Sunday, 27 October 2013

Procompetitive Effects and the Ban on Paying College Athletes

USA Today's Steve Berkowitz wrote on Friday that Judge Wilken denied a motion to dismiss in the O'Bannon litigation.  Here is an excerpt from Berkowitz's article in which he addresses Judge Wilken's remarks concerning whether a ban on athlete pay serves a procompetitive purpose:
Meanwhile, the judge also raised questions about the applicability to this case of the 1984 Supreme Court ruling in NCAA v. Board of Regents, a case that was about control of college football TV rights but the opinion on which included the statement that "in order to preserve the character and quality of the (NCAA's) 'product,' athletes must not be paid, must be required to attend class and the like."
The NCAA has relied upon this language in defending its amateurism system and has successfully used it [in] many prior legal cases.
However, Wilken wrote in Friday's ruling that the case "does not stand for the sweeping proposition that student-athletes must be barred, both during their college years and forever thereafter, from receiving any monetary compensation for the commercial use of their names, images, and likenesses.
"Although it is possible that the NCAA's ban on student-athlete pay serves some procompetitive purpose, such as increasing consumer demand for college sports, Plaintiffs' plausible allegations to the contrary must be accepted as true at the pleading stage."
Wilken also wrote that the Supreme Court "never even analyzed the NCAA's ban on student-athlete compensation under the rule of reason nor did it cite any fact findings indicating that this ban is the type of restraint is 'essential if the (NCAA's) product is to be available at all'. More importantly, the Court never examined whether or not the ban on student-athlete compensation actually had a procompetitive effect on the college sports market."
Berkowitz's piece raises a really interesting question.  In sports antitrust cases, the issue concerning procompetitive effects essentially revolves around competitive balance.  Why is there an assumption that a ban on athlete pay increases consumer demand for college sports and/or fosters competitive balance?  

First, while I do believe there are many consumers who do not want athletes to be paid, I have serious doubts whether there is any correlation between consumer demand and athlete pay (or lack thereof).  For starters, the consumer knows there are lots of athletes in big-time college sports who are paid under the table from boosters and various other third parties (unless of course one believes that the number of athletes getting paid is limited to only those who actually get caught).  But more importantly, if the rules were changed to permit athletes to be compensated for their names and images, I don't believe fans and alumni would take the position, "I'm not watching my team play this weekend because I read somewhere that somebody paid our defensive end $1,000 this week for signing some memorabilia."  

But who cares what I think and let's assume for sake of argument that some consumers would not be interested in the product if the athletes were paid more than they are currently.  How much relevance should it have for antitrust purposes?  Is a producer insulated from antitrust liability simply by calling its product "unpaid labor"?  If all of the law firms in the U.S. agreed to restrict the pay of their associates (in the first four years before making partner) to law school tuition reimbursement, would the agreement pass antitrust scrutiny if they marketed their product to the consumer as "cheap associate labor"?  Most would not dispute that a team salary cap violates antitrust law but is the answer different if a sports league calls its product "salary capped labor"?  If the NFL could show that it is losing consumers because they believe the athletes are grossly overpaid, would/should that have any relevance for antitrust purposes if the league put an individual cap on each player's salary?  

Second, on the issue of competitive balance, the irony is that college football arguably has much less competitive balance than professional football where the athletes are paid competitive wages.  Unlike professional football, college football has "dynasties" and "powerhouses".  For a college sport that supposedly has competitive balance, why are Alabama's football fans leaving so many empty seats in the stadium

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