Economic Watch THE NCAA: A CARTEL IN SHEEPSKIN CLOTHING
GARY S. BECKER

09/14/1987
Business Week
Pg. 24
Copyright 1987 McGraw-Hill, Inc.

You don't have to be an economist to understand the behavior of cartels. A cartel increases the profits of its members by assigning quotas that reduce production and raise prices. Some cartels hide behind highfalutin language and expressions of good intentions. Rival producers claim to be cooperating only to prevent chaos or to protect the health and safety of consumers and workers. An example is the group of independent doctors and other medical professionals who recently joined together to fight the spread of health maintenance organizations. No doubt many health practitioners sincerely worry about the effect of HMOs on patient care, but when these professionals organized, surely they gave some thought to the stiff competition they are getting from HMOs.

Governments often fail to oppose cartels that involve educational and other nonprofit entities because these institutions are especially good at clouding the issues with self-righteous rhetoric. An excellent illustration is the National Collegiate Athletic Assn., a group of almost 800 colleges and universities and more than 100 conferences and related bodies. Some college coaches, faculty, and administrators do worry about the effects of big-time athletic programs on academic quality and the education athletes receive. NCAA's regulations, though, by reducing competition for players, TV contracts, and tournaments, raise the profits that member schools realize--or cut the losses they suffer--from their athletic programs.

In 1984 the U. S. Supreme Court to some extent saw through the NCAA's claims of good intentions, declaring its restrictions on televised college football games an illegal conspiracy in violation of the Sherman Antitrust Act. The court said that ''good motives alone will not validate an otherwise anticompetitive practice.'' UNLAWFUL CONSPIRACY. The effect the court's decision had on the market for televised games supports its conclusion about the monopoly power of the NCAA. Since the decision, the number of college football games broadcast on the primary network and cable carriers has increased dramatically, while the average fee per game paid to schools declined sizably. Moreover, such popular schools as the University of Oklahoma and the University of Notre Dame have increased their share of televised games at the expense of less popular schools.

In a dissent to the majority opinion, Justice Byron R. White argued that the court's majority was inconsistent in ruling against the NCAA while permitting it to retain its power over compensation to student athletes. I agree that the majority opinion was inconsistent, but White should have called for abolishing restrictions on compensation, not maintaining the A's power over TV broadcasts.

Regardless of good intentions, the NCAA's restraints on pay to athletes clearly reduce the competition for such people. There is little doubt that scholarships and other compensation would increase if the court were to decide that these restraints are also an unlawful conspiracy. The increase would be especially large for the top athletes, who generally come from poor families. HARD TO BELIEVE. As schools compete in a more open and honest fashion, under-the-table payments to athletes and other subterfuges devised to cheat on the NCAA would disappear. This could end the so-called scandals that plague the NCAA, such as the latest involving Auburn University.

Defenders of the present system claim that if colleges could compete freely for athletes, the athletes' education would suffer, they would be spoiled by large incomes, and the financial stability of many athletic programs would be jeopardized. It is hard to believe that even the strongest defenders of the NCAA take these objections seriously. Under the present system, many of the best athletes never graduate from college, while those who do often cheat to get through or are steered into programs with little educational value. A recent book by Lawrence Taylor, the great linebacker for the New York Giants, confesses his own cheating at the academically respected University of North Carolina. Big incomes do no more harm to student athletes than to young professional athletes or other young people. Would anyone advocate a cap on the earnings of young traders on Wall Street so that they don't get into trouble from having a lot of money? And why should the best athletes be forced to support athletic programs by accepting low pay--rather than alumni and students supporting them through contributions and higher ticket prices?

Economists disagree about many things, but they strongly agree that cartels raise prices, lower outputs, and are bad for society. The effect on prices and output of explicit cartels like OPEC are direct and obvious. The harmful effects of cartels that hide behind the smokescreen of good intentions are more difficult to detect, especially when nonprofit institutions are involved. The NCAA is a prime example of such a cartel. It is time that all the NCAA's restrictions on competition for athletes and sports revenues be declared an unlawful conspiracy in violation of the antitrust laws.

The self-righteous rhetoric and ostensible good intentions of the college athletics association fail to hide its monopoly power and the inequities it fosters

-- GARY S. BECKER IS UNIVERSITY PROFESSOR OF ECONOMICS AND SOCIOLOGY AT THE UNIVERSITY OF CHICAGO