College Athletics: The Chink in the Seventh Circuit's 'Law and Economics' Armor

Abstract

If any court is linked to the “law and economics” movement, it is the Seventh Circuit, home of former Judge Richard Posner, the “Chicago School,” and analysis based on markets and economics. It thus comes as a surprise that in college-athletics cases, the court has replaced economic analysis with legal formalisms. In adopting a deferential approach that would uphold nearly every rule the NCAA claims is related to amateurism, the court recalls the pre-Chicago School era, in which courts aggressively applied “per se” illegality based on a restraint’s form, rather than substance. While the Seventh Circuit’s detour of deference has taken several stops, this Essay focuses on the most recent, the 2018 decision in Deppe v. NCAA.

In Deppe, a college football punter who believed he would receive an athletic scholarship transferred after learning that he would not. Pursuant to the NCAA’s “year in residence” rule, the punter was forced to sit out for one year before he could play for his new school. The punter claimed that the NCAA’s rule violated antitrust law. But the district court dismissed the claim, and the Seventh Circuit affirmed, finding that the rule was “presumptively procompetitive.”

The Seventh Circuit’s ruling suffered from four critical flaws. First, the court misread antitrust precedent, relying on dicta from a decades-old Supreme Court case addressing a different issue to manufacture a wholly new analytical framework. Second, the court misconstrued antitrust law by neglecting the longstanding “Rule of Reason” analysis that involves burden shifting and emphasizes consumer welfare. Third, the Seventh Circuit ignored the procedural setting of a motion to dismiss, making up facts benefiting the defendant rather than — as hornbook law makes clear — applying facts in the light most favorable to the plaintiff. And fourth, the court neglected the economics that would have shown the anticompetitive nature of the year-in-residence restriction on student-athletes’ movement between schools.

In short, the court upheld a restraint that could harm student-athletes, colleges, and sports fans by applying unsupported rigid rules rather than considering a market’s economic realities. The Seventh Circuit would benefit from returning to its law and economics roots.

Keywords: NCAA, College Sports, Antitrust, Amateurism, Student-Athletes, Rule of Reason

JEL Classification: D40, D42, K21, L40, L41, L44, L83, O34