Does a Recent Court Ruling Present a New Option for Athletic Conferences?

Various athletic conferences recently wrapped up their annual meetings, and a reported agenda item in several meetings, driven by the surge in roster costs, has been whether conferences should consider withdrawing from the NCAA and going it alone.

The NCAA’s Control and Governance of College Athletics

The NCAA is a nonprofit membership association, tax-exempt pursuant to Section 501(c)(3) of the Internal Revenue Code and composed of members who meet requirements to belong. The members are universities that engage in athletic competition, including all major colleges.

The NCAA employs an executive staff and administrative structure that operates the association, interprets and enforces its rules, expresses its policies and administers its business, at least structurally under supervision of the members. Over time, this apparatus has grown to control virtually all college sports of significance.

When Does Market Power Trigger Antitrust Enforcement?

“Market power” is a threshold question in antitrust scrutiny to determine whether an organization or business affects such a sufficiently broad and identifiable market for the activity at issue that it may impair competition in that market.   

Market power is often difficult to prove. But recent cases held that the breadth of the NCAA’s control over college athletics was so extensive that market power was almost conceded.

For example, in Alston, the Supreme Court recited the findings of the trial court that “the NCAA enjoys ‘near complete dominance of, and exercise[s] monopsony power in, the relevant market,’ – which it defined as the market for ‘athletic services in men’s and women’s Division I basketball and FBS football.’” The trial court also noted that “there are no ‘viable substitutes,’ as the ‘NCAA’s Division I essentially is the relevant market for elite college football and basketball.’” This determination of control and lack of viable options provided the basis to challenge the NCAA’s rule against student-athlete compensation.

Market Power and Independent Conferences

A recent case shed light on how a conference that split from the NCAA and operated independently might use the market power requirement to defend its operations against antitrust attack.

In Choh v. Brown University, et al, a group of Ivy League athletes claimed that the Ivy League’s refusal to provide athletic scholarships constituted price fixing in violation of the Sherman Act. The trial court dismissed the case, and the United States 2nd Circuit Court of Appeals affirmed the dismissal on appeal. However, the 2nd Circuit’s ruling contained a finding that could prove significant should any conferences decide to withdraw from the NCAA and go it alone. 

While Choh extensively quoted the Supreme Court in Alston, the discussion centered on the Supreme Court’s finding that the NCAA had market power and controlled college athletics nationwide. In contrast, while the NCAA did have market power due to the breadth of its authority, the 2nd Circuit in Choh noted that the Ivy League was just one conference, and that “no individual conference, such as the Ivy League, enjoys that level of ‘market dominance.’”

The court noted that there were numerous “viable alternative” schools available to the plaintiffs. The court affirmed that if the Ivy League athlete wanted an athletic scholarship, he or she could attend any number of other universities which provide them, something that the plaintiffs in Alston could not do to achieve relief due to the NCAA’s comprehensive control and the scope of its rules.

This could mean that if a major conference did withdraw from the NCAA and operate independently, it could defend against future antitrust cases relating to its operations or governance, such as eligibility limits, using the same argument – that a plaintiff is free to compete in another conference as a viable alternative. 

An Independent Conference Model Could Transform College Athletics

Sudden adoption of the concept alluded to in Choh could produce a free-for-all in college athletics. It could also transform the way college football in particular is played and governed, how competition is structured, how revenue is generated and divided, and the role, if any, played by private equity. For example:

• Each conference would need to independently adopt its own policies for governance, scheduling and eligibility requirements.
• Conferences could establish their own rules regarding private equity involvement.
• Conferences could adopt different recruiting windows to eliminate “commitments” and “national signing days” and instead enter into binding agreements with recruits, such as those who have completed their junior year of high school. This would enable the schools to eliminate the current practice that turns an offer made by the school, which the athlete has publicly accepted by committing, into a stalking horse bid others can then interfere with for months until the national signing day arrives in December.
• Some conferences might extend eligibility beyond normal college age, such as by not counting time spent in junior colleges or The National Association of Intercollegiate Athletics toward eligibility, as the Pavia decision suggested.
• Conferences might have separate rules on compensation, or policies for responding to tampering. Assuming revenue-sharing compliance with the House settlement, an individual conference might adopt a salary cap for teams in that conference.
• A group of independent conferences might schedule a year-end tournament or playoff between members of those conferences as a contractual joint venture and negotiate media rights and the terms for qualification for participants.

Choh is not precedent outside the 2nd Circuit. Other circuits have not addressed the issue and may decide it differently. Additionally, the premise might be weakened should conferences withdraw to create a super conference or new national governing body. Still, it does represent a decision by a federal circuit court of appeals and suggests a path to a potentially effective legal defense in an antitrust context, depending on what happens next in college sports.

Please contact Tom Sullivan, Rhett Parker or any member of the Phelps sports team with questions or for advice and guidance.