My November 8 Yale Journal on Regulation Notice and Comment post on antitrust and sign stealing has generated lots of comments and conversations, ranging from enthusiastic (Michigan fans) to not enthusiastic (others). Some people just want to have fun with it, and that’s fine. The whole sign-stealing “scandal” is a welcome breather from lots of truly awful or important things happening in the world, and we should have fun with it. That said, my post about the antitrust implications of enforcing NCAA Bylaw 11.6.1 wasn’t a joke—it really could raise antitrust issues. To be clear, I’m not arguing that the antitrust laws should be applied in this circumstance (I have serious doubts about whether the answers that antitrust law seems to be giving on college athletics are optimal). Rather, as someone who has spent nearly my entire professional career in antitrust law—as a scholar, teacher, and litigator—I’m pointing out that there is a real possibility that, if challenged, Rule 11.6.1 would be found illegal under Section 1 of the Sherman Act. For anyone interested in digging a bit more into the substance of the issues, here are some further thoughts, mostly provoked by conversations or questions.
First, some business practices like horizontal price fixing are per se illegal under the antitrust laws—you just can’t do them, and go to jail if you’re caught. A rule prohibiting scouting that’s designed to limit how much schools spend on their football programs isn’t anything like that. It would be judged under antitrust’s rule of reason, which is complicated and sometimes unpredictable. I didn’t say, and wouldn’t say, that Bylaw 11.6.1 is an antitrust violation—only that it could be and raises serious antitrust risks. Everything I’ve just said is also true of the player compensation rules struck down in Alston and the NIL rules struck down in O’Bannon. Before the courts decided on them, there were fair arguments on both sides. They were judged under the rule of reason, and found unlawful. So, yes, if there were ever to be antitrust litigation over the anti-scouting rule, there would be plenty to say for and against the rule, which goes to there being antitrust risk in enforcing the rule. Maybe the Big Ten and NCAA think that risk is worth taking—their call, not mine.
Second, some people have questioned my statement that the no-scouting rule is a financial rule rather than a rule of the game. People who have raised this kind of argument tend to focus either on the form of the agreement or its effects.
Let’s start with the form of the agreement. A number of folks have pointed out that the rule prohibiting scouting says nothing at all about money or an athletic department’s expenditures. The rule flatly prohibits a kind of conduct—scouting—and not the expenditure of money. Mixing metaphors, this argument wouldn’t get to first base under contemporary antitrust law. To see why, suppose that Michigan and Ohio State administrators were looking for ways to cut their budgets and laid their sights on scouting, which costs lots of money. Each school could unilaterally decide to stop paying for scouting, but each school might fear that it would lose a recruiting edge with potential athletes if it cut scouting but the other school did not. So suppose the two schools agreed with each other that neither school would continue to scout.
This one’s easy: The agreement to discontinue scouting would be per se illegal under the antitrust laws as an agreement to restrain competition that is naked (i.e., not ancillary to some legitimate function like NCAA regulation) and horizontal (since Ohio State and Michigan are competitors). Even though the agreement would make no direct mention of money, that’s not a criterion for antitrust illegality. What’s different about Bylaw 11.6.1? It’s still an agreement that restrains competition, it’s still horizontal (see Alston), but it’s not naked (because it’s part of the NCAA’s regulation of college athletics). That the Bylaw is ancillary and not naked buys it rule of reason rather than per se illegality, which puts it in the company of Alston, O’Bannon, and Board of Regents (where the relevant NCAA rules were struck down under the rule of reason).
As to the effects argument, some folks have observed, quite correctly, that if one school follows the rule and another other breaks it, that can have effects on the field. How big those effects would be is subject to some doubt. The NCAA itself has admitted that there is “minimal competitive advantage gained by scouting future opponents.” But suppose the effect were significant. That still wouldn’t distinguish the anti-scouting rule from the player compensation or NIL rules struck down in Alston and O’Bannon. If Ohio State followed the player compensation rule while Michigan was offering Ferraris to its top recruits, that undoubtedly would translate into Michigan fielding a stronger team and thus have effects “on the field.” That’s exactly the “competitive balance” argument the NCAA advanced in Alston and O’Bannon—and lost. That rules intended to achieve financial parity have effects on the field doesn’t change that they’re rules whose origin and justification is financial, unlike rules about how many players you can have on the field, which go to how the game itself is defined.
The best argument to distinguish Alston and O’Bannon would be that, in those cases, the linkage between the prohibited activity (i.e., paying players) and what happens on the field is less immediate and direct than scouting your upcoming opponent. That’s a plausible distinction, and goes to the kinds of proximate causation issues that courts routinely examine. But let’s be clear that “plausible” is semantically the opposite of “slam dunk.” Would that argument prevail? Maybe, but maybe not.
Third, some people have said that if my argument were correct, salary caps would be illegal. Exactly! Salary caps in professional sports are only legal because of the statutory labor exemption for collective bargaining. If you don’t believe me, (a) spend a few hours in the history of antitrust law and labor; and (b) spend two minutes on the DOJ’s March 2023 enforcement against Activision Blizzard over salary caps for players in the Call of Duty and Overwatch esports leagues. Absent the labor exemption, salary caps violate the antitrust laws.
Now the back-peddling will start: But the ban on scouts isn’t a salary cap. Ok, let’s play it out. Suppose the NCAA put a $30,000 salary cap on scouts. Following Activision, the DOJ would say that’s anticompetitive. Suppose the NCAA put a $15,000 salary cap on scouts. That would be even more anticompetitive. Suppose the NCAA put a $0 salary cap on scouts. Economically, that’s exactly what a total prohibition on scouts amounts to.
In conclusion, let me stress again that: (1) I don’t speak for the University of Michigan, (2) there are fair arguments that the no-scouting rule doesn’t violate the antitrust laws, and (3) Michigan should be held to high ethical standards. But enforcing NCAA Bylaw 11.6.1 does create antitrust risk. To ballpark the magnitude of that risk, let me put it this way: If a plaintiff with standing were to bring a claim for declaratory or injunctive relief or perhaps even treble damages under Section 1 of the Sherman Act, there is a very high likelihood that a well-crafted complaint would survive a motion to dismiss and that discovery would ensue. And once discovery ensues… lots of things can happen.