By Donald Remy
NCAA General Counsel
Last weekend, the New York Times published an op-ed piece about the NCAA – “The College Sports Cartel” as well as a magazine story – “Let’s Start Paying College Athletes,” both authored by business columnist Joe Nocera. While I respect Mr. Nocera, I believe both the magazine story and column are uninformed, wrong on the facts, wrong on the law and wrong on the economics of the NCAA.
The reform proposals in his magazine piece simply fail to make “walking around sense.” They are based on an illusion that the NCAA is somehow restraining trade. In fact, if anyone in America wants to start a sports league under the Nocera plan, they are free to do so.
Indeed, any group of schools wanting to compete against each other under a pay-for-play model could start paying athletes tomorrow if they chose to do so – either by leaving the NCAA or by changing a portion of its rules for “big-time” football programs through the NCAA rule-making process.
That no one has done so reflects the lack of merit in the idea. An examination of Mr. Nocera’s plan reveals his flawed logic.
A cartel is a group of independent, non-integrated producers, such as OPEC, who collectively act as a single seller to reduce output and raise prices to the monopoly level to maximize profit. This works because demand exceeds the restricted supply and prices rise to transfer wealth (known as consumer surplus) from consumers to producers. A cartel, however, only succeeds when consumers have no effective substitutes and if the cartel members act jointly with no additions or defections. Mr. Nocera has this much right.
Joe Nocera did not check his facts.
Mr. Nocera writes athletics departments act in a cartelized manner to maximize revenues and exploit student-athletes. This is not true on any examination of the facts. Only a few programs make money. Most lose a lot. Why? To support and educate their student-athletes and provide a complete collegiate experience for the entire student body. In a profit maximizing model, sports that lose money would be eliminated.
Mr. Nocera writes student-athletes are forced to sign a document that deprives them of rights and gives all their rights to the NCAA. No such document exists. Since 2004, the NCAA has requested student-athletes to authorize it to use their name, image or likeness to promote NCAA championships. Nothing more. After leaving school, they retain all of their rights to earn money however they wish. Former Notre Dame football player Daniel “Rudy” Ruettiger sold his rights to his collegiate story, which became a major motion picture. Former Florida football player Tim Tebow currently has a documentary available on Amazon.com.
Mr. Nocera writes student-athletes are not entitled to engage a lawyer when charged with a rules infraction. This is patently incorrect and the Times was informed of this before the story was published.
He writes the NCAA lacks legal protections for its rules, but he ignores the Supreme Court precedent and decades of lower court precedent readily available to any interested researcher.
Finally, Mr. Nocera does not do justice to a substantial conflict of interest. Although he acknowledges that his fiancée is director of communications for one of the legal firms assisting in the Ed O’Bannon “likeness” case against the NCAA, his small disclaimer is buried about 4,000 words into the story. In fact, the relationship calls into question the motivation behind the article given its one-sidedness and consistent disregard for the facts
The NCAA, however, does not fit this model. Most importantly, the NCAA is not a collection of independent non-integrated competitors. To the contrary, the NCAA is a wholly integrated joint venture among schools that creates and supports the unique product of college sports. The most popular of these sports are football and basketball. Without collaboration, as Mr. Nocera concedes, there would be no college sports at all. The same is plainly not true of oil production.
The NCAA, however, is not the exclusive seller of football or basketball games – not even close. The NCAA sells the rights to its men’s basketball championship, commonly known as March Madness for a substantial sum (more than 90 percent of which goes back to the schools and to support student athletes).
But the only thing the NCAA sells is its own championship competition. Regular-season basketball is sold by the conferences and independent schools to the networks and cable carriers in vigorous competition with each other, entirely unregulated by the NCAA.
Output is not restricted as with a cartel; the number of schools playing Division I basketball continues to grow as does the total number of games and the games available on cable and broadcast TV – not to mention streaming and other new technologies.
The NCAA role in Division I football is even less cartel-like. The NCAA sells no Football Bowl Subdivision games and the Bowl Championship Series, not the NCAA, controls championship selection. The conferences compete vigorously for TV rights packages, as well as for members. Output continues to rise, and the NCAA does not preclude new qualified schools from moving into or out of Division I or the FBS. Unlike OPEC, the NCAA does not act in any way as a producers’ cartel.
Some have argued the NCAA acts as a buyers’ cartel to control the “labor market” in which student-athletes “sell” their services to schools and that NCAA amateurism rules extract or transfer rents or wealth from the student-athletes to the schools. Mr. Nocera seems to espouse this theory.
It is wrong, however, as a matter of fact and as a theory of antitrust law. If one wanted to apply this type of crude analysis to student-athletes, it becomes readily apparent the supply of willing and able student-athletes who want to play football and basketball at the college, junior college, Division I, Division II, Division III, NAIA, ACCA, NCCAA, USCAA, professional, Canadian, European league and recreational levels is essentially limitless.
This so-called “labor” market certainly is not dominated by Division I NCAA programs. All you have to do is look at the large number of walk-ons who play with no scholarship, those who play in the Ivy League and other leagues without athletics scholarships, those who choose Division II and III programs, and those who bypass college altogether. Good players will always play sports regardless of compensation.
In economic terms the supply-of-labor function is essentially limitless or unresponsive to price. The players want to play, and many of them effectively will pay tuition and more to be able to play. Some want an education, some want to go pro (few do), and some want both. Some just want to play for their school.
Given this highly inelastic supply function, the NCAA rules cannot control this hypothetical market because buying less – by for example reducing the value of a grant-in-aid – would not materially reduce the supply of players.
While quality might arguably be diminished somewhat if the value of a grant-in-aid were reduced (some student athletes would go straight to the NBA [or D League] or the European leagues or play soccer or baseball instead of football), college sports would not really change.
Aside from that failed logic, Mr. Nocera argues exploitation: the student athletes generate the revenue and everyone else gets rich. Sounds good, but again it is wrong. College games would be probably just as popular if they were played by players who shot 80 percent free throws instead of 84 percent. The fans want to root for their alma mater, real or imagined.
The players play the games, to be sure, but the other inputs are enormously valuable. Coaches recruit in a highly competitive environment, turn some high school kids into stars, and maintain competitive teams despite constant turnover. The school colors, fight songs, stadia, traditions, and campuses outlast and predate any player, whether Heisman winner or bench warmer. It is the NCAA model that is popular, not simply a few elite players.
And, for their contribution, the student-athletes get an opportunity for an education that lasts a lifetime – an opportunity that many student-athletes might not get at all without the athletics scholarships they receive. The critics like to think every student-athlete fits the dumb jock model, but that is not true. More student-athletes go on to successful lives in medicine, business, law, insurance, health care, politics, journalism and even economics.
Student –athletes often thank their playing experience for making them tougher, healthier, more disciplined, better connected, better team players and better educated than they otherwise would be. Former student-athletes regularly out-earn their peers, graduate with less debt, and have higher lifetime earning expectations.
The suggestion that the antitrust laws require, or would even support, Mr. Nocera’s proposed commercial restructuring of NCAA athletics is similarly mistaken. More than 25 years ago, the Supreme Court recognized that the NCAA’s rules are beneficial to competition because they allow the NCAA to create a unique type of athletics – intercollegiate athletics played by students, not employees. Indeed, one of the best reasons to disregard the labor market exploitation theory adopted so blithely by Mr. Nocera is the United States Supreme Court has ruled on and rejected this view of the antitrust laws. Discussing college football in particular, the Court held that:
"Moreover, the NCAA seeks to market a particular brand of football—college football. The identification of this “product” with an academic tradition differentiates college football from and makes it more popular than professional sports to which it might otherwise be comparable, such as, for example, minor-league baseball. In order to preserve the character and quality of the “product,” athletes must not be paid, must be required to attend class, and the like. And the integrity of the “product” cannot be preserved except by mutual agreement; if an institution adopted such restrictions unilaterally, its effectiveness as a competitor on the playing field might soon be destroyed. Thus, the NCAA plays a vital role in enabling college football to preserve its character, and as a result enables a product to be marketed which might otherwise be unavailable. In performing this role, its actions widen consumer choice—not only the choices available to sports fans but also those available to athletes – and hence can be viewed as pro-competitive. (NCAA v. Board of Regents of the University of Oklahoma, 1984)"
The Supreme Court’s insight that NCAA rules enhance competition, rather than restrain it, have been repeated and adopted by several federal courts during the intervening years. The courts have long rejected the argument that the NCAA’s rules must achieve some platonic level of perfection or face legal condemnation. In rejecting this argument one federal circuit has held: “That the NCAA has not distilled amateurism to its purest form does not mean its attempts to maintain a mixture containing some amateur elements are unreasonable.”
Moreover, if Mr. Nocera thinks there is an antitrust problem with the NCAA’s financial aid and eligibility rules, his proposal certainly would not fix those problems – it would make them worse. If the NCAA adopted this plan, gave up its unique “product” of intercollegiate athletics played by students and began offering instead professional athletics played by employees, it could well lose the benefit of the Supreme Court precedent.
It is easy for Mr. Nocera to waive away concerns like this (as well as the serious Title IX problems his plan would present) with an airy comment that the courts would have to “work it out.”
The hundreds of thousands of student-athletes, coaches and university administrators who have to deal with the wreckage caused Mr. Nocera’s plan cannot be so sanguine.
The participation of amateur student-athletes is key to the NCAA’s identity. And the existence of the NCAA broadens the opportunities available both to sports fans and to the student-athletes themselves. The antitrust laws endorse the collegiate model; they do not require a pro model.
While the NCAA is examining many legitimate changes to its system, Mr. Nocera’s specific criticisms of the NCAA, and his proposal for “fixing” what he regards as the “problems” of college athletics, are based on a premise that is profoundly antithetical to the NCAA’s collegiate model of athletics.
Mr. Nocera approaches college athletics as a matter of entertainment first and foremost, something to supplement the NFL and NBA television schedules. This leads him to unapologetically embrace a professional or perhaps “semi-pro” model of college athletics in which only elite football and men's basketball players matter, since in his view football and men’s basketball games get the best ratings and sell the most tickets.
All of NCAA athletics, he insists, must be rearranged around the imperative that the best football and men’s basketball players must be paid as employees in a manner he deems commensurate with the public’s interest in their games. He seems to regard the fact his proposals would result in college football and basketball being played by professional, unionized university employees – not students in any meaningful sense of the word – as a feature, rather than a drawback, of his plan.
As Mr. Nocera seems to recognize, his proposals would have a disastrous effect on the vast majority of NCAA student-athletes. His plan would cut football rosters significantly and deny scholarship opportunities to thousands of students a year. Even those athletes who were lucky enough to receive Mr. Nocera’s proposed salaries would have taxable earnings and lose their eligibility for other scholarships and financial aid like Pell Grants.
He would starve women's sports, and “non-revenue” men’s sports, of athletic department funding by insisting that most or all athletic department revenue be directed to football and men's basketball; those scholarships, too, would be lost. Many NCAA member institutions might cease fielding teams entirely under such a model. Mr. Nocera claims fairness requires this, but it's a very cramped and odd definition of fairness, one in which (to quote one federal court) "every aspect of life in the United States is reduced to a single-minded vision of the ubiquity of commerce."
The NCAA’s members, including those who operate so-called "big time" football and basketball teams (which all too often actually lose money), have a different notion of fairness than Mr. Nocera. They believe a broad range of students should be given a chance to compete in intercollegiate athletics, whether or not they can cover their own costs of operation through ticket or television sales.
NCAA athletics are about maximizing student-athlete opportunity, not student-athlete revenue. Other sports leagues have different models: there are, already, ample opportunities for elite football and basketball players who want to sell their "athletic labor" to an employer for money, to do so. There is no reason that America's colleges should be forced to operate their athletic programs in the same way.
Mr. Nocera is also wrong to suggest that the proposal would increase the quality of NCAA athletics. In any sports league, the important “quality” is the quality of the competition, not the quality of the individual players. This is why two NCAA teams (like Washington and Baylor in the recent Alamo Bowl) can put on a much more entertaining and interesting game than two NFL teams (like the recent game between the Kansas City Chiefs and the Denver Broncos).
The surging popularity of both NCAA football and NCAA basketball demonstrate there is no need to “fix” the quality of the competition. Another example to demonstrate the fallacy of his argument is the distinct difference between college teams and professional teams.
I ask Mr. Nocera, if the University of New Orleans bought the New Orleans Saints and renamed the team the University of New Orleans Saints, would the Saints be a college team? Of course not.
Alternatively, if the Big Ten and the SEC and the Pac 12 decide to pay their players, they could do so tomorrow by leaving the NCAA or by changing the rules for FBS teams to allow such payment. That they have not done so has nothing to do with exploitation, but has everything to do with educational principles.
The distinguishing feature of college sports is that they are played by amateur participants in the collegiate model, a model so successful that it is almost universally accepted in this country despite the absence of any barriers to exit or entry.