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From Antitrust Law Daily, March 7, 2014

Ex-college football player alleges that NCAA’s cap on athletic financial aid restrains trade

By Linda O’Brien, J.D., LL.M.

The National Collegiate Athletic Association and five major conferences unlawfully engaged in a restraint of trade by capping the value of financial aid given to college student athletes, in violation of the Sherman Act and California’s Unfair Competition Act, according to a complaint filed in the federal district court of San Francisco (Alston v. National Collegiate Athletic Association, March 5, 2014).

The National Collegiate Athletic Association (NCAA) is a nonprofit organization of approximately 1,200 educational institutions that organizes athletic programs in many of those institutions in the United States. The Big Ten Conference, Pacific 12, Big Twelve Conference, Southeastern Conference, and Atlantic Coast Conference are multi-sport collegiate athletic conferences and conference members of Division 1, one of three divisions adopted by the NCAA. Through the NCAA Constitution and By-Laws, the NCAA adopted regulations governing all aspects of college sports, including athletic (grant-in-aid) scholarships. Regarding recruitment for college athletic programs, the NCAA prohibits its member institutions from paying student athletes salaries or offering deferred trust funds. Instead, students receive grants-in-aid which are limited to a maximum amount.

Shawne Alston was a member of the football team at West Virginia University, a member of one of the top five conferences. He received grants-in-aid during the last four years. Alston filed a putative class action against the NCAA, alleging that the association and the top five conferences violated antitrust laws by agreeing to unlawfully cap the value of a grant-in-aid at an amount substantially below the cost of attending school and below what a Division 1 college football player would receive for his services in a competitive market.

The complaint alleges that the value of a grant-in-aid is often several thousand dollars below the actual expenses of a typical student. Student athletes have far less time and ability to earn extra money through part-time employment than do other students. Those athletes are more likely to come from lower-income households and incur substantial travel costs to attend school than other students. The NCAA and its member schools allegedly colluded to artificially depress the value of an athlete’s grant-in-aid to the athlete’s economic detriment and arbitrarily restricts athletic financial aid to amounts less than an athlete would receive in a competitive market. The NCAA enforces the agreement through the threat of sanctions, ranging from the loss of the ability to compete to a boycott of all other members, Alston claimed.

The NCAA first imposed a collusive cap on grants-in-aid in 1956 and removed a cost of attendance stipend in 1973, according to the complaint. Since 1973, there have been no significant changes to the grant-in-aid limitations, despite public comments by NCAA representatives concerning the needs of college athletes. In the absence of collusion, the major conferences would raise scholarship offers to at least cover the full cost of attendance.

College football is a big business for the universities and conferences that the members of the NCAA’s Division 1 and generates billions of dollars in revenue annually. Because the NCAA and member institutions control the most popular levels of college football, an individual who wishes to provide athletic services in exchange for a full tuition scholarship for an academic education must, by necessity, attend an NCAA Division I member institution, Alston charged. There are no major college football programs in the United States that are not NCAA Division I members, abiding by NCAA rules, the complaint alleged.

The complaint states that there are reasonable and less restrictive alternatives available to the current anticompetitive practices, such as to allow the conferences to compete among themselves as to the financial aid terms that would be made available to college football players.

Alston asserts claims for restraint of trade, and violations of Sections 1 and 2 of the Sherman Act and California’s Unfair Competition Act. The action seeks declaratory and injunctive relief, compensatory and treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 3:14-cv-01011-EDL.

Attorneys: Steve W. Berman (Hagens Berman Sobol Shapiro LLP) and Bruce L. Simon (Pearson, Simon & Warshaw LLP) for Shawne Alston

Companies: National Collegiate Athletic Association

MainStory: TopStory Antitrust CaliforniaNews

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