468 U.S. 85, 104 S.Ct. 2948 (1984)
The National Collegiate Athletic Association, founded in 1905, regulates amateur collegiate sports including playing rules, academic eligibility, recruitment, and squad sizes for its approximately 850 member institutions divided into Divisions I, II, and III.1
In 1938 the University of Pennsylvania began televising its home football games, and by the 1950 season all of its home contests were broadcast.2 In January 1951 a three-person NCAA Television Committee reported that television adversely affected attendance and recommended collective action.3 The NCAA retained the National Opinion Research Center to study the impact, imposed a moratorium on telecasts, and adopted its first plan limiting each area to one game per week with a three-Saturday blackout and a two-appearance limit per team.4
From 1952 through 1977 the NCAA developed annual or biennial television plans through member questionnaires and mail referenda, retaining exclusive control over the number of games televised.5 In 1977 it entered a four-year exclusive contract with ABC.6 The 1981 plan at issue covered the 1982-1985 seasons, awarded rights to ABC and CBS for fourteen live exposures each, set a minimum aggregate compensation of $131,750,000 over four years, imposed appearance requirements of at least eighty-two different institutions per two-year period, and limited any member to six total appearances and four national appearances.7
In 1979 members of the College Football Association explored an independent television agreement and obtained a contract offer from NBC that permitted more appearances and higher revenues.8 The NCAA announced it would impose sanctions, including on non-football sports, against any CFA member complying with the NBC contract.9 On September 8, 1981, the Board of Regents of the University of Oklahoma and the University of Georgia filed suit in the United States District Court for the Western District of Oklahoma and obtained a preliminary injunction.10
After a full trial the District Court found the NCAA plan violated the Sherman Act and issued injunctive relief.11 The Court of Appeals for the Tenth Circuit affirmed the violation finding but modified the remedy.12 The Supreme Court granted certiorari on November 14, 1983, heard argument on March 20, 1984, and issued its decision on June 27, 1984.13
Whether the NCAA's television plan for college football games violates Section 1 of the Sherman Act?14
Section 1 of the Sherman Act, 15 U.S.C. § 1, declares illegal every contract, combination, or conspiracy in restraint of trade.15 Horizontal agreements among competitors that fix prices or limit output are ordinarily condemned as unreasonable per se because they pose a high probability of anticompetitive effects.16 When such restraints are essential to the availability of a joint product such as league sports, the rule of reason governs and asks whether the restraint enhances or suppresses competition overall.17
Yes. The NCAA's 1981 television plan constitutes a horizontal restraint because member institutions collectively limit the total number of games that may be televised and fix the minimum aggregate compensation paid by the networks.18 The District Court found that the plan operates as a classic cartel by controlling supply and setting uniform prices unresponsive to viewer demand or team quality.19 The Court of Appeals affirmed the violation finding.20 The Supreme Court held that the plan raises prices and reduces output below competitive levels while eliminating individual institutions' freedom to negotiate separate contracts.21
The Universities of Oklahoma and Georgia challenged the plan after the NCAA threatened sanctions against any CFA member that honored an independent NBC contract offering more appearances and higher revenues.22 After a full trial the District Court defined the market as live college football television and concluded that the NCAA possessed complete control over supply.23 The Court of Appeals agreed that the statute had been violated.24 The Supreme Court granted certiorari and affirmed.25
The plan awards exclusive rights to ABC and CBS for fourteen exposures each during the 1982-1985 seasons and sets a minimum aggregate compensation of $131,750,000.26 Appearance requirements mandate at least eighty-two different institutions per two-year period while capping any single member at six total appearances and four national appearances.27 No member may sell television rights outside the plan.28
The District Court found that absent the plan many more games would be televised and that the fixed price structure prevents negotiation responsive to consumer preference.29 The Supreme Court concluded that these effects constitute paradigmatic restraints the Sherman Act was intended to prohibit.30
The NCAA's television plan violates Section 1 of the Sherman Act.31
Related opinions on this issue
Joined by Justice Rehnquist
Justice White dissented on the ground that the NCAA exists primarily to enhance the contribution made by amateur athletic competition to the process of higher education rather than to realize maximum return on it as an entertainment commodity.32 He argued that the television plan furthers the NCAA's fundamental policy of preserving amateurism and integrating athletics and education by spreading revenues among schools and reducing financial incentives toward professionalism.33 Justice White would have reversed the judgment of the Court of Appeals because the plan passes muster under the Rule of Reason when noneconomic values are factored into the balance.
He also contended that the Court erred by subjugating educational goals to purely commercial antitrust analysis.34
Whether the NCAA's television plan constitutes a naked restraint on price and output that is illegal per se or must instead be evaluated under the rule of reason?35
Per se rules condemn practices that facially appear always or almost always to restrict competition and decrease output without inquiry into market context.36 The rule of reason applies when horizontal restraints on competition are essential if the product is to be available at all.37 This occurs in league sports where rules defining the contest and preserving the character of the product must be agreed upon jointly.38
No. Although the plan fixes prices and limits output, the Supreme Court held that it would be inappropriate to apply a per se rule.39 The case involves an industry in which horizontal restraints are necessary for the product of college football to exist.40 Rules on eligibility, recruitment, and amateur status must be agreed upon mutually to preserve the academic tradition that differentiates college football from professional sports.41
The plan was therefore evaluated under the rule of reason to determine its actual competitive significance.42
The NCAA's television plan must be evaluated under the rule of reason rather than condemned as per se illegal.43
Whether the NCAA possesses market power in the market for live college football television?44
Yes. The District Court correctly defined the market as live college football television because intercollegiate football telecasts generate an audience uniquely attractive to advertisers that cannot be replicated by other programming.47 The NCAA exercises complete control over the supply of such telecasts through its plan, enabling it to raise the price networks pay while limiting output.48 The Supreme Court affirmed that these findings establish market power, as the plan precludes any price negotiation between broadcasters and individual institutions.49
The NCAA possesses market power in the market for live college football television.50
Related opinions on this issue
Joined by Justice Rehnquist
Justice White argued that the District Court erred by focusing only on the price paid by networks rather than on the nature and quality of the product delivered.51 He contended that the plan creates a new product of exclusive television rights that is more valuable to networks because it limits head-to-head competition and delivers a larger share of the audience to advertisers.52 In his view any rise in price more properly reflects an increase in output measured by total viewership rather than an anticompetitive exercise of market power.53
Whether the NCAA's asserted justifications for its television plan, including protecting live game attendance and preserving competitive balance among member institutions, are sufficient under the rule of reason?54
Under the rule of reason a restraint is lawful only if its procompetitive justifications outweigh its anticompetitive effects or if it promotes consumer welfare by enhancing competition.55 Justifications based on the assumption that competition itself is unreasonable or that the product is insufficiently attractive to consumers in a free market are inconsistent with the Sherman Act.56
No. The District Court found no evidence that the plan protects live attendance in today's market and noted that games are televised during all hours college football is played.5758 The plan is not tailored to promote competitive balance because it does not regulate expenditures or equalize team strength and because other NCAA rules on amateurism are sufficient for that purpose.59 The Supreme Court held that the justifications fail because the plan reduces output and blunts member institutions' ability to respond to consumer preference, thereby restricting rather than enhancing the place of intercollegiate athletics.60
The NCAA's asserted justifications for its television plan are not sufficient under the rule of reason.61
Related opinions on this issue
Joined by Justice Rehnquist
Justice White dissented on the ground that the plan fosters amateurism by spreading revenues among member schools and reducing the financial incentives toward professionalism.62 He argued that the plan helps ensure the economic viability of athletic programs at a wide variety of schools and promotes competitive football among many and varied amateur teams nationwide.63 In his view these contributions are sufficient to offset any minimal anticompetitive effects when the legitimate noneconomic goals of educational institutions are properly considered.64