College Athletes Challenge NCAA Pay Limit in Court

OAKLAND, Calif. (CN) – Calling the National Collegiate Athletic Association a “cartel,” a San Francisco sports economist testified in a federal bench trial Tuesday that eliminating caps on how much compensation student athletes receive increases demand for college sports.

The testimony by University of San Francisco professor Daniel Rascher contradicts the NCAA’s contention that compensating athletes above the cost of attendance blurs the line between amateur and professional sports, eroding popularity and revenues from ticket sales and broadcasts.

Rascher, testifying on behalf of three classes of men’s and women’s football and basketball players, attributed a $700 million increase in sports revenues during the 2016-2017 season to changes in NCAA compensation rules implemented the previous year allowing member schools to begin paying athletes up to the cost of attendance and to offer additional benefits above the cost of attendance.

“When [college] athletes started receiving more money, demand went up,” Rascher said in federal court in Oakland, “All of these athletes are receiving compensation above the cost of attendance and the market is, in a sense, happy to continue watching them play football and basketball.”

Accusing the NCAA of anti-competitive behavior under the Sherman Act, former Clemson football player Martin Jenkins leads 53,000 current and former Division 1 football and men’s and women’s basketball players seeking an injunction eliminating NCAA caps on compensation and benefits.

They claim the caps unfairly barred them from earning money playing sports while the NCAA receives multibillion-dollar payments from TV networks and advertisers.

The NCAA initially sought dismissal, saying the claims were identical to those litigated in O’Bannon v. NCAA, in which the Ninth Circuit held in September 2015 that member schools need not compensate athletes above the cost of attendance.

Two years later, presiding U.S. District Judge Claudia Wilken approved a $208 million settlement in the case. But she said the settlement didn’t bar class members from pursuing an injunction, clearing the way for a two-week trial on the issue.

On Tuesday, Pac-12 Conference attorney Bart Williams with Proskauer Rose noted student athletes received compensation above the cost of attendance even before the 2015 rule change.

His observation boosted the defendants’ argument, presented in a written opening statement, that no injunction is necessary because the recent increase in consumer demand noted by Rascher didn’t cross the line into the realm of professional sports.

Williams also called Rascher’s prediction that individual conferences would pass their own compensation caps in the event an injunction was granted “speculation.” He hypothesized that if caps are eliminated, schools could begin offering new recruits $1 million to play for them.

But Rascher said that would hurt demand, and conferences wouldn’t allow it. Case witnesses and the NCAA itself have said they won’t allow it either, he said.

“The NCAA claims that some of their fans care about restraints on pay, so individual conferences would decide what level of restraint they are willing to allow,” he said. “The market itself helps them dictate what those levels would be. I’d be shocked if individual conferences started allowing unfettered competition.”

The NCAA argues in its opening statement that paying student athletes above the cost of attendance would destroy college sports, because wealthy schools would compete for valuable players by offering “millions of dollars in compensation,” while poorer ones would struggle to attract recruits.

“Plaintiffs’ conference autonomy alternative would balkanize college sports, making the product less interesting and thereby reducing the popularity of college sports,” its opening statement says.

The plaintiffs, however, say the justifications for limiting compensation “are nothing more than NCAA mythology.”

“[T]he trial,” their opening statement says, “will expose amateurism as a mythical procompetitive justification devoid of evidentiary support in the post-O’Bannon world—an emperor with no clothes.”

Trial continues Wednesday with testimony by Stanford University economist Roger Noll.

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