Does the NCAA Rule College Sports Like a “Cartel”?

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Watch Money and March Madness, FRONTLINE’s 2011 investigation into the big business of college sports.

As the second day of testimony in the NCAA images lawsuit continued on Tuesday, it became easy to see why plaintiffs fought for a bench trial in Judge Claudia Wilken’s courtroom, rather than a trial by jury.

A jury of casual sports fans might be much more sympathetic to the NCAA’s questioning on Monday of lead plaintiff Ed O’Bannon about what it was like to visit the White House as a college basketball player and national champion than it would be to parsing the idiosyncrasies of antitrust law. The plaintiffs hope Judge Wilken will stick to the law and leave other justifications for the current state of big time college sports at the courtroom door.

On Tuesday, Roger Noll, an emeritus economics professor at Stanford, took the stand for a second straight day. Noll laid out his analysis for lead plaintiffs’ attorney Michael Hausfeld, and sparred with NCAA outside counsel Rohit Singla under cross-examination. At issue was whether the NCAA and its member schools have “collectively conspired” to prevent current and former athletes from receiving any compensation for the use and sale of their names, images and likenesses. In other words, does the NCAA behave like a cartel? Cartels violate antitrust laws in the United States, which is why the case is being tried under the Sherman Antitrust Act.

NCAA chief legal officer Donald Remy said at a press conference Monday that the term is “highly politicized and highly charged”– it conjures up images of oil barons or, more likely, drug lords — but it is central to Noll’s argument and to the plaintiffs.

“The NCAA is a cartel that creates a price fixing agreement among the member schools and among the student athletes,” Noll said on Monday. “It’s an association of firms that explicitly agrees to coordinate its activities, typically to maximize joint profits.”

The plaintiffs contend that the price for names, images and likenesses has been set at zero. Noll pointed out that the separate firms — the more than 1,000 NCAA member schools, or approximately 350 Division I schools which are the focus of this case — begin to “imitate the behavior of a monopoly.” And monopolies by their very nature are anti-competitive.

The NCAA’s market power leaves the top football and basketball players in this country with “no reasonable substitute” if they want to continue playing their sport after high school, Noll said. “If the top athletes are offered a Division I scholarship, they take it. They do not go anywhere else.”

Glenn Pomerantz, an attorney for the NCAA, spent time questioning O’Bannon on Monday, asking if top basketball players could play ball in Europe after high school. It’s an alternative available to some. Don’t want to buy your oil from the Organization of Petroleum Exporting Countries? You’re welcome to buy from Russia or China, or see how much you can pump out of the ground in Bakersfield or extract from the Gulf of Mexico.

Once athletes sign up to play at their college or university, they must adhere to the NCAA’s long list of rules contained in the Division I Manual. It’s those rules, the plaintiffs argue, that prevent players from seeking compensation for the use of their names, images and likenesses in television broadcasts, video games, and sales of jerseys or other memorabilia.

“An essential part of the cartel is a system of rewards and punishments that create an incentive to adhere to its rules,” Noll said. If the players sought and received compensation, they would be subject to NCAA punishments and possibly forbidden from playing for their school.

But the NCAA contends that such rules are a necessary reality of the enterprise — It’s the getting together to make rules that makes the competition work.

“I listened to [Professor Noll’s] testimony, and by his definition, any and every amateur organization would be a cartel,” Remy said on Monday. “The reality is our member institutions do get together collectively to make judgments about what’s in the best interest of the student-athlete and the ability to compete in an environment that’s safe and fair.”

The NCAA says its rules maintain a level playing field and ensure the well being of its athletes. The plaintiffs argue that the rules victimize players, particularly in the case of Division I football and basketball players, the two sports that generate significant television revenues.

Judge Wilken must decide the case by weighing the balance between the pro-competitive benefits the NCAA touts — that the rules are made for a reason and athletes, schools, and sports fans get a better experience because of it — and the anti-competitive effects that the plaintiffs say such rules present.

Noll’s view: The alleged pro-competitive justifications for the NCAA brand of amateur sports “do not produce any benefits” that offset the anti-competitive harm, and the NCAA could even relax some of its rules and still keep much of its model intact.

“There’s nothing inherent in the word amateurism that would say that increasing substantially the amount that is paid to athletes” — such as giving them more than current rules for athletic scholarships allow — “or indeed eliminating or relaxing this long list of restrictions would in fact violate the principles of amateurism,” Noll said.

The NCAA will call its own expert to discuss the matter next week.

Zachary Stauffer, a contributor to various FRONTLINE projects, is based at the Investigative Reporting Program at UC Berkeley.

AP Photo/Keith Srakocic
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