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Tuesday, April 15, 2008
David Throws Two Punches at Goliath

A year ago last April, it was reported that Houston Baptist University (HBU), an NAIA school, made an application to rejoin the NCAA at the division one level, on a provisional basis. At that time, it was also reported that, because HBU was an NCAA division one school previously from 1973 to 1990, HBU would be required to wait only three years instead of the normal seven to become a full-fledged member of the NCAA. But according to HBU, after it became a provisional member last year, the NCAA notified HBU that the rule setting forth the provisional period for returning members was changed from three to seven years by an "editorial revision...(that) does not require a vote of Division 1 membership and is not a substantive change."

Last month, HBU threw its first punch by filing a lawsuit against the NCAA in state court alleging that the NCAA violated its own constitution when it informed HBU that it would have to wait the full seven years before becoming a full-fledged member. In its lawsuit, HBU asserts "such an amendment (to the constitution) would have to be voted on by the full membership and passed by a two-thirds vote" and that "the change was arbitrary, capricious, and in total disregard of its own rules and regulations."

Last week, HBU threw its second punch by filing an antitrust lawsuit against the NCAA in federal court alleging that the seven-year provisional period amounts to "an unreasonable restraint of trade" in violation of the Sherman Antitrust Act. HBU alleges that the seven-year wait has deprived it and other schools of the opportunities to compete in "highly successful and lucrative" postseason tournaments, specifically the NCAA men's basketball tournament, and that the NCAA has recently "established and sought to enforce policies that have had the intent and effect of restricting colleges from competing at all."

Whether David actually ends up defeating Goliath here remains to be seen. In the state lawsuit, one of the first issues that most likely needs to be resolved is whether HBU has standing to assert a violation of the NCAA constitution when it is not a member of the NCAA. There is a factual issue regarding when the rule was revised from three years to seven. According to the press release, an NCAA spokesman said that "information on the change was provided in writing to Houston Baptist before the school applied for membership." If the rule was revised before HBU filed its application, it might bolster a defense by the NCAA that HBU has no right to complain about the manner in which NCAA member schools conduct their business, even when it violates their own constitution and bylaws. But if the rule was revised after HBU filed its application, the standing issue becomes more problematic for the NCAA because then it can be argued that the NCAA has an obligation to all applicants to follow its rules and to not act unfairly nor arbitrarily, which would necessarily include following its rules pertaining to the procedures for amendments to the Constitution. HBU would then need to prove that the amendment to the rule regarding the provisional period for returning members was not made in accordance with the requisite procedures for amendments as set forth in its Constitution (another factual issue).

In the antitrust lawsuit, I don't think it's pertinent when the rule was revised by the NCAA. HBU is asserting that a seven year provisional period is an unreasonable restraint on HBU's ability to compete with other member schools in NCAA post-season basketball tournaments. A rule providing a provisional period before an applicant can become a full-fledged member of the NCAA constitutes a restraint on trade because the applicant is prohibited from competing in Division I athletics with all NCAA member schools. But the key question is what period of time constitutes a "reasonable" period of time, or to put it another way, whether seven years is an "unreasonable" period of time. The NCAA essentially needs to show a legitimate business reason for adopting a seven-year provisional period. Under a rule of reason analysis, the NCAA needs to demonstrate that the procompetitive effects of the rule outweigh its anticompetitive effects -- Of course, focusing on how the consumer is affected by this rule, which I have no idea how to assess. Let the jury try to figure out who the consumer is and how he, she or it is affected. You gotta love antitrust in sports....


I am not a lawyer, but it seems to me that if the NCAA is subject to antitrust laws regarding basketball competition then the players should also file suit, given that the cartel conspires not to pay them fair wages for their services.

Anonymous Anonymous -- 4/15/2008 11:55 AM  

I agree that maybe the athletes at the school should file a class action suit. The freshmen in all sports were recruited with the promise of the possibility of post season season competion their senior year.

Anonymous Anonymous -- 4/15/2008 12:29 PM  

I am not so sure I agree with the grounds for which Anon 12:29 suggests. You would be hard pressed to find a suit that alleged failure to deliver based on a "promise of the possibility." In this case, such a possibility simply did not come to pass. This is the difference between a promise and a possibility. If playing on the D-I level meant that much to HBU student-athletes then perhaps they should have attended a different institution.

Without knowing a whole lot about NCAA legislation, I find it interesting that HBU is allowed to jump, even on a provisional basis, from the NAIA level straight to D-I without having to compete on the D-II or D-III level.

Does anyone know if HBU was able to meet their provisional requirements during this past season?

Anonymous brad -- 4/15/2008 1:13 PM  

The NCAA is under no obligation to pay wages because they offer competition in the unique market of amateur athletics and the NCAA has some discretion to define amateur (note that the NAIA defines amateur more narrowly than the NCAA, some sports associations for specific sports more broadly). Based on current law, the NCAA members cannot be compelled to award more aid than is needed to cover the cost of attendance.

The NCAA was sued on this matter and it appears to be headed to settlement.!ut/p/kcxml/04_Sj9SPykssy0xPLMnMz0vM0Y_QjzKLN4g38nYBSYGYxqb6kWhCjggRb31fj_zcVP0A_YLc0IhyR0VFAABTEJw!/delta/base64xml/L0lDU0lKQ1RPN29na21BISEvb0VvUUFBSVFnakZJQUFRaENFSVFqR0VBLzRKRmlDbzBlaDFpY29uUVZHaGQtc0lRIS83XzBfNVVWLzEwODIzMTM!?WCM_PORTLET=PC_7_0_5UV_WCM&WCM_GLOBAL_CONTEXT=/wps/wcm/connect/NCAA/Media+and+Events/Press+Room/News+Release+Archive/2008/Official+Statements/NCAA+Statement+in+Settlement+of+White+Case

It appears Houston Baptist's state court case is a non-starter thanks to the standing issue.

On the Federal side, it would seem likely that SOME mandatory transition period would be upheld. Is seven years appropriate? That will be the case I think.

There would be several sound reasons to put forward for a transition period.
1. Assuring that the institution and staff understand the NCAA regulations and are in compliance.
2. Allowing sufficient time to pass for rosters to be filled with student-athletes who meet the initial eligibility standards of the NCAA.
3. Requiring institutions to demonstrate the needed financial commitment to Division I athletics where institutions are required to give more grants-in-aid and sponsor more sports than NAIA members or members of the other two divisions.

Blogger Mark -- 4/16/2008 12:33 PM  

Why did the NCAA extend the provisional period? Are they looking for proof that the institution is committed to adhering to NCAA regulations? Looking for an economic commitment from the insitution to the program?

It's obvious to me that it's in the NCAA's best interest to keep the total number of D.1. basketball teams low. If the NCAA makes it easy to enter D.1., more teams will join, which will likely create more conferences, which will allow more teams to get automatic bids unless the mid-major and smaller (size school) conferences expand. Either way the effect would be a decrease in competitiveness of games, which would end up costing the NCAA.

Looks like the NCAA is in a tough position when considering fairness. Can the NCAA implement a promotion/relegation system, much like the European soccer leagues, for uncompetitive teams to avoid anti-trust violations? Implement a second tier (play in) league for provisional and uncompetitive teams?
This would have the affect of encouraging these colleges to sink money into their programs, assuming this has the effect of making the program more competitive.

Blogger Will -- 4/17/2008 11:57 AM  

More conferences isn't much of an issue.

Auto bids are capped at 30 and there are 31 conferences. The two lowest rated teams earning an auto bid have to play-in. If there were one more conference added the four lowest rated auto qualifiers would have to play in.

An additional conference wouldn't qualify for an auto bid for five years and once it does each year in Division I it would get (currently) $190,000 for each basketball tournament participation the past 6 years. Even taking a full share (six year's worth) that amounts to less than two-tenths of percent of the NCAA basketball revenue before merchandise and ticket sales.

Blogger Mark -- 4/17/2008 3:13 PM  

post the blog and sports video on - definitely news worth information in this article to post there.

Blogger Jon -- 4/18/2008 12:15 AM  

The HBU antitrust claim would be a perfect law school exam question. The NCAA clearly is on shaky grounds trying to defend the idea that an "editorial" change like this is not substantive. Four additional years of waiting is substantive. As much as the NCAA and Myles Brand may not like it, the NCAA must follow its own rules. Because it didn’t follow its own rules, the NCAA has subjected itself to an antitrust suit by trying to pull a "fast one" on HBU. This could turn into a very foolish decision for the NCAA. Certainly, some mandatory waiting period is necessary before attaining full NCAA membership, but now the NCAA may have put its seven year waiting period at risk just because it didn't follow the associations rules. The scope of what relevant market is being restrained here will be key. If the NCAA manages to frame the relevant market as "collegiate amateur sports"...HBU won't be impacted at all because it still competes on a provisional basis. If HBU frames the relevant market as NCAA Division I athletic competition, it may have a better claim because the restraint is more severe. Even if HBU identifies a narrow relevant market, the pro-competitive justifications may carry the day for the NCAA. Is a seven year probationary period too long? This then becomes the question. If the NCAA wins that argument, HBU could easily make a case that 5 or even 3 years is the least restrictive means necessary to accomplish the pro-competitive justification put forth by the NCAA. The end result....the NCAA put its 7 year probationary period at risk because Myles Brand is an arrogant and dictatorial administrator that doesn't feel the need to follow the rules of the NCAA....even though he expects everyone else to.

Anonymous Anonymous -- 4/23/2008 12:05 AM  

Has there been any movement in either of the Houston Baptist cases?

Anonymous Anonymous -- 6/03/2008 9:44 AM  

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