• October 20, 2014

Justice Department Examines NCAA Scholarship Rules

In a rare show of interest in college sports, the U.S. Department of Justice is examining the rules that determine how colleges award athletics scholarships.

Lawyers from the department's antitrust division recently met with officials from the National Collegiate Athletic Association to discuss the association's rules governing athletics scholarships, according to an e-mail message from the NCAA obtained by The Chronicle. The department appears to be looking at the limitations the NCAA places on scholarships. Currently, an institution is allowed to give an athletics scholarship for only one year at a time—a rule that has been on the books since 1973­—and the scholarship may be renewed for no more than five years in all.

The message from Elsa Cole, the NCAA's general counsel, was sent this week to Division I athletic directors and conference commissioners, among others. Lawyers from the Justice Department, Ms. Cole said in the message, are now beginning to contact the general counsels of Division I colleges, as well as conference commissioners, to discuss "the purpose and effect of those rules."

A spokeswoman for the Justice Department said she could not comment on the matter.

The precise nature of the discussion between the association and the lawyers is not clear. Bob Williams, a spokesman for the NCAA, said in an e-mail message to The Chronicle that the association was working with the federal agency "to help it understand that athletics financial aid is a 'merit' award." He said the NCAA would emphasize to the department that athletes must remain academically eligible and meet certain expectations to retain their scholarships, making annual reviews "appropriate."

The debate over whether financial aid for athletes should be renewable annually or represent a four-year commitment has never fully abated in the 37 years that the one-year rule has existed. Some athletes say the annual renewal leaves them vulnerable in cases of injury or misunderstandings with a coach, while many athletic directors and coaches say it is a necessary and logical practice.

Yet while the sensitivity might be familiar, the antitrust angle is not—and could have a significant impact on college sports, legal experts said.

"If the Justice Department takes the position that rules most people think are designed to protect amateurism or academics are somehow subject to antitrust risk ... that's opening the door" to legal challenges, said Gary R. Roberts, dean of the Indiana University School of Law at Indianapolis.

A Legal Precedent

College sports is no stranger to attention from Washington. In the past year, President Obama has said he would favor a college football playoff, Secretary of Education Arne Duncan has criticized programs that fail to graduate their athletes, and last month, Vice President Joe Biden said the administration would work hard to strengthen gender-equity policies.

The NCAA has also faced its share of scrutiny. The association's rules have been the target of legal action on many occasions, and in recent years, some members of Congress have challenged its federal tax-exempt status.

In this case, it's not clear what prompted the Justice Department to take an interest in scholarship rules, or what the outcome might be. Several athletic directors and one conference commissioner confirmed on Thursday that they had received the NCAA's message but were not certain of the scope or significance of the inquiry.

"I'm not surprised by [the inquiry]," said Gregory Christopher, athletic director at Bowling Green State University. "The entire concept of grant-in-aid has been talked about before. It's a not a new conversation."

Michael McCann, a professor at Vermont Law School who specializes in sports law, said several outcomes were possible: The Department could recommend that the NCAA change its rules governing scholarships. It could sue the association, which he said is unlikely. Or it could do nothing at all.

Mr. Roberts, of Indiana, said many of the NCAA's bylaws, not just those governing scholarships, are meant to create parity among athletics programs. But they are rules that, in any other context, could be seen as overly restrictive and possibly in violation of antitrust law, he said.

Over the years, court rulings have established a legal precedent that favors the NCAA in challenges of rules meant to protect amateurism or academic requirements. But in matters that are commercial in nature—capping coaches' salaries, for instance—courts have been less sympathetic. In those antitrust cases, courts have ruled that the NCAA does not have the authority to regulate its members so strictly.

In 1991, the NCAA's member institutions, in an attempt to contain spiraling costs, adopted a rule putting strict limits on the salaries of certain assistant coaches. A group of coaches later sued the NCAA, claiming the rule violated antitrust law, and in May 1998, a federal jury awarded $22.3-million in damages to the coaches—an amount that, under antitrust principles, was tripled to $67-million.

More recently, in 2008, the NCAA settled a case brought by a group of former Division I football and basketball players who challenged the NCAA's cap on scholarships. Under the settlement, the association agreed to reallocate up to $228-million over five years to help more than 150,000 Division I athletes in all sports pay for basic expenses not covered by their athletics scholarships.

The current scrutiny of scholarship rules could blur what has become a bright line, legally speaking, between legislating the amateur side of college sports and controlling the business side of it, Mr. Roberts said.

"There's a lot of history and a lot of precedent to suggest that these kinds of rules ... that are designed to protect amateurism and academic standards are lawful," Mr. Roberts said. "But that's not carved in stone."

Comments

1. 11134078 - May 07, 2010 at 09:53 am

"Amateurism"? With those TV contracts and those coaches' salaries? Intercollegiate sports (at least at the Division I level) is inherently corrupting. Just for a start at getting the business under control, it might be useful of receipts from games, whether at the gate or from TV contracts, were taxed as unrelated income.

2. ddwalker - May 07, 2010 at 10:25 am

I'd like to see more details about the annual review. Academic scholarships are typically predicated on maintaining some minimum GPA, which makes them subject to annual review, but the criteria are stated up front and the student knows what is expected. Are athletic scholarships guaranteed for up to 5 years if explicit criteria are met, or is each year a subjective decision? I don't know and wish the article were clearer. And now I'll pontificate. The cap at 5 years should be changed to however many years the average student at each institution takes to graduate. If the typical student at Big Sports U takes 6.5 years to graduate, then all athletic scholarships should be expanded to that number. Does that put institutions that average 6 plus years at a competitive disadvantage to institutions that average 4 years? You bet. So what? Let's reward the quick for promoting successful academics. Moreover, athletes should be allowed to negotiate the maximum length. If the coach is really jonesing for an athlete, let the athlete negotiate for however many years they want. Master's degree? Doctorate? How badly is the athlete desired?

3. 362614 - May 07, 2010 at 12:01 pm

The one year scholarship renewal really isn't that bad if it isn't coupled with strict transfer rules for certain sports. For something that is suppose to be about amaturism, I don't see the need for student-athletes of certain sports to essential sign non-compete clauses when they accept a grant-in-aid.

4. 12071647 - May 07, 2010 at 04:14 pm

I'm at a private university that has the status of a non-profit, exempt from taxes because its mission serves the public good. However, its very successful hundreds-of-million dollar business (college basketball) has caused it to forget the reasons behind that tax-exempt status. The university's value of that sports-business mission is reflected in the coaches' multi-million dollar salaries, all the while a disgusting moral lapse is evidenced by the unpaid labor of the athletes -- college "students" lured in by the hopes of the riches of going pro. Sure, they get a scholarship to attend the university, but that only means that they don't have to pay tuition to provide the sweat and skill that gains tremendous revenue for the university.

I say let's privatize college sports. Introduce a rule/law that if a coach is paid more than, say, twice the average faculty salary, then the sport is deemed outside the sphere of public service. Then tax all of that sport's revenues as business income, which would allow the phenomenal coaches' salaries, but also end the morally bankrupt practice of not paying the athletes for their valuable efforts.

5. marka - May 10, 2010 at 07:12 pm

As the article mentions, this isn't the only aspect of NCAA activity to merit antitrust scrutiny. There is plenty of big $$ involved, with plenty of large commercial enterprises involved. The whole scheme is worthy of a thorough antitrust review.

6. 11236850 - May 18, 2010 at 12:49 pm

I see that almost of you that wrote above are not well informed and unaware of the real scope of college athletics.

It is probably because the article did not give some details on some parts (and many other considerations in NCAA sports), as there are differences from sport to sport and difference on support of each sport gender.

Not all sports are fully funded and many have a scholarship cap of less than the number on a sport roster. Ex: soccer- 24 players average, only UP to 14 scholarships available (the "UP" because the institution can decide on allowing even less than the total cap set by NCAA).

The other sports (mostly male sports) as football, men's basketball, and baseball gets what it is "culturally" expected and supported. Higher scholarship numbers (even though many times the roster is less than the number of scholarship available and capped by NCAA - Ex: men's basketball: 15 scholarships cap for 12-13 players (they might recruit more than 15 players but cut some sophomore or juniors that is nor "performing").

The coaches of other sports earned much less than coaches than the ones that work with football, basketball, and baseball (or hockey if the school is up North or Midwest).

Another thing, females coaches doen'st not make up part (or have opportunity to work) on the "culturally supported" sport and earn much, much less. Many times they work more than other sport coaches because they coach sport that have a higher number on they roster and less assistant coaches to work for them. They are also given less opportunity (or not at all) to coach these "culturally supported" male sports.

The situation of what include scholarship renew is much less important than other facts and situations that includes the support from sport-to-sport, gender-coaching, and roster size than maintaining academics as the sole important part to keep an yearly scholarship eligibility.

We need to remember that NCAA reflects what the university officials wants, and university officials reflect what the community/culture wants and support.

The matter of having four years "deal" is not helpful for the motivation and responsibility of being a "future bread-winner" as for a hand full of opportunities of getting a REAL job tha will come along with a four-year contract. That is not realistic and feasible for the economy growth and production. It does not happen in real life, and if it would, the economy and businesses could not afford to contract every single work in a four year deal.

The average and poorly motivated millenium generation student-athetes and general students are looking for ways to continue taking for granted what they believe they are "entitled to." In case of injury, many coaches award a second year scholarship to help the transition by asking the student-athlete to serve in student-managing team support after that year of scholarship have expired. Or, the student-athletes find other means of support in general student aid.

There are student-athletes that quits sport program in the fall because they know they would have a scholarship cover in the spring regardless of grade and performance (they use the system taking advantage of the one-year deal).

If a longer scholarship contract is established to last four years (or whatever it takes to graduate) the whole generation of student-athletes will be compromised as they will expect that companies or business offer them a four-year plus deal for them to make a living because "they deserve."

Life is much more valuable and helpful to young adults to learn and grow on a day-to-day basis or a year-to-year commitment than what is being investigated.

Student-athletes need to stay academically eligible, performance ready, and disciplined focused. Athletics still helping young adults to be more prepared to job market, to be accountable, to produce, to be a "team player."

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