Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Ex-college football player alleges NCAA’s cap on athletic financial aid is a restraint of trade, (Aug 11, 2014)

By Linda O’Brien, J.D., LL.M.

The National Collegiate Athletic Association and 10 major conferences unlawfully engaged in a restraint of trade by limiting the value of financial aid given to college student-athletes, according to a complaint filed in the federal district court of Minneapolis (Thompson v. National Collegiate Athletic Association, August 8, 2014).

The National Collegiate Athletic Association (NCAA) is an unincorporated association of approximately 1,200 educational institutions and athletic conferences located throughout the United States. Pacific 12 Conference, Big Ten Conference, Big Twelve Conference, Southeastern Conference, Atlantic Coast Conference, American Athletic 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. Derek Thompson was a student-athlete on the football team of the University of North Texas, a member of one of the 10 conferences, and received grants-in-aid from 2009 to 2013.

The complaint states that the NCAA and the ten conferences violated antitrust laws by enacting and enforcing rules that limit the amount players may receive as compensation for their athletic services to full grant-in-aid (GIA), which covers only tuition, required fees, room and board, and course books. The GIAs fall far short of covering the full cost of attending school. The out-of-pocket expenses that student-athletes with full GIAs must pay each year to cover the gap includes health insurance, transportation, utilities, laundry, toiletries, and food which is not fully covered.

The By-Laws of the NCAA serve as a contract among the Conferences. Absent the restrictive rules of the NCAA, the member institutions would compete for talent by offering players at a minimum the full cost of attendance and likely significantly more than the lower GIA. NCAA member institutions have set up an elaborate mechanism to monitor compliance and penalize violations of the GIA restrictions. Sanctions for any Division I member that fails to abide by NCAA rules are severe, including a complete ban on athletic participation and a reduction in the amount of GIAs a school may offer, the complaint alleges.

According to the complaint, the NCAA Division I football programs are distinct from the NCAA’s lower divisions—the programs are the highest level of competition and generate billions of dollars in revenue from ticket sales, broadcasting rights, corporate sponsorships, merchandise sales and licensing, and alumni contributions. The superior revenues allow the programs to provide superior coaching, playing, and training facilities, and travel opportunities, which are critical in recruiting superior talent. Thus, there are no substitutes for the Division I football players market. For a prospective or current college football player, participating in a Division I program provides the opportunity to compete at the highest level of college football while earning a college degree, and offers the best prospect of advancement to a professional football career.

There is competition among Division I schools to recruit the most talented football players in the country. Due to the NCAA’s anticompetitive conduct, these financial institutions cannot offer players any amount above a full grant-in-aid (GIA), an amount that is insufficient to cover players’ cost to attend school. Although the NCAA maintains that its foundational concept is amateurism, there is nothing amateur about the millions of dollars a year paid to coaches, athletic directors, conference presidents, and NCAA executives, the complaint charged.

Division I football is a highly commercialized business for the NCAA and member institutions and generates substantial revenue annually. NCAA conferences also profit directly from agreements with television networks. Although players are denied fair compensation for their services, NCAA coaches have received staggering compensation packages. In light of their astronomical profits, the NCAA’s claims of amateurism are wholly unsupported and factually contradictory.

The plaintiff asserts claims for violations of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, damages, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 0:14-cv-03129-MJD-JJK.

Attorneys: Brian C. Gudmundson (Zimmerman Reed, PLLP) for Derek Thompson.

Companies: National Collegiate Athletic Association

News: Antitrust MinnesotaNews