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Sports and Antitrust: Why Suing the BCS has a Wildcat's Chance in Columbus of Winning in Court

[BH: This is too good of analysis not to bump up to the front page - even during Michigan Week.]

In case you haven't heard, various government-type organizations have been rumbling about potential antitrust violations in the BCS.  While such charges might make for high quality political theater, they have little chance of succeeding in the legal system*.

In general, anti-trust suits must have two parts to lead to substantial damages or forced action. First, the accused parties must have acted in a way that restricts trade or manipulates the market. Second, this restriction must have harmed customers (or theoretically other businesses, but unlikely in the current legal environment).  "Harmed" has to be in comparison to a market without the restriction, not to whatever dream scenario the lawyers concoct.  In other words, Fresno State can't argue that the BCS harms their school because it receives less money than under an NCAA-administered playoff, just as they can't argue that the BCS harms their school because it receives less money than under their "Every other school cuts a million dollar check to Fresno State" plan.  The comparison must be to a free market, not one that is restricted to favor the plaintiffs.  

It's unclear exactly who is the "customer" and who is the "business" in college football bowl arrangements, so I'll try a couple scenarios:

*Disclaimer: Don't take legal, medical, or relationship advice from the internet, and definitely not from a random article on a sports blog.

 

 

1. The bowls are the customers and the conferences are the businesses

To win this setup, they would have to argue first that the BCS conferences have conspired against the bowls to restrict who they may invite and second that this restriction has harmed the bowls.  For instance, the Fiesta would argue that they would have been better off (better attendance and ratings) had they been able to invite Florida instead of UConn last year.  This case might actually be winnable, but I doubt that the DOJ is fighting for the right for bowls to invite whomever they want regardless of record or championship. They could probably stop the AQ conferences from signing a collective contract for the entire BCS but they can't stop individual conferences from signing contracts with individual bowls. A antitrust win here would help the bowls and hurt the non-AQs.  


2. The conferences are the customers and the bowls are the business (i.e. the bowl is "selling" spots in the games)

To win this setup, they would have to argue first that BCS bowls have conspired in their decisions (relatively easy) and second that this collusion has led to non-competitive decisions which harmed customers (presumably the non-BCS conferences). It's very difficult to argue that the BCS arrangement has led to fewer non-AQ teams in BCS bowls (i.e. "sales") considering that before the BCS when bowls were free to invite whomever they pleased they (almost?) never invited a non-AQ team.  The disparity in payouts in the relatively open market of second tier bowls further hurts this case.  It would take a particularly well endowed attorney to argue that without the BCS arrangement, bowls would pay Utah State substantially more.  


3. The individual schools are the customers and the bowls are the business

Similar to 2, the argument has to be that the BCS collusion has harmed specific schools. Again, this argument is very difficult because if anything the schools harmed are the more popular AQ schools whose at-large bids were taken by less popular AQ or non-AQ teams. Furthermore each school has agreed to allow its conference to determine the bowl negotiations and financial disbursements. If a school wanted to sue its conference for forcing this relationship, they might have a case, though my inclination is that this setup would fall under allowable promotion of competition.  


4. The fans are the customers and the NCAA is the business

The phrase "negotiating with the hostages" has come up in this scenario.  In terms of the BCS, it's difficult to argue that the NCAA has any role in the process. If the NCAA ran the BCS (or any postseason) and forced everyone to participate under its rules, that would be a much easier case. Further complicating this point is that the NCAA restricts trade in several obvious ways, e.g. scholarship limits, paying players, maximal allowed games, forcing athletes to be students.  Some of these are defensible, some are likely not.  However, the NCAA has lost nearly every case filed against it for non-competitive practices. If it tried to force a playoff, it would likely be sued again and lose again. (As an aside, the NCAA might lose cases for restricting the number of games, for disallowing a two tiered conference playoff, and for requiring schools to participate in their post-season formats e.g. the basketball tournament.)


5. The fans are the customers and the conferences are the businesses

In this case, the argument is that the BCS conferences have conspired to restrict trade by only allowing 5 BCS bowls and limiting their participants (again, relatively easy) and that this behavior has harmed customers (relatively hard). I don't know how this case would work.  The DOJ would have to argue that the BCS arrangement has led to higher prices (dubious), lower quality games (again, dubious compared to a locked-in open market of bowls and conferences), or fewer games (ridiculous, considering how many bowls exist and how many of them have started since the BCS began).  Perhaps the DOJ can argue that the BCS conferences are coercing each other into a restricted postseason format, thereby limiting the customers choices (similar to 1), but any sort of playoff would have a similar coercement issue and any damages would be paid out to other BCS conferences.  This point cuts to the core of the difficulty of antitrust legislation against sports entities: they inevitably involve necessary and legal cooperation for championships and competitions, but they also compete against each other for fan support and financial revenue (and I suppose sporting event victories).  Demonstrating collusion is easy.  They collude every time they agree on simple matters such as rules for playing the sport, or on playoff or conference scheduling arrangements.  However, demonstrating that such a collusion both harms competition and unnecessarily restrains the market is extremely difficult.  

 

Other Ridiculous Comments Heard on this Issue

"The DOJ is going to sue the BCS conferences for not making more money with a playoff"

Huh?  Turns out that making less money than you possibly could is not illegal.  The DOJ can't sue to force a playoff anymore than they could sue to force a 256 team basketball tournament, a 52 game regular season in football, a giant Apple symbol painted on midfield of every stadium ("If you're not at a Michigan game, then you're not at a Michigan game"), or targeted advertisements in referee announcements ("The ruling on the field is confirmed.  Bud Light has more taste and fewer calories than Miller Light").  All these choices have led to less money for athletic departments and colleges overall.  None of them are illegal.  

 

"The DOJ is going to sue the BCS into having a playoff."

Another head scratcher.  Successful antitrust suits nearly always result in financial damages, not forced action.  It boggles the mind to think of a ruling that results in forced participation in a playoff (in perpetuity?).  If you don't believe me, take it from Jimmy D, Esquire:  "There's no judge or jury in the world that can make you enter into an four-team, eight-team or 16-team playoff."

 

"The government is going to take away the non-profit status of schools"

According to the ever graceful writing style of the IRS, "The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals."  Changing this statement to "The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition unless they are an NCAA Division 1 (FBS) football sponsoring school and they refuse to do what we tell them, and preventing cruelty to children or animals" would be a political firestorm from more directions than any politician wants to fight.    

Pundits forget that the BCS schools considered collectively represents a large, extraordinarily politically well-connected organization.  While such organizations lose or settle lawsuits with some regularity, they very rarely lose political battles of this magnitude.  Posturing against the BCS might gain a congressman or a senator a few votes, but no representative in the state of Ohio will deliberately take federal money from OSU.  No representative from Georgia will vote to harm UGA.  Both of Idaho's congressmen might try, but they wouldn't be successful.  A determined minority can win a war, a revolution or a riot, but it can't win a vote.  The four states with FBS schools but not BCS schools have a total of 10 congressmen.  The thirty six states with BCS schools have 412 congressmen.  From my rudimentary understanding of local politics across the country, only 3 states with a BCS school potentially have a greater interest in a non-BCS school: Utah (BYU), New York (Buffalo and the SUNY system over Syracuse), and Massachusetts (UMass over Boston College?).  If you recognized the last two as the least college football aware states in the country, then congratulations, you have enough understanding to realize that injuring BCS schools in a legislative environment over a football playoff and non-AQ access is dead in the water.

 

"The BCS has disproportionately helped Iowa State"

The next part of college football that helps Iowa State will be the first.  This statement proceeded from a comment that the BCS has favored lower tier BCS schools at the expense of upper tier non-BCS schools, another ridiculous statement.  No one but no one has benefited from the BCS setup more than Utah, TCU and Boise State while Iowa State remains mired in whatever they have been mired in since time immemorial.

 

"The Fiesta Bowl is run by a bunch of corrupt, hooker obsessed lunatics.  Therefore X"

These statements represent a failure of basic logic more than legal knowledge (mostly unrelated concepts).  A corrupt bowl doesn't signal a fundamental or intractable problem for the bowl system any more than the demonstration of a f---saw in an after-class presentation signals the moral degradation of the university system and the country as a whole.  This line of reasoning has the same level of "won't somebody think of the children" discourse as video-games-cause-violence and comic-books-cause-stupidity.  If conferences do not want a particularly bowl, it's easy to switch.  

 

Final Point:

If this lawsuit goes to trial, one of two things will happen.  Either it will succeed, meaning that the collective negotiation by the BCS conferences is illegal and must stop, or it will fail and the BCS conferences will continue working together.  The unlikely first result leads to a return to the old bowl system.  The second result should be terrifying to any non-AQ school.  Depending on the strength of the ruling, the BCS conferences could end up in a position where they have legal backing to arrange a post-season however they damn well please in whatever sports they please and the other conferences can fend for themselves.  Ironically, the second result might well lead to a college football playoff, just not one involving the non-AQ schools.  

My article ends here, though I've included a few summaries of the major antitrust cases involving sports leagues. 

 

The Case: Federal Baseball Club v. National League (1922)

The details of this case almost certainly don't affect the current situation, but the Supreme Court somehow ruled unanimously that professional baseball is not interstate commerce.  This result gave baseball immunity from any antitrust or monopoly accusation, though with the cost of increased federal scrutiny.  Further cases have said "We have no idea why they ruled this way, but we're not going to change it".  No other league has received similar status.

 

The Case: NCAA v. Board of Regents of University of Oklahoma (1984)

Prior to this case, the NCAA sold all television rights for college football and closely regulated how often every team appeared.  They collected all the money and made out payments to each school. Oklahoma and Georgia sued in order to sell their television rights on the open market.  

The Result: The NCAA lost.

The original ruling is quite lucid for this sort of thing.  The court ruled that NCAA violated the Sherman Antitrust Act by restraining competition on price and availability.  It rejected the arguments of the NCAA that the schools are unable to sell their broadcasts separately, that limiting television protects attendance, and that limiting the financial gain of schools from television promotes competitive balance.  

That last part particularly relates to the current environment, considering the angst over the size of recent television contracts.  The court agrees that the NCAA has a legitimate interest in competitive balance; however, it notes that television is merely "one source of revenue that is more important to some colleges than to others".  The ruling tantalizingly hints that limiting the money spent on the football program might fall within legitimate power of the NCAA, but rejects that restricting television effectively accomplishes that goal.  

 

The Case: USFL v NFL (1986)

The upstart professional football league sued the NFL for conspiring to ruin it with their existing monopoly.

The Result: The USFL "won".  

This case is amusing.  The USFL contended that the NFL had an illegal monopoly, acquired and maintained from anti-competitive practices.  They had several documents of the NFL's plan to marginalize and the destroy the USFL.  The jury agreed with nearly all of these accusations.  However, they found that the USFL failed from its own poor decisions and that the USFL deliberately tried to confront the NFL to force a merger.  (The unsuccessful merger strategy was driven by a guy named Donald Trump.  What ever happened to him?)  The jury awarded the USFL $1 in damages.  Since antitrust provides tripled damages, this amount became $3, or $3.76 after interest accrued during the trial.  

This case emphasizes a key point.  Having a monopoly, even an "evil" one, does not lead to antitrust success.  The plaintiffs must demonstrate that the monopoly damaged them in a critical way.   

 

The Case: White v NCAA (settled in 2008)

Former "student-athletes" sued the the NCAA for preventing schools from covering incidentals (e.g. transportation, laundry) for athletes in major level revenue sports.  They contended that this restriction represented anti-competitive behavior among schools because it prevented schools from competing on scholarship amounts and coverage.

Result: The NCAA settled to avoid losing.

The NCAA made a settlement that stopped short of allowing stipends and direct money, but allows for a wider variety of aid including health and injury insurance as well as establishing a limited fund that for "anything you want to directly provide benefits to student athletes".  This case cleverly focused on the shortfall between purported and actual cost.  By avoiding the terminology of payment, the plaintiffs stayed within the NCAA's own amateur framework.  The NCAA could not successfully argue then that this case should fail based on the position that amateurism is a key part of the appeal of college sports, which would be their primary tactic in any pay-for-play case.  

This case will play a key role in any future stipend discussion.  

 

The Case: American Needle v NFL (ruling in 2011)

The American Needle company sued the NFL for selling a single contract to make all of the the licensed team apparel hats.  They argued that the NFL restrained trade by colluding between teams on hat license sales.

Result: The NFL lost, at least in a narrow scope

The inherent tension in all sports antitrust suits derives from teams needing to have competitive agreement for games, but they still are separately owned and operated franchises.  For some purposes, the law considers a league a single entity and thus immune to antitrust laws (e.g. for television contracts, though there's some complexity there as well).  For other purposes, the law considers it a collection of competing businesses.  As near as I can tell, this ruling considers the NFL as a collection of competing businesses...for the purpose of selling hats.  No one seems to know to what else or whom else this ruling applies.   

 

The Case: Brady v NFL

NFL players sue the league for collusion

Result: None yet

If this case ever goes to trial, it will be the easiest decision ever.  Imagine if upon graduation from college, you were instructed where you were allowed to work (i.e. a draft).  Also, your employer says he would pay you more, except he's made an agreement with all of the other companies in your field to only pay a fixed amount to the combined staff in the company (i.e. a salary cap).  To top it off, you and the other workers in your field had previously signed a contract for those terms, but the employers collectively decided they weren't making enough money, reneged on the contract and then agreed amongst themselves not to hire anyone (i.e. a lockout).  

Now a few of these terms might be defensible from the standpoint of an improved product and competition, but the players will likely counter that other leagues such as the MLB and indeed college football are horrifically imbalanced but have suffered few ill effects.  I cannot envision the NFL winning this case in a substantial way.

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