NCAA AND ANTITRUST
NCAA v Okla Regents: THE
Major Antitrust Precedent for
College OR Pro Sports
1> 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 noneconomic 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 nonrevenue sports?
DISTINGUISHING NONCOMMERCIAL 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/ NONCOMMERCIAL
• Why is Smith’s challenge to graduate
school participation not analyzed as a
restraint of trade?