NCAA Still Hasn’t Solved Its Antitrust Problems, Lawyers Say

Stay current on the latest developments from agencies including the CFPB, Federal Reserve, FDIC, and OCC to advise clients on real-life regulatory situations.

By Victoria Graham

The highly anticipated Commission on College Basketball report, released April 25, missed its mark in addressing antitrust woes that plague college basketball, lawyers told Bloomberg Law.

Leaving the requirement that colleges can’t pay their players in place means there’s still no way for them to compete for a better slot, said Marc Edelman, professor of law at Baruch College’s Zicklin School of Business in New York.

“The commission’s decisions there were bogus,” Edelman said.

The report makes it clear that the NCAA will not change its status quo until a court order requires it to do so, he told Bloomberg Law. Their best chance for a fix comes when a federal lawsuit, Jenkins v. NCAA, goes to trial in December in California challenging the NCAA practice of scholarship capping. The plaintiffs in the case argue that the caps on student scholarships for playing college sports is an unlawful restraint of trade under antitrust law.

Amateurism Woes

Many advocates had hoped that the commission, headed by former secretary of state Condoleezza Rice, would offer recommendations that student athletes be paid. The commitment to “amateurism” in sports leads to schools generating millions for themselves and the NCAA, but leaves the players unpaid and unable to switch to another team if they are offered more money.

Duke University, for example, brought in $34.3 million in revenue for the 2017-18 season, and netted a profit of $14.9 million after expenses, according to an analysis by John Vrooman, sports economics professor at Vanderbilt University.

Antitrust critics contend that student athletes, which are key to generating profits, should be entitled to compensation beyond scholarship funds.

Confronting Corruption

The commission, established in 2017, set out to assess the state of college basketball in the wake of a massive bribery scandal uncovered that year in which athletes were steered toward certain colleges in exchange for bribery payments, some of which amounted to nearly $100,000.

“It is the overwhelming assessment of the commission that the state of men’s college basketball is deeply troubled,” the report read. The 14-person panel said the college basketball environment is ripe with temptations to violate NCAA laws. The commission offered structural remediation, such as placing more accountability on university officials to ensure their athletic programs are in compliance.

But the strongest recommendations offered in the report overall seem to skirt the core antitrust issues, lawyers said.

“The report recommendations don’t address the core problem of schools being barred from compensating these players — while the institutions make billions by restricting competition — which is the fundamental issue we are pursuing in the Jenkins case,” David Feher, partner and co-chair of Winston & Strawn LLP’s sports practice, told Bloomberg Law. Feher is also a lawyer for the plaintiffs in the Jenkins case.

One and Done

One recommendation, for example, calls for the elimination of the National Basketball Association’s “one and done” rule, which requires at least one year of college basketball before a player can be drafted professionally. The proposal is contingent on the NBA and National Basketball Players Association first changing their rules. If a change can’t happen at the professional level, the commission will reconvene to address the situation, the report said.

The ability to be drafted right out of high school gives players the option to pursue basketball at the professional level right away. Forcing students to play in college, despite being good enough to go pro, could make players “potentially disgruntled magnets for corrupt money,” the report states. Going pro after high school offers talented athletes an avenue to reap their fair market value faster than they would have under NCAA’s amateurism model.

But the chances of a high school graduate immediately landing an NBA spot are slim. On average, only eight college freshman, post-one and done rule, are drafted by the NBA every year, the report discloses.

The other 99.9 percent of athletes who can’t be drafted post-high school would remain unpaid, which creates an anti-competitive environment. “No other country in the world attempts to do what American universities do — attach higher education to a multi-million dollar business,” Jon Solomon, editorial director at the Aspen Institute Sports & Society program in Washington, said during an American Bar Association panel earlier this month.

The core issues of amateurism is not solved by the proposed elimination of one and done, John Briody, principal at McKool Smith in New York, told Bloomberg Law. “Creating more flexible options that, at the end of the day, allow a student-athlete to potentially be paid by a professional basketball team does not reach that issue.”

Waiting for a Court Ruling

The report says NCAA should reexamine its use of student’s images and likeness for marketing and promotional purposes, which was the subject of another lawsuit against the NCAA, but it doesn’t offer concrete recommendations beyond that.

“It looks like the commission considered, but ultimately took a pass on wading into these issues,” Briody said. The commission is “waiting to see how they shake out in the courts before weighing in.”

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Antitrust on Bloomberg Law