exclusive power within these relative markets by dictating the rules and regulations of its stakeholders through the established Division I Council and member institutions and their continued participation within the NCAA. The NCAA and its member institutions earn revenue from the consumption of sport contests in return for offering the means and platform for athletes to compete, participate, improve, receive their education, and increase their personal notoriety for advanced opportunities monetarily or professionally. The Plaintiff again states that this relationship between college athletes and the NCAA falls under the purview of the Sherman Act.
It has long been made known that many of the rules and regulations established by the NCAA are meant to assist in the overall well-being of student athletes while also aimed to preserve the amateurism model that has been the foundation of much debate. The Rule, as it currently exists, restricts college athletes from moving freely among collegiate programs that may offer them increased economic opportunities, enhanced personal growth, and better overall well-being which are freedoms not restricted to other non-student athletes, coaches, and administrators as previously stated. The Plaintiff highlights again that this is in violation of the Sherman Act because it has direct anticompetitive effects that harm college athletes and those who consume college athletics.
Elaborating on this notion, the idea of losing an entire year of eligibility restricts or deters many athletes from seeking more fruitful opportunities because of the evident repercussions that would accompany losing said eligibility. Despite a wide variety of reasons an athlete may wish to transfer, both athletic or personal, knowing a loss of eligibility could be applied for seeking a new institution does create hesitation to move freely within this market in which athletes do participate and exist. Additionally, it should be noted that these institutions are also competing to recruit and retain high caliber college athletes through a current system that favors such an outcome. A second transfer currently requires athletes to complete and be granted a waiver to be permitted to compete immediately and forgo the year of academic residency previously outlined. The athlete may not apply for such a waiver until they have already applied and been accepted into the new institution which places the risk of a denied waiver heavily on both the athlete and the new institution. Many institutions may second guess if recruiting a two-time transfer is worth the gamble which distorts the market and also deflates the potential value of said athlete. In some instances, athletes may be forced into a transfer through a loss of scholarship, coaching changes, or other varying factors that can influence their decisions or trajectory. Finally, another factor that harms the athletes is the loss of a single year of eligibility, especially those who seek the publicity and opportunity to perform on large stages that may offer increased opportunities to pursue professional careers within their sport. This loss of opportunity could directly and negatively affect an athlete personally, professionally, and economically in both the immediate and long-term instances. The focal point here highlights that in the highly competitive and limited roster sports available for those who have the opportunity to advance past collegiate play, these opportunities to compete on the highest stage are invaluable. Not only does this influence the professional opportunities, but also the more immediate opportunities that exist and are continuing to grow through NIL agreements. These opportunities reach well into the millions for those who are successful at the highest levels. The Transfer Eligibility Rule has negative effects on the aforementioned stakeholders and markets through both application and design.
In regard to the Rule’s negative effect on consumers, the restriction placed on popular athletes is projected to have a negative effect on fandom and could decrease the level of competitiveness for the team on gameday. On a broader scale, the Rule decreases parity throughout collegiate athletics which could offer a better overall product and entertainment for consumers. Allowing more freedom to pursue better opportunities would in theory disperse the talent among the conferences and institutions that extend past the traditional and repeatedly successful programs often consistently seen in the post season or winning championships. Consider the Cinderella story teams often marketed and highlighted within the NCAA Division I Men’s Basketball Tournament for reference as to how increased parity may positively influence the stakeholders surrounding the sport.
The Plaintiff also states that the justifications for the Rule’s enforcement are pretextual. The statement that the Rule promotes an athlete’s academic well-being falls short when considering all academic and athletic requirements are still established and expected where additional time that is insisted to accompany the Rule does not actually exist. Even while athletes are not permitted to participate on gameday, many are expected to be present which affords them no additional time to dedicate toward their academic requirements. Additionally, the enforcement of the Rule does not have an effect on the amateur status often referenced and broadly applied by the NCAA. Removing the Rule would have no effect on amateurism as defined by the NCAA and its Bylaws.
As the aforementioned justifications fall short, it should be noted that less restrictive Bylaws are already in place to address these issues. Bylaws established requiring athletes to make adequate progress toward completing their degree, the completion of a minimum number of credit hours, and an overall GPA must all be adhered to for an athlete to be deemed eligible for competition. Extending on these requirements, the NCAA currently has additional Bylaws prohibiting in-season transfers within the same sport. Ultimately, the same intentions put forth by the NCAA surrounding the Rule are enforced and applied currently through less restrictive Bylaws that must consistently be upheld and adhered to by all participating stakeholders and allowing the argument to abolish or suspend the Transfer Eligibility Rule.
Update as of Press Time
As a result of this lawsuit, and less than three weeks after said action was taken, the NCAA released a memo which stated that college athletes who enter the transfer portal this fall will be immediately eligible to compete during the 2024-2025 academic year. Thus, allowing the college athletes previously highlighted who are recognized as two-time transfers immediate eligibility whereas they would previously need to be granted a waiver for such an opportunity. Additionally, this confirms that an athlete transferring during the 2023-2024 academic year will be eligible during next season and would even allow athletes additional transfer opportunities extending the two-time limit highlighted throughout this article and in which the Transfer Eligibility Rule primarily focuses on. At the time of this article, there were 1,825 FBS players in the transfer portal, and it is projected that with the release of this memo an increase in that number is likely to occur. As the evolving landscape of collegiate athletics continues to advance, it is within reason to expect a closer evaluation at the effectiveness of established NCAA Bylaws may become more common. Advancements within collegiate athletics, such as the continued evolution of NIL and heightened prioritization placed on both mental and overall well-being of student-athletes, will certainly make stakeholders across the spectrum weigh modern opportunities against predated rules and regulations.
Dr. Michael A. Ross, Senior Writer for the Journal of NCAA Compliance, is the Department Chair and an Associate Professor of Sport Management at Shorter University specializing in research related to youth sport studies, leadership, sport law, social media policies and procedures within athletics, and participation motivations in sport and recreation.
