Search Results For NCAA

Some Antitrust Links

Josh Wright —  23 July 2009
  • Fred Jenny and David Evans just published a new edited volume called Trustbusters which contains chapters from the heads or senior officials of many of the leading competition authorities around the world. You can download the introductory chapter here and you can order the book from  Competition Policy International or from Amazon.
  • Sports Law Blog’s Michael McCann offers up some analysis the recently filed Ed O’Bannon v. NCAA challenging the NCAA’s use and license of former student-athletes’ identifies in various commercial ventures
  • OK, its not exactly antitrust, but Richard Posner’s criticism of a new Consumer Protection Financial Agency based on the insights of behavioral economics is worth reading.  Posner points out that following investment advice borne of behavioral economics a decade ago to invest more in equities to avoid “myopic loss aversion” would not have been a good decision and ends with the important point that is unclear that allowing cognitively biased regulators to regulate cognitively biased consumers improves matters
  • I predict that the Ultimate Fighting Championship president Dana White finds the firm on the defendant side of an antitrust suit in the near future stemming from its decisions to require all sponsors of individual fighters to pay the UFC a $100,000 licensing fee and to prohibit any fighter who signs a licensing agreement with the new EA mixed martial arts video game from dealing with the UFC (see here and here for details)
  • Intel takes on the EU fine on human rights grounds (see also here) and Qualcomm takes a $208 million hit in South Korea

kolaskyWilliam Kolasky is a partner in WilmerHale’s Regulatory and Government Affairs Department, a member of the firm’s Antitrust and Competition Practice Group, and a former Deputy Assistant Attorney General in the Antitrust Division at the Department of Justice.

The market power section of the Department’s Single Firm Conduct report is one of the strongest sections of the report.  It provides an exceptionally clear discussion of the market power element under Section 2.  It recognizes, in particular, that a violation of Section 2 requires more than mere market power, but rather a finding of substantial and durable market power – “an extreme degree of market power” as the Fifth Circuit expressed it in Beauville v. Federated Dep’t Stores.

In addition, the report make a persuasive argument that agencies and courts should rely principally on market shares and entry conditions as the primary means of evaluating whether a firm has monopoly power or a dangerous probability of achieving it.  As the report notes, courts often say that monopoly power can also be shown through direct evidence, but when one examines those decisions, one finds that courts almost never (and perhaps never) find monopoly power or a dangerous probability in section 2 cases without first finding that the firm has a very large market share.  Even in section 1 cases, while the Supreme Court held in NCAA and Indiana Federation that market power can be shown by direct evidence “without a detailed market analysis,” in both cases the defendants’ market shares of the likely relevant market were very high.

The report explains quite persuasively the problems with relying on direct evidence as a basis for finding monopoly power.  One type of direct evidence that is frequently mentioned are large price-cost margins, but as the report notes the economics literature raises serious doubt as to whether one can infer anything about the presence or absence of monopoly profits from a company’s profits as reported in its accounting records.  Similarly, while some have suggested that the presence of price discrimination might be used to infer monopoly power, most economists now recognize that price discrimination is common in markets in which firms do not have durable, long-run monopoly power.

In this regard, the Justice Department’s views appear consistent with those of the FTC staff, at least as reflected in the FTC staff reports that the FTC has posted on its website.  What both agencies seem to believe is that direct evidence may be useful in addition to, but not as a substitute for, an examination of market structure and entry conditions.

It wasn’t too long ago that I blogged about the purported end of the Demarcus Cousins saga.  For TOTM readers that want to catch up to speed, here is how things stood about a month ago:

For those who haven’t, Cousins is a blue chip high school basketball recruit who has been bargaining hard with the University of Alabama-Birmingham (UAB) over signing his National Letter of Intent — the letter that commits a player to attend the university and imposes the penalty of giving up a full year of eligibility if the student-athlete transfers. Cousins wants to commit to UAB to play for former Indiana University coach Mike Davis but wanted to seek contractual insurance for the possibility that after signing the letter of intent and making specific investments to UAB, Davis might leave the program. Cousins alleged that Davis promised that UAB would release Cousins without penalty if Davis was no longer his coach.

When we last left Cousins, he was holding out, talking to other programs, and attempting to bargain for this term in his National Letter of Intent.  He’s now signed with Memphis.

Back then, I noted that I thought it was odd that UAB could not find a way to include the contractual provision in Cousins’ NLI and wondered whether other athletes were successful in doing so.  It turns out recent developments give answer to that question, and also involve Cousins.

As the college basketball world now knows, former Memphis coach John Calipari (who successfully got the verbal commitment from Cousins) has accepted the head coaching position at the University of Kentucky.

With Calipari accepting the Memphis job, the question now turns to whether his excellent recruiting class will stay at Memphis.  But what about the NLI provisions that commit a player to attend or take the one year penalty for transferring?  Apparently, Cousins only committed to Memphis verbally and so is free to transfer.  ESPN reports that Cousins may stay at Memphis but that Calipari is likely to have a wonderful shot at him heading to Kentucky.

But here is the interesting new fact (at least to me and as it has been reported on ESPN): Another blue chip recruit that had signed an NLI with Memphis, Xavier Henry, but ESPN reporters continue to reference his NLI including a provision that allows him release without penalty in the case of Coach Calipari leaving.  My immediate reaction is that the fact that the competitive process for top recruits allows those players to extract these sorts of commitments from programs like Memphis convinces me that the problem at UAB must be related to a dispute between their coach (Mike Davis) and the UAB administration.  Of course the coach wants the provision.  But perhaps administrations at mid-majors want to increase the cost of early departures by prohibiting coaches from leaving and keeping recruits at the new school whereas this is less of a problem at major programs that have other substitute methods of keeping their coaches on staff for long periods of time.  For example, this list of terms reported to be included in Calipari’s Kentucky deal are too good not to post:

  • The $31.65 million deal making John Calipari the highest-paid coach in college basketball is packed with perks beyond his annual salary, including membership to the country club of his choice, two cars and incentives for reaching the NCAA Sweet Sixteen and Final Four and winning a national title.
  • The Wildcats paid Memphis $200,000 as part of Calipari’s buyout of his Tigers’ contract, which had paid him $2.35 million per year.
  • Including $3 million in retention bonuses he’ll get for staying with Kentucky through March 31, 2016, Calipari is in line to receive an average of $4 million a year over the eight years.
  • Two “late model, quality automobiles,” plus mileage.
  • Membership in a country club of his choice, including monthly dues and initiation fees.
  • 20 prime “lower-level” season tickets to UK home games.
  • Eight tickets for each UK home football game.
  • Hundreds of thousands of dollars in incentives for reaching certain milestones, such as a 75 percent graduation rate or better ($50,000), winning the Southeastern Conference ($50,000), winning the SEC tournament ($50,000), making the NCAA tournament round of 16 ($100,000), making the Final Four ($175,000), or winning the national title ($375,000).
  • The right to income from conducting basketball camps using UK facilities.
  • Should the university fire Calipari without cause, he would still receive $3 million for each year left on the contract, double the annual buyout former Kentucky coach Billy Gillispie says he is entitled to under his memorandum of understanding.

kolaskyWilliam Kolasky is a partner in WilmerHale’s Regulatory and Government Affairs Department, a member of the firm’s Antitrust and Competition Practice Group, and a former Deputy Assistant Attorney General in the Antitrust Division at the Department of Justice.

The most controversial part of the Justice Department’s Single Firm Conduct Report is the Department’s proposed use of what it terms a “substantial disproportionality” test for exclusionary conduct. Under this test, the Justice Department would bring a case only if the harm to consumers and competition caused by a dominant or near-dominant firm’s conduct is “substantially disproportionate” to any legitimate benefits the firm might realize. The Department argues that this test is superior to the three alternative tests it considers—an effects-balancing test, a no-economic-sense test, and an equally-efficient-competitor test—because it is more administrable and because it reduces the risk of false positives (i.e., finding conduct unlawful that does not harm competition ), which the Department views as more serious than that of false negatives (i.e., finding conduct lawful that does harm competition).

Critics of the Department’s report argue that this test places a finger on the scale in favor of monopolists and near-monopolists, leaving consumers and smaller competitors with too little protection, and it is certainly easy to see why the test gives rise to this perception. But there is another, more fundamental problem with the Justice Department’s proposed test – namely, that it perpetuates the outdated view of the rule of reason as an ad hoc balancing test, and does not take into account the extent to which the Supreme Court and the lower courts have given greater structure to rule of reason analysis over the last thirty years. Continue Reading…

My colleague and fellow UCLA alumnus Thomas Hazlett and I have published an op-ed in the Chicago Tribune proposing a partial solution, partially inspired by the early exit of Kevin Love from our beloved Bruin basketball squad, to the problem of early exit by potential NBA draftees.  We note that the problem is the NCAA cartel, which restricts payments to college players while attempting to maintain the charade of amateurism.  While this restriction on cash payments is not likely to be lifted any time soon, we proposed that universities extend insurance coverage that will allow interested potential draftees to stay in school and insure the risk of draft slippage.   Here’s an excerpt:

So the answer, given that universities cannot pay athletes market wages, is to at least insure them. Were underclassmen to be appraised, via draft rankings, and then offered compensation in the event—post-graduation—they slipped by some increment, they could hedge this very considerable exposure. The NCAA allows players to insure, but the player pays even though it is largely the university (and its fans) that benefits. Moreover, policies can only insure against career-ending injuries, leaving the more common outcomes—less serious injuries and performance-related changes in draft status—terrifying prospects.

The schools should extend broader coverage. The contracts we propose do not fully compensate college athletes for their valuable service, and would thus retain only some of the talent now jumping early to the pros. Yet, the approach would preserve the NCAA’s “amateur” wink, while allowing student-athletes to play college ball until their 21st birthday without risking the family jewels. A slam dunk, really.

Check out the whole thing.

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.

Tyler picks the San Antonio Spurs to win the NBA title this year. No time like the present to get on the record with a few of my own.

1. NFL: Bears v. Chargers in the Superbowl. I’m going to go out on a limb (and against Tradesports) and pick San Diego over the Colts in the AFC … and to win the whole thing.

2. NBA: The Spurs look good in the West. I’m going to predict a Spurs v. Heat final and stick with my pick from a year ago: Heat in 6. Given Wade’s performance in the playoffs last year, I refuse to pick against him in a playoff series until they lose one again. My own version of the Jordan (Ok, Jordan-like) rules.

3. NCAA Basketball: Ok, its November … but Joe Lunardi has already got his picks up at ESPN, and I’m going to GMU’s home opener against Wichita State Saturday, so it is officially basketball season. There is good news and bad news for me in Lunardi’s picks. He’s got UCLA as a one seed, but also has Hofstra avenging its exclusion from the Tourney in GMU’s favor and taking the only spot from the CAA. Nonetheless, I’m sticking with the Patriots making a return trip to the dance (sorry Matt!), but I’m going to pick a relatively conservative Final Four: UNC, UCLA, Florida and Pittsburgh. The winner? UNC … but I’ll be sitting in the UCLA section. Go Bruins.

The NCAA is no stranger to defending antitrust suits. Remember Maurice Clarett? How about the NIT? Tom Farrey of ESPN the Magazine brought my attention to a new and very interesting antitrust suit filed last week in Los Angeles on the theory that the NCAA has illegally conspired to prohibit member colleges from offering athletic scholarships covering the “full cost” of attendance. Apparently, the NCAA fixes a standard scholarship package, called “grant-in-aid,” which is approximately $2,500 less than the official cost of attendance. Farrey also notes that:

“[A]thletes are the only students subject to aid restrictions imposed by an agreement among universities. Talented students in music, chemistry or any other area can be bid upon by individual colleges, without limits on the total value of their scholarship packages.”

NCAA President Myles Brand had apparently come out in favor of a proposal bridging the gap between grant-in-aid and full cost in 2003, but to no avail. The lawsuit was filed on behalf of a class of scholarship athletes in the graduating classes from 2002-2010 by none other than (1998 California Antitrust Lawyer of the Year) Maxwell Blecher and seeks damages covering the difference in scholarship costs and full costs for some 20,000 athletes from 144 colleges (the article estimates this difference to be near $117 million, which would be trebled to $351 million). Of course, one expects that the NCAA will trot out the classic sports/antitrust defenses: the fixed scholarship is necessary to maintain “competitive balance” and “preserve amateurism.”
This suit will be a fun one to watch.

*For the sake of disclosure, this suit caught my attention because Ramogi Huma, a UCLA linebacker during the 1990s, was responsible for getting the class of plaintiffs together through his organization, Collegiate Athletes Coalition. CAC has received its own fair share of press for its work over the years with regards conditions for student-athletes (insurance for mandatory summer workouts, health care, eliminating employment restrictions, etc.). This fact caught my attention because, like many former Bruins who managed to make their way to the weightroom from time to time, I met Ramogi during the early days of the CAC. Though I have not been following their activities closely, the CAC has clearly grown from its UCLA days, with Congressional testimony under its belt (and apparently, support from the United Steelworkers of America), and involvement in a federal antitrust suit.

"Hofstra-gate?" Revisited

Josh Wright —  14 March 2006

Matt Bodie, of Hofstra and Prawfsblawg, is “a little outraged” at the NCAA tournament selection committee’s failure to invite Hofstra to the big dance.  But what really gets Matt is that:

George Mason, a team that Hofstra beat twice, is going instead.  George Mason had a slightly tougher out of conference schedule, but it has been tough to rationalize the two head-to-head losses.

Unable to find a reasonable explanation for the committee’s decision in favor of Mason over Hofstra, Matt (and many sportswriters) have turned to conspiracy theories.  Here are the highlights of the controversy:

1.  While Mason and Hofstra have similar records and RPIs, Hofstra beat Mason head to head twice this season.

2.  Tony Skinn, one of Mason’s best players, is suspended for the first round game.

3.  GMU’s Athletic Director is on the selection committee, though out of the room for discussions of Mason.  If that isn’t enough, apparently, the head of the committee (Craig Littlepage) is a good friend of GMU’s Coach Larranaga.

While I appreciate Matt’s loyalty to his home institution, the same loyalty requires me to defend GMU’s basketball squad from these attacks by offering two points in defense of selecting my home institution:

1.  Hofstra does not have a signature non-conference win.  Mason beat Wichita State on the road (RPI 27, and a #7 seed in the tournament), and UNC-Wilmington (whom Hofstra also beat).

2.  Mason plays a tougher schedule (four of their seven losses came against top 50 teams, e.g., Wake Forest and Mississippi State).

If I were a Hofstra fan, I too would be irked that a team we beat twice in the last 10 days of the season was selected in lieu of my squad.  But that does not mean the committee made the wrong decision (though I realize reasonable minds may disagree here).  Let us not forget that the unit of analysis is supposed to be the team’s “body of work” over the entire season.  In my humble opinion, Mason’s body of work is superior to Hofstra’s even with the two head to head losses.  As much fun as it is to point at larger, more mysterious forces, isn’t this the most plausible reason that Mason gets at least one more game this year while Hofstra heads to the NIT? 

P.S. My Final Four picks are: Texas, UCLA (Go Bruins!), UCONN, and Boston College.