Antitrust Law Daily Wrap Up, ANTITRUST NEWS: College football and basketball players allege NCAA’s cap on athletic financial aid restrains trade, (Apr 28, 2014)

By Linda O’Brien, J.D., LL.M.

The National Collegiate Athletic Association and eleven major conferences unlawfully engaged in a restraint of trade by limiting the value of financial aid given to college student athletes, in violation of the Sherman Act, according to a complaint filed in the federal district court of Minneapolis (Floyd v. National Collegiate Athletic Association, April 25, 2014).

The National Collegiate Athletic Association (NCAA) is a nonprofit organization of approximately 1,200 educational institutions that organizes athletic programs in many of those institutions in the United States. The Big Ten Conference, Pacific 12, Big Twelve Conference, Southeastern Conference, Atlantic Coast Conference, American Athletic Conference, Atlantic Sun Conference, Conference USA, Mid-American Conference, Mountain West Conference, and Sun Belt Conference are multi-sport collegiate athletic conferences and conference members of Division I, one of three divisions adopted by the NCAA. Through the NCAA Constitution and By-Laws, the NCAA adopted regulations governing all aspects of college sports, including athletic (grant-in-aid) scholarships.

Sharrif Floyd, and six other male and female student athletes, were members of the football or basketball teams in one of the eleven conferences and received grants-in-aid since 2007. The plaintiffs filed a putative class action against the NCAA, alleging that the NCAA and the eleven conferences violated antitrust laws by agreeing to unlawfully limit the value of a grant-in-aid at an amount substantially below the cost of attendance of a typical student. Specifically, the plaintiffs allege that the NCAA and its member schools have colluded to artificially depress the value of an athlete’s grant-in-aid to the athlete’s economic detriment.

There are no procompetitive justifications for the grant-in-aid limitations. Within the confines of the grant-in-aid limitation, member institutions fiercely compete for top prospective college football and basketball players. Absent the anticompetitive agreements, such competition would include competition for remuneration for players’ services and such remuneration would far exceed the NCAA’s artificially imposed grant-in-aid limitation, the complaint states.

From its website, the NCAA was founded in 1906 to protect students from dangerous and exploitive athletic practices at that time. Although payment to athletes in any form was initially prohibited, the NCAA allows its member schools to provide athletes with minimal compensation to cover tuition and related expenses at an amount set by the NCAA. The anticompetitive grant-in-aid restrictions are strictly enforced by the NCAA with sanctions that include a complete ban on athletic participation. The member schools football and basketball programs are far from amateur, since they generate billions of dollars in revenue and profits from television agreements for the NCAA and its member institutions. While student athletes are denied fair compensation for their services, the pay for coaches has outpaced the pay for corporate executives because of their staggering compensation packages, the complaint alleges.

According to the complaint, despite their astronomical profits, the practical effect of the grant-in-aid limitations results in gaps between the scholarships and the full cost of attendance to be between $2,300 and $5,400 a year. The gap in scholarships is harmful and creates a serious misperception of the actual financial risk associated with choosing to attend college. The financial risk is a disadvantage that student athletes bear.

College football and basketball are big businesses for the universities and conferences that are members of the NCAA’s Division I and generate substantial revenue annually. The superior revenues allow football and basketball programs to provide superior coaching, playing and training facilities, and travel opportunities. There are no substitutes for the football and basketball players’ market. Because the member institutions operate programs at the highest level of intercollegiate athletics, an individual who wishes to participate in these high-level programs must, by necessity, attend an NCAA Division I member institution, the complaint alleged.

The plaintiffs assert claims for restraint of trade, and violations of Section 1 of the Sherman Act. The action seeks injunctive relief, treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 0:14-cv-01290-ADM.

Attorneys: Daniel E. Gustafson ( Gustafson Gluek PLLC) and Richard M. Hagstrom and Daniel S. Mason (Zelle Hofmann Voelbel & Mason LLP) for Sharrif Floyd, Kyle Theret, Duane Bennett, Chris Stone, John Bohannon, Ashley Holliday, and Chris Davenport.

Companies: National Collegiate Athletic Association

News: Antitrust MinnesotaNews