Amateurism Is What We Do!

Paul Gift —  30 January 2008

Yesterday, the NCAA settled a horizontal price fixing class action case initiated by former basketball and football players (here, here, and here).  It’s nice to see the student-athletes get something, but I wish they would have received more.  The suit deals with the difference between the NCAA’s grant-in-aid (GIA) cap and the full cost of attendance (whether they were secretly trying to include the opportunity cost of attendance in their damages, I do not know).  The settlement provides $10 million over three years to cover former student-athletes’ “bona fide educational expenses” over the GIA cap and $218 million through 2012-2013 to “use the available funds for such aid to student-athletes with demonstrated financial and/or academic needs, and to include such assistance in their reports to the NCAA describing their uses of these funds.  Consistent with current practice, those reports will not be disclosed outside the NCAA.”  It will be interesting to see what exactly the latter means.

In my opinion, the NCAA has been one of the most blatant cartels in recent history, and I tend to be pretty free-market.  Colluding to lower an input’s wage is just as anti-competitive as colluding to raise the price of outputs like vitamins or lysine.  When you here NCAA President Miles Brand speak about it, you get the same “Amateurism is what we do” quote (quoting from memory) over and over again.  I bet those vitamin and lysine guys wish they could have had a catch-phrase like that to help keep the law off their backs.

The collusion was so bad that student-athletes weren’t, at a minimum, having their full expenses covered.  It made the lame Reggie Bush story headline news (and I went to UCLA).  And then there’s this part of the settlement:

“Conditioned upon final approval of this Settlement, the NCAA Division I Board of Directors has approved adoption of a rule permitting, but not requiring, Division I member schools to provide year round, comprehensive health insurance to student-athletes.”

I’ll leave that one to the reader.  In summary, I’m happy today but I wish I could be happier.