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Academics to propose federal legislation restructuring NCAA

Antitrust for the NCAA?
October 11, 2013

An athletics watchdog group plans to pursue federal legislation that would dramatically restructure the National Collegiate Athletic Association by giving the sports governing body a "limited antitrust exemption," allowing colleges to cap spending and redirect revenue toward athletes in the form of educational and medical benefits, Inside Higher Ed has learned.

The proposal, which is still in the early draft stages, would probably be introduced as an amendment when Congress renews the Higher Education Act of 1965, a process that has begun but is unlikely to unfold at a quick pace.

The College Athlete Protection Act has been in the works since May or so, initiated by members of the Drake Group who want to turn the NCAA "back into something more academic oriented, rather than just going all out professional," Allen Sack, a member of the Drake Group and business professor at the University of New Haven, said in an interview late Thursday.

It comes at a time when conference commissioners and college presidents at the highest competitive levels of the NCAA are calling for more autonomy in spending and legislative issues, and many have become resigned to the idea that there's no stopping the so-called arms race in collegiate athletics spending.

A concurrent and massive antitrust lawsuit, O'Bannon v. NCAA, threatens to cause turmoil in the association as it stands now, as it could result in colleges, the NCAA and television networks having to pay athletes for use of their images.

"Either you're going to treat the athletes as the employees that they have been transformed into," Sack said, "or you try to make the athletes not employees anymore -- make them students. And that's the direction that the Drake Group has decided to go in."

Because the O'Bannon suit alleges an antitrust violation and could be years away from resolution, and the legislation would provide an antitrust exemption, the amendment would appear to conflict with the lawsuit's goals. But Sack said he envisions that the amendment would not apply to litigation already under way.

Sack stressed that he and the other main authors of the bill -- Andrew Zimbalist, an economics professor at Smith College, Sports Management Resources President Donna Lopiano; Gerald Gurney, University of Oklahoma assistant professor of adult and higher education; and Bryan Porto, assistant law professor at Vermont Law School -- have yet to present the legislation to other Drake Group members for feedback, which may result in modifications.

Antitrust and Athletics Spending

Antitrust law has long created impediments for efforts to control costs and limit the expansion of sports programs. Perhaps the broadest attempt to rein in burgeoning expenses came in the late 1980s and early 1990s, when a group of conference commissioners proposed a set of rules changes to control season lengths and especially the costs of competition. One of the changes approved in 1991 sought to limit the salaries of assistant coaches, eliminating a category of coaches known as part-time assistants and creating a new category of entry-level job -- literally known as "restricted-earnings coaches" -- who could earn no more than $16,000 a year.

A group of assistant coaches sued the association in 1993, alleging that the NCAA's members had violated federal antitrust law by limiting the ability of coaches to earn a fair wage. Three years later, a federal judge concluded that the NCAA had illegally capped the earnings of about 1,900 junior coaches -- a ruling upheld by a federal appeals panel in 1998. That May, a jury ordered the NCAA to pay the coaches $67 million in damages, plus $10 million in court costs. The association settled the case later that year for $54.5 million.

Reform-minded groups and even NCAA officials themselves have considered the possibility of seeking an antitrust exemption, but the idea has often been seen as politically unfeasible.

The stated purpose of the legislation being discussed now is "to ensure that higher education institutions that receive federal funds provide students participating in commercialized athletic programs with sufficient health and medical protection and prevent their academic or financial exploitation."

In addition to the antitrust exemption -- which covers "conduct engaged in by national governance associations in order to restore the ability of these associations to combat commercial excesses in college sports and to maintain a clear line of demarcation between collegiate and professional sports" -- it would provide due process rights and increased scholarship support and medical benefits for athletes.

The exemption would protect from possible antitrust challenge any NCAA rules that have commercial consequences -- for example, limiting games to weekends or school vacation periods -- so long as the primary purpose of the rules is to enhance athletes' educational experiences.

The bill would also restructure NCAA governance, by replacing the Executive Committee with a Board of Directors with more equal balance between the association's competitive divisions (evenly split, in the proposed board structure, as opposed to the current committee's heavy preference toward Football Bowl Series institutions). At least 40 percent of the board would be former college presidents.

The board would have authority -- and sole authority -- to limit coaching staff sizes, sport expenditures, scholarships and other rules that affect spending. It could also limit the number of games, length of season and hours per week that athletes devote to their sport. It would determine the terms of insurance for athletes.

In regard to due process protections, the bill would require that during NCAA enforcement proceedings institutions, coaches, athletes or other personnel be allowed to sufficiently make their case (even cross-examining witnesses) before facing punishment, except in the case of inadequate graduation rates or other academic faults. (Currently, the NCAA enforcement and infractions committees act as investigator, judge and jury when sanctioning programs, and athletes are prohibited from obtaining legal representation. The bill would require the NCAA to hire professional investigators and judges as independent contractors, as well as an athlete welfare advocate to provide independent legal advice to athletes at no cost.)

The bill contains substantial provisions regarding athletic revenues. Institutions would still be allowed to sell media rights, tickets and sponsorships and use that money to support athletics or the general institutional fund.

The NCAA, which would own the college football playoff as well as the basketball tournaments (it already owns the latter), would continue to earn revenue off those competitions and would distribute that money among member institutions "for educational, athlete health, and athlete welfare uses specified by the Association."

"To the extent possible," football playoff revenue would go toward an "athletics injury insurance and/or institutional member medical cost subsidy program." Some revenue would also be devoted -- at the most athletically competitive programs -- to increases in financial aid to cover the full cost of attendance. (And grant funds for athletes could not exceed the full cost of attendance at their institutions.)

The NCAA and member institutions would retain 5 percent of gross annual media rights fees in an academic trust fund, 60 percent of which would be dedicated to education-based grants for athletes who meet certain educational and eligibility requirements. The rest would go toward merit and financial need grants for non-athlete students.

The bill would allow the NCAA, colleges, conferences and third parties to continue selling rights to use the name and likeness of any current athlete, "limited to the promotion, publicity, conduct, and/or live or delayed electronic transmission" of athletic events. None of that money would go to athletes.

Profiting off "any other commercial purpose related to athletic participation" during an athlete's eligibility -- for example, video games or names on apparel -- would be prohibited. Athletes would also be forbidden from selling their own likenesses for commercial purposes, unless the athlete's sport and college remained unidentified.

The bill contains additional provisions regarding "whistle-blower protection" for athletes and staff who expose wrongdoing, academic control over counseling and support services for athletes, a cap on coaches' salaries at all levels (which for head coaches and athletic directors, "may not exceed two times the national average of compensation of full professors at doctoral institutions being paid at the 95th percentile based on the annual American Association of University Professors Report on the Economic Status of the Profession adjusted to 12 months"), academic standards for eligibility, multiyear scholarships, faculty oversight, and student fees.

Finally, the U.S. secretary of education would be responsible for determining whether the NCAA or its member institutions meet the requirements of the act.

Sack acknowledged likely resistance from FBS programs and the NCAA itself. But he notes that the plan would not restrict revenues -- just redirect them.

"It is potentially realistic," he said. "This is the beginning, not the end."

 

 

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