White v. NCAA Case and Antitrust Implications in Collegiate Athletic Scholarship Limits

Introduction

White v. NCAA case concerns the organization’s limits on athletic scholarships. The prosecution’s main complaint was that the NCAA limits athletic scholarships to mandatory tuition fees, living, and other expenses (Ruddell et al., 2019). The prosecution argued that the NCAA’s determination of student-athlete subsidies was a violation of the Antitrust Law (Ruddell et al., 2019).

The parties came to a compromise: schools were now allowed to buy sports insurance, and two benefit funds were merged (Ruddell et al., 2019). A $10 million fund was also set up for athletes to receive either a payout or help with tuition fees; in addition, each plaintiff received $5,000 in damages (Ruddell et al., 2019). This case is a good example of how the antitrust law works.

Positions of the Parties

The case was a class action lawsuit from a coalition of college athletes against the NCAA. The main position of the prosecution was the statement that the organization illegally allocates scholarships to student-athletes, violating the Antimonopoly Law (Ruddell et al., 2019). The athletes made this decision on the basis of the anti-competitive behavior of the NCAA since the possible scholarship had a limit that rarely covered the actual expenses of students.

The lawsuit was filed on September 8, 2006, and the defendant, represented by the NCAA, responded with a motion to dismiss the lawsuit (Davis et al., 2019). The court agreed with the organization’s first motion, and then the plaintiffs filed an amended complaint, which the NCAA also denied (Davis et al., 2019). By the time the second appeal was filed, the position of the court had apparently changed in connection with the additional investigation. As the NCAA engaged its opponents in the discussion and began to offer solutions, the matter was settled through an agreement.

Legal Basis and the Main Issue

The main issue that the court would have to decide was whether the NCAA had violated the Sherman Antitrust Act. It was assumed that the organization, by limiting the amount of assistance that was provided in the amount of a scholarship, forced students to bear more expenses than they would have had if the limits had not been established (Davis et al., 2019). The court would have to determine whether the restriction constituted anti-competitive conduct.

The Sherman Antitrust Act dates back to 1890 and originally prohibited any activity that would restrict competition in the market (Shapiro, 2019). According to this law, every contract aimed at monopolizing or restricting trade and preventing competition must be declared illegal (Shapiro, 2019). Given the broader interpretation of this law, the case against the NCAA may fit the description of such an offense.

Importance of the Cause

Although the court never had the opportunity to consider this case and make a correct decision, since the parties reached a compromise, this case is important for understanding the Antitrust Law. If the case went to court, the student-athletes had a high chance of being resolved in their favor. The gap between student spending and the size of the scholarship could be the main argument that would force the NCAA to change its policy.

The court did not have the opportunity to clarify the antitrust law, and accordingly, the case against the NCAA did not set a precedent. However, this case provoked changes in the organization’s policy before even reaching the court. Acceptance by the NCAA of a settlement agreement and readiness to make concessions means acceptance of this problem and willingness to look for ways to solve it. If the case went to court, this precedent would open up the possibility of many lawsuits regarding the violation of students’ rights.

Analysis

This case against the NCAA was correctly qualified from a legislative point of view and had a potentially high chance of success when considered by the court. The position taken by the plaintiffs was that educational institutions should be entitled to cover all expenses, including the official cost of education, with scholarships (Ruddell et al., 2019). Since the plaintiffs were athletes involved in lucrative sports, it is indeed a policy violation to limit the amount of assistance provided. This fact is confirmed by the court’s cancellation of the petition for termination of the case by the defendant. If the NCAA did not limit the amount of student aid, students would be able to avoid most of the costs by receiving significant scholarships.

A significant role in this case was played by the recognition of the claim as a class action. A certain class of victims was established: students, football and basketball players. The court decided that the plaintiffs in this case were able to adequately represent the interests of their social group, which gave the case greater resonance and publicity. The recognition of the claim as a collective one played a big role in the NCAA’s desire to peacefully resolve the problem that had arisen.

Since the court recognized that the organization undermined the interests of the whole group with its restrictions on scholarships, the peace settlement was beneficial for the NCAA. If the compensation were awarded by a court decision, the NCAA would have to completely revise its policy, incurring not only financial but also reputational losses. Senior management made the right decision about the pre-trial settlement, which signaled a readiness for change and a step toward students.

By its restriction policy, the NCAA did violate antitrust laws. The organization classified its athletes as amateurs, and monetary compensation to them was a subsidy (Ruddell et al., 2019). Thus, the NCAA prevented open competition for players, which is necessary to protect the interests of athletes. The NCAA also prevented schools that could offer favorable terms from competing for students. For example, scholarships for especially gifted students could cover tuition costs. Educational institutions could use this competitive advantage in the fight for talented students. Under the terms of the pre-trial settlement of the conflict, the NCAA now provides such an opportunity without hindering free competition.

Conclusion

White v. NCAA is an important and useful case despite the fact that it was settled out of court. Firstly, this case demonstrates the need for changes that were realized by the organization itself. The removal of the hard limit on sports scholarships contributed to the improvement of the situation for students and the development of sports.

Secondly, this case demonstrates the possibility of a broad interpretation of antitrust laws designed to fight for free competition. The decision of the top management of the NCAA was of great positive significance since it saved the company’s reputation and improved the well-being of students. The pre-trial settlement did not allow the case to become a precedent, but it contributed to the students’ struggle for their rights.

References

Davis, T., Mitten, M. J., Shropshire, K. L., Smith, R. K. (2019). Sports law and regulation: Cases, materials, and problems. Wolters Kluwer.

Ruddell, L. S., Champion Jr., W. T., Karcher, R. T. (2019). Sports ethics for sports management professionals. Jones & Bartlett Learning.

Shapiro, C. (2019). Protecting competition in the American economy: Merger control, tech titans, labor markets. Journal of Economic Perspectives, 33(3), 69-93. Web.