Antitrust Law Daily Wrap Up, ANTITRUST NEWS: NCAA transfer rules, scholarship limits challenged as restraint of trade, (Mar 10, 2016)

By Linda O’Brien, J.D., LL.M.

The National Collegiate Athletic Association and its member institutions unlawfully engaged in a restraint of trade by requiring transferring students to lose one year of athletics eligibility, limiting the number of scholarships granted in any given year, and capping the value of financial aid given to college student athletes, according to a complaint filed in the federal district court in Indianapolis (Deppe v. National Collegiate Athletic Association, March 8, 2016).

The National Collegiate Athletic Association (NCAA) is an unincorporated association of approximately 1,100 schools that are organized into three divisions. Division I includes 348 schools, including 242 with extensive football programs. Through the NCAA Constitution and By-Laws, the NCAA and its members have adopted regulations governing all aspects of college sports. Because the NCAA and its member institutions control the highest and most popular levels of college football, an individual who wishes to provide athletic services in exchange for payment of full tuition for an undergraduate education must attend an NCAA Division I member institution, the complaint alleges.

The complaint states that, in 2014, Peter Deppe was recruited by and offered a football athletic (grant-in-aid) scholarship to Division I school Northern Illinois University (NIU). After a new special teams coach was named in 2015, Deppe was informed that he would no longer have a football grant-in-aid from NIU. Deppe attempted to transfer to another Division I school, University of Iowa. However, he was unable to secure a hardship waiver of the NCAA transfer rules to which he would be forced to lose athletic eligibility for one year. Subsequently, Iowa, as well as other Division I schools that had expressed an interest in recruiting Deppe, moved on to recruit other players who did not need to wait for a waiver and could play immediately.

According to the complaint, the NCAA imposes a highly restrictive cap on the total number of Division I football scholarships that can be granted to student athletes each year. These NCAA rules allegedly cannot be justified by amateurism concerns or by competitive balance concerns. The rules actually permit the most competitive schools to have more scholarships, Deppe claims. Moreover, the complaint argues that competitive balance is not a valid pro-competitive justification for restraining price competition among NCAA member institutions for student athlete labor because numerous methods exist, such as restricting alumni donations or recruiting budgets, by which competitive balance could be maintained.

The NCAA rules also provide that if a student athlete at a Division I school wishes to transfer to a different Division I institution then he must sit out from intercollegiate competition for one academic year. Although there is a waiver process available due to hardship, even if the student meets the stringent requirements for eligibility, the process allegedly requires extensive documentation and has been criticized for its inconsistent approvals. The sheer complexity of the rules serves as a barrier to players’ consideration of transferring schools, further entrenching the NCAA’s anticompetitive effects in the market, the complaint states.

The plaintiff asserts claims for conspiracy in restraint of trade in violation of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:16-cv-00528-WTL-MPB.

Attorneys: William N. Riley (Riley Williams & Piatt, LLC), Steve W. Berman, Elizabeth A. Fegan, and Jon T. King (Hagens Berman Sobol Shapiro LLP), and Stuart M. Paynter (The Paynter Law Firm PLLC) for Peter Deppe.

Companies: National Collegiate Athletic Association

News: Antitrust IndianaNews