NCAA Football Scholarship Limits Not Alleged to Harm Commercial Market

This posting was written by E. Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Claims by former recipients of collegiate football scholarships that the National Collegiate Athletic Association (NCAA) violated federal antitrust law by entering into an agreement with member schools to restrict the number of football scholarships awarded by each school to a prescribed number and by prohibiting multi-year scholarships did not sufficiently plead a valid relevant market, the U.S. Court of Appeals in Chicago has ruled. Dismissal of the suit was therefore affirmed.

The complaining student-athletes, alleging that the bylaws prevented them from obtaining scholarships that covered the entire cost of their college educations, failed to allege that the NCAA’s actions had an anticompetitive effect in a relevant commercial market, the court stated.

The transactions that NCAA member schools made with premier athletes—full scholarships in exchange for athletic services—were not noncommercial, since schools could make millions of dollars as a result of those transactions. Thus, they were, to some degree, commercial in nature, and therefore took place in a relevant market with respect to the Sherman Act, the court remarked. Moreover, because the bylaws were not inherently or obviously necessary for the preservation of amateurism, the student-athlete, or the general product of college football, they could not be presumptively procompetitive.

However, the plaintiffs’ complaint did not adequately identify either of the markets upon which they claimed the bylaws had an anticompetitive effect—the market for bachelor’s degrees and the market for student-athlete labor.

It was not apparent whether the plaintiffs believed that the bylaws affected an overall market for bachelor’s degrees, which would impact scholarship athletes and non-athletes alike, or some subsidiary market that only concerned athletes attempting to obtain educational degrees in exchange for athletic services.

Even if adequately alleged, such a relevant market would have been problematic in that (1) given the small proportion of bachelor’s degree candidates who were scholarship athletes who scholarships had not been renewed, the anticompetitive impact would have been very minimal; and (2) bachelor’s degrees were not automatically received or guaranteed upon payment of tuition. The difference between a market for educational services and a market for bachelor’s degrees was "of vital importance," the appellate court noted.

While a labor market for student-athletes would have described a cognizable market under the Sherman Act, nothing resembling a discussion of a relevant market for student-athlete labor could be found in the plaintiffs’ amended complaint, the court observed.

The June 18 decision is Agnew v. National Collegiate Athletic Association, 2012-1 Trade Cases ¶77,939.