Sports Law Blog
All things legal relating
to the sports world...
Tuesday, July 10, 2007
The All American Football League and Its College Degree Eligibility Rule

I've received e-mails from several readers about the All American Football League, a professional football league that will begin operations in the spring of 2008, feature between six to eight teams in the southeast, and pay players around $70,000 to $75,000 a season.

The AAFL, as it is called, was scheduled to begin operations this year, but was pushed back till next year. Wisely, the league does not intend to compete with the NFL, as AAFL games will be played in the spring, during the NFL's off season. Along those lines, the AAFL seeks to provide consumers with an otherwise unavailable product--outdoor professional football in the spring. The league also aspires to develop players to the point where they can seek employment in the NFL, particularly now that NFL has shut down its own developmental league, NFL Europa. The AAFL will also try to capitalize on local rivalries, with players assigned to teams based on where they played in college--so a player who starred at the University of Southern Mississippi, for instance, would be assigned to the Mississippi franchise. The NBA used to employ a similar system of player allocation before it turned the NBA draft.

The AAFL features an impressive Board of Directors (including our friend Gary Roberts, the new dean of Indiana University School of Law in Indianapolis), but undoubtedly faces a difficult task. There have been many attempted professional football leagues over the last three decades, and for every Arena Football League, there seem to be quite a few failed ventures, including the United States Football League, the XFL, the Regional Football League, and the likely many others that never advanced past the planning stages. In addition, the AAFL isn't the only pro football league in-the-works: the United Football League, which hopes to begin play next summer in major cities that do not have NFL teams (including Los Angeles and Mexico City) and which enjoys the funding of Mark Cuban and Google executive Tim Armstrong, among other very wealthy folks, may emerge as a rival (for great discussions of the UFL, see posts by CNBC's Darren Rovell and Sports Economist's Skip Sauer, and for thought-provoking speculation that the UFL might attract players not old enough to meet the NFL's age requirement, see this post by AOL Fanhouse's Michael David Smith).

Whether or not the AAFL succeeds as a business venture, it features one noteworthy eligibility rule: players must possess a college degree. This rule, which does not reflect collective-bargaining (since there doesn't seem to be an AAFL players' association) but instead a unilateral league imposition, is ostensibly designed to encourage college football players to stay in school and focus on their studies. A cynic, however, might characterize it as a thinly-veiled attempt to appease the NCAA and colleges, which do not want to lose the players who generate so much revenue for them, and one that seems noticeably reflective of the backgrounds of AAFL's Board of Directors, which includes former NCAA president Cedric Dempsey as well as former conference commissioners, athletic directors, and head football coaches. Obviously, the rule also limits the number of available players, especially since many of the nation's best teams have poor graduation rates.

The college degree rule provides a topic for possible legal inquiry, at least in an academic sense. Back in the 80s, the USFL tried to impose the same eligibility requirement on players who sought to enter its draft, but in Boris v. USFL, 1984 Trade Cas. (CCH) P 66,012, (D. Cal. 1984), a federal district court held that the USFL and its teams, by unilaterally imposing such a rule, were engaging in a group boycott, thereby committing a per se violation of Section 1 of the Sherman Act. As I wrote in my law review article, "Illegal Defense: The Irrational Economics of Banning High School Players from the NBA Draft":
Perhaps most significant, the Boris court questioned many of the reasons the USFL offered for its draft eligibility rule, particularly in relation to the one reason the USFL failed to mention: "the principal reason for the adoption by the USFL and its member teams of the Eligibility Rule was to respond to apparent demands made by college football programs and thereby to gain better access to these programs towards the end of selecting the best college players available." In other words, by guaranteeing that the USFL would not raid [*220] college programs of their players before their collegiate eligibility expired, college programs would steer some of their players towards the USFL, rather than the NFL--the competing and in most respects, superior professional football league. Equally notable, the court regarded the "principal reason" behind the draft rule as far more important than those proffered by the USFL - reasons which happen to echo some of the same reasons presently offered by the NBA: "very few college-athletes are physically, mentally, or emotionally mature enough for professional football ... the Eligibility Rule promotes the concept of the importance of a college education ... the Eligibility Rule promotes the efficient operation of the USFL by strengthening the sport at the college level so that the USFL does not have to develop players at that level."
For similar reasons, in Denver Rockets v. All-Pro Management, 325 F. Supp. 1049 (D. Cal. 1971), the NBA lost an attempt at a unilaterally-imposed requirement that players be four years removed from high school because such a requirement was found to comprise an illegal restraint of trade.

In response, however, the AAFL might argue that its rule does not impact its draft eligibility, but rather eligibility to sign an employment contract (not sure that would be a sufficiently meaningful distinction). The AAFL might also argue that, unlike the USFL, it is not steering players away from the NFL, since it is expressly not competing with the NFL. Again, I am not predicting a lawsuit, I just find eligibility requirements interesting.


Without the labor exemption, there is a blatant antitrust problem if they are thinking about capping salaries as you mentioned. And I have no problem predicting a lawsuit on that one :)

Blogger Rick Karcher -- 7/10/2007 4:13 PM  

Instead of capping the individual player salary at $75,000, could the league just take that 75,000 X number of players per team and let the market sort out what the players would be paid. The league would not be a market for the high paid athletes of the NFL, so the actual number for a player should land between 50-100K. Im not sure if this would work, i guess there still would be a problem with a cap without a CBA.

Antitrust and labor ssues aside, would be interesting to see another outside football league with educated athletes. I wonder if it could compete with the AFL though, the AFL uses less skilled players but in a setting that creates the excitement lost due to skill. The rivalry setting is probably their biggest hook, I'd probably pay to go see some former Gator's play on Floridas team against Tennessee.

Blogger Jimmy H -- 7/10/2007 7:19 PM  

To constitute an agreement for purposes of Section 1, all you need is an understanding among the teams that they are going to pay players a certain salary (it is not necessary that there be a formal "cap" or other written league rule in effect). If the teams are in fact "projecting" salaries to be in the $70k to $75k range as the article states, aren't the teams essentially creating an understanding right now what the players are going to be paid?

Blogger Rick Karcher -- 7/10/2007 8:07 PM  

Ok, I see your point. Then ANY attempt to limit wages on the part of the league or team owners would fail under Section one (unless it is included in a CBA).

A few things bother me here.
#1. I haven't been able to locate much information on the league, other than what is on their website. I wonder if the teams are all owned by the leage (like the XFL) or if the model is the NFL where each team is owned seperately. If they are all owned by the league, wouldn't this be a perfect "single entity" defense?

#2. Assuming that we do have a section 1 agreement, the only way to limit wages would be through a CBA, correct? as of right now, there are no players assigned to the teams (at least from what I understand.) Who would be included in the class for negotiation purposes? would all eligible players according to the league rules (of course even the eligibility rules could be questioned here as well) be included in this class?

If the league went ahaed and implemented these rules, who would have standing to file an action? All invited players, all hired players, or all eligible players?

This league could be in for some stormy waters before it even has a chance to play a game. I hope they make it though!

Blogger Jimmy H -- 7/10/2007 10:51 PM  


We are obviously talking in the context of a hypothetical situation, but standing wouldn't be based on all eligible players. It would be signed players who could demonstrate an antitrust injury (i.e. the salary obtained through the contract negotiation and signing process was inhibited by a league-wide understanding that compensation would be limited to a certain amount).

Blogger Rick Karcher -- 7/11/2007 10:20 AM  

Jimmy H. is correct: the AAFL will be a single entity. As the AAFL website states: "Teams will initially operate as divisions of League whose football operations will be run by a quasi-independent board and General Manager." Further, "[t]he Board alone has the authority and responsibility for all business matters, including football operations." Therefore, there is no Section 1 claim.

In any event, although the salary-cap presents obvious antitrust problems, I'm not sure the eligibility requirement does. The NCAA has avoided antitrust liability for its eligibility rules by arguing that they are necessary to create a new product, i.e., amateur football. See McCormack v. NCAA; Gary Roberts's 1996 (I think) article in the Tulane Law Review. The AAFL would do the same, arguing that it is creating a new product: football played by college-educated athletes. Of course, there's no empirical support for the proposition that fans care about whether athletes obtain college degrees, but there's also no empirical support for the proposition that fans care about whether athletes are paid, yet courts have nevertheless accepted the NCAA's antitrust arguments.

The employment laws, however, may present a different ground for challenged the college-degree rule. If the rules have a disparate impact based on, for example, race, then the AAFL would likely have to that they are justified by business necessity. (This is the theory that plaintiffs use to sue other employers who create employment requirements that have disparate impacts and that do no appear to relate in any way to the job in question.) Can such a showing be made?

Anonymous Anonymous -- 7/11/2007 1:15 PM  


I wouldn't conclude that this is a single entity based upon the quote you recited from its website. I'm not even sure what that statement is saying. The key factor for single entity purposes is how it's structured from an ownership standpoint.

Regarding your comment on the eligibility requirement, I don't see this analogous to the NCAA at all. There is a nexus between amateurism and the universities that make up the NCAA because the players are students receiving an education. There is no nexus between having a college degree and playing football for pay when they are not students anymore.

Blogger Rick Karcher -- 7/11/2007 3:57 PM  

The quotes (and other comments on the website) indicate that the league will own the teams. Further, while ownership is a key factor, it's not the only factor in the single entity analysis.

Can you cite any authority for your "nexus" theory? In any event, what is the "nexus" between not paying players and college football. One could argue, I suppose, that a player has to be enrolled in the school, but why can't he also be paid? The NCAA's justification (and language from Board of Regents v. NCAA) appears to be that not paying players benefits consumers (and thus doesn't violate the antitrust laws) because it creates a new product. As I noted in my earlier post, the same argument can be made for the AAFL.

Anonymous Anonymous -- 7/11/2007 5:05 PM  

Hmmmm. Maybe you all could actually wait until the first kickoff before you go antitrust and labor law violation crazy? Oh, wait, it's summer and we are all bored...

Anonymous Anonymous -- 7/11/2007 7:07 PM  

No, it seems like those government knuckleheads who tried to force Hooters to hire male wait staff--if you know ahead of time what you are getting into, it seems you shouldn't complain about it when you join up!

On a slightly different tack: Why is it that pro football has had more new leagues (real and proposed) come up, either for or against the NFL? You don't hear too much about new leagues alonside of or against the NBA, MLB, or NHL . . . ??

Anonymous Anonymous -- 7/12/2007 1:11 AM  

I think the reason that more pro football leagues have sprung forth is that it is easier to find football players with the required skills than baseball or basketball players (I know nothing about hockey). You can be a reasonably successful football player, at most positions, based on nothing more than aggressiveness and the ability to withstand pain. Baseball and basketball both require more sharply defined skill sets; not that there aren't some one dimensional players found in the professional ranks of either sport. In addition, football makes for great television; every play begins from a dead ball, with the players all concentrated in a relatively small area.

Anonymous Anonymous -- 7/12/2007 11:44 AM  

There is no antitrust issue with the AAFL's college degree requirment or with a fixed player salary. (1) The AAFL is unquestionably a single entity -- the team are all owned by the league, and even if they weren't the player policy is set by the league's board of directors, none of whom have any ownership interest beyond the league itself as a whole. (2) The AAFL has no market power in the player labor market. (3) Even if the above two defenses didn't succeed (which they surely will), I doubt any court would find the degree requirment unreasonable from an antitrust standpoint since, as noted above, that is the characteristic that defines this unique type of entertainment product and you'd be hard pressed to identify an injury to consumer welfare from having it. Anyone who sued the AAFL with antitrust claims would be wasting their time and money.

Anonymous Anonymous -- 7/12/2007 12:03 PM  

Anon 12:03

My antitrust is a little rusty: do you need to show market power in a naked horizontal price-fixing case? See Trenton Potteries.

Anonymous Anonymous -- 7/12/2007 12:18 PM  

"Thus, where a practice has obvious anticompetitive effects -- as does price fixing -- there is no need to prove that the defendant possesses market power" Law v. NCAA.

"As a matter of law, the absence of proof of market power does not justify a naked restriction on price or output. To the contrary, when there is an agreement not to compete in terms of price or output, no elaborate industry analysis is required to demonstrate the anticompetitive character of such an agreement." Board of Regents.

Blogger Rick Karcher -- 7/12/2007 1:58 PM  

And to address the issue raised about the college degree requirement as defining this unique type of entertainment product (similar to the NCAA's amateurism requirement), it's just not making sense to me. The AAFL fan is not going to say, I'm in the mood to watch some good professional football today but only if the players possess a college degree. Presumably, the fan just wants to see recognizable former college players. If Darren McFadden drops out of school today and goes to play for the AAFL without first obtaining his degree, is the AAFL fan going to be upset if he sees him playing?

But in any event, the relevant market here would be defined as the market for player services. We're not focusing on harm to consumer welfare.

Blogger Rick Karcher -- 7/12/2007 2:49 PM  

Prof. Karcher:

I thought Anon 12:03 was mixed up on that.

Regarding your response to my earlier comment, I'd say the same thing about college football: Is a college football fan not going to watch anymore because players are paid? We simply do not know the answer to this question, but I would submit that the burden is on the NCAA to prove this point because they are engaged in what otherwise would be a per se violation of the antitrust laws. But as Tibor Nagy and others have demonstrated (see his article in the 2003 Marq. Sports Journal), the courts have not put this burden on the NCAA. If the NCAA doesn't have to bear it, why should the AAFL?

On your second point, I think case law is on your side re: horizontal price-fixing in the labor market. See, e.g., Todd v. Exxon Corp. But see then-Judge Breyer's opinion in the Kartell case, which upheld a buy-side cartel in an input market. I'm not aware of similar cases regarding buy-side cartels in labor markets, however.

Anon 1:15

Anonymous Anonymous -- 7/12/2007 3:19 PM  

Anon 1:15 (feel like I'm citing the Bible or something),

Well, personally, I love college sports, so to answer your question I wouldn't watch it if the players were paid and there are plenty of others who wouldn't either. It wouldn't be as team-oriented and school-spirited if the players were paid. The players would make decisions about where to attend school based upon compensation, and their motivations for playing would be entirely different. Let me put it in even simpler terms, "amateur sports" by definition means no pay. However, "professional sports" does not mean degree requirement (the two are not connected whatsoever).

Blogger Rick Karcher -- 7/12/2007 7:23 PM  

Prof. Karcher:

I feel compelled to push you on this because your statements are quite provocative.

First, you state that amateur athletics is by definition not paid, but this is of course not true. There can be no doubt that college athletes are paid to play -- an athletic scholarship is, after all, quite valuable. Further, NCAA rules do not bar payments. Rather, the rules bar payments in excess of what the NCAA allows. In other words, under NCAA rules, amateurism is whatever the NCAA says it is.

Second, your entire position is based on nothing more than the supposition that other people care about college athletes not being paid and do not care that AAFL athletes have college degrees. These are obviously questions of fact. Who should have the burden of proving whether fans care about these characteristics or not? It seems clear to me that antitrust law puts this burden on the NCAA and the AAFL. Do you disagree?


Anonymous Anonymous -- 7/12/2007 10:07 PM  


I was expressing my disagreement with Anon 1:15's assertion that the AAFL's degree requirement is analogous to the NCAA's amateurism requirement. I can't really disagree with everything you said in your first paragraph, but the issue then is what effect does or should all of that have from an antitrust standpoint.

The first basic premise in any antitrust analysis, before you start even talking about the NCAA rules consisting of an "agreement" or the anti-competitive effects that those rules may or may not have, and this issue seems to be overlooked in the pending NCAA antitrust case brought by former student-athletes, is that there must be a "restraint on trade". In what respect are amateur athletes engaged in trade?

Employees selling their services in a labor market constitutes trade. There is an assumption that student-athletes are similarly situated with employees selling their services in a labor market. What is it that makes the participation in an extracurricular activity for an educational institution equivalent to a labor market?

Is it the fact that they are being recruited and receive scholarships? So do students receiving academic scholarships. The typical justification for treating students on athletic scholarship differently from students on academic scholarship for purposes of antitrust always seems to be that the schools and the NCAA derive substantial profits from their on field performances. But why is that relevant? I've never understood the significance of the argument that the schools and their coaches make so much money that it must trickle down to the student-athletes that make them that money -- one may feel that way but how does that translate to a restraint on trade?

Most importantly, student-athletes are making a choice to go to school rather than enter the labor market. The real injustice, then, is not the NCAA rules, but the NFL rule that doesn't permit them to enter the labor market and leaves them with the only choice of going to school. The NFL eligibility rule is the restraint on trade, and probably an illegal one too (and the labor exemption shouldn't apply).

Blogger Rick Karcher -- 7/13/2007 8:18 AM  

Prof. Karcher:

Several points:

1) You seem to be making the argument that NCAA sports (or at least the market for one input -- athletes) are "noncommercial" activity and thus outside the scope of antitrust law. There are several cases supporting your position, but I do not think it is correct and have made the argument at length in 6 Va. Sports & Ent. L.J. 51, 76-80 (2006).

2) Horizontal price-fixing in the market for academic scholarships is within the ambit of the antitrust laws. See United States v. Brown Univ., 5 F.3d 658 (3d Cir. 1993). See also the dicussion of this case in the article cited above at pgs. 77-78.

3) Points (1) and (2) above render college athletes' choice to go to college rather than take a different job irrelevant. Arguing that plaintiffs knew about horizontal restraints before they voluntarily entered a market is no defense to an antitrust violation.

Anonymous Anonymous -- 7/13/2007 9:19 AM  


I'm not sure that Brown is on all fours. That case involved giving monetary tuition discounts to families based on "need" not merit (essentially fixing the price of tuition). Here is how the court framed the issue in that case: "We thus come to the crux of the issue-is providing financial assistance solely to needy students a selective reduction or “discount” from the full tuition amount, or a charitable gift? If this financial aid is a component of the process of setting tuition prices, it is commerce."

More specifically, here is what was going on: "When MIT admits an affluent student, that student must pay approximately $25,000 annually (tuition plus room, board and incidental expenses) if he or she wishes to enroll at MIT. If MIT accepts a needy student and calculates that it will extend $10,000 in financial aid to that student, the student must pay approximately $15,000 to attend MIT. The student certainly is not free to take the $10,000 and apply it toward attendance at a different college. The assistance package is only available in conjunction with a complementary payment of approximately $15,000 to MIT. The amount of financial aid not only impacts, but directly determines the amount that a needy student must pay to receive an education at MIT. The financial aid therefore is part of the commercial process of setting tuition."

Blogger Rick Karcher -- 7/13/2007 1:19 PM  

Brown may not be on all fours, but I think it stands for the proposition that joint activity that effects students' tuition and fees is commercial activity and thus within the ambit of the antitrust laws. Therefore, I think any attempt to limit athletic scholarships to below the cost of attendance would be subject to antitrust review. (Perhaps that is why the class action initiated by the Susman Godfrey firm is arguing that damages are the difference between what the athletes received and their actual cost of attendance.)

Your position, if I may reformulate it, appears to be that Brown is limited to the cost of attendance. Once you go above cost of attendance, the bargaining is no longer over the "cost of tuition," but rather over wages. And in your view, these athletes are not employees, and thus talk of "wages" presupposes a labor market that does not exist. (Question: would you say the same for the services provided by graduate student TAs? In other words, can colleges jointly determine the wages TAs are be paid?)

I respectfully disagree with your position for the reasons noted in the article cited in my previous post. Nevertheless, you raise a difficult issue: when is something commercial? In my view, it is difficult to argue that negotiating for one input (athletes) is not commercial activity, but negotiating for other inputs (e.g., coaches) is commercial. I'm particularly suspicious of the argument here because, in the words of the Areeda/Hovenkamp treatise, "the [schools] are likely to receive direct economic benefit as a result of any reduction in competition in the market in which [they] operate."


Anonymous Anonymous -- 7/13/2007 1:56 PM  

No, that's not my position. I don't really care where the line is drawn, i.e. cost of attendance, etc. Where the line should be drawn comes into play under a rule of reason analysis, but you only get to that point if student-athletes are engaged in trade.

I see Brown as involving a different situation all together. I think the court was concerned about, as it expressly said, "the process of setting tuition prices". For one, this case was brought by the DOJ, not by students alleging that they don't have the ability to sell their services in a labor market. MIT and Ivy League schools entered an agreement in which they set and reduced tuition prices so that they could lure high caliber students (with the inability to pay) away from Stanford. MIT tried to argue that the price discounts it gave to these needy students constituted "charity" and thus couldn't be commercial. I can see why the court disagreed and held that what MIT and the Ivy League schools did was commercial in nature. It's just not analogous to student-athletes who are claiming that they should have the ability to compete in a free market for their services.

If you think about it outside of difficult to apply antitrust principles, MIT and the Ivy League schools were simply getting an unfair advantage over Stanford; it wasn't a level field in competing for high caliber students. In contrast, NCAA rules apply uniformly to all schools and attempt to make it as level a playing field as possible.

Blogger Rick Karcher -- 7/13/2007 6:56 PM  

It is so risky, to start another pro football league. After history, has told the story so many times, of leagues failing. To stay in business.

I live in Oklahoma City, and as a boy, my father took me to watch the Oklahoma OutLaws.
The OutLaws's QB. was "Doug Williams"
I just hate to see another league fail. I like the idea of a choice, to watch and support.
For example the NBA and the ABA.
The choice was great in the 70's. We the Fans, had our choice. Between the two basketball leagues.

So to see another pro football league, coming out. Does spark that child inside me. A new bread of football, I like the Idea, just like when Vince McMahon ; stated the XFL.
McMahon, threw in the towel, just after one season.
Well only time will tell if the AAFL. can go head to head with NFL.
I know that is not there goal, yet,
it is a business. And they have to make money to keep the gates open.

So I expect if the AAFL, has good rating, they will push it and see how far they can take the AAFL.
So I will be watching.
I hope they can keep the gates open.csipdhc

Blogger Mike D Lunsford -- 7/17/2007 6:50 AM  

Good post. It does bring up a number of valuable questions and points.

First, the other sports do have other leagues. Baseball has single-A, double-A, etc. Hockey had the AHL, IHL, ECHL, etc. And basketball has the NBA developmental league. However, football is pretty much college or pro. Sure, we have the AFL and the CFL, but they operate under different rules and aren't seen as a direct comparison to "pro"(i.e. NFL) football.

Second, I'm not an expert on anti-trust legislation by any stretch, but I wonder that if making part of the argument in favor of requiring a college diploma be centered around improving college graduation rates would make a difference. Quite a few people don't exactly see the current NCAA structure as very favorable for the athletes because the schools rake in tons of money capitalizing on their playing ability. This is a way for them to benefit from the college education that they've been given by their school.

BTW, I think that former Gator/AAFL Spokesman Travis McGriff is scheduled to be on a South Carolina radio show this evening discussing the new league.

Blogger BDoc -- 7/20/2007 9:32 AM  

Post a Comment