Friday, December 10, 2010

A Different Take on the Legality of the BCS

In the spirit of a little good-natured debate, and because I ultimately come out differently on the merits of the issue, I thought I'd take the time to offer a few counter-arguments to Mike's thoughtful commentary yesterday regarding the legality of the Bowl Championship Series.

To begin, though, I agree with a lot of what Mike wrote. For instance, I agree that the BCS can credibly argue that it has created several pro-competitive benefits, such as the creation of a national championship game. I also agree that an antitrust suit against the BCS would itself be unlikely to directly result in the creation of a playoff (although I do believe that a verdict against the BCS would ultimately pave the way to the NCAA adopting a playoff).

However, where I differ from Mike is that I do not think that the pro-competitive benefits created by the BCS would necessarily save the system under antitrust law. Specifically, as Gabe Feldman's excellent 2009 law review article illustrates, when applying the rule of reason most courts would not only balance the system's pro- and anti-competitive effects, but would also (for better or worse) consider whether the BCS's pro-competitive benefits could be similarly achieved via less restrictive, alternative means. In other words, courts would ask whether the BCS could create the same pro-competitive benefits in another way, one that doesn't carry the same anti-competitive ramifications.

For example, I have previously argued that the BCS can be accused of violating antitrust law by unequally distributing its revenue to the disadvantage of the non-automatically qualifying, so-called "non-BCS Conferences." Notably, following last season, the BCS distributed at least $18 million in revenues to each of the six BCS Conferences, while the five non-BCS Conferences collectively received a total of only $24 million, despite two non-BCS schools (Boise State and TCU) having been selected to participate in BCS bowl games. Should a group boycott claim be asserted against the BCS on this basis, the creation of a national championship game is unlikely to save the BCS under the rule of reason, because a plaintiff could easily argue that this same pro-competitive benefit could be obtained in a less restrictive system, one where all BCS participants are rewarded equally (or, at least, more fairly) for their participation, regardless of their membership in a BCS Conference. Therefore, because I believe that the BCS is unable to point to a pro-competitive benefit that could not likewise be obtained via less restrictive, alternative means, I believe that it fails to satisfy the rule of reason.

Also, while I agree with Mike that the use of computer ranking systems in the BCS would normally support the legality of the current system, in this case I think that that benefit is mitigated by the questionable reliability of the BCS's computer systems. In particular, as Jeff Passan and Dan Wetzel (authors of the must-read "Death to the BCS") have pointed out, the BCS's computer rankings fail to account for margin of victory, an omission that renders them of highly questionable merit, and has actually resulted in several prominent statisticians calling for a formal boycott of the BCS. The omission of margin of victory most directly impacts schools from the non-BCS Conferences, who generally have to rely on beating lesser competition by significant margins as evidence of their competitive strength. Moreover, just this week several errors resulting from computer miscalculations were discovered in the final BCS Standings, highlighting the lack of safeguards and transparency in the present system.

Similarly, while I also agree that maintaining the significance of the regular season in theory provides a strong pro-competitive argument in favor of the BCS, one can argue that the BCS on balance actually detracts from the regular season for several reasons. First, in the BCS-era major conference teams have become increasingly less likely to schedule challenging regular season, non-conference games, for fear of sustaining a crippling early season defeat. More significantly, though, the BCS renders the vast majority of Division I football games irrelevant to the national championship race, including any late-season games not featuring one of the handful of teams still in the title race.

Finally, Mike also notes that the BCS could defend itself from a claim that it unfairly discriminates against the non-BCS Conference teams by arguing that the current selection process and revenue distribution policies simply reflect the current competitive landscape, in which demand is higher for games involving BCS Conference schools. Indeed, University of Nebraska chancellor Harvey Perlman has himself made this very argument in defense of the BCS. The problem with this argument is that over the last few years BCS bowl games involving schools from non-BCS conferences have actually generated higher television ratings and stadium attendance than some BCS games involving only BCS Conference schools. Most notably, the TV ratings for last year's showdown between non-BCS schools Boise State and TCU in the Fiesta Bowl outdrew the Orange Bowl (featuring two BCS Conference schools) by a significant margin. In any event, this defense by the BCS would also likely succumb to the less restrictive alternatives inquiry, in that the BCS could obtain all of its current pro-competitive benefits under a system in which each conference is rewarded for its own individual contributions. In other words, rather than categorically awarding each of the six BCS Conferences one large sum of money, while giving the non-BCS Conferences a significantly smaller sum, the BCS could instead individually assess the respective contributions of the various participating conferences when deciding how to distribute its revenue. This year, such a system would undoubtedly award a greater share of the pie to third-ranked TCU and its Mountain West Conference than unranked UConn and the Big East Conference. Under the BCS's current revenue distribution policies, though, the Big East will likely take home more than twice as much revenue from the BCS as will the Mountain West Conference.

Therefore, while reasonable minds can of course differ, I believe that on balance the current BCS does in fact violate antitrust law. That having been said, given the unpredictable nature of the jury trial process, I admit that the outcome of an antitrust suit against the BCS would be far from certain.

For more on these (in my mind) fascinating issues, be sure to check out Mike's forthcoming law review article "Antitrust, Governance, and Postseason College Football," and my own "Antitrust & The Bowl Championship Series."