NCAA AND ANTITRUST

NCAA v Okla Regents: THE Major Antitrust Precedent for

College OR Pro Sports1> Sherman Act only bars unreasonable restraints of trade

2> use Rule of Reason because this "involves an industry in which horizontal restraints on competition are essential if the product is to be available at all"

3> KEY R/R EXPOSITION: Price is higher and output lower than they would otherwise be, and both are unresponsive to consumer preference.“

4> THUS: "these hallmarks of anticompetitive behavior place upon petitioner a heavy burden of establishing an affirmative defense which competitively justifies this apparent deviation from the operations of a free market"

REVIEW: the Rule of Reason

• First, pltf establishes actual anticompetitive effect

• Direct evidence re price or output• Indirect evidence of defts’ market power

• Second, deft demonstrates pro-competitive justifications

• Third, pltf can rebut by showing that restraint is unnecessarily restrictive

Application of the Rule of Reason to Bd of Regents

• How would you apply the Rule of Reason to the NCAA’s television agreement?

• What are the NCAA’s legitimate justifications?

• What are the real motivations for the NCAA’s agreement?

Fundamentally different approaches of majority and dissent

• Stevens: NCAA as a distinctive commercial product

• White: NCAA’s non-commercial goals are “central”

NCAA’s Non-Profit Status

• Does the NCAA act any differently than it would if it were profit-maximizing? What non-commercial goals are furthered here?

NCAA’s special role /2

• Professional Engineers rejected non-economic justifications for restraints of trade by commercial enterprises; BRW says that this principle should not apply to non-profit institutions– Do you agree that, while only Congress should be able

to allow for-profit companies to restrain trade to achieve socially worthy goals, non-profit institutions should be able to argue to a court that it’s non-economic goals are legitimate justifications for trade restraints under the Rule of Reason?

• Should NCAA be able to take surplus profits from football and men’s basketball to cross-subsidize non-revenue sports?

DISTINGUISHING NON-COMMERCIAL RESTRAINTS

• Smith v NCAA [918] is an important precedent: non-commercial restraints do not ‘restrain trade’

• No clear restraint in any relevant commercial market

• No suggestion that intent or effect of rule is to enhance revenues

• Can’t apply “output responsive to consumer preference” criterion to non-revenue sports, since if responded to consumer preference wouldn’t offer the sport!

COMMERCIAL/ NON-COMMERCIAL

• Why is Smith’s challenge to graduate school participation not analyzed as a restraint of trade?