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Antitrust and Amateurism: A Destructive Combination
[June 6, 2003]

By S. M. Oliva

The biggest story in college sports recently has nothing to do with on-the-field competition, but rather off-the-field politicking among NCAA conferences. Not surprisingly, the trouble started when a former political hack, University of Miami President Donna Shalala, decided that her school would be best served by leaving the Big East Conference—it’s home for the past decade—and moving to the Atlantic Coast Conference. Sensing Miami’s imminent move, longtime Big East members Boston College and Syracuse decided to jump ship as well, bringing the ACC from its current nine schools to an impending 12.

Twelve is a magic number in the NCAA, especially as it relates to football, the most financially profitable college sport. Under NCAA rules, a 12-school conference may split into two divisions for the regular season, then pit the division champions against one another in a conference championship game. Such games generate substantial television revenues for the Southeastern and Big XII conferences, and the ACC wanted to join the party. More importantly, the ACC wants to establish itself as a conference capable of holding its own against the neighboring ACC and rising Big XII. Taking three of the Big East’s prominent football schools was the price of the ACC’s goal.

All of this, interestingly, will likely raise substantial antitrust questions in the future. College football is unique in that it does not end its season with an NCAA-sponsored championship tournament. Instead, a host of 25 or so “bowl games” crown the season during December and January. A few years ago, the four most prominent bowl games formed an alliance with the six most profitable football conferences—the aforementioned Big East, ACC, Big XII, and SEC, along with the Big Ten and Pacific Ten—to create a single package of postseason games to maximize television revenues. This scheme, called the Bowl Championship Series (BCS), leaves only two slots in the prominent bowl games for the remaining NCAA Division I conferences, which cannot match the financial prominence of the six majors.

Each BCS game pays out several million dollars to the participating school and its respective conference. Therefore, if one of the two at-large spots goes to a Big East school, that conference’s members divide the revenue for both its champion and the second school. The smaller conferences and schools are left out in the cold. In college basketball, by contrast, the NCAA runs a postseason tournament and splits the television revenue (more than $1 billion) among all member schools relatively equally. But basketball also permits every conference to have at least one team participate in the tournament, often more than one. Football’s natural constraints would preclude such wider participation, which means any effort at imposing an egalitarian structure over postseason football revenues would result in an unfair subsidy of the lower-performing schools by the higher-performing ones.

All of this money creates problems, especially if you’re the NCAA, an organization which proclaims its primary virtue to be “amateurism.” This, of course, is rubbish. Colleges already compensate most Division I players in the form of athletic scholarships. Amateurism is nothing more than a code word for self-sacrifice: the players are expected to sacrifice their economic interests and rights to their respective schools, while the schools in turn are expected to sacrifice their interests to the “greater good,” namely the NCAA. The whole concept of amateurism, as applied by the NCAA, is an anathema to the values of individual rights and capitalism, but that matters little to NCAA officials, most of whom are college administrators who wouldn’t know a free market if it hit them in the head.

In tandem with amateurism, you also have the specter of antitrust hanging over all of this. The BCS is, under any antitrust standard, an illegal cartel under the Sherman Act. This matters little to antitrust opponents like me, but it means a great deal to fidgety college presidents, who are trying to resolve issues over the structure of college football with a proverbial political weapon of mass destruction hanging over their heads. For the past couple years, a number of smaller conferences have threatened an antitrust action to stop the BCS. This was considered unlikely to ever get beyond the threat stage, largely because the smaller conferences didn’t really want to destroy the BCS; they wanted to be part of it. An antitrust lawsuit brought by smaller, mostly private schools would serve little good.

But with the ACC expansion looming, there’s a new player in the antitrust scenario. The Big East schools left in the cold by Miami and company are plotting their next move. Without the three defectors, the Big East is no longer a viable football conference, and will likely lose its prized spot in the BCS system. The two schools which lose the most from this are Virginia Tech and the University of Connecticut. UConn recently spent millions on its football program in anticipation of joining the Big East as a full Division I member. Tech has already risen to prominence in the Big East. Both are government-run schools that stand to lose millions in BCS revenue in the next few years.

I could easily foresee—although I possess no specific knowledge at this point—the highly political attorneys general of Virginia and Connecticut, respectively Jerry Kilgore and Richard Blumenthal, bringing an antitrust claim against the BCS. Indeed, Connecticut’s two U.S. senators recently spearheaded a letter to Miami objecting to its plans to leave the Big East. Sen. Orrin Hatch, the pro-antitrust head of the Judiciary Committee, recently said he would strongly consider “hearings” on the ACC-Big East squabble, which further raises talk of possible antitrust action. Overall, I strongly suspect there will be an antitrust train wreck over the BCS within the next several months, possibly as early as this fall.

Of course, antitrust will solve nothing here. It will just enrich the antitrust bar at the expense of already cash-strapped university budgets. Indeed, Miami’s motive for leaving the Big East in the first place was to obtain additional revenues from the ACC to help cover Miami’s substantial athletic department deficit. Nor will the NCAA prove much help. So long as that group is wedded to its outdated and immoral principles of amateurism, there is no incentive whatsoever for the major football schools to seek a new playoff system within the current structure.

This leaves open the idea for a new for-profit system, one which would be free of both antitrust constraints and the NCAA’s amateurism. As I outlined last night on Fox Sports Radio’s “Steve Czaban Show,” such a system could be constructed in the following manner: The five remaining major football conferences could remove their football programs from the NCAA entirely. This constitutes approximately 60 schools. Each of these schools would then form separate for-profit corporations to manage their football program. Similar to arrangements used by holding companies, each individual company would pay its school a “licensing fee” to use the school’s name and logo for the football team. The players themselves would be semi-professionals, organized under a union which would then adopt a collective bargaining agreement with the alliance of the independent football companies. This agreement would also provide for a budget cap, similar to the current salary cap in the NFL, that would allow each program to constrain costs. Done under the guise of a collective bargaining agreement, this arrangement would not be subject to the antitrust laws. The alliance would then conduct an annual postseason tournament, giving fans the long-desired national playoff, while keeping the NCAA’s amateurish whim-worshippers out in the cold.

This type of system would benefit all relevant parties. The football programs would (hopefully) be self-sustaining enterprises. The licensing fees paid back to the schools would continue to support other, non-revenue generating athletic teams. The players would be compensated more justly for their work, while also being in a position to negotiate other terms with their schools relevant to football, such as practice schedules and stadium conditions. And as an added benefit, removing the football programs from direct university supervision would almost certainly wipe all football scholarships from Title IX calculations, thus further reducing economic burdens on those athletic departments that are constantly trying to maintain compliance with that law’s arbitrary “gender-equity” requirements.

The only major downside to all this would be that, as for-profit entities, the college football companies would have to pay taxes. While I’m normally not one to encourage an entity to increase its tax burden, in this case the trade-off more than benefits the colleges. Acknowledging college football as the professional entity that it is will make the system more financially honest and stable, saving the universities more in the long haul than their new subsidiaries will end up paying to Uncle Sam.

The NCAA establishment would never consider a proposal this radical. Indeed, few college presidents have the stomach or the intellectual fortitude to actually say: “it’s good to make money from college football, and it’s good to pay the players.” Professionalism, after all, is an evil concept to most of these people. But colleges and universities encourage the profit motive in most areas of their work—after all, most people go to college to increase their eventual earning power in the market—so there’s no good reason to continue acting like athletics are engaged in some immoral pursuit.

None of this should be read to mean that being an amateur athlete is wrong or immoral. It is not being an amateur, but amateurism which is the principal error at the center of the NCAA’s ethical paradox. Too many collegiate amateurs are sacrificial lambs, forced to place the values and interests of others above thier own. This is not the kind of “education” we should be giving our college athletes. Even football players deserve better.

 

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