SYMPOSIUM: Antitrust Issues In Amateur Sports, held at the Indiana University School of Law - March 198

Scanlan, John

English

Indiana University Bloomington Maurer School of Law

Indiana Law JournalVolume 61 | Issue 1 Article 1Winter 1985Antitrust: The Emerging Legal Issues (SymposiumIntroduction)John ScanlanIndiana University Maurer School of Law, scanlan@indiana.eduFollow this and additional works at: http://www.repository.law.indiana.edu/iljPart of the Antitrust and Trade Regulation Commons, and the Entertainment, Arts, and SportsLaw CommonsThis Symposium is brought to you for free and open access by the LawSchool Journals at Digital Repository @ Maurer Law. It has been acceptedfor inclusion in Indiana Law Journal by an authorized administrator ofDigital Repository @ Maurer Law. For more information, please contactwattn@indiana.edu.Recommended CitationScanlan, John (1985) "Antitrust: The Emerging Legal Issues (Symposium Introduction)," Indiana Law Journal: Vol. 61: Iss. 1, Article 1.Available at: http://www.repository.law.indiana.edu/ilj/vol61/iss1/1Indiana Law 5 2Journal Vol. 61, No. 1OCCCI 1985SYMPOSIUMAntitrust Issues In Amateur Sports tINTRODUCTION: ANTITRUST-THEEMERGING LEGAL ISSUEJOHN SCANLAN*I.Shortly after collecting her gold medals at the Los Angeles Olympics,Mary Lou Retton flashed her breakfast cereal smile and confessed that hergreatest wish was to drive away in a brand new Corvette. This was America'snewest sweetheart speaking: role model for thousands of teenage girls pro-pelling themselves into the air in hundreds of gymnasia scattered acrossAmerica, an athlete so photogenic and agile she put the memory of nimbleNadia in the shade, and permitted the nation to forget-officially at least-that Olga Korbut had ever existed. Given her exalted status, and her roleas returning hero, it was not surprising that Mary Lou's fondest wish wasgranted: when she arrived back in West Virginia, the car of her dreams wasthere waiting.As lawyers, educators, athletic administrators, or broadcast representativeswe should, I think, have a particular interest in the story of Mary LouRetton and her car. That interest should be heightened in our present setting,t The articles for this symposium were presented at the March 1985 Conference on"Antitrust Issues in Amateur Sports" which was sponsored by the Center for Law and Sportsat the Indiana University School of Law, Bloomington, Indiana. Funding for the conferencewas provided by the Eli Lilly Endowment, Inc., of Indianapolis, Indiana.* Associate Professor of Law (part time); Director, Center for Law and Sports, IndianaUniversity School of Law, Bloomington, Indiana. A.B., 1966, Notre Dame; M.A., 1967, Univ.of Chicago; Ph.D., 1975, Iowa; J.D., 1978, Notre Dame.INDIANA LAW JOURNALat a conference devoted to antitrust issues in athletics, especially amateurathletics. For the story gives us an immediate, somewhat superficial visionof the role sports play in our society, and a means of entering the obscurerregions of sports organization and sports economics. Both, I believe, haveconsiderable legal relevance.In Olympic sports, the immediate vision focuses on the athlete in mid-vault, the applause and instant adulation. Athletes are honored because theyare immensely skilled, because they give us vicarious pleasure, because emo-tionally, physically, even politically they represent us on the field of sport.In these terms, a Corvette is the symbolic equivalent of the laurel wreatheswhich were once awarded the winners of the ancient Greek games. Bothhad economic value-Athenian athletes were technically "amateurs," butthey were well fixed for life if they returned home as champions. Yet money,commerce, and industry were all essentially irrelevant to the audience duringthe moment of competition and during its immediate aftermath.The Constitution of the National Collegiate Athletic Association (NCAA)defines an "amateur student athlete" as a person "who engages in a par-ticular sport for the educational, physical, mental and social benefits hederives therefrom and to whom participation in that sport is an avocation."IThat definition, tailored to the collegiate setting, endorses a view of athleticswhich is very similar to the one I have been describing. Its principal distin-guishing feature lies in its endorsement of the educational value of athletics.Thus, another constitutional provision states:The competitive athletic programs of the colleges are designed to be avital part of the educational system. A basic purpose of this Associationis to maintain intercollegiate athletics as an integral part of the educa-tional program and the athlete as an integral part of the student bodyand, by so doing, retain a clear line of demarcation between collegeathletics and professional sports.2"Maintain[ing] intercollegiate athletics as an integral part of the educationalprogram" can mean any number of things, including-but not necessarilyrestricted to-a) maximizing the opportunity of students to participate inintercollegiate competition by sponsoring numerous sports, irrespective ofthe income they produce, or b) substantially integrating a school's athleticprogram into its overall curriculum. Whatever its practical implications,however, the integration of sports and education suggests that "amateurism"has another potential dimension, best summarized by the classic phrase, "asound mind in a sound body." Such a dimension, the NCAA suggests, helpsto set off its program from "professional sports"-including, it is safe topresume, its more tawdry, money-grubbing aspects.1. N.C.A.A. CONST. art. III, § 1.2. N.C.A.A. CONST. art. II, § 2-(a).[Vol. 61:1ANTITRUST AND AMATEUR SPORTSYet Mary Lou Retton did not get her car merely because she can twistherself into knots in midair, and Doug Flutie did not receive his HeismanTrophy on live national television merely because his last-second pass in theMiami game excited millions. Nor was television present a few weeks laterwhen he signed a $6 million professional contract because quarterbackinghad enhanced his skills in the classroom. In the case of both athletes, amateurathletic performance was valued so highly, not only because of its intrinsicphysical, aesthetic, or moral appeal, but also because it had become acommodity in some sense equivalent to Mary Lou's Wheaties, marketed ina similar fashion, and for the same general purpose-to secure productrecognition and generate revenue. Thus, Mary Lou's car and Doug's Heis-man and Jackie Sherrill's immense salary at Texas A&M all help underlinea fact that Professor Koch's fine paper will bring into sharper focus: amateursports in many important respects is a business, a highly specialized industrywhich converts the raw material of athletic skill into a product which is cus-tomarily sold in the competitive television market.That amateur sports is in some sense a business is of course not news.That the Supreme Court, in its interpretation of the antitrust laws, shouldexplicitly treat the NCAA as a business-albeit a special sort of one-is,however, a new development and a very noteworthy one. For in the caseof NCAA v. Board of Regents of the University of Oklahoma,3 (NCAA),the Court, for the first time, brought intercollegiate athletics-and by im-plication, at least-other forms of amateur sport into the regulatory main-stream, forcing athletic organizations to justify, in specifically economicterms, conduct which has an apparent negative effect on market competition.The Supreme Court's decision was foreshadowed by the earlier decisions ofthe lower federal courts in the NCAA case. But in the main, it marked asharp departure from several lines of cases effectively immunizing collegesand universities, and their athletic programs, and the activities of amateurathletic associations and organizations from regulation under the antitrustlaws. As Ms. Kirby and Mr. Weymouth demonstrate in their comprehensivepaper, those cases had granted schools and sports organizations broad lat-itude in establishing and enforcing a wide variety of constraints on suchactivities as the setting of minimal educational or participatory standards,the hiring of coaches, and the marketing of broadcast and telecast rights.The ultimate effect of the Supreme Court's decision will not, of course,be knowable until more cases are decided. Yet it is because those results inone area-the selling of television rights-have already been substantial, andbecause the language and logic of the NCAA decision raises broad andtroubling questions about many of the other controls which colleges andamateur athletic organizations still impose that we are meeting here at thisconference.3. 104 S. Ct. 2948 (1984).1985]INDIANA LAW JOURNALII.The economist and the lawyers who will be speaking after me are con-siderably more expert in the ramifications of antitrust law than I will everbe. From them, we will hear the details of the litigation which led to theSupreme Court's decision, and will be given exceptional insight into theCourt's logic, its economic and social assumptions, and the probable effectof its reasoning on the organization and conduct of amateur sports. I canadd nothing to their scholarship. But by concluding my remarks with a shortoverview of the present state of the law and a short summary of some ofthe questions we will be addressing, I hope I can provide some focus to ourcommon enterprise, and perhaps highlight some of the more important issueswe ought to discuss.First, I believe the most important thing the NCAA case tells us is thathenceforth the courts are going to look much more closely at the economicconsequences of amateur sports organizations and of the control that uni-versities, athletic associations, and national governing boards exert overathletic competition and its marketing. However, a strong case can be madefor the proposition that Olympic sports, because of their special legislativestatus, are unlikely to be affected as significantly as intercollegiate sports.Yet even in the Olympic area, the virtual monopoly power that nationalgoverning bodies have to schedule and market events, and to dictate theterms of competition could have adverse antitrust implications.Second, the decision in NCAA leaves considerable room for the courts toeither expand upon its rationale and coverage, or to limit the case to instanceswhere the regulations of organizing bodies result in clear restraints of trade.Philip Areeda, discussing antitrust law generally, has made the followingpertinent comment:Federal antitrust statutes are very much simpler than commercial codesor tax statutes. The basic statute, the Sherman Act, simply condemns(1) contracts, combinations, and conspiracies in restraint of trade, and(2) monopolization, combinations to monopolize, or attempts to mo-nopolize . .. IT]he prohibition of trade restraints and monopolizationis extremely vague and general. Indeed, the Sherman Act may be littlemore than a legislative command that the judiciary develop a commonlaw of antitrust.4The NCAA case represents one of the first stages of such common lawdevelopment as it affects the legality of restrictive practices employed byamateur-and more specifically-intercollegiate sports organizations. Thereis dicta in the case which supports the view that some regulations whichpreserve the special character of the amateur sports "product" will beregarded as permissible, even if they affect the access that athletes and4. P. AREEDA, ANTITRUST ANALYSIS: PROBLEMS, TEXT, CASES 5 (3d ed. 1981).[Vol. 61:1ANTITRUST AND AMA TEUR SPORTSinstitutions may have to the sports or television marketplace. Speaking spe-cifically of "college football," for instance, the Court noted:the NCAA seeks to market a particular brand of football-college foot-ball. The identification of this "product" with an academic traditiondifferentiates college football from and makes it more popular thanprofessional sports to which it might otherwise be comparable, such as,for example, minor league baseball. In order to preserve the characterand quality of this "product," athletes must not be paid, must be requiredto attend class, and the like. And the integrity of the "product" cannotbe preserved except by mutual agreement; if an institution adopted suchrestrictions unilaterally, its effectiveness as a competitor on the playingfield might soon be destroyed.'Third, despite such dicta, the dominant message of the case is that amateursports are a business, that the athletic contests which they generate are"products," in essence, no different from cellophane, linoleum, or refinedoil, and that every restriction reached jointly by separate institutions (orpresumably, by sports organizations constituting a monopoly) will be meas-ured against the single standard of enhanced competition. Thus, the Court'sapparent approval of measures designed to preserve the integrity of "collegefootball" is premised, not on the view that ideals of amateurism or of thestudent-athlete have any value in themselves, but on the view that regulationssupporting these values help maintain the identity of a unique community.This point can be amply illustrated by completing the quote just given:the NCAA plays a vital role in enabling college football to preserve itscharacter and as a result enables a product to be marketed which mightotherwise be unavailable. In performing this role, its actions widen con-sumer choice-not only the choices available to sports fans but also thoseavailable to athletes-and hence can be viewed as procompetitive.'The Court, in important sections of the NCAA case, states many of itsconclusions in the economic language of consumer sovereignty. Mr. Heidt,rightly concerned about this exclusive emphasis on "unrestricted output"and market efficiency, raises some disturbing questions about the potentialeffect of this approach on athletes subject to discipline or exclusion fromcompetition. The decisions he draws on are professional rather than amateursports cases, but the issues he presents clearly cross over into the domainof amateur sports.The potential legal difficulty for athletes is fairly obvious: if variousdisciplinary or eligibility rules can be justified on the grounds that theirenforcement helps strengthen an identifiable "product"-intercollegiate ath-letics-then even though those rules may restrict the playing opportunitiesfor individual athletes, they will be regarded as consistent with the thrustof the antitrust laws. On the other hand, the potential problems for colleges,5. 104 S. Ct. at 2961.6. Id. (emphasis added).19851INDIANA LAW JOURNALuniversities, amateur athletic associations, and NGB's are probably at leastas great. Thus, rules that cannot under the Rule of Reason be economicallyjustified as procompetitive will probably be adjudged illegal, even thoughthey may contribute to defensible noneconomic institutional goals. Oneeffect of the NCAA case, for example, is that smaller colleges with athleticprograms that are not self-supporting are no longer entitled to share intelevision receipts. A possible consequence may be that institutions fieldingteams that emphasize broad opportunity to compete, albeit with no particulardistinction, may be forced to discontinue all or part of their athletic pro-grams.Fourth, I believe that there are other lessons that the professional sportscases can teach us. One such lesson is that many time-honored restrictivepractices, once exposed to sharp analysis under the antitrust laws, will infact be regarded as anticompetitive. Due in large part to a famous 1922opinion by Justice Holmes that concluded that professional baseball was nota "business," and therefore not subject to antitrust restrictions,7 professionalathletics for many decades remained, figuratively speaking, in their MaryLou Retton phase. League restrictions on the freedom of individual playersto strike their own bargains with teams willing to purchase their serviceswere upheld by the Supreme Court and lower federal courts, as were inci-dental rules designed to keep under-age and other unwanted players out ofthe professional draft. However, beginning in 1957, in a case attacking thereserve clause in professional football,8 the Supreme Court began carvingaway the antitrust exemption for professional sports, so that now, thanksto stare decisis, it exists only as an anachronistic curiosity in professionalbaseball. 9 With the demise of this sports exemption, professional teams andleagues in every sport have found it virtually impossible to justify rules whichrestrict the bargaining rights of present or prospective professional athletes,or which impose artificial limits on output. Only in one area do suchrestrictions appear to be clearly defensible. Thus, rules which are integralto a sport, establishing for example the number of teams in a league, thepermissible size of each squad, and the scheduling of contests can all probablybe justified on the grounds that without such rules, an identifiable "prod-uct"-professional baseball or basketball or football-could not be said toexist at all. This argument, which was first presented by Judge Bork in a lawreview article, 0 was specifically adopted by the Court in the NCAA case.Not specifically adopted, but almost certainly implicit in the case, is the7. Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs,259 U.S. 200 (1922).8. Radovich v. National Football League, 352 U.S. 445 (1957).9. See Flood v. Kuhn, 407 U.S. 258 (1972).10. Bork, Ancillary Restraints and the Sherman Act, 15 A.B.A. SECTION OF ANTITRUSTLAW 211 (1959).[Vol. 61:1ANTITRUST AND AMATEUR SPORTSview that anticompetitive barriers to entry in amateur sports-such as re-strictions on the maximum number of permissible coaches, or on the identityor number of agents seeking to represent athletes turning professional, wouldbe regarded with extreme suspicion.The net result of the NCAA case, then, is to deprive amateur sports ofmuch of its innocence. No longer will paternalistic arrangements negotiatedby leagues or associations on behalf of teams or players be regarded neutrallyby the courts. Absent a relevant statutory exemption, such as the one whichmay be in effect for the Olympic sports, or the one which clearly governsthe broadcasting of many professional contests, each such arrangement willbe evaluated in terms of its potential effect on economic competition. Inthe amateur sports field, this fact may generate more demands for a statutorybroadcasting exemption to the antitrust laws. Alternatively, it may lead tonew attempts to design profit-sharing or pooling arrangements which willstill meet the requirements of promoting competition. The difficulties ofestablishing such arrangements are substantial, and will be addressed by Mr.Gregory.I now leave you to the care and the guidance of the experts whom youhave all come to listen to.19851

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