The NCAA has been challenged once again under Section 1 of the Sherman Antitrust Act.
This time, the antitrust claim, challenges the number of football scholarships an NCAA Division I program may offer in a given year and the NCAA's restriction of Division I Football Bowl Subdivision (FBS) football players from being able to transfer to another FBS institution without sitting out a season of competition.
MORE: A review of NCAA litigation | USOC antitrust lawsuit
The lawsuit, Deppe v. NCAA , was filed in U.S. District Court in the Southern District of Indiana by attorney Steven Berman of Hagens Berman, who has a wealth of experience litigating against the NCAA regarding various restrictions that have been placed on college athletes. Berman is representing former football student-athlete Peter Deppe and other similarly situated student-athletes.
Deppe lays the groundwork for an antitrust claim against the NCAA
The Sherman Antitrust Act (the Sherman Act) is designed to promote and protect competition. Section 1 of the Sherman Act, which prohibits unreasonable restraints on competition, requires Deppe to demonstrate there was (1) an agreement (2) which unreasonably restrained competition (3) which affects interstate commerce.
As with other recent antitrust cases involving the NCAA, Deppe should be able to establish there was an agreement in place that affected interstate commerce. To demonstrate an agreement is a restraint of trade, Deppe must show there was an agreement between two separate entities rather than a single entity. Here, Deppe will establish the challenged regulations were agreed upon my NCAA FBS colleges and universities through the NCAA's legislative process. Deppe will also be able to establish interstate commerce was affected as the challenged regulations involve the ability to field a FBS football team in a 3 billion-dollar industry, fueled by broadcast revenue.
As with the majority of antitrust claims, and especially claims relating to college athletics, the difficult issue is establishing the challenged regulations unreasonably restrain competition. While there are three methods of analysis that may be utilized to demonstrate an unreasonable restraint, the "rule of reason" test will almost certainly be the methodology used here since past precedent has demonstrated the NCAA will likely be able to demonstrate the challenged regulations have at least some level of business justification. As a result, the court will inquire as to whether each challenged regulation has procompetitive or anticompetitive results using a burden-shifting framework. In layman's terms, the court will balance the negative impact the rules have on FBS football players against any legitimate business reason the NCAA has for the rules.
Analyzing whether the NCAA's scholarship and transfer restrictions on FBS players have procompetitive results
Under the "rule of reason" analysis, Deppe is first required to demonstrate NCAA legislation produced significant anti-competitive effects within a relevant market. Deppe believes the conduct here impacts the nationwide market for the "labor" of Division I football student-athletes. In this market, student-athletes compete for roster spots on NCAA Division I football teams and those teams compete for those student-athletes by offering athletics scholarships, academic assistance and football training and development.
Deppe argues this market is restricted in two ways. First, FBS teams are only permitted to have 85 scholarship football student-athletes per year on their roster. Deppe believes without this price-fixing scheme, teams would compete by offering additional schlarships to prospective football student-athletes.
Additionally, Deppe argues the market is restrained because student-athletes lose opportunities for athletics scholarships due to restrictions that punish student-athletes transferring to FBS teams by forcing them to serve one year at that institution before being eligible to participate. Deppe argues this prevents coaches from considering many transfer students due to pressure to "win now." Further, Deppe believes no reasonable alternative exists for student-athletes in this market because no other there is no college football substitute of similar competitiveness or quality exists.
If Deppe demonstrates this restraint, the burden would then shift to the NCAA to demonstrate sufficient evidence of a legitimate business interest within the same market. Although the NCAA has yet to file a response, which will outline their specific defenses, their arguments will revole around competitive balance and amateurism concerns. First, in terms of the 85 scholarship cap, the NCAA would argue a cap increase would harm competitive balance as better-funded football programs would be able to afford a much larger scholarship roster. As a result, games would become less competitive and consumer demand would decrease.
In terms of the transfer regulations, the NCAA would argue that lifting the transfer restriction would impact the organization's amateurism ideals by hindering a student-athlete's educational experience. Specifically, allowing unrestricted transfers to occur could impact a student-athlete's ability to progress towards a degree in a specified major. The NCAA may also argue lifting the transfer restriction would hurt consumer demand as fans may lose interest with constant roster turnover. However, this would also seem to conflict with the NCAA's contention that the value of college football is related to the brand of the team rather than the individual brands of student-athletes.
Deppe doesn't believe the restraints have any pro-competitive effects and that even if they did they would be outweighed by their anticompetitive aspects. First, Deppe argues schools are already competing and true competitive balance doesn't exist as better-funded programs have an advantage in building better facilities, spending more on recruiting and paying more for coaches and support personnel. Deppe also argues transfer restrictions do not impact all student-athletes in the same manner due to some student-athletes being permitted a one-time transfer exception. Additionally, Deppe could point to the NCAA's continuing eligibility legislation as appropirate in managing whether a student-athlete is on track to earn a degree.
However, should the NCAA offer sufficienct pro-competitive benefits, the burden would then shift back to Deppe to demonstrate there was a less restrictive alternative available for the NCAA to achieve the rule's objective. Here, Deppe would focus on the additional avenues in which the NCAA may level the playing field (e.g., alumni donation caps, recruiting budget caps, etc.), disparities in transfer regulations between NCAA sport programs and how the 85 scholarship cap was determined.
Antitrust challenges (and legal challenges) against the NCAA are just beginning
The recent wave of legal challenges against the NCAA isn't a phase. The organization is facing increased scrutiny from the media and general public with the practical effect being legislation that restricts student-athletes and where institutions, athletics administrators and coaches are perceived to be rewarded as a result of those restrictions will be challenged legally. While courts have been extremely deferential to the NCAA's principles thus far, one can only wonder how long this will continue.
Justin P. Sievert, Esq. is the founder/principal of Sievert Collegiate Consulting, a professor of sports law at the University of Tennessee, and is a contributing writer on sports law and sports business issues for Sporting News. He is an attorney licensed to practice in Tennessee, North Carolina and Florida and has focused his practice on higher education and sports law. Justin has a Bachelors of Arts (B.A.) from Union College (NY), a Master's Degree in Education (M.ED) from St. Lawrence University and a Juris Doctor (J.D.) degree from the University of Miami (FL).