Friday, January 17, 2014

NCAA v. Board of Regents of the University of Oklahoma case brief

NCAA v. Board of Regents of the University of Oklahoma case brief summary

FACTS
The NCAA created contracts with ABC and CBS in order to regulate the showing of football games of NCAA members, allegedly to avoid conflicts with live football games, which strongly restricted the number of games that any one team could televise. In response the College Football Association (including the University of Oklahoma) enacted a contract with NBC that allowed a more liberal number of appearances and would have greatly increased revenues of the CFA members. The NCAA threatened disciplinary action and the CFA sued for an injunction.

HOLDING
The Court rejected the application of a per se rule because the NCAA’s very purpose was to regulate horizontal competition and was necessary to maintain the character of college football, rendering it ultimately precompetitive, following Broadcast Music’s acceptance of a competitive joint-selling arrangement.

DISCUSSION
Nonetheless, the Court found that the NCAA’s television plan constituted a restrain upon the operation of the free market that raised prices and reduced output under the rule of reason without sufficient procompetitive justifications.
  • The Court found that the underlying justification for the policy was a fear that tickets for live football games could not actually compete against televised football games—protecting a product that cannot compete in a free market is a justification incompatible with the basic policy of the Sherman Act.
  • The District Court found no precompetitive efficiencies arising out of the television plan, thus suggesting that the agreement was unnecessary to market the product, distinguishing Broadcast Music.
  • NCAA clearly had market power. It controlled intercollegiate football broadcasts, which had a unique audience that advertisers would pay a premium price per viewer to reach. It was not merely part of the entertainment television market.
Analysis
  • Although this was an agreement concerning price (and thus fell into the traditional per se category), after Broadcast Music, there were sufficient justifications—it was necessary to bring the product to market—to reject the per se rule and invoke the rule of reason.
  • Under the rule of reason analysis, there was an actual negative effect upon competition in that the price was higher, output was lower, and consumer preference was ignored.
  • The buyers in this case were really advertisers, who motivate the broadcasters’ selections of content, based upon the target audience content draws and advertisers are willing to pay for.
  • NCAA is one type of a quick look analysis. Since there are actual harms to competition, there is no need to analyze market power.
Legal Consequences

  • There is no need to prove market power when actual harm (higher prices and lower output) is proved.

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