INDIANAPOLIS (CN) – In an antitrust class action, a former Division I quarterback claims the NCAA’s “main purpose is to suppress competition”: that it illegally caps schools’ athletic scholarships, costing students millions of dollars a year, to “serve the selfish interests of the NCAA and its member institutions.”
In his federal complaint, John Rock claims the NCAA’s prohibition of multiyear athletic scholarships in Division II schools, its prohibition of athletic scholarships in Division III schools, and its across-the-board caps on athletic scholarships are illegal restraints on commerce.
He calls it “a blatant price-fixing agreement and restraint between member institutions of the National Collegiate Athletic Association.”
Rock, a quarterback, says he received numerous scholarship offers from Division I schools and went to Gardner-Webb University in North Carolina in part because the coach promised his scholarship would be renewed each year.
But when the school appointed a new head coach his junior year, Rock says, the coach questioned his commitment because he missed some practices to participate in a mandatory internship to finish his degree in political science.
He says Gardner-Webb canceled his football scholarship in August 2011, forcing him to pay his tuition out of pocket to graduate this year.
Summing up complaints against the NCAA that have been heard for years, but which have increased since the Penn State scandal, Rock says: “Although it describes itself as ‘committed to the best interests … of student-athletes,’ the NCAA’s true interest is in maximizing revenue for itself and its members, often at the expense of its student athletes. While extolling the virtues of ‘amateurism’ for student-athletes, the NCAA itself runs a highly professionalized and commercialized licensing operation that generates hundreds of millions in royalties, broadcast rights and other licensing fees each year. The annual revenues for the NCAA in fiscal year 2007-08 were $614 million. … The direct expenses for operating the actual games that generate the $614 million in revenues were only $59 million.
“The NCAA, its member institutions and their high-level officers and employees use the monies earned from college athletes to pamper themselves with plush headquarters and perks normally associated with Fortune 500 companies. According to published reports, the NCAA’s headquarters in Indian cost and estimate $50 million and the NCAA is currently planning an additional $35 million expansion. Ironically, given that its main purpose is to suppress competition, the NCAA cited the recent economic downturn and increased ‘competition among contractors’ as the explanation for the timing of the construction.
“NCAA top executives use money earned off the back of student-athletes to pay themselves salaries of hundreds of thousands of dollars. For example, current NCAA president Mark Emmert has been publicly reported to earn $1.6 million per year.”
In February this year, the NCAA’s Division I Board of Directors changed its rules, to allow schools to offer multiyear scholarships, a change that most Division I schools opposed.
“For years, NCAA member institutions unlawfully conspired to maintain the price of students-athletes’ labor at artificially low levels by agreeing never to offer student-athletes athletics-based scholarships of a duration in excess of one year,” Rock says in his complaint. “Only recently after litigation in this court, did the NCAA abandon these restrictions and permit NCAA member institutions to award multiyear scholarships. Contrary to the dire warnings of the NCAA’s counsel in prior litigation, the abandonment of the rule has not affected the amateur nature of intercollegiate athletic competition or created competitive imbalances. Instead, it is benefiting student-athletes by resulting in the adoption of multiyear scholarships by NCAA member institutions and the restoration of competition for student athletes.
“Though it has abandoned the multiyear prohibition, the NCAA continues to artificially restrict the total number and amount of available athletics-based scholarships by imposing artificial caps on the number and amount of athletics-based scholarships that its member institutions can offer.
“The NCAA’s multiyear prohibition and its caps on the total number and amount of athletics-based scholarships are not, and never were, necessary to protect the amateur status of NCAA student-athletes; rather, they only serve the selfish interests of the NCAA and its member institutions. For years, the NCAA and its member institutions maintained the multiyear prohibition because they knew that in a competitive market, they would be forced to compete for the athletic services of student athletes by offering multiyear athletics-based scholarships. The NCAA and its member institutions continue to artificially restrict the amount and number of scholarships because they know that in a competitive market they would be forced to dramatically increase the overall supply of athletics-based scholarships and the amounts of those scholarships.
“By unlawfully agreeing not to offer multiyear athletics-based scholarships, the NCAA and its member institutions ensured that student-athletes who were injured or who simply did not meet the school’s expectations could be cut from a team and their scholarships terminated. In materials recently submitted to the NCAA in connection with the NCAA’s abandonment of the multiyear rule, member institution Indiana State University encapsulated the attitude of most NCAA institutions when it lobbied to retain the multiyear prohibition on the ground that it allowed member institutions to dump student athletes who no longer had ‘athletic usefulness.'”
The NCAA allows colleges and universities to treat its student-athletes as disposable labor, and by limiting scholarships cost the athletes “tens of millions” of dollars, while saving the schools that money for themselves, Rock says.
Division I schools may offer 13 basketball-related full scholarships and 11.7 baseball-related full scholarships, according to the complaint. Schools may divide their scholarships, offering two 50 percent scholarships instead of one full scholarship for example, but cannot provide more than 27 baseball, 85 football and 13 basketball scholarships in total.
Rock adds that “lifting limitations on the number of athletics-based scholarships that can be offered to student-athletes would have absolutely no effect on amateurism because student-athletes would continue to receive no wages for their playing.”
He claims: “The NCAA’s wholly artificial caps on the number and distribution of athletics-based scholarships reduces the overall supply of athletics-based scholarships available to student-athletes thereby forcing them to accept far less compensation than they would have received for their labor by millions of dollars. Top-tier athletes routinely receive less than 100-percent athletics-based scholarships and thousands of highly talented student-athletes receive no athletics-based scholarships at all. … In short, the supply of available athletics-based scholarships is kept artificially low by NCAA rules.”
Rock seeks class certification, declaratory judgment that it is illegal for the NCAA to prohibit multiyear scholarships for Divisions II and III and to restrict the number of scholarships schools can offer, and punitive damages for violations of the Sherman Act.
His lead counsel is Steve Berman with Hagens Berman Sobol & Shapiro in Seattle.
Local counsel is William Riley with of Price, Waicukauski & Riley of Indianapolis.