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Utah vs. The BCS: A Primer

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Football, money and lawsuits seem to occupy our sports headlines today. The NFL lockout continues, the NBA negotiations stall and the Dodgers are under league management with their owner threatening to sue. The lines between professional and big-time college athletics appear to be blurring with the influx of media money and growing fan support. As Utah Attorney General, Mark Shurtleff, prepares to file an antitrust lawsuit against the BCS this summer, here is a brief summary of the issues and arguments for each side.

Scott Cowen, President of Tulane University, succinctly articulated the basis for the non-BCS conferences' objections to the BCS in testimony before the House Judiciary Committee in 2003: "Our country is based on the idea of equal opportunity for all, and our educational institutions are dedicated today to the principles of access, inclusiveness, fairness, and consistency. It goes against everything we hold dear to allow - even encourage - a system that showers financial and reputational rewards on one member while unnecessarily denying or limiting the opportunity for another member to earn the same rewards."

"Everything we hold dear" as Americans includes fairness and an equal opportunity for all, as well as rooting for the little guy. Yet, in this case, Irish fans must realize that Notre Dame is not the little guy. The implication of Utah's antitrust case is that the administration of Notre Dame has colluded with the BCS conferences to unfairly limit competition and is involved in fixing reimbursements that deny other universities the same opportunities.

Or can the BCS system be unfair in many eyes but still legal?

Unfair vs Illegal

Admission into some universities like Notre Dame may increase someone's opportunities for success, just as a football scholarship to some football programs may increase a player's chances for getting to the NFL. Yet as long as a BCS system provides an equal opportunity to success and equal reimbursement for BCS bowl participation, that system would be upheld by the courts. Holes may exist in this and reasonable people may disagree.

The classic standard for violating the "Rule of Reason" standard such antitrust cases was written by Justice Brandeis: "The legality of an agreement or regulation cannot be determined by so simple a test as whether it restrains competition. Every agreement concerning trade, every regulation of trade, restrains...The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroys competition."

Does a system's pro-competitive aspects outweigh its anti-competitive aspects?

Brandeis continues on how to reach that judgment: "To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts."

The peculiar facts related to the business of sports leagues and conferences are given some leeway in antitrust issues in the courts not only because their formations are exclusionary in nature but also because they are established for the purpose of competition, usually ending in some reward for champions or qualifiers

For example, conferences can and do set their own rules that may distribute bowl royalties unequally, such as in the WAC, the Mountain West and the Big East. The WAC's rules allowed Boise State ('06-'07) and Hawaii ('07-'08) to keep 70% of the $6 million for their participation in BCS bowls with revenue-sharing by the other WAC teams of the other 30%. Due to a change in conference agreements, Boise State kept only 50% of their BCS bowl revenue in '08-'09.

As a conference agreement, a WAC school could not reasonably expect to sue Boise State in an antitrust case. Utah State could not sue Boise State. Boise State would argue that the pro-competitive aspects of the conference agreement reasonably outweighs the anti-competitive aspects of it and is necessary for competition.

The focus of any litigation by Utah, however, would be on the BCS as "an unreasonable restraint of trade" that acts as a "group boycott" limiting the non-automatic qualifier (non-AQ) schools. Not only would the suit include BCS conference schools, including Notre Dame, but may also include the BCS bowls, media and likely some ranking systems like the coaches poll that could be proved to be biased.

Antitrust, The NCAA, and The Evolution of the BCS

The seeds of the BCS began when the Universities of Oklahoma and Georgia won an antitrust case against the NCAA, which sought to control television contracts and distribute revenue. As bowl games evolved with increasingly significant media rights and revenues for participants, the NCAA could only sit on the sidelines, observing as conference champions played in bowls with tie-ins. Conferences then united to form the Bowl Coalition (1992), then the Bowl Alliance (1995) and, finally, the Bowl Championship Series (BCS) in 1997 with the goal of uniting the top two teams in the country for a national championship game.

Rating systems, bowls involved, and criteria have changed over the years since its inception. The last change in selection criteria, which were revised in 2004 and which went into effect for the 2006-07 season, made it easier for non-AQ teams more access with a more liberal criteria. Prior to that agreement only one team, Utah in 2004-05, had met the criteria for being selected to a BCS bowl. In the five years since then, six non-AQ teams have been to BCS bowls.

As another example of the dynamics in the history of the BCS, Utah, TCU and Boise State, who account for all but one of the seven BCS bowl appearances by non-AQ teams since 2004, have switched conferences this past summer. Utah and TCU will join BCS conferences. Utah joins the Pac-10 (12) this year. TCU joins the Big East next year. Boise State switched from the WAC to the Mountain West this year. BYU has become an independent.

Utah and TCU have chosen to move into a group that "showers financial and reputational rewards on one member..." and into conferences with a guaranteed BCS bowl slot.

In Legal Terms

The focus of litigation by Utah would be that the BCS agreement acts as "an unreasonable restraint of trade" using a "group boycott" under Section 1 of the Sherman Antitrust Act, limiting the non-automatic qualifier (non-AQ) schools. Not only would the suit include BCS conference schools, including Notre Dame, but may also include the BCS bowls, media and likely some ranking systems like the coaches poll that could be proved to be biased.

The allegation would be that these entities conspired in a "horizontal" price-fixing scheme, which limits the relative amounts that the non-BCS schools can earn and their opportunity to reach a national championship game.

But due to the increased frequency of non-AQ teams appearances in BCS bowls and the admission of two of the top non-AQ teams to BCS conferences undermine the "evil believed to exist" in this agreement between BCS and non-BCS schools?

Lines Are Drawn

A few months ago - with WAC Commissioner Karl Benson present - Jim Delaney, the Big Ten's Commissioner said about the possibilities of changes in the BCS agreement: "The notion that over time by putting political pressure on, it's just going to get greater access, more financial reward and more access to the Rose Bowl, I think you're really testing.... The only thing I would say, if you think you (the non-automatic qualifying leagues) can continue to pressure the system and we'll just naturally provide more and more and more. I don't think that's an assumption that our presidents, athletic directors, football coaches and commissioners necessarily agree with."

Pac-10 Commissioner, Larry Scott, sounded the same: "The six (BCS) conferences have bent over backwards and tried to be politically correct to their own detriment, probably further than they had to, maybe should have."

Big 12 Commissioner, Dan Beebe, voiced the alternative in blunt terms: "Don't push it past this because if you push it past this, the Big 12's position is we'll just go back to the old (bowl) system. You're getting the ability to get to places you've never gotten before. We've Jerry-rigged the free market system to the benefit of those institutions and a lot are institutions that don't even fill their stadiums."

Until today, Mark Shurtleff, had been unable to get other states or federal antitrust agencies involved. The Justice Department's Antitrust head, Christine Varney, today sent a letter to NCAA President, Mark Emmert, asking why a playoff system is used for FBS football, what steps the NCAA has taken to create one, and what disadvantages fans, schools and players see to the BCS. "Your views would be relevant in helping us to determine the best course of action with regard to the BCS."

"Serious questions continue to arise suggesting the current Bowl Championship Series system may not be conducted consistent with the competition principles expressed in the federal antitrust laws," wrote Varney. Varney received a letter from a number of professors in April asking her to review the antitrust implications of BCS behavior.

Are big-time athletics headed to the courts once again?

Exhibit A - BCS Revenue/Payouts by Conference, 2004-11, Rankings, Non-AQ Participants

Exhibit B - BCS TV Ratings 2006-11

Exhibit C - NCAA 5 Year Summary of Revenue Distribution Including Income

Exhibit D - NCAA Bowl Finance: Something changed in 1995

Further Reading: Antitrust & The Bowl Championship Series, Nathaniel Grow, Harvard Journal of Sports & Entertainment Law, June 2010

The BCS, Antitrust and Public Policy, Andrew Zimbalist, Robert A. Woods Professor of Economics, Smith College.

Antitrust laws Do Not Provide Answer to Reforming the BCS, Gordan Schnell and David Scupp, Sports Business Journal Daily, August 2010

The Problem with Utah's BCS Antitrust Claim, Josh Patashnik, The New Republic, 2009

Antitrust, Governance, and Post-Season College Football, Michael McCann, Boston College Law Review, 2011

An Antitrust Analysis of College Football's Bowl Championship Series, Brett Fenasci, Loyola Law Review, 2004 (LexisNexis)

Network Effects, and Antitrust Law: Predation, Affirmative Defenses, and the Case of U.S. vs Microsoft, Max Schanzenbach, Stanford Technology Law Review, 2002

Next Week's Article: Arguments for both sides