NCAA’s Scholarship Caps Called Anti-Competitive at Trial

The National Collegiate Athletic Association stifles competition among schools for players by capping scholarships, a Stanford University professor said at a trial in which athletes are seeking a cut of the billions of dollars generated by college sports.

Roger Noll, an economics professor testifying as an expert witness for Ed O’Bannon, a former college basketball player and lead plaintiff in the lawsuit, continued his testimony from yesterday that the NCAA is a cartel that blocks competition. Students should be able to market themselves to schools and broadcasters, he said.

O’Bannon is suing to stop the NCAA from preventing student players from seeking payments when their games are televised. Under NCAA regulations that treat athletes as amateurs, they can be stripped of their scholarships and barred from playing if they accept payment.

The NCAA had $912 million in total revenue last year, including $838 million from television, championships and marketing rights fees, according to its financial statement.

U.S. District Judge Claudia Wilken in Oakland, California, will decide the case without a jury in a trial scheduled to last three weeks.

Group Licenses

If student athletes could license their names and identities, many would choose to let universities negotiate group licenses on behalf of their teams, Noll said. The schools would then offer stipends based on the proceeds from those licenses, and use those payments as bargaining chips to attract the best talent, Noll said.

The NCAA restrains such competition by controlling the amount and value of scholarships and barring students from marketing their images, he said.

“It’s that list of restrictions that prevents competition in the market for student athletes,” said Noll, who was paid $800-an-hour for his work on the case.

Under questioning by Rohit Singla, an attorney for the NCAA, Noll acknowledged that no major league athletes anywhere in the world are paid for the use of their names, likeness and images, known as NILs, in team games that are televised live. Professional athletes get a share of broadcast revenue as part of their pay negotiated through collective bargaining agreements, he said.

‘No Experts’

“The plaintiffs have no experts that suggest that there are NIL rights for athletes in broadcasts,” Singla said.

“I don’t know,” Noll responded. “It’s not a concern of mine what the legal rights are.”

If O’Bannon wins the case, a student athlete could be offered a scholarship and a $50,000 payment from a group license for broadcasts, Singla said.

“The next day another college would come and say we will give you $65,000” to recruit the student “regardless of whether there are any such things as NIL rights,” Singla said.

“It has nothing to do with whether there are any NIL rights,” Noll said. “Nothing hinges on that.”

The case is In Re NCAA Student-Athlete Name and Likeness Licensing Litigation, 09-01967, U.S. District Court, Northern District of California (Oakland).

To contact the reporter on this story: Karen Gullo in federal court in Oakland, California at kgullo@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg, Joe Schneider

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