The NCAA and the Rule of Reason

Abstract

This brief essay considers the use of antitrust’s rule of reason in assessing challenges to rule-making by the NCAA. In particular, it looks at the O’Bannon case, which involved challenges to NCAA rules that limit the compensation of student athletes under the NCAA rubric that protects the “amateur” status of collegiate athletes. Within that rubric, the Ninth Circuit got the right answer. That outcome leads to a broader question, however: Should the NCAA’s long held goal, frequently supported by the courts, of preserving athletic amateurism be jettisoned? Given the dual role that colleges play, that is a complex question, which raises issues that are not only commercial but also educational. More important for the purpose at hand, is whether jettisoning amateurism in NCAA athletics is a suitable task for an antitrust tribunal. This paper argues that antitrust law is not an appropriate vehicle for addressing that issue. This does not mean that antitrust has no role to play in policing athlete compensation in NCAA schools. But it does suggest that that role be limited to addressing restraints on trade that occur within the rubric of amateur status—at least until such time as a more competent body decides whether amateurism in collegiate athletics is worth preserving.

This is a preview of subscription content, log in to check access.

Notes

  1. 1.

    15 U.S.C. § 26.

  2. 2.

    See, e.g., United States v. Microsoft Corp., 253 F.3d 34, 59 (D.C. Cir. 2001) (stating a balancing requirement under Section 2 of the Sherman Act, but then deciding the case without doing any balancing).

  3. 3.

    E.g., Pennsylvania v. NCAA, 948 F. Supp. 2d 416 (M.D. Pa. 2013) (NCAA's imposition of severe penalties on Penn State football program in the wake of sexual abuse scandals was noncommercial, and thus not reachable under the antitrust laws).

  4. 4.

    See NCAA Student-Athlete Name and Likeness Licensing Litig., 990 F. Supp. 2d 996 (N.D. Cal. 2013).

  5. 5.

    National Collegiate Athletic Assn. v. Board of Regents of the University of Oklahoma (NCAA), 468 U.S. 85 (1984).

  6. 6.

    Id. at 101 (“Rather, what is critical is that this case involves an industry in which horizontal restraints on competition are essential if the product is to be available at all”).

  7. 7.

    American Needle, Inc. National Football League, 560 U.S. 183, 203 (2010).

  8. 8.

    United States v. Trans-Missouri Freight Assn., 166 U.S. 290 (1897).

  9. 9.

    See United States v. Trans-Missouri Freight Ass'n, 58 F. 58, 79–80 (8th Cir. 1893), rev'd, 166 U.S. 290 (1897):

    The fact that the business of railway companies is irretrievably interwoven, that they interchange cars and traffic, that they act as agents for each other in the delivery and receipt of freight and in paying and collecting freight charges, and that commodities received for transportation generally pass through the hands of several carriers, renders it of vital importance to the public that uniform rules and regulations governing railway traffic should be framed by those who have a practical acquaintance with the subject….

  10. 10.

    SCFC ILC, Inc. v. Visa USA, Inc., 36 F.3d 958, 962 (10th Cir. 1994).

  11. 11.

    Cf. American Needle, Inc. v. NFL, 560 U.S. 183 (2010), where each team owned its intellectual property individually but the court relied on NCAA for the proposition that the rule of reason should apply.

  12. 12.

    Oklahoma, 468 U.S. at 109–110 (“This naked restraint on price and output requires some competitive justification even in the absence of a detailed market analysis.”).

  13. 13.

    E.g., Costco Wholesale Corp. v. Maleng, 522 F.3d 874, 902 (9th Cir. 2008) (antitrust challenge to liquor price posting statute, requiring s balancing of the state’s interest in promoting temperance with the federal interest in promoting competition).

  14. 14.

    Wilk v. AMA, 895 F.2d 352 (7th Cir. 1990).

  15. 15.

    Oklahoma, 468 US. 85 at 120 (“NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports. There can be no question but that it needs ample latitude to play that role….”).

  16. 16.

    See, e.g., Law v. NCAA, 134 F.3d 1010, 1022 (10th Cir. 1998) (“[C]ourts should afford the NCAA plenty of room under the antitrust laws to preserve the amateur character of intercollegiate athletics.”).

  17. 17.

    NCAA, 468 U.S. at 123, quoting Kupec v. Atlantic Coast Conference, 399 F.Supp. 1377 (D.N.C. 1975).

  18. 18.

    See Blair and Wang 2017 (criticizing the concept of amateurism as being easily manipulable by the NCAA and, in any event, unnecessary to NCAA athletics).

  19. 19.

    15 U.S.C. 1 (condemning contracts, combinations or conspiracies “in restraint of trade or commerce….”).

  20. 20.

    U.S. Const., Art. I, Section 8, Cl. 3.

  21. 21.

    See, e.g., Law v. NCAA, 134 F.3d 1010, 1024 (10th Cir. 1998) (rule limiting compensation of basketball coaches was commercial and could be an antitrust violation); NCAA I-A Walk-On Football Players Litig., 398 F. Supp. 2d 1144 (W.D. Wash. 2005) (alleged agreement among NCAA schools restricting the number of scholarships given to walk-on athletes could be commercial).

  22. 22.

    E.G., Bleid Sports, LLC v. NCAA, 976 F. Supp. 2d 911 (E.D. Ky. 2013) (NCAA enforcement of student recruiting rules noncommercial); Smith v. NCAA, 139 F.3d 180 (3d Cir. 1998), vacated on other (title IX) grounds, 525 U.S. 459 (1999) (similar; player eligibility rules); Gaines v. NCAA, 746 F. Supp. 738, 744–746 (M.D. Tenn. 1990) (NCAA rule forbidding players from having agents is noncommercial); Adidas America, Inc. v. National Collegiate Athletic Assn., 40 F. Supp. 2d 1275, 1285–1287 (D. Kan. 1999) (NCAA restriction on advertising on student athlete uniforms very likely noncommercial); College Athletic Placement Service v. NCAA, 1975-1 Trade Cas. ¶60,117 (D.N.J. 1974), aff'd mem., 506 F.2d 1050 (3d Cir. 1974) (rules governing educational standards of NCAA members noncommercial); Bassett v. NCAA, 2005-2 Trade Cas. ¶75,027 (E.D. Ky. Nov. 8, 2005) (coach excluded from NCAA games for recruiting violations could not challenge NCAA under Sherman Act because the policy pertained to noncommercial objective of ensuring fair competition in intercollegiate athletics).

  23. 23.

    See Bowers v. NCAA, 9 F. Supp. 2d 460 (D.N.J. 1998) (Sherman Act does not apply to NCAA eligibility rules pertaining to grades).

  24. 24.

    O’Bannon v. NCAA, 802 F.3d 1049 (9th Cir. 2015).

  25. 25.

    Id. at 1061.

  26. 26.

    E.g., Golden Bridge Tech., Inc. v. Motorola, Inc., 547 F.3d 266 (5th Cir. 2008) (no antitrust violation where cell phone standard-setting organization declined to adopt plaintiff’s technology).

  27. 27.

    E.g., Brown v. Pro Football, Inc., 518 U.S. 231 (1996).

  28. 28.

    802 F.3d 1074.

  29. 29.

    Ibid.

  30. 30.

    Ibid.

  31. 31.

    Id. at 1075.

  32. 32.

    One exception is the BMI-ASCAP antitrust consent decree, which compels royalty regulation under the supervision of the Federal Court for the Southern District of New York. See United States v. ASCAP, No. 41–1395 (WCC), 2001 WL 1589999 (S.D.N.Y. June 11, 2001). Importantly, however, this rate setting is an interpretation of a consent decree, which is a contract between the government and the settling parties. Consent decrees often go far beyond anything compelled by the antitrust laws, and a violation of them is not an antitrust violation but only a breach of the decree. See Areeda and Hovenkamp (2011, vol. 2A, ¶327).

  33. 33.

    15 U.S.C. § 37b, Confirmation of antitrust status of graduate medical resident matching programs:

    It shall not be unlawful under the antitrust laws to sponsor, conduct, or participate in a graduate medical education residency matching program, or to agree to sponsor, conduct, or participate in such a program. Evidence of any of the conduct described in the preceding sentence shall not be admissible in Federal court to support any claim or action alleging a violation of the antitrust laws.

    See Jung v. Assoc. of Am. Medical Colleges, 184 Fed. Appx. 9 (D.C. Cir. June 1, 2006) (applying this provision).

  34. 34.

    See, e.g., Osborn v. Visa, Inc., 797 F.3d 1057, 1068 (D.C. Cir. 2015) (notwithstanding restructuring, Visa remained a cartel of its individual member banks, considering that they retained significant independent business interests and decision making power), following American Needle, Inc. v. NFL, 560 U.S. 183 (2010).

  35. 35.

    Fraser v. Major League Soccer, LLC, 284 F.3d 47 (1st Cir. 2002).

References

  1. Areeda, P. E., & Hovenkamp, H. (2011–2018). Antitrust law (22 Vols. 3rd and 4th ed.). New York, NY: Aspen Publishers.

  2. Blair, R. D., & Wenche, W. (2017). The NCAA cartel and antitrust policy. Review of Industrial Organization (forthcoming).

  3. Hemphill, S. (2016). Less restrictive alternatives in antitrust law. Columbia Law Review, 116(4), 927.

    Google Scholar 

  4. Hovenkamp, H. (2016). Antitrust balancing. New York University Journal of Law and Business, 12(2), 369.

    Google Scholar 

  5. Hovenkamp, H. (2017). The rule of reason. Florida Law Review (forthcoming).

  6. Lazaroff, D. (2007). The NCAA in its second century: Defender of amateurism or antitrust recidivist. Oregon Law Review, 86(1), 329.

    Google Scholar 

  7. NCAA.org (last reviewed March 10, 2017). Estimated probability of competing in professional athletics. http://www.ncaa.org/about/resources/research/estimated-probability-competing-professional-athletics.

  8. White, L. J. (2008). Market power and market definition in monopolization cases. In W. D. Collins (Ed.), Issues in competition law and policy (Vol. 2, pp. 913–924). Chicago, IL: ABA Pub.

    Google Scholar 

  9. Wright, J. D. (2007). Mastercard’s single entity strategy. Harvard Negotiation Law Review, 12(1), 225–232.

    Google Scholar 

Download references

Acknowledgements

Author thanks to Roger D. Blair, Erik N. Hovenkamp, and Andrew Zimbalist for valuable comments.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Herbert Hovenkamp.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Hovenkamp, H. The NCAA and the Rule of Reason. Rev Ind Organ 52, 323–335 (2018). https://doi.org/10.1007/s11151-017-9589-5

Download citation

Keywords

  • Antitrust
  • NCAA
  • Rule of reason
  • Balancing