More on the Legality of the BCS: The Consumer Welfare Issue

Following up on last week's discussion regarding the legality of the BCS under antitrust law, there is one additional defense that can be asserted by the BCS that warrants some consideration. Specifically, in recent weeks BCS Executive Director Bill Hancock has argued that the BCS does not violate antitrust law because it does not harm consumers. In other words, the BCS alleges that it, at most, results in the six major BCS Conferences harming their rivals (i.e., the non-automatically qualifying, so-called non-BCS Conferences), but does not diminish competition overall. As a result, because consumers have not themselves been harmed, the BCS argues that it does not violate federal antitrust law.

This defense draws on a line of antitrust precedent dating back to the Supreme Court's 1962 decision in Brown Shoe Co. v. United States, in which the Court famously stated "it is competition, not competitors, which the [Sherman] Act protects." Following Brown Shoe, courts have increasingly required antitrust plaintiffs to establish that a challenged restraint harm consumers, rather than simply hurt a competing firm in the larger competitive marketplace.

This consumer welfare argument is probably the BCS's strongest defense in response to a group boycott claim focusing on harm to the non-BCS Conferences. While the BCS's ultimate chances of success on this argument are uncertain, the defense is not as foolproof as the BCS would have people believe. Indeed, as I discuss in my forthcoming article "Antitrust & The Bowl Championship Series," there are several significant counter-arguments that can be asserted against the BCS on the consumer welfare issue.

As an initial matter, the Supreme Court has never considered whether a showing of harm to consumer welfare is necessary in a group boycott claim. While the Court could of course ultimately hold that consumer welfare must be implicated in group boycott cases, that outcome is not necessarily certain, given that a classic group boycott claim is - at its root - premised on harm to a competing firm.

More significantly, though, a plaintiff challenging the BCS under antitrust law can point to analogous case precedent to argue that the BCS does in fact harm consumers in a way that is cognizable under antitrust law. Specifically, in the 2004 case of Metropolitan Intercollegiate Basketball Ass'n v. National Collegiate Athletic Ass'n, 339 F.Supp.2d 545 (S.D.N.Y. 2004), the promoters of college basketball's National Invitational Tournament (NIT) sued the NCAA, alleging that an NCAA rule requiring that all teams selected for the NCAA's post-season college basketball tournament exclusively play in that tournament unfairly harmed the competing NIT, preventing the NIT from assembling the best possible field of teams for its own tournament. In response, the NCAA -- like the BCS -- argued that its regulation did not harm consumers, but instead at most only harmed a competitor to the NCAA, and therefore did not violate antitrust law. The Southern District of New York rejected this argument, finding that it could not distinguish harm to the competing NIT from harm to competition itself. Specifically, the court held that because the NCAA's rule prevented the NIT from offering consumers the most competitive basketball possible, consumer welfare had been sufficiently implicated to allow the NIT to proceed with its antitrust case.

A plaintiff challenging the BCS can rely on this precedent to argue that the BCS similarly implicates consumer welfare. For example, this year both Virginia Tech and UConn received automatic bids to BCS bowl games by virtue of winning the ACC and Big East, respectively. Those invitations came at the expense of higher-ranked teams left out of BCS bowl games, such as tenth-ranked Boise State, who was relegated to the MAACO Bowl Las Vegas. As a result, one could argue that football fans have been harmed by not being able to watch the most competitive BCS games possible, such as one featuring Boise State against ninth-ranked Michigan State, another highly regarded team left without a BCS bid. Similarly, a plaintiff could also argue that the BCS harms consumer welfare when it distributes a disproportionately lower share of revenue to participating non-BCS Conference schools, insofar as these financial discrepancies help foster competitive disparities throughout college athletics. In other words, because the six BCS Conferences receive twice as much revenue for their participation in a BCS bowl game as does a participating, non-BCS Conference, the BCS schools are able to use this revenue advantage to field stronger teams not only on the gridiron, but across a number of different sports. As a result, consumers are thus deprived of the most competitive college athletics events possible at the non-BCS Conference level.

Third, a plaintiff could also point to recent surveys showing that anywhere from 63 percent to 90 percent of college football fans have an unfavorable opinion of the BCS as further evidence that the BCS generally harms consumer welfare.

Finally, the consumer welfare defense likely would not protect the BCS from a potential price fixing claim, which could be alleged insofar as the BCS enables (i) formerly independent, competing entities (the participating conferences and bowl games) to collectively determine the amount of revenue to be distributed to BCS participants, and (ii) various BCS bowls to forgo competition by collectively selling their broadcast rights to television networks. In either case, harm to consumers could be established by pointing to the fact that both ticket prices and television fees rose significantly following the formation of the BCS, costs that have ultimately been shouldered by consumers. While some of these increases can undoubtedly be attributed to higher demand resulting from the BCS's creation of a national championship game, at least some portion is almost certainly the result of the elimination of competition between the formerly competing entities.

Therefore, contrary to the recent statements of the BCS's Executive Director, I do not believe that the consumer welfare defense would necessarily save the BCS from an antitrust suit. While the defense may ultimately enable the BCS to prevail in a group boycott case, there are strong arguments to the contrary available to a plaintiff challenging the system under such a theory. Even then, the defense likely would not offer the BCS protection against a possible price fixing claim. As a result, I believe that the BCS currently remains vulnerable to an antitrust attack.

A Different Take on the Legality of the BCS

In the spirit of a little good-natured debate, and because I ultimately come out differently on the merits of the issue, I thought I'd take the time to offer a few counter-arguments to Mike's thoughtful commentary yesterday regarding the legality of the Bowl Championship Series.

To begin, though, I agree with a lot of what Mike wrote. For instance, I agree that the BCS can credibly argue that it has created several pro-competitive benefits, such as the creation of a national championship game. I also agree that an antitrust suit against the BCS would itself be unlikely to directly result in the creation of a playoff (although I do believe that a verdict against the BCS would ultimately pave the way to the NCAA adopting a playoff).

However, where I differ from Mike is that I do not think that the pro-competitive benefits created by the BCS would necessarily save the system under antitrust law. Specifically, as Gabe Feldman's excellent 2009 law review article illustrates, when applying the rule of reason most courts would not only balance the system's pro- and anti-competitive effects, but would also (for better or worse) consider whether the BCS's pro-competitive benefits could be similarly achieved via less restrictive, alternative means. In other words, courts would ask whether the BCS could create the same pro-competitive benefits in another way, one that doesn't carry the same anti-competitive ramifications.

For example, I have previously argued that the BCS can be accused of violating antitrust law by unequally distributing its revenue to the disadvantage of the non-automatically qualifying, so-called "non-BCS Conferences." Notably, following last season, the BCS distributed at least $18 million in revenues to each of the six BCS Conferences, while the five non-BCS Conferences collectively received a total of only $24 million, despite two non-BCS schools (Boise State and TCU) having been selected to participate in BCS bowl games. Should a group boycott claim be asserted against the BCS on this basis, the creation of a national championship game is unlikely to save the BCS under the rule of reason, because a plaintiff could easily argue that this same pro-competitive benefit could be obtained in a less restrictive system, one where all BCS participants are rewarded equally (or, at least, more fairly) for their participation, regardless of their membership in a BCS Conference. Therefore, because I believe that the BCS is unable to point to a pro-competitive benefit that could not likewise be obtained via less restrictive, alternative means, I believe that it fails to satisfy the rule of reason.

Also, while I agree with Mike that the use of computer ranking systems in the BCS would normally support the legality of the current system, in this case I think that that benefit is mitigated by the questionable reliability of the BCS's computer systems. In particular, as Jeff Passan and Dan Wetzel (authors of the must-read "Death to the BCS") have pointed out, the BCS's computer rankings fail to account for margin of victory, an omission that renders them of highly questionable merit, and has actually resulted in several prominent statisticians calling for a formal boycott of the BCS. The omission of margin of victory most directly impacts schools from the non-BCS Conferences, who generally have to rely on beating lesser competition by significant margins as evidence of their competitive strength. Moreover, just this week several errors resulting from computer miscalculations were discovered in the final BCS Standings, highlighting the lack of safeguards and transparency in the present system.

Similarly, while I also agree that maintaining the significance of the regular season in theory provides a strong pro-competitive argument in favor of the BCS, one can argue that the BCS on balance actually detracts from the regular season for several reasons. First, in the BCS-era major conference teams have become increasingly less likely to schedule challenging regular season, non-conference games, for fear of sustaining a crippling early season defeat. More significantly, though, the BCS renders the vast majority of Division I football games irrelevant to the national championship race, including any late-season games not featuring one of the handful of teams still in the title race.

Finally, Mike also notes that the BCS could defend itself from a claim that it unfairly discriminates against the non-BCS Conference teams by arguing that the current selection process and revenue distribution policies simply reflect the current competitive landscape, in which demand is higher for games involving BCS Conference schools. Indeed, University of Nebraska chancellor Harvey Perlman has himself made this very argument in defense of the BCS. The problem with this argument is that over the last few years BCS bowl games involving schools from non-BCS conferences have actually generated higher television ratings and stadium attendance than some BCS games involving only BCS Conference schools. Most notably, the TV ratings for last year's showdown between non-BCS schools Boise State and TCU in the Fiesta Bowl outdrew the Orange Bowl (featuring two BCS Conference schools) by a significant margin. In any event, this defense by the BCS would also likely succumb to the less restrictive alternatives inquiry, in that the BCS could obtain all of its current pro-competitive benefits under a system in which each conference is rewarded for its own individual contributions. In other words, rather than categorically awarding each of the six BCS Conferences one large sum of money, while giving the non-BCS Conferences a significantly smaller sum, the BCS could instead individually assess the respective contributions of the various participating conferences when deciding how to distribute its revenue. This year, such a system would undoubtedly award a greater share of the pie to third-ranked TCU and its Mountain West Conference than unranked UConn and the Big East Conference. Under the BCS's current revenue distribution policies, though, the Big East will likely take home more than twice as much revenue from the BCS as will the Mountain West Conference.

Therefore, while reasonable minds can of course differ, I believe that on balance the current BCS does in fact violate antitrust law. That having been said, given the unpredictable nature of the jury trial process, I admit that the outcome of an antitrust suit against the BCS would be far from certain.

For more on these (in my mind) fascinating issues, be sure to check out Mike's forthcoming law review article "Antitrust, Governance, and Postseason College Football," and my own "Antitrust & The Bowl Championship Series."

Conference Expansion and the BCS

Although the conference expansion frenzy has seemingly settled down for the time being (see earlier posts on the subject here and here), one of the questions that remains is what impact, if any, the minor reshuffling will have on the Bowl Championship Series. Specifically, following Utah's recent decision to join the Pac-10, the question arises of whether two of the most strident critics of the BCS, Utah Attorney General Mark Shurtleff and Utah Senator Orrin Hatch, will remain as interested in pursing antitrust claims against the BCS.

Both Attorney General Shurtleff and Senator Hatch have previously accused the BCS of violating federal antitrust law by granting preferential treatment to universities in the traditionally stronger "BCS Conferences," at the expense of teams from the historically less competitive "non-BCS Conferences." Both men became critical of the BCS following perceived snubs over the years to their home state schools, the University of Utah and Brigham Young University.

For his part, Senator Hatch has stated that he will continue his campaign against the BCS despite Utah's recent admittance into a BCS Conference. Indeed, Senator Hatch - a BYU alumnus - has a strong basis to argue that the BCS continues to violate antitrust law.

In a new paper, Antitrust & The Bowl Championship Series, I argue that the BCS remains quite vulnerable to attack under federal antitrust law. In particular, although recent modifications to the BCS have increased the access for non-BCS Conference teams, the BCS can still be challenged on several grounds.

First, I assert that the BCS can be attacked as an illicit group boycott, insofar as it distributes revenue unequally and without justification, to the detriment of universities in the non-BCS Conferences. For example, following the 2009-10 season, the BCS distributed at least $18 million in revenues to each of the six BCS Conferences, while the five non-BCS Conferences received a total of only $24 million, despite two non-BCS schools (Boise State and TCU) having been selected to participate in BCS bowl games. Thus, despite increased access to BCS games for the non-BCS schools, the non-BCS Conferences still face significant differential treatment with respect to the financial payouts accompanying an appearance in a BCS bowl game.

Second, and perhaps more significantly, the BCS can also be attacked as an illegal price fixing scheme, due to the fact that it enables formerly independent, competing entities (the participating BCS Conferences and bowl games) to collectively determine the amount of revenue to be distributed to BCS participants.

Given this continued antitrust vulnerability, combined with the fact that Senator Hatch seems intent to continue pushing for reform, and it appears that the legality of the BCS under federal antitrust law is an issue that will not be going away anytime soon.

Utah AG Announces He Intends to File an Antitrust Suit Against the BCS

USA Today reported on Wednesday that Utah Attorney General Mark Shurtleff intends to file a federal antitrust suit against the Bowl Championship Series within "the next couple of months." Shurtleff reportedly told the paper that the attorneys general of at least two other, unnamed states would join him in the suit. The story also reports that Shurtleff stated the U.S. Department of Justice has indicated it would consider following on with its own formal investigation should the state AGs take the lead by filing a suit. Shurtleff is seeking to enlist the help of an antitrust law firm to assist with the case.

This is not the first time that Shurtleff has spoken out against the BCS. A vocal critic of the BCS dating as far back as 2003, Shurtleff announced that he was formally investigating a potential antitrust claim against the BCS in 2009. Meanwhile, Shurtleff stated last October that his office had finished a draft complaint for the case. It will be interesting to see if Shurtleff follows through on this latest threat, or if he is just trying to increase the pressure on the BCS heading into its annual meeting next week in New Orleans. Given Shurtleff's previous stated desire for the U.S. Department of Justice to take the lead on an antitrust suit against the BCS, this latest announcement may also provide an indication that the federal government is unwilling to initiate a suit itself.

While the merits of such a suit can, of course, be debated (see here and here), ultimately I'd be surprised if Shurtleff's suit ever proceeded all the way to trial. There is little incentive for the BCS conferences to spend millions of dollars (and risk treble damages) defending a system that generates hundreds of millions of dollars less per year than would a playoff system.

Meanwhile, although BCS officials have previously threatened to return to the pre-Bowl Alliance post-season model should the BCS system be challenged legally, this threat rings hollow for several reasons. First, the BCS conference schools would be leaving too much money on the table -- money they have grown to depend on during the lifespan of the BCS -- to ever seriously consider a return to the old system. Second, as Sports Illustrated's Andy Staples notes, even if college football initially did go back to the pre-Bowl Alliance days, several of the current BCS conferences (in particular the Big East and ACC) would likely fare much worse than they would under a playoff system. Therefore, even if the SEC, Big 10, Pac 12, and Big 12 were all content to return to the old system, the ACC and Big East would likely join with the current non-BCS schools to give the "have-nots" a significant majority within the Football Bowl Subdivision, dramatically increasing the pressure on the NCAA to finally implement a playoff system.

Therefore, although an antitrust suit against the BCS is itself unlikely to directly lead to a court order mandating that the NCAA adopt a playoff system, I strongly suspect that a playoff system would ultimately result should AG Shurtleff files suit. It simply doesn't make sense for the BCS conferences to expend the resources necessary to defend the current system, and in lieu of the current arrangement, a playoff system is the most practical option.

Update #1: A new report out states that AG Shurtleff will be meeting with officials from the U.S. Justice Department this week, so my assumption above that the federal government may be unwilling to be involved in the case might be premature.

Update #2: AG Shurtleff discussed his decision to file suit against the BCS with a local radio station yesterday. The interview is available here.

Even More on Antitrust Law and the BCS

While Monday evening's BCS National Championship Game commanded much of the college football world's attention this week, the antitrust implications of the Bowl Championship Series continued to make news as well. Specifically, as reported by several media outlets, the law firm of Arent Fox -- legal counsel to Boise State University and the Mountain West Conference on matters relating to antitrust law and the BCS -- recently submitted a report to the United States Department of Justice arguing that the BCS violates federal antitrust law. The Justice Department is presently deciding whether to launch a formal antitrust investigation of the BCS.

The Arent Fox report sets out to debunk 22 common arguments advanced in support of the BCS, ranging from the assertion that a playoff would damage college football's regular season, to the issue of whether consumer welfare is sufficiently implicated by the BCS to warrant an antitrust lawsuit. The report concludes that the BCS does in fact violate antitrust law, and urges the Justice Department to launch a formal investigation.

To read the Arent Fox report click here. For other takes on the legality of the BCS under antitrust law, please see my article "Antitrust & The Bowl Championship Series," as well as Michael McCann's "Antitrust, Governance, and Postseason College Football."

More Antitrust and the BCS

Following up on my post from last week, the Idaho Statesmen features an interesting article today regarding a potential antitrust lawsuit against the Bowl Championship Series. The article notes that Utah Attorney General Mark Shurtleff intends to continue his pursuit of an antitrust case against the BCS, despite Utah's recent admission into the Pac-10. The article reports that AG Shurtleff will be meeting with the U.S. Department of Justice in mid-July to discuss the possibility of the DOJ challenging the BCS under federal antitrust law, with a decision from the DOJ expected this fall.

The article also includes an interesting discussion regarding the effect that a possible appearance by Boise State in this season's BCS National Championship Game would have on a potential antitrust suit against the BCS. While other strong antitrust claims against the BCS would continue to exist, having a university from a non-BCS conference appear in the national title game would nevertheless weaken such a case, enabling the BCS to argue that its system is truly open to all Football Bowl Subdivision universities, regardless of conference affiliation. This is one of the reasons why I believe that claims based on price-fixing and unequal revenue distribution provide a stronger basis for an antitrust challenge to the BCS, shifting the focus of the case from one of access to the financial disparities inherent in the current system.

The Idaho Statesmen article is available here. For more on potential antitrust claims against the BCS, see my article Antitrust & The Bowl Championship Series.

Bullish on BCS?: Stripping USC and Potential Antitrust Implications for the BCS

As expected, the BCS chose to vacate USC’s 2004 national title last Monday. The decision was merely a formality because the BCS was only waiting for the NCAA to deny USC’s final appeal. From a legal perspective, however, the interesting consideration is why the BCS even cares about the NCAA’s ruling in the first place.

The BCS, which has been debated vigorously on this blog, is a virtual legal fiction with no organizational contracts at all. It has no formal affiliation with the NCAA whatsoever. Yet, BCS executive director Bill Hancock said in reference to the BCS championship games, “One of the best ways of ensuring they remain so is for us to foster full compliance with NCAA rules.” Presumably, there is nothing that mandates the BCS to take away a title for NCAA rules violations. In fact, the Associated Press did not to strip USC of its title. Theoretically, the BCS could operate completely outside the scope of NCAA regulations. Vacating USC’s appearances simply maintained the integrity of the system. With a potential antitrust suit lurking, the obvious co-dependence between the BCS and the NCAA could certainly play a prominent role in the case.

As attenuated as it might seem, this action could be potential ammunition for BCS opponents to suggest that the BCS is in fact not the least restrictive alternative system under rule of reason analysis of Section One of the Sherman Act. Hancock’s quotes seem to manifest an uneasiness that the BCS could in fact lose its right to stage the games should it fail to comply with NCAA rules. Perhaps Hancock realizes that the system is now in a precarious position and that viable less restrictive alternatives exist (e.g. the old bowl system, an NCAA mandated playoff, or another independently run postseason tournament). It could be that the BCS stripped USC of its title in order appease the NCAA and preserve its restrictive system.

Alternatively, the BCS may try to mitigate its culpability by portraying the NCAA as an equally complicit co-conspirator. The fact that the BCS is concerned with running its system in accordance with the NCAA suggests the presence of an unspoken agreement between the parties to maintain the current system. If the BCS did not require NCAA compliance, the NCAA would certainly step in and create its own postseason product. It seems, on the surface at least, that the NCAA has a “don’t ask don’t tell” type of policy in regard to the BCS, so long as it requires its member schools to remain in compliance. Despite NCAA President Mark Emmert’s letter to Assistant Attorney General Christine Varney, the NCAA may not be able to wash its hands of responsibility should a suit be filed.

Ultimately, the USC ruling may have little bearing on any potential suit, and certainly both sides will advance stronger arguments than this, but it certainly raises questions as to the veritable relationship between the BCS and the NCAA. Some conspiracy theorists argue that the NCAA actually plays a role in BCS operations? If so, what is that role? Will it matter if the Government files suit?

Hat tip to law clerk, Brian Konkel, for his work on this piece.

Recent BCS-Related Developments

For those following the on-going saga regarding the legality of the Bowl Championship Series under federal antitrust law, there have been several developments this week that may be of interest.

First, the Honolulu Star-Advertiser reported on Tuesday that the State of Hawaii is considering whether to join the forthcoming antitrust suit that Utah Attorney General Mark Shurtleff intends to file against the BCS. Hawaii AG David Louie reportedly discussed the issue at length with Shurtleff during a recent meeting of state attorneys general, and his office is working on an agreement with Utah to share related materials. Hawaii would be a logical state to join in such a suit, given that its flagship university is in a non-BCS conference, and received a disproportionately small share of revenue for its 2008 Sugar Bowl appearance.

Second, Christine Varney, an Assistant Attorney General in the Antitrust Division at the U.S. Department of Justice, sent a letter on Tuesday to NCAA President Mark Emmert, inquiring as to the NCAA's position on the BCS. Varney's letter began by stating that "serious questions continue to arise suggesting that the current [BCS] system may not be conducted consistent with the competition principles expressed in federal antitrust laws." The letter then went on to ask the NCAA to explain why it does not offer a playoff for the Football Bowl Subdivision, and whether the NCAA believes the BCS currently serves the best interests of "fans, colleges, universities, and players." The letter closes by stating that the NCAA's views on these issues will help the Justice Department determine how to proceed with respect to the BCS, a clear signal that the federal government continues to investigate the legality of the system.

It will be interesting to see how the NCAA responds to the Justice Department's letter. The six BCS conferences possess an inordinate amount of power within the NCAA, and will presumably pressure the organization to remain agnostic regarding a playoff in its response. However, the NCAA membership at large would stand to benefit significantly if a playoff were implemented in the Football Bowl Subdivision, given that the NCAA would undoubtedly retain a share of the revenues it generates (as it does for the NCAA Division I men's basketball tournament). In the unlikely event the NCAA came out in favor of a playoff, pinning the blame for the lack of a playoff on the obstinate leadership of the six power conferences, it could inflict a significant blow to the BCS's chances of surviving this latest round of political pressure.

Finally, CNN is reporting that Utah Senator Orrin Hatch "demanded" the Justice Department further consider a potential lawsuit against the BCS during Attorney General Eric Holder's appearance before the Senate Judiciary Committee on Wednesday. AG Holder reported stated that he did "not disagree" with Senator Hatch's characterization of the BCS as a "mess" that provides distinct advantages to certain "privileged conferences."

All in all, one has to wonder how much longer the BCS leadership will continue to defend the system in the face of increasing political pressure, especially given the fact that the six BCS conferences would stand to earn hundreds of millions of dollars more per year under a playoff system.

Update: Mike McCann is interviewed today by David Moltz of Inside Higher Ed on the Justice Department's letter to the NCAA.

Update #2: The PlayoffPac blog discusses the relevance of the NCAA's views on the playoff matter, noting that NCAA bylaws prohibit any outside entity from establishing its own championship tournament.

BCmesS: The 2008 Edition

The BCS has gotten old, or at least talking about it has. No, it's still not legal. No, the accomodationist reforms introduced in 2006 have not solved things. No, it's not all that interesting. After crowning a two-loss "champion" this week, the BCS system is something not even its creators and enablers seem to love.

In what can only be described as a cynical ploy to appease disgruntled boosters, UGA President and NCAA Executive Committee leader Michael Adams has now abandoned his 20 years of opposition to a playoff system and called for reform. SportsProf has some good analysis, concluding by asking the question, "What does the BCS really do?" (Think about how the lack of any real answer to this question would translate in terms of procompetitive justifications for trade restraints in an antitrust case).

In other amusing BCS news, Neil Abercrombie (D-HI), my former U.S. representative, has demonstrated why it is useful to have a law degree if one wants to be a lawmaker, declaring last month that the BCS was an unconstitutional antitrust violation (HT Lion in Oil via Hawaii Supreme Court blog):

Hawai'i Rep. Neil Abercrombie is prepared to propose a bill that would declare the Bowl Championship Series as unconstitutional and call for a playoff system.
* * *
Abercrombie said a system that limits automatic berths to six conferences "is restraint of trade. The automatic qualifiers are still taking care of themselves. I'm saying regardless of what good intentions may be behind this, it's restraint of trade. It's illegal. It's unconstitutional."

The amusing part of this is, of course, the labelling of anything one doesn't like as "unconstitutional."

The sad thing is that things almost worked out for the perfect antitrust claimant against the BCS this year. For a time, it seemed possible that Hawai`i would go undefeated yet miss the BCS. Had they done so, the WAC or the school itself would have been ideally situated to raise an antitrust objection to the current system. For better or for worse, the team made one of the big games, losing its ability to challenge the current system in court. Although last year's Boise State WAC victory over Oklahoma was thrilling, it may have been a fluke. From here out, one can safely expect that any WAC or Conference USA (and maybe even MAC) team which manages to end up undefeated will be given a BCS spot and then destroyed on the field. Once a school has a choice between the easy money for playing bowl patsie, or the long saga of litigating against the BCS cartel, it's hard to turn down the money.

Who is the next best hope? It seems to me like the Mountain West Conference has both the biggest gripe with the current system (among non-BCS conferences) and the best chance of effecting change. For some reason, the Big East is an "automatic berth" conference, and the Mountain West isn't. This is the case even though the top teams in the Mountain West (BYU and Utah) could likely compete in the PAC-10 against everyone but USC (which is a pretty fair description of most NCAA schools). One scenario: an undefeated Utah or BYU team gets a BCS bowl, while the other team, with one loss (to the undefeated team) and a win over a PAC 10 school, is excluded in favor of a one loss (or two loss) SEC team. Or what about a situation where an undefeated BYU or Utah team is excluded from a national title game in favor of a one or two loss "tie-in" school? Remember, BYU and Utah are not Hawai`i -- BYU has won a national championship and Utah has won a BCS game and gone undefeated. To be sure, Utah did not complain too loudly when it was excluded from the title game at the end of the 2004-2005 season (when both title contenders, as well as also-excluded Auburn, had perfect records), but should the Mountain West be happy with just a BCS berth every 2-3 years? It would seem that the current system would make it virtually impossible for a non-automatic berth conference team to ever earn a spot in the title game.

The BCS System: Could it be an illegal restraint on trade?

First, I would like to thank Greg and Mike for inviting me to speak this week in Greg's absence. I'm an avid reader of the Sports Law Blog, and these guys provide a great service to the sports law community.

Well, we're right in the thick of the college football season. Two weeks from now, the BCS football rankings will be revealed and the quest officially begins for the two best college football teams that will compete for the national championship -- that is, according to the system devised by the BCS conferences (ACC, Big East, Big 10, Big 12, Pac-10 and SEC). USA Today reporter Steve Wieberg recently wrote an interesting article ("BCS: Boon or bust?" 9/23/05), in which he highlighted some of the arguments for and against the BCS system that combines several polls and rankings of schedule strength. Wieberg pointed out some of the system's inherent flaws, including the games "it didn't get right":

--One championship-game qualifier (Florida State in 2000) nudged out another contender to which it lost (similarly once-beaten Miami, Fla.).
--In 2001, Nebraska didn't even win its conference title, getting blown out 62-36 in its regular-season finale.
--And there was nothing like 2003, when Southern California finished the regular season atop both the coaches' and media polls and didn't make the two-team cut.

I'm a skeptic when it comes to the use of statistics in sports, and I personally would like to see some sort of a playoff system devised for college football. I just can't get comfortable with polls and computers determining the top two teams that should compete for the national title. Look at the results this past weekend based upon the most recent USA Today poll:

--No. 5 Florida was demolished by No. 16 Alabama
--No. 12 Michigan State (which beat Notre Dame earlier this year) lost to unranked Michigan (which lost to Notre Dame earlier this year). And today, Michigan is ranked five spots lower than MSU, and Notre Dame is ranked seven spots higher than MSU. It's confusing, I know.
--No. 18 Virginia lost to unranked Maryland.
--No. 19 Minnesota lost to unranked Penn State.
--Oh, and No. 1 Southern Cal had two relatively close come-from-behind victories the past couple of weekends.

From a legal standpoint, an interesting question is whether the BCS could be subject to an antitrust attack under Section 1 of the Sherman Act, which prohibits agreements that seek to destroy or limit competition. Under the BCS system, six of the eight available slots in the elite bowl games (Rose, Fiesta, Sugar and Orange) go to the champions of the six BCS conferences and one of those bowl games determines the national championship. A non-BCS school may get one of the other two remaining slots if it is ranked in the top six as determined by the BCS computer ranking system. So in other words ladies and gentlemen of the jury: The six largest athletic conferences got together and agreed that the teams in their conferences have the toughest schedules and should, therefore, have a greater opportunity to compete for a national title to the exclusion of an undefeated team that simply does not compete at their level according to them (such as a Tulane in 1998 or a Utah in 2004), and they devised a system to accomplish those ends.

Typically, the focus of the antitrust laws is whether the consumer (the fan) is harmed by the restraint. Wieberg disclosed the results of a USA Today/CNN/Gallup poll in which 453 college football fans were asked to opine on the BCS system, 45% said their opinion was at least somewhat negative and 40% at least somewhat positive. I wouldn't call that a "ringing" endorsement from the consumer. Throw in the fact that, as Wieberg notes, the BCS has evolved into one of the most recognizable brands in sports, paying out more than $120 million annually, and I think it would be difficult for a judge not to send the case to a jury.

Is President Obama Serious about Taking on the BCS?

In a terrific column, Sports Illustrated's Andy Staples addresses President Obama's interest in replacing the BCS with a college football playoff. Andy interviews me for the column. Here's an excerpt:

* * *

Second, the federal deficit will not rise one penny if the Justice Department investigates the BCS. The Justice Department employs people, and those people must do something. If they are ordered to investigate the BCS, there is an opportunity cost exacted -- they could have investigated something else -- but not a monetary one. Also, it is the government's responsibility to monitor the activities of a multi-billion business that involves more than 100 publicly funded universities.

Third, [BCS executive director Bill] Hancock's response doesn't actually answer the question; it simply misdirects. So, as a public service for Hancock and the bowl lovers everywhere, I called Michael McCann, the Vermont Law School professor who writes about legal issues for SI.com, and asked him to explain how the BCS might defend itself against an antitrust challenge.

"The people that support the BCS would say that we wouldn't have a national championship without it," McCann said. "All it does is reflect the college football standings. It doesn't do anything other than that."

McCann also summarized what the Justice Department might argue in an antitrust proceeding against the BCS. "It's arguably a cartel," McCann said. "It's producers and sellers joining together to control a product's production, price and distribution. ... In terms of anticompetitive effect, it affects prices. It also creates financial and recruiting disadvantages for some schools. There are economic disparities between BCS members and non-BCS members . . . ."

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Besides, even BCS leaders will admit that there's more money in a playoff. The NCAA basketball tournament brings in an estimated $545 million a year, and college football is exponentially more popular than college basketball. The BCS brings in only $150 million a year, but it funnels most of it to the most powerful conferences. Government intervention would strip those conferences of their power. After that, given a choice between less money and more money, here's betting college presidents forget about their arguments against a playoff and opt for more money.

There is another solution, and it probably will work. Compromise. Offer a plus-one -- a four-team, bracketed playoff -- and offer to split the revenue 11 ways. Then the president could declare victory, and the relationship with the most powerful bowls would be preserved. That could very well result in what Hancock calls "bracket creep," but one man's creep is another man's market correction.

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To read the rest, click here.

An Accommodationist Season Begins

College football begins here in Toledo at 8:00 pm EST tonight when the Toledo Rockets game against the Iowa State University Cyclones arrives via satellite. The other games of the day are the ESPN-featured Mississippi State – South Carolina matchup and Northwestern’s game at Miami of Ohio, which has been dedicated to the memory of late NWU coach Randy Walker.

This season promises to be an interesting one for college football and the once-embattled Bowl Championship Series (BCS). Longtime readers will recall early postings which questioned the legality of the BCS arrangement under federal antitrust laws, such as Greg’s post from November 2003, Rick’s post from October 2005, Mike’s December 2005 post and guest-blogger Chad McEvoy’s December 2005 post.

This season represents the first to be played under a “five-bowl” BCS system. The fifth bowl was agreed to back in 2004 as part of an effort to ward off threatened antitrust action against the BCS and its privileged conferences. Under the new system, the champion of a mid-major conference like the Mid-American Conference (MAC), Western Athletic Conference (WAC), or Conference USA can earn an automatic BCS bid provided that:

a. Such team is ranked in the top 12 of the final BCS Standings, or,
b. Such team is ranked in the top 16 of the final BCS Standings and its ranking in the final BCS Standings is higher than that of a champion of a conference that has an annual automatic berth in one of the BCS bowls.

However, if two or more mid-major champions would qualify under these rules, only the higher BCS-ranked team would earn an automatic berth, while the other would be limited to consideration for an at-large berth (something that, while possible, remains unlikely).

The additional bowl and possibility of an automatic berth for a mid-major conference champion drastically reduce the likelihood of an effective Sherman Act challenge against the BCS, if for no other reason that the odds are there won’t be two such teams in a given year. Since only an undefeated, mid-major conference champion would have standing to challenge the BCS system, the new approach takes away that potential plaintiff. Now, one would likely need two undefeated mid-major champions (or possibly one-loss teams with quality wins over major conference opponents) for there to be one excluded team legally capable of raising a challenge.

For those who still dream of a college-football playoff, I guess all this means cheering for the likes of Utah, TCU, Northern Illinois, Tulsa and Toledo.

BCS Hearings and Antitrust Implications

The Voluntary Trade Council's web site ran an interesting story last week on a theoretical antitrust challenge to the Bowl Championship Series. As a longtime college football playoff proponent, I'm always devising scenarios by which we can destroy the BCS and institute an eight- or even sixteen-team playoff as a replacement (if Chad Henne from Michigan doesn't complete that last pass to beat Penn State, think of the public outrage of Joe Paterno and the undefeated Nittany Lions locked out of a USC-Texas title game). Unfortunately, I've believed for a couple of years now that it would be difficult for any potential plaintiff to show standing in an antitrust challenge following the 2004 agreement between the six BCS conferences and the Coalition for Athletics Reform, which designated criteria by which non-major conference schools can automatically qualify for a BCS berth. Now that any Division I-A football program has a means by which to play in a BCS bowl, an antitrust challenge by an NCAA member institution seems unlikely. One interesting point made within the VTC story is that in such a challenge, the BCS-related defendants could argue that is actually pro-competitive, rather than anti-competitive, in that the bowl system allows for increased participation/output versus a playoff system as there are 28 bowls currently.

That being said, I can't help but envision what an eight-team playoff might look like. Using the current BCS standings, picture the following matchups being played over Christmas weekend at various bowl sites: #1 USC vs. #8 Miami, #2 Texas vs. #7 Georgia, #3 Penn State vs. #6 Notre Dame, and #4 Ohio State vs. #5 Oregon (automatic conference champion berths ignored here for simplicity's sake). The semifinalists could play New Year's weekend at other bowl sites with the championship game the following weekend in primetime at a rotating venue.

BCS - A Collection of 'Haves' and 'Have Nots': The Wall Street Journal has an article today discussing the conflict between the Bowl Championship Series and the schools that do not comprise the BCS. Currently, only the Big 10, Big 12, Pac 10, ACC, Big East and SEC (+ Notre Dame) are guaranteed at least one representative in the BCS. In 1998, Tulane's football team went 12-0 but did not receive a BCS bid. A similar controversy was avoided this year when TCU lost to Southern Miss, preventing an undefeated season.



Dr. Scott Cowen, the president of Tulane, has been the spokesman for the movement by the "unwanted" schools and has said he would file suit if Tulane again finished undefeated and was denied a BCS bid. Cowen claims this is a violation of antitrust law, as the "top" schools receive the excess of riches from the BCS (hundreds of millions) and those schools on the outside have no chance to join in. In Cowen's eyes, this results in "insurmountable barriers" that form the background of antitrust claims.



The BCS anticipated this at its formation, and hired Hogan & Hartson to assist them in avoiding problems of antitrust. Since a 1984 Supreme Court decision ruled the NCAA could not limit national telecasts to 1-2 games a week, the individual conferences have controlled their own television deals, leading to increased wealth for the "top" schools. In addition, each of the bowls is owned and controlled locally. Thus, Tulane may have an uphill battle to climb, but it has consulted with David Boies and Covington & Burling, among others.



There seems no way to avoid this problem unless college football switches to a play-off system. Schools like Tulane and TCU will never have the strength of schedule nor the drawing power to encourage BCS bowls to accept them as one of the two "at-large" schools. Thus, these teams will never have a chance to do what Gonzaga has done in basketball -- parlay a string of "Cinderella" runs in the postseason into increased exposure, better recruiting and an overall better program that now legitimately competes every year. For the time being, this journey seems impossible for schools to make in football, which in the long run will entrench the current schools and hurt the overall quality of the game.

Academics and Practitioners Ask Dept. of Justice to Investigate the BCS

The Wall Street Journal is reporting that a group of 21 law and economics professors and practitioners have submitted a letter to the United States Department of Justice, urging the DoJ to launch a formal antitrust investigation of the Bowl Championship Series. The letter (which is available here) argues that the BCS violates antitrust law both by unfairly restricting schools in the so-called non-automatically qualifying conferences from competing in the BCS National Championship Game and other BCS sponsored bowl games, as well as by disproportionately distributing its revenue in favor of the six automatically qualifying conferences. Signatories to the letter include economists Andrew Zimbalist (Smith College) and Richard Thaler (Univ. of Chicago), as well as law professors Roger Abrams (Northeastern Univ.) and Raymond Yasser (Univ. of Tulsa).

For additional discussion of the antitrust issues surrounding the BCS, check out my article "Antitrust & The Bowl Championship Series," and Michael McCann's "Antitrust, Governance, and Postseason College Football."

U.S. Department of Justice Weighing Antitrust Suit Against the BCS

The Salt Lake Tribune is reporting that Utah Attorney General Mark Shurtleff, a long-time critic of the Bowl Championship Series, met yesterday with officials from the U.S. Department of Justice regarding a potential antitrust suit against the BCS. Following the meeting, Shurtleff said he was "blown away" by the government's due diligence on the issue, and found it hard to imagine a scenario where either the state or federal government did not file suit against the BCS. He noted however that he believed the DOJ would be best positioned to challenge the BCS in court, not only due to the likely cost of such a suit, but "because AGs from around the nation often represent the major universities in their states and it is the college presidents who make up the BCS."

For more on Shurtleff's meeting with the Justice Department, click here. For more on the strength of potential antitrust claims against the BCS, please see my forthcoming law review article.

Utah's Attorney General Planning an Antitrust Suit against the BCS

Following a Congressional subcommittee voting to prevent the BCS from declaring its culminating game the "national championship," as Howard discussed on Wednesday, it appears that another legal challenge to the BCS may be brewing. ESPN.com's Lester Munson reported on Friday that Utah Attorney General Mark Shurtleff is prepared to file an antitrust lawsuit against the BCS as soon as early 2010. The suit would presumably be premised on the BCS' exclusion of an undefeated Utah team from the national championship game last year. AG Shurtleff has scheduled a meeting with Christine Varney, the head of the U.S. Department of Justice's antitrust division, to ascertain whether the federal government would be interested in participating in the suit.

With or without federal assistance, Utah's proposed suit strikes me as a much more serious threat to the BCS than the Congressional measure discussed this week.

My new Boston College Law Review Article on the BCS and Postseason College Football

I just posted on SSRN a free copy of my forthcoming article in the Boston College Law Review titled, "Antitrust, Governance, and Postseason College Football." Here is the abstract:

This Article examines the compatibility of the Bowl Championship Series (“BCS”) with federal antitrust law and the appropriateness of the federal government using its formal and informal powers to encourage a new format for postseason college football. The Article begins by examining the legality of the BCS under Sections 1 and 2 of the Sherman Antitrust Act. It then discusses the appropriateness of government actors concerning themselves with, and expending taxpayer dollars on, the scheduling of college football games. The Article concludes by offering possible changes to the scheduling structure of postseason college football, with an emphasis on voluntary, efficiency-promoting changes by the colleges, universities, and conferences currently associated with the BCS.

Hope you have a chance to check it out. For another take on this topic, be sure to read Nathaniel Grow's excellent forthcoming article in the Harvard Journal of Sports and Entertainment Law titled "Antitrust and the Bowl Championship Series."

Pressure Mounts on the BCS

The legality of the Bowl Championship Series has been a frequent topic of discussion over the years at Sports Law Blog. Typically, legal criticism of the BCS has centered on whether the system violates federal antitrust law. However, a new line of legal attack was recently asserted against the BCS.

Specifically, last month PlayoffPAC, a political action committee formed in 2009 to advocate for the adoption of a playoff in college football, submitted a report to the Internal Revenue Service challenging the tax-exempt status of the Fiesta, Orange, and Sugar Bowls. The report effectively argues that the three BCS bowls should not be considered Section 501(c)(3) charities in light of the (allegedly) excessive compensation and benefits they give to their executives, as well as their various (and sometimes undisclosed) political lobbying efforts. BCS opponents in Congress have taken notice of the report, urging the IRS to review the allegations. In response, the Fiesta Bowl announced last week that it was undertaking an investigation to determine whether its employees were reimbursed for political donations, a potential felony.

Meanwhile, the BCS is also facing criticism on another front, as Yahoo! Sports columnists Dan Wetzel, Josh Peter, and Jeff Passan have taken aim at many of the common defenses asserted in support of the BCS in their new book Death to the BCS: The Definitive Case Against the Bowl Championship Series. Based on some of the initial reviews, the book is likely to be of interest to anyone following the BCS debate.

More Antitrust and the BCS

In a recent interview with Salt Lake City's ABC affiliate KTVX, Utah Attorney General Mark Shurtleff announced that his office has completed a draft antitrust complaint to be filed against the Bowl Championship Series. The article indicates that the lawsuit would allege both illegal monopolization and price fixing claims against the BCS. Shurtleff stated that he will be meeting again shortly with antitrust officials in the U.S. Department of Justice, but maintains that he will file the suit alone if the DOJ elects not to pursue the matter. For more of Shurtleff's interview, click here. For more on the strength of potential antitrust claims against the BCS, please see my forthcoming law review article.