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January 2, 2013

Pennsylvania Governor Brings Antitrust Suit Against NCAA over Sanctions Imposed on Penn State

By Jeffrey May, J.D.

The Governor of Pennsylvania filed an antitrust suit in the federal district court in Harrisburg, alleging that the National Collegiate Athletic Association (NCAA) and its member institutions conspired to restrain and suppress competition in violation of Sec. 1 of the Sherman Act by “using the Sandusky Offenses as a pretext to impose arbitrary, capricious, and unprecedented sanctions on Penn State for actions wholly unrelated to the mission of the NCAA” (Pennsylvania v. National Collegiate Athletic Assn., Case 1:13-cv-00006-YK, complaint filed January 2, 2013).

The state is bringing the action pursuant to its parens patriae authority. It is seeking injunctive relief, as well as attorney fees and costs

While the antitrust laws permit a trade association of competitors, such as the NCAA, “to impose and enforce rules or standards to promote certain procompetitive purposes, such rules must be reasonably related to those purposes, and must be enforced through procedures designed to prevent their arbitrary application,” the complaint contends.

“The NCAA, as an organization of competitors, is prohibited from imposing, and arbitrarily enforcing, rules that bear no reasonable relationship to the NCAA's need for self-regulation for the purpose of denying the benefits of participation to a single competitor, and thereby lessening competition.”

Sanctions for Child Sex Abuse Scandal

The suit challenges the sanctions imposed by the NCAA on Pennsylvania State University (Penn State) in the wake of the child sex abuse scandal involving Gerald A. Sandusky and Penn State’s handling of the matter. The sanctions included a $60 million fine to be paid into an endowment for programs preventing child sexual abuse, a four-year ban on football postseason play, a four-year reduction in football scholarships, four years of probation, vacation of all football wins between 1998 and 2011, a waiver of NCAA rules restricting transfer of student-athletes between colleges, and a requirement that Penn State permit football players wishing to remain at Penn State to retain their athletic scholarships, regardless of whether they continue to play football. Penn State had no practical alternative but to accept the sanctions, the complaint alleges.

Fairness in Intercollegiate Athletic Competition

“[T]he sanctions against Penn State do not even ostensibly serve the NCAA's stated goal of protecting the fairness of intercollegiate athletic competition,” the complaint alleges. “Rather, they were taken for the purposes of debilitating a once-powerful football program, enhancing the NCAA's own reputation, and boosting the competing football programs of certain member colleges and universities by removing from competition one of the leading competitors.”

The complaint points out that, after the sanctions were imposed, at least ten Penn State football players transferred from the school and at least five football recruits severed their commitments to the university. “Like children looting a newly broken pinata, competing colleges and universities promptly snapped up the newly available football players, strengthening their own football programs at the expense of the one the NCAA had conspired to decimate.”

Injury in Nationwide Markets

The complaint alleges injury in three nationwide markets: a market for postsecondary education, a market for Division I football players, and a market for the sale of college football-related apparel and memorabilia. “The NCAA sanctions against Penn State threaten severe and irreparable harm to each of these markets through the removal of a major competitor,” according to the complaint. Moreover, Pennsylvania has allegedly suffered severe and irreparable harm as a direct, foreseeable, intended, and proximate result of the NCAA’s actions.

News: Antitrust PennsylvaniaNews

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