Yesterday, a federal judge heard opening arguments in one of several antitrust lawsuits challenging National Collegiate Athletic Association rules restricting the compensation intercollegiate athletes may receive for their sports participation. Some commentators herald these cases as a potential way to effectively resolve the problems inherent in commercialized college athletics.
In contrast, we believe that the potentially adverse consequences if these rules are invalidated make antitrust litigation a less attractive means of reforming college sports.
While the outcome of these cases could significantly change the way big-time college sports traditionally has operated, a free market solution mandated by antitrust law would inhibit universities from providing many athletes with a college education they would not otherwise receive, severely limit colleges’ ability to cross-subsidize women’s and men’s non-revenue sports with surplus funds from football and men’s basketball, and probably reduce the economic value of scholarships currently offered to many college football and basketball players, while providing greater economic benefits (including cash payments) to a relatively few star college football and basketball players.
More on the O'Bannon Case
A year after predicting that big-time college sports is invulnerable to legal challenges, Murray Sperber changes his mind. Read more.
As the trial gets under way, NCAA settles related lawsuit over video game images for $20 million. Read more.
As an alternative, we propose an open and transparent system of federal regulation combined with antitrust immunity for intercollegiate athletics reforms that are approved by a federal regulatory commission and voluntarily adopted by the NCAA.
Most sports sponsored by the NCAA and its 1,100 member universities -- particularly Division II and III sports, as well as Division I non-revenue sports -- are based on an idealized “amateur/education” model of intercollegiate athletics. The NCAA Constitution expressly states that the NCAA’s objective is to “retain a clear line of demarcation between intercollegiate athletics and professional sports” and that “[s]tudent-athletes shall be amateurs,” meaning “their participation should be motivated primarily by education and by the physical, mental and social benefits to be derived.” Intercollegiate athletes “should be protected from exploitation by professional and commercial enterprises,” and university athletic programs should be operated with “prudent management and fiscal practices.”
The enormous popularity of and public demand for Division I football and men’s basketball, particularly games played by ACC, Big Ten, Big 12, Pac 12, and SEC universities, have given rise to a “commercial/education” model for these college sports, which collectively generate very substantial revenues. For example, the NCAA men’s basketball television contracts will generate $10.8 billion over 14 years. The broadcast rights for the Division I FBS College Football Playoff that will begin this year has an estimated worth of $7.3 billion over 12 years.
The pervasive commercialization of “big-time” college football and basketball directly reflects marketplace realities. Fueled by new media technologies needing popular content to attract viewers and advertisers, sports is one of the few things that millions of people watch live. Universities’ use of big-time sports as an entertainment product and marketing tool is a rational response to marketplace realities in an increasingly competitive higher education environment.
However, university leaders have often allowed this rampant commercialization to trump, rather than serve, the broader goals of higher education. For example, financial resources are often misallocated from academics to athletics. Each year, relatively few Division I athletic departments (approximately 20-25) generate net revenues, and university subsidies to balance their budgets are prevalent. Too often, the educational aspects of intercollegiate athletics are marginalized. As former Ohio State football coach Woody Hayes stated: “The coach will squeeze every bit of football from each player that he can, but in return the coach must give that man every legitimate measure of help he needs to get ‘the rest’ of his education.... We feel that the man who plays college football and does not graduate has been cheated." This is particularly true for students from underprivileged backgrounds, disproportionately students of color.
In addition, commercialization economically exploits elite Division I football and men’s basketball players. Big-time football and basketball programs generate billions of dollars of annual revenues, and many coaches are paid multimillion-dollar salaries. But the value of the players’ athletic scholarships is less than the full cost of attendance at their respective universities, and because of the extensive time demands of playing football or basketball at this level of competition, their lifestyle during the season generally is less than that enjoyed by their classmates, alumni, and fans. Although they receive high-quality coaching and training, only about 1 percent of them will ever play professionally in the NFL or NBA. Virtually none will earn enough from playing professionally to achieve lifetime financial security.
These realities are inconsistent with the NCAA’s constitutional objectives. Big-time football and basketball are not played by “amateurs,” and the “clear line of demarcation between intercollegiate athletics and professional sports” is blurred. Ironically, big-time intercollegiate athletics is the commercial enterprise causing the academic and economic exploitation of student-athletes. Prudent management and fiscal practices also are lacking because so few Division I athletic program generate net revenues.
At the same time, professionalization of big-time football and basketball programs is not socially optimal. Although commercialized college sports operate in a fundamentally different way from the amateur sports ideal -- because university athletics directors seek to maximize the commercial return on big-time sports -- they are not subject to the same economic forces as purely commercial enterprises like professional sports.
The “commercial/education” model is distinct from the “commercial/professional” model embodied by the NBA and NFL in several important respects. First, nonprofit universities use excess revenues generated by commercially successful football and men’s basketball programs to cross-subsidize women’s and men’s non-revenue sports rather than distributing these “profits” to owners or investors as professional leagues and clubs do.
Second, the commercial/education model features important social benefits not feasible for a “minor professional league,” including access to college educational opportunities for athletically gifted persons of all socioeconomic backgrounds, offering a very popular distinctive brand of sports entertainment, cross-subsidizing athletic participation opportunities for women, and potentially providing additional financial support for academic programs if university athletic departments exercise prudent fiscal management.
Third, maintaining this model will avoid the numerous collateral labor, tax, worker’s compensation, and other legal issues if intercollegiate athletics are professionalized by the unionization of college football and basketball players or they receive salaries for playing services greater than scholarships covering the full cost of university attendance through the operation of free market forces mandated by antitrust law. Refining this model to ensure student-athletes participating in commercialized sports receive the educational, physical, mental, and social benefits of intercollegiate athletics, which distinguishes them from professional sports, is a better alternative.
History demonstrates that economically self-interested NCAA internal reform will not effectively achieve these objectives. The former Congressman and NBA and college basketball player Tom McMillen correctly observes that “[t]here is just too much money involved in the multibillion-dollar industry that is college athletics to expect the participants to police themselves.” As evidenced by the current debate among Division I universities regarding full cost of attendance scholarships, universities’ economic interests inhibit the development of NCAA rules to remedy student-athlete exploitation and prevent subordination of academic values to the forces of commercialization.
Although external reform is necessary, micromanagement of intercollegiate athletics through contract and antitrust litigation is not the optimal solution. Courts will enforce the express terms of athletic scholarships, but will not otherwise use contract law to remedy any perceived unfairness in the relationship between a university and its athletes. Regardless of the outcome of the O’Bannon litigation, which challenges NCAA rules prohibiting college basketball and football players from being compensated for the use of their likenesses in video games and television broadcasts, and other pending antitrust cases, piecemeal antitrust analysis of individual NCAA rules will not broadly resolve systemic problems inherent in the production of intercollegiate athletics.
Although antitrust law prohibits unreasonable conduct, it does not require socially optimal policies (e.g., ensuring college football and basketball players receive educational and other non-economic benefits) and may inhibit the continuing cross-subsidization of women’s and non-revenue sports by refusing to recognize this practice as a procompetitive economic justification for NCAA rules that restrain competition in the production of college football and men’s basketball.
A Better Way
To better promote the educational values and economic sustainability of intercollegiate athletics, our proposed Congressional intercollegiate athletics reform legislation would have three mandatory substantive requirements: (1) at least a four-year athletic scholarship with limited university termination rights; (2) medical care or health insurance for all sports-related injuries and scholarship extensions for injuries; and (3) elimination of the NCAA requirement that Division I universities operate at least 14 intercollegiate sports. It would create an independent intercollegiate athletics oversight commission authorized to propose non-binding rules regulating intercollegiate athletics originating from Congress, of its own accord, or with any intercollegiate athletics stakeholder.
The commission would establish procedures providing transparency and access to all intercollegiate athletics stakeholders, including student-athletes and members of the public, akin to the Administrative Procedure Act’s notice and comment requirements for informal rule-making. NCAA, athletic conference, or university conduct taken in compliance with the commission’s rules would receive antitrust immunity, provided that any intercollegiate athletics stakeholder allegedly harmed by one of these entities’ conduct in compliance with the subject rule(s) may seek independent arbitral review to ensure the rule(s) have a reasoned basis consistent with the public interest.
In our recent Oregon Law Review article, “A Regulatory Solution to Better Promote the Educational Values and Economic Sustainability of Intercollegiate Athletics,” we suggest that the commission consider adopting rules creating financial incentives and funding to increase graduation rates for Division I football and men’s basketball players such as requiring universities to offer a graduation bonus (at least to those at-risk academically) and scholarship aid to those who leave school in good academic standing and later seek to complete their college education.
We also suggest rules that would define a “full athletic scholarship” to include modest stipends beyond tuition, fees, books, supplies and room and board to allow poor athletes to have a lifestyle consistent with many of their non-athlete classmates, which would not compromise the “clear line of demarcation” between college and professional sports. In addition, financial self-sufficiency rules would give each Division I university the flexibility to determine which mix of sports to offer and invest in to achieve its individualized academic and intercollegiate athletics mission consistent with Title IX, should be considered.
This federal regulatory commission would have the necessary authority to establish rules that effectively prevent intercollegiate athletics from crossing the line between a commercial/ education model and a commercial/professional model for intercollegiate sports, enhance the academic integrity of intercollegiate athletics, promote more competitive balance in intercollegiate sports competition, and require university athletic departments to operate with fiscal responsibility. The “carrot” of antitrust immunity would provide the NCAA, athletic conferences, and their member institutions with a significant incentive to adopt and comply with its rules to achieve these objectives, which would be the product of a transparent process in which all stakeholders (including student-athletes) and members of the public would have a full opportunity to be heard by the independent commission.
Matthew Mitten is professor of law and director of the National Sports Law Institute at Marquette University. Stephen F. Ross is Lewis H. Vovakis Faculty Scholar, professor of law, and director of the Institute for Sports Law, Policy and Research at Pennsylvania State University.
Some time between now and the end of June, the U.S. Supreme Court will issue its ruling in a major case challenging affirmative action policies in higher education, Fisher v. University of Texas. Many legal observers believe a conservative court will significantly curtail or even eliminate the ability of universities to use race in admissions, but according to a recent Inside Higher Ed poll, college presidents are much more confident that the decision’s impact will be minor.
Which group is most likely to be correct?
In the case, Abigail Fisher, a white student, sued the University of Texas at Austin for using race in admissions decisions to boost the proportion of black and Latino students, contending it is a violation of the 14th Amendment’s Equal Protection Clause. UT argues that its use of race is permitted by the U.S. Supreme Court’s 2003 ruling supporting affirmative action at the University of Michigan Law School, Grutter v. Bollinger.
According to the Inside Higher Ed poll, by 77 percent to 23 percent, college presidents believe the U.S. Supreme Court will stop short of imposing "major limits on the consideration of race in the admissions process.” Some 51 percent of presidents suggest the court will impose only “modest limits” and 26 percent expect the justices to “uphold current policies.”
On one level, the confidence is understandable. In the earlier Supreme Court challenges – the 1978 Bakke case and the 2003 Grutter litigation – supporters of affirmative action managed to dodge the bullet. Despite dire predictions at the time, the Court ended up allowing universities to continue to employ race in admissions. Despite the unpopularity of affirmative action programs among the broader American public, the nation’s military, business and educational establishments managed to sway a narrow majority of justices in 2003, and more than three-quarters of university presidents expect the same thing to happen again in the Fisher litigation.
But this time around, the result may well be different for two reasons: the make-up of the U.S. Supreme Court has changed, and the on-the-ground experience with alternatives to affirmative action is more fully developed.
A decade ago, when the Supreme Court ruled in the Grutter case, Justice Sandra Day O’Connor cast the decisive fifth in favor of allowing universities to employ race in admissions. She has since been replaced by the much more conservative justice, Samuel Alito; Justice Anthony Kennedy, who dissented in Grutter, is the new swing justice.
One of Kennedy’s major objections to the Grutter decision involved Justice O’Connor’s handling of the rule that universities seek “race-neutral” ways of achieving racial and ethnic diversity prior to employing explicit racial preferences. This judicial requirement has long been in place under the theory that because the Constitution disfavors categorizing individuals by race, if universities can achieve racial diversity in another way (by, for example, favoring low-income students of all races), they should do so.
O’Connor’s Grutter opinion irked Kennedy because she said of the University of Michigan: “We take the Law School at its word that it would ‘like nothing better to find a race-neutral admissions formula’ and will terminate its race-conscious admissions program as soon as practicable.” In dissent, Kennedy replied: “Were the courts to apply a searching standard to race-based admissions schemes, that would force educational institutions to seriously explore race-neutral alternatives. The Court, by contrast, is willing to be satisfied by the Law School's profession of its own good faith.”
Kennedy’s key concern is related to the second new development: evidence from a number of universities that race-neutral approaches can produce as much racial and ethnic diversity as using race per se. At the University of Texas, a lower court decision in 1996 banned the university from using race, so it adopted two race-neutral alternatives: a plan to admit students in the top 10 percent of their high school class (irrespective of test scores) and affirmative action for economically disadvantaged students of all races. These two plans produced a class that was 4.5 percent African American and 16.9 percent Latino in 2004, compared with a class that was 4.1 percent African American and 14.5 percent Latino in 1996, when race was last used. For Kennedy, Texas’s subsequent reintroduction of race in admissions is likely to be seen as unnecessary and therefore illegal.
More broadly, in an analysis of leading public universities where the use of race was dropped, my colleague Halley Potter and I found that in 7 of 10 cases, the use of race-neutral alternatives such as class-based affirmative action produced as much black and Latino representation as had the previous use of race.
Looking forward, the U.S. Supreme Court could take one of three paths: (1) keep Grutter in place and support the continued use of race; (2) overturn Grutter and declare the use of race illegal across the board, or (3) strictly enforce Grutter’s requirement that universities try race-neutral alternatives and only use race as a very last resort.
My expectation, based on Kennedy’s pivotal role, is that the court will go for option 3. On the surface, this might look like a “minor” limitation, applying only to universities that have Texas-type race-neutral alternatives already in place. But that is a mistaken interpretation. The principle requiring universities to vigorously pursue alternatives to racial preferences before using race would apply across the board. And in practice, such a rule would revolutionize the way universities admit students.
Several studies find that universities now employ very large racial preferences (for example, increasing a student’s chances of admissions by 28 percentage points) and provide virtually no preference to low-income students. If the Court instead requires universities to use race-neutral alternatives primarily, and only employ race as a very minor factor to the extent alternatives don’t work, the effect would be to flip the emphasis so that class counts a great deal and race counts very little, if at all.
Risk-averse lawyers advising admissions offices may in fact suggest that universities only employ race-neutral alternatives. That is what has happened for the most part in K-12 education, where a 2007 decision limiting the ability of school districts to use race in student assignment has seen some 80 districts shift the focus of integration programs from race to class.
In the event that the court severely restricts the ability of colleges to employ race, the Inside Higher Ed presidents’ poll suggest class-based alternatives are about three times as popular as Texas-style percentage plans (which are hard to apply to universities with national applicant pools.) If the right of colleges to employ race and ethnicity in admissions is scaled back, 11 percent of presidents agreed or strongly agreed they would drop standardized tests and 14 percent said they would adopt a policy to admit a top percentage of students from every high school in their state.
By contrast, enthusiasm for class-based affirmative action was stronger: 39 percent said they agreed or strongly agreed that they would place more consideration on applicants’ socioeconomic status; 42 percent would place more consideration on first generation status, and 43% would spend more on financial aid. Evidence from states where affirmative action has already been banned suggests the percentages of universities that switch to class will be even higher.
Interestingly, then, a conservative Supreme Court decision requiring universities to pull back on racial preferences could pave the way for a more liberal set of policies: greater consideration of class in admissions, and the financial aid to back it up.