Incidentals Matter: Antitrust Class Action Filed Against NCAA

My thanks to Penn State/Dickinson Law School 2L Bobbi-Sue Doyle-Hazard and Attorney Chris Callanan for alerting me of the media coverage concerning an important federal antitrust lawsuit filed last Friday in the U.S. District Court for the Central District of California. The complaint was filed by several former Division I-A athletes who represent a class of thousands of former and current Division I-A men's football and basketball players. They seek to prohibit the NCAA from precluding member colleges from offering athletic scholarships up to the "full cost of attendance" (meaning all of the actual costs of attending college). Presently, scholarships may cover tuition, room, board and required books but not incidentals, such as phone bills, laundry, school supplies, and travel expenses. Particularly for players from lower-income families, "incidentals" can prove quite costly. In fact, according to the NCAA's own statistics, incidentals for basketball and football players average about $2,500 a year--for families hovering around the poverty line (which, for a family of four, is one that earns just under $19,000 a year), $2,500 obviously means a lot.

In terms of antitrust law, the complaint primarily concerns Section 1 of the Sherman Antitrust Act: the plaintiffs contend that these NCAA rules comprise an unlawful restraint of trade by denying men's basketball and football players of the billions of dollars in revenue they generate for the schools and conferences in which they play. The suit also alleges that this revenue should at least pay for the "full cost" of attending college. This argument follows the observation that Division I-A men's football and basketball seem to provide a economic windfall for just about everyone--the schools, conferences, coaches, sneaker companies, television networks, ad agencies, merchants, videogame companies--everyone, that is, except for the persons who actually generate the market interest: the basketball and football players. This is a topic, among others, that Joe Rosen and I address in our forthcoming essay in the Case Western Reserve Law Review.

How will this case resolve? I suspect we'll see a settlement, along with the NCAA assenting to cover more of the incidentals. The NCAA can't afford to lose this case: the lawsuit applies to 144 colleges, and if back compensation for "full cost" is imposed, around 20,000 affected athletes will receive an estimated $117 million in unreimbursed incidental expenses. Plus, NCAA President Myles Brand has previously enunciated a need to move closer to "full cost," so doing so now--even when threatened by litigation--would not likely appear contradictory.

For two excellent media accounts of this lawsuit, take a look at Mark Alesia's "Lawsuit: NCAA Should Pay 'Full Cost'" in the Indianapolis Star and Doug Lederman's "Court Challenge on Athletic Aid" in Inside Higher Ed. For more reaction from legal scholars, check out Hanno Kaiser at Antitrust Review and Josh Wright at Truth on the Market. And for analysis from a seasoned litigator, check out Tom Kirkendall's post on Houston's Clear Thinkers.

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