RADICAL REFORM OF
INTERCOLLEGIATE ATHLETICS:
Antitrust, Title IX, and Public
Policy Implications
Stephen F. Ross
The Pennsylvania State University
Dickinson School of Law
Institute for Sports Law, Policy & Research
CLE Lecture: April 16, 2011
THE PROBLEMS TODAY
• Current levels of spending on
intercollegiate athletics are nonsustainable
– as many as 60 schools lose money on
football
– even wealthy programs like Michigan
spend more than they take in
• Financially strapped universities are
spending millions more than
necessary to provide athletes in nonrevenue sports with the physical,
mental, and social benefits derived
from athletics participation
/2 PROBLEMS
• Women’s sports and Title IX improperly blamed
for cutbacks, while universities reflexively seek
formalistic equality without regard to real
educational or social goals
• Revenue-sport star athletes are economically
exploited
– millions made from their efforts
– grant-in-aid is often far below average support among
affluent classmates
– ripe for corruption
– huge inefficiencies in recruitment
CHARTER OF REFORM
• ARTICLE 1: Using newly-created “Generally
Accepted Intercollegiate Athletics Accounting
Principles,” schools cannot participate in
Varsity men’s sports unless their revenues
match or exceed expenses
– revenue sharing
– approved, transparent subsidies (Olympic sports,
strategic spending from general funds)
/2 Charter
• Article 2: Schools must provide varsity
women’s sports opportunities equal to those
provided to men under Art. 1
– i.e. 68 scholarships if offer football and men’s
basketball (see Art. 4); more if hockey or other
sports offered
– schools would select ~4-5 sports best suited for
their history, facilities, etc.
/3 Charter
• Article 3: All other sports would be operated
as ‘club sports’
– no scholarships (need-based ok)
– limited # of coaches
– regional travel in localized conferences
/4 Charter
• Article 4: All varsity sports scholarships
allocated on an equivalency basis, with
football reduced to 55, and the individual
award ranging from ¼ to 1 ½ full grant-in-aid
ANTITRUST COMPLIANCE: General
Principles
• Commercial restraints
– scope: limit competition to increase profits (Bd of Regents;
Law)
– rivals need to agree in order to develop a competition (Bd
of Regents; American Needle): thus rule of reason applies
– justified as effective product differentiation with
professional sports featuring vastly superior athletes (Bd of
Regents)
• Non-commercial restraints
– scope: inconsistent with profit-motive
– antitrust laws do not apply (Smith v NCAA)
ANTITRUST COMPLIANCE: The Rule
of Reason
• Bd of Regents: “Hallmark” of unreasonable restraint is where
– price is higher
– output lower
– output unresponsive to consumer demand
• Law: shifting burden of proof
– plaintiff shows actual restraint on competition
– defendant can justify with purpose that is (a) legitimate
and (b) pro-competitive
– plaintiff can rebut by showing overbreadth
ANTITRUST: applied
• In a sporting competition where rivals need to agree, moneylosing programs reflect either
– strategic behavior that distorts the competition, risking a
loss of fan appeal; or
– non-commercial goals that can be restrained outside scope
of Sherman Act
• THEREFORE ...
– Art 1 is lawful (enhancing competition or non-commercial)
– Art 2 requirement of Title IX compliance is non-commercial
– Art 2 bar on money-losing expenditures on women’s
sports not required by Title IX is also non-commercial
ANTITRUST: applied/2
• Key principle: these rules only apply to NCAAsanctioned sports; members free to act on
their own outside NCAA ambit
– cf. NCAA response to CFA in 1984
– indeed, removal of 14-sport rule for Division I
schools is actually pro-competitive
ANTITRUST: applied/3
• A limit on expenditures for club sports is a legitimate way of
maximizing the non-economic goals of intercollegiate athletic
competition
– analogies upheld under antitrust: Division III, ‘minor’
competions (M&H Tire), NASCAR limits on expensive
adjustments to stock cars
– just a matter of degree from current NCAA rules sharply
limiting # of scholarships
ANTITRUST: Distinguishing Law v
NCAA from limits on club sports
• Salary limits on basketball coach designed to
maximize profits from commercial activity
• Restrained trade in a relevant market (labor
market for coaches)
• No commercial market is being restrained by
limit that only applies to non-revenue sports
• Not trying to save inefficient or unsuccessful
competitors from market effects
ANTITRUST: new football rules
• Change from full scholarships only to
equivalency is efficient and pro-competitive
– indeed, agreement that schools must provide full
grant-in-aid or walk-on is suspect
– facilitates more efficient allocation of players to
teams
– provides athletes with a more informed choice
ANTITRUST: football /2
• Change from 85 full scholarships to 55
equivalency scholarships is not anticompetitive
– no different than any roster limit
– promotes competitive balance: particularly
output-enhancing in college sports due to capacity
constraints
ANTITRUST: football /3
• Maximum grant of 1.5 x Cost of Education
– for competitive balance, need to average
– limits economic exploitation of stars
– “amateurism” is a myth
– real justification from Bd of Regents: product
differentiation based on “clear line of demarcation”
between pro and college sports
– cash subsidy up to 50% of Cost of Education not so
extensive as to significantly differentiate student-athletes
from student body
• trust fund alternative
TITLE IX COMPLIANCE
• By providing equal scholarships for men and women, will
meet Prong 1 of Title IX regulations
• Title IX not violated if women’s coaches, in own discretion,
allocate scholarships on a more or less equal basis then men
• Real controversy with Title IX is not equality between men
and women but “mythical Title XI”:
– right to play football
– right to have equivalent opportunity if choose not to play
football
POLICY BENEFITS OF REFORM
• Eliminates special interest capture of university
policy
• Improves competitive balance
• Likely to improve physical, mental, and social
benefits for athletes in non-revenue sports
• Frees up millions for educational mission
– significantly reduces most schools’ subsidy for nonrevenue sports
– allows top programs to use football profits for
libraries, liberal arts, etc.
Questions and Comments
Thanks for Coming