Court Challenge on Athletic Aid

Antitrust lawsuit accuses NCAA of illegally restricting value of sports scholarships.
February 23, 2006

Over the years, those who believe athletes get a raw deal in the high stakes world of big-time college sports have tried a variety of tactics, from public pressure to unsuccessful attempts at union organizing, to help athletes gain a bigger piece of the pie. But player advocates and legal experts say a federal antitrust lawsuit filed against the National Collegiate Athletic Association on Friday may give athletes their best shot yet at expanded benefits -- even though, ironically, it purposely steers clear of seeking pay for athletes.

There's nothing subtle about the underlying aim of the suit, which was filed by two heavy hitting Los Angeles law firms on direct behalf of three former athletes, but indirectly on behalf of all football and men's basketball who've competed for 144 Division I universities over the past four years.

The legal complaint says plainly: "While big-time college sports have become a huge commercial enterprise generating billions in annual revenues, the NCAA and its member institutions do not allow student athletes the share of the revenues they would obtain in a more competitive market.... The NCAA and its member institutions have agreed to deny a legitimate share of the tremendous profits of their enterprise to the student athletes who make the big business of big-time college sports possible."

But instead of asking to have athletes be paid -- which could undercut the case's chances from an antitrust standpoint -- the lawsuit seeks to show that the association and its members have violated federal law by agreeing to artificially suppress the value of the sports scholarships the athletes receive.

"The NCAA and its member institutions have shortchanged student athletes by imposing an artificial cap on the amount of financial aid any student athlete may receive in the form of an athletic scholarship, or 'grant in aid,'" the complaint reads. "The artificial cap on financial aid ... is set below the amount of the full cost of attendance that any student would incur to attend the relevant colleges and universities."

By limiting the value of athletic scholarships to tuition and fees, room and board, and required books, the lawsuit argues, the NCAA's Division I members have agreed not to cover such things as school supplies, health and disability insurance and travel costs -- aspects of a typical student's education that the NCAA itself values at an average of $2,500. Without such a cap, "the same competitive forces that drive schools to provide coaches with million dollar salaries and build lavish athletic facilities would also compel those schools to provide athletics-based financial aid covering the full [cost of attendance]."

Although the lawsuit as filed does not say how much the athletes are seeking, doing the math -- 144 colleges with 100 football and men's basketball players times four years' worth of alleged annual scholarship underpayments of $2,500, times the trebled damages possible under federal antitrust law -- comes out to a cool $350 million.

Erik Christianson, an NCAA spokesman, said Wednesday that association officials were "surprised, frankly," by the lawsuit, since recent changes in NCAA rules allow  Division I colleges to supplement athletic scholarships with institutional or other financial aid, including Pell Grant money, that is not based on athletic skill, and permit athletes to work part time. "When you take all that into consideration, we think these claims really don't have any merit."

More importantly, the lawsuit ignores the NCAA's right to "determine what's covered in a scholarship and, broadly, to enact its own rules," said Christianson. "Our members have spoken about where they believe these limits should be."

Although the NCAA has on numerous occasions successfully defended its members' right to set their own rules, especially on issues related to athletes and competitive measures, it has been vulnerable in several recent cases to federal antitrust challenges, particularly related to its business practices. (Most notably, the association paid $54.5 million in 1999 to settle a lawsuit brought by a category of assistant coaches whose pay its members had voted to restrict.)

It is for precisely that reason that the lawyers behind the lawsuit filed Friday -- who have a strong track record in antitrust cases -- have framed their case the way they have, several legal experts said, and why they have a reasonable shot at succeeding.

"This is a well conceived challenge," said Paul H. Haagen, a law professor at Duke University. Added C. Peter Goplerud III, dean of Florida Coastal School of Law: "If I'm sitting in Indianapolis right now," he said, referring to NCAA headquarters, "I'm guessing I'm hearing some concern."

That's because lawyers for the plaintiffs -- a former University of San Francisco basketball player and Stanford and University of California at Los Angeles football players -- have crafted the lawsuit to make it harder for the NCAA to argue that it needs the scholarship restriction to sustain the amateur nature of college sports, which courts have traditionally seen as the NCAA's strongest and most persuasive argument for rules that might otherwise be seen as limiting competition or individual rights. Under federal antitrust laws, defendants typically are required to show a "procompetitive" reason for engaging in a practice that in some other way limits competition.

Any attempt to seek stipends or other payments over and above that a normal student might get, Haagen said, would open the door to an NCAA argument that such a move would professionalize college sports, and probably doom it from an antitrust standpoint. Instead, the lawsuit filed last week argues that restricting the value of athletic scholarships is a "cost containment mechanism that enables the NCAA and its member institutions to preserve more of the benefits of their enterprise for themselves." To back up that argument, the legal complaint cites a 2003 statement in which the NCAA's president, Myles Brand, said he favored the idea of increasing the value of a scholarship to the full cost of attendance.

In years past, efforts to increase what colleges provide to athletes or spend on other have usually been defeated on the grounds of what in NCAA parlance is known as "competitive equity": the idea that without limits on spending, wealthier sports programs would be able to outspend their smaller peers and ultimately run them into the ground, decreasing the competitiveness of the market.

"The NCAA's strongest argument is going to be to say that this is their only way of maintaining a level playing field in terms of athletic recruitment," said Goplerud of Florida Coastal. "The idea is to prevent the Ohio States and Michigans from going hog wild crazy and saying that the true cost of attendance at their schools is 15 times that of Miami of Ohio and Marshall."

But courts rejected arguments along those lines in the case involving the assistant coaches' pay, and lawyers for the athletes involved argue, to the contrary, that eliminating the limitation on the value of scholarships would actually increase competition among NCAA members in ways that would benefit those who now benefit the least: the athletes.


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