Published May 31, 2012 - 1:22pmNEW: Follow on facebook -
The media loves to complain about athletes who act “above the law.” Yet it’s sports owners and sports leagues—including the NCAA—that enjoy far greater legal privileges in relation to the ordinary person, especially the ordinary businessperson. We see this most commonly with taxpayer bailouts for NFL owners disguised as “investments” in new stadiums. The courts and government officials also contribute to the disparity by affording special antitrust privileges to sports leagues.
In 1922, the Supreme Court famously created a special antitrust exemption for Major League Baseball. A failed rival sued the National and American Leagues for unfair competitive practices. Justice Oliver Wendell Holmes, writing for the Court, said the Major Leagues could not be sued under federal antitrust law because “the business is giving exhibitions of base ball, which are purely state affairs.” In other words, baseball did not constitute interstate commerce. That may have been a defensible proposition in the 1920s, but the Court continued to apply the exemption well into the 1970s, when Major League Baseball clearly engaged in interstate commerce. Certainly no other business could claim such a broad-based exemption.
The NCAA also gets an extraordinary amount of leeway from the courts on most antitrust issues. The Supreme Court did apply the antitrust laws against the NCAA in 1984, striking down the organization’s restrictions on college football telecasts. But for the most part, the NCAA is free to restrain trade as it sees fit, so long as it claims it’s necessary to preserve “amateurism.” Although Congress does not provide for such an exception, the courts have routinely dismissed lawsuits challenging allegedly unfair or unjust enforcement of NCAA rules.
In 2008, the Cincinatti-based U.S. Court of Appeals for the Sixth Circuit rejected an antitrust lawsuit filed by former Kentucky football assistant coach Claude Bassett. Bassett resigned from Kentucky in 2000 after then-athletics director Larry Ivy confronted Bassett with allegations of NCAA recruiting violations. Bassett resigned. The NCAA later issued a “show cause” order, effectively banning any NCAA member from hiring Bassett for a period of eight years. Bassett then sued the NCAA, Kentucky and the Southeastern Conference, alleging fraud, breach of contract and antitrust violations.
On the antitrust claim—that the NCAA engaged in what amounted to an illegal group boycott of Bassett—the trial court and the Sixth Circuit said NCAA rules generally could not be challenged under federal antitrust law. The Sixth Circuit reasoned that since antitrust laws only deal with “commercial” activities, and the NCAA says its rules are designed to punish individuals who attempted to “commercialize” what’s supposed to be an amateur environment, the antitrust laws simply didn’t apply:
[The] NCAA’s rules on recruiting student athletes, specifically those rules prohibiting improper inducements and academic fraud, are all explicitly non-commercial. In fact, those rules are anti-commercial and designed to promote and ensure competitiveness amongst NCAA member schools. Violation of the applicable NCAA rules gives the violator a decided competitive advantage in recruiting and retaining highly prized student athletes. It also violates the spirit of amateur athletics by providing remuneration to athletes in exchange for their commitments to play for the violator’s football program. Finally, violators of these rules harm the student-athlete academically when coaches and assistants complete coursework on behalf of the student-athlete.
It’s a neat trick. If competitors in any other industry banded together and publicly blacklisted a person as Bassett was, those companies would face civil and criminal antitrust penalties. But because the courts magically decree the NCAA has “non-commercial” intentions, the antitrust laws cease to exist. Never mind the billions of dollars NCAA institutions earn—or the fact schools often hire coaches with dubious commitments to NCAA policies who nonetheless produce championships and revenues. The Sixth Circuit, and most federal appellate courts for that matter, simply accept the NCAA’s “amateurism” claims at face value.
Of course, amateurism isn’t the only way to get special antitrust treatment. The NFL gets it simply by existing. Recently, the NFL Players Association sued the NFL for collusion—a type of antitrust violation—over what the league admits was a conspiracy to implement an salary cap during the 2010 season. This despite a signed labor agreement declaring there would be no such cap that year. The NFL didn’t just engage in collusion, but price-fixing, which is a felony punishable by up to ten years imprisonment for all responsible parties. Yet there’s no evidence the Justice Department has convened a grand jury to indict Roger Goodell or the NFL owners.
Obviously, the high profiles of the NCAA and NFL help to inoculate them from the public pressure any other business would face under similar circumstances. Politicians and press eagerly grandstand for antitrust investigations against unpopular industries like oil companies or Microsoft. Antitrust, in fact, is often little more than an excuse to demonize businessmen. For example, a federal appeals court recently upheld a record four-year prison sentence against an Iowa concrete executive who pled guilty to price-fixing. The judge went out of his way to paint the defendant as a terrible human being motivated by “insatiable greed.” Of course, if that same businessman owned an NFL team or served as NCAA president, that same judge might be singing a much different tune. One man’s greed is another man’s amateurism.