NATIONAL COLLEGIATE ATHLETIC ASSOCIATION v. BOARD OF REGENTS OF THE UNIVERSITY OF OKLAHOMA ET AL.
No. 83-271
Supreme Court of the United States
Argued March 20, 1984—Decided June 27, 1984
468 U.S. 85
Frank H. Easterbrook argued the cause for petitioner. With him on the briefs were George H. Gangwere and James D. Fellers.
Andy Coats argued the cause for respondents. With him on the brief were Clyde A. Muchmore, Erwin N. Griswold, J. Ralph Beaird, and James F. Ponsoldt.
Solicitor General Lee argued the cause for the United States as amicus curiae urging affirmance. With him on the brief were Assistant Attorney General McGrath, Deputy Solicitor General Wallace, Deputy Assistant Attorney Gen-
JUSTICE STEVENS delivered the opinion of the Court.
The University of Oklahoma and the University of Georgia contend that the National Collegiate Athletic Association has unreasonably restrained trade in the televising of college football games. After an extended trial, the District Court found that the NCAA had violated § 1 of the Sherman Act1 and granted injunctive relief. 546 F. Supp. 1276 (WD Okla. 1982). The Court of Appeals agreed that the statute had been violated but modified the remedy in some respects. 707 F. 2d 1147 (CA10 1983). We granted certiorari, 464 U. S. 913 (1983), and now affirm.
I
The NCAA
Since its inception in 1905, the NCAA has played an important role in the regulation of amateur collegiate sports. It has adopted and promulgated playing rules, standards of amateurism, standards for academic eligibility, regulations concerning recruitment of athletes, and rules governing the size of athletic squads and coaching staffs. In some sports, such as baseball, swimming, basketball, wrestling, and track, it has sponsored and conducted national tournaments. It has not done so in the sport of football, however. With the
The NCAA has approximately 850 voting members. The regular members are classified into separate divisions to reflect differences in size and scope of their athletic programs. Division I includes 276 colleges with major athletic programs; in this group only 187 play intercollegiate football. Divisions II and III include approximately 500 colleges with less extensive athletic programs. Division I has been subdivided into Divisions I-A and I-AA for football.
Some years ago, five major conferences together with major football-playing independent institutions organized the College Football Association (CFA). The original purpose of the CFA was to promote the interests of major football-playing schools within the NCAA structure. The Universities of Oklahoma and Georgia, respondents in this Court, are members of the CFA.
History of the NCAA Television Plan
In 1938, the University of Pennsylvania televised one of its home games.3 From 1940 through the 1950 season all of Pennsylvania‘s home games were televised. App. 303. That was the beginning of the relationship between television and college football.
On January 11, 1951, a three-person “Television Committee,” appointed during the preceding year, delivered a report to the NCAA‘s annual convention in Dallas. Based on preliminary surveys, the committee had concluded that “television does have an adverse effect on college football attendance and unless brought under some control threatens to seriously harm the nation‘s overall athletic and physical
The committee‘s 1951 plan provided that only one game a week could be telecast in each area, with a total blackout on 3 of the 10 Saturdays during the season. A team could appear on television only twice during a season. The plan also provided that the NORC would conduct a systematic study of the effects of the program on attendance. Id., at 279. The plan received the virtually unanimous support of the NCAA membership; only the University of Pennsylvania challenged it. Pennsylvania announced that it would televise all its home games. The council of the NCAA thereafter declared Pennsylvania a member in bad standing and the four institutions scheduled to play at Pennsylvania in 1951 refused to do so. Pennsylvania then reconsidered its decision and abided by the NCAA plan. Id., at 280-281.
During each of the succeeding five seasons, studies were made which tended to indicate that television had an adverse effect on attendance at college football games. During those years the NCAA continued to exercise complete control over the number of games that could be televised. Id., at 325-359.
From 1952 through 1977 the NCAA television committee followed essentially the same procedure for developing its television plans. It would first circulate a questionnaire to the membership and then use the responses as a basis for formulating a plan for the ensuing season. The plan was then submitted to a vote by means of a mail referendum. Once approved, the plan formed the basis for NCAA‘s negotiations
The Current Plan
The plan adopted in 1981 for the 1982-1985 seasons is at issue in this case.5 This plan, like each of its predecessors, recites that it is intended to reduce, insofar as possible, the adverse effects of live television upon football game attendance.6 It provides that “all forms of television of the football
In separate agreements with each of the carrying networks, ABC and the Columbia Broadcasting System (CBS), the NCAA granted each the right to telecast the 14 live “exposures” described in the plan, in accordance with the “ground rules” set forth therein.9 Each of the networks agreed to pay a specified “minimum aggregate compensation
Thus, although the current plan is more elaborate than any of its predecessors, it retains the essential features of each of them. It limits the total amount of televised intercollegiate football and the number of games that any one team may televise. No member is permitted to make any sale of television rights except in accordance with the basic plan.
Background of this Controversy
Beginning in 1979 CFA members began to advocate that colleges with major football programs should have a greater voice in the formulation of football television policy than they had in the NCAA. CFA therefore investigated the possibility of negotiating a television agreement of its own, devel-
In response the NCAA publicly announced that it would take disciplinary action against any CFA member that complied with the CFA-NBC contract. The NCAA made it clear that sanctions would not be limited to the football programs of CFA members, but would apply to other sports as well. On September 8, 1981, respondents commenced this action in the United States District Court for the Western District of Oklahoma and obtained a preliminary injunction preventing the NCAA from initiating disciplinary proceedings or otherwise interfering with CFA‘s efforts to perform its agreement with NBC. Notwithstanding the entry of the injunction, most CFA members were unwilling to commit themselves to the new contractual arrangement with NBC in the face of the threatened sanctions and therefore the agreement was never consummated. See id., at 1286-1287.
Decision of the District Court
After a full trial, the District Court held that the controls exercised by the NCAA over the televising of college football games violated the Sherman Act. The District Court defined the relevant market as “live college football television” because it found that alternative programming has a significantly different and lesser audience appeal. Id., at 1297-1300.12 The District Court then concluded that the NCAA
“almost absolute control over the supply of college football which is made available to the networks, to television advertisers, and ultimately to the viewing public. Like all other cartels, NCAA members have sought and achieved a price for their product which is, in most instances, artificially high. The NCAA cartel imposes production limits on its members, and maintains mechanisms for punishing cartel members who seek to stray from these production quotas. The cartel has established a uniform price for the products of each of the member producers, with no regard for the differing quality of these products or the consumer demand for these various products.” Id., at 1300-1301.
The District Court found that competition in the relevant market had been restrained in three ways: (1) NCAA fixed the price for particular telecasts; (2) its exclusive network contracts were tantamount to a group boycott of all other potential broadcasters and its threat of sanctions against its own members constituted a threatened boycott of potential competitors; and (3) its plan placed an artificial limit on the production of televised college football. Id., at 1293-1295.
In the District Court the NCAA offered two principal justifications for its television policies: that they protected the gate attendance of its members and that they tended to preserve a competitive balance among the football programs of the various schools. The District Court rejected the first justification because the evidence did not support the claim that college football television adversely affected gate attendance. Id., at 1295-1296. With respect to the “competitive balance” argument, the District Court found that the evidence failed to show that the NCAA regulations on matters such as recruitment and the standards for preserving amateurism were not sufficient to maintain an appropriate balance. Id., at 1296.
The Court of Appeals held that the NCAA television plan constituted illegal per se price fixing, 707 F. 2d, at 1152.13 It rejected each of the three arguments advanced by NCAA to establish the procompetitive character of its plan.14 First, the court rejected the argument that the television plan promoted live attendance, noting that since the plan involved a concomitant reduction in viewership the plan did not result in a net increase in output and hence was not procompetitive. Id., at 1153-1154. Second, the Court of Appeals rejected as illegitimate the NCAA‘s purpose of promoting athletically balanced competition. It held that such a consideration amounted to an argument that “competition will destroy the market“—a position inconsistent with the policy of the Sherman Act. Moreover, assuming arguendo that the justification was legitimate, the court agreed with the District Court‘s finding “that any contribution the plan made to athletic balance could be achieved by less restrictive means.” Id., at 1154. Third, the Court of Appeals refused to view the NCAA plan as competitively justified by the need to compete effectively with other types of television programming, since it entirely eliminated competition between producers of football and hence was illegal per se. Id., at 1155-1156.
Finally, the Court of Appeals concluded that even if the television plan were not per se illegal, its anticompetitive limitation on price and output was not offset by any
II
There can be no doubt that the challenged practices of the NCAA constitute a “restraint of trade” in the sense that they limit members’ freedom to negotiate and enter into their own television contracts. In that sense, however, every contract is a restraint of trade, and as we have repeatedly recognized, the Sherman Act was intended to prohibit only unreasonable restraints of trade.17
Horizontal price fixing and output limitation are ordinarily condemned as a matter of law under an “illegal per se” approach because the probability that these practices are anticompetitive is so high; a per se rule is applied when “the practice facially appears to be one that would always or almost always tend to restrict competition and decrease output.” Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U. S. 1, 19-20 (1979). In such circumstances a restraint is presumed unreasonable without inquiry into the particular market context in which it is found. Nevertheless, we have decided that it would be inappropriate to apply a per se rule to this case. This decision is not based on a lack of judicial experience with this type of arrangement,21 on the fact that the NCAA is organized as a nonprofit entity,22 or on
As Judge Bork has noted: “[S]ome activities can only be carried out jointly. Perhaps the leading example is league sports. When a league of professional lacrosse teams is formed, it would be pointless to declare their cooperation illegal on the ground that there are no other professional lacrosse teams.” R. Bork, The Antitrust Paradox 278 (1978). What the NCAA and its member institutions market in this case is competition itself—contests between competing institutions. Of course, this would be completely ineffective if there were no rules on which the competitors agreed to create and define the competition to be marketed. A myriad of rules affecting such matters as the size of the field, the number of players on a team, and the extent to which physical violence is to be encouraged or proscribed, all must be agreed upon, and all restrain the manner in which institutions compete. Moreover, the NCAA seeks to market a particular brand of football—college football. The identification of this “product” with an academic tradition differentiates
Our analysis of this case under the Rule of Reason, of course, does not change the ultimate focus of our inquiry. Both per se rules and the Rule of Reason are employed “to form a judgment about the competitive significance of the restraint.” National Society of Professional Engineers v. United States, 435 U. S. 679, 692 (1978). A conclusion that a restraint of trade is unreasonable may be
“based either (1) on the nature or character of the contracts, or (2) on surrounding circumstances giving rise to the inference or presumption that they were intended to restrain trade and enhance prices. Under either branch of the test, the inquiry is confined to a consideration of impact on competitive conditions.” Id., at 690 (footnotes omitted).
Per se rules are invoked when surrounding circumstances make the likelihood of anticompetitive conduct so great as to
III
Because it restrains price and output, the NCAA‘s television plan has a significant potential for anticompetitive effects.28 The findings of the District Court indicate that this
court found that by fixing a price for television rights to all games, the NCAA creates a price structure that is unresponsive to viewer demand and unrelated to the prices that would prevail in a competitive market.30 And, of course, since as a practical matter all member institutions need NCAA approval, members have no real choice but to adhere to the NCAA‘s television controls.31
The anticompetitive consequences of this arrangement are apparent. Individual competitors lose their freedom to com
As a matter of law, the absence of proof of market power does not justify a naked restriction on price or output. To the contrary, when there is an agreement not to compete in terms of price or output, “no elaborate industry analysis is required to demonstrate the anticompetitive character of such an agreement.” Professional Engineers, 435 U. S., at 692.39 Petitioner does not quarrel with the District Court‘s
IV
Relying on Broadcast Music, petitioner argues that its television plan constitutes a cooperative “joint venture” which assists in the marketing of broadcast rights and hence is procompetitive. While joint ventures have no immunity from the antitrust laws,51 as Broadcast Music indicates, a joint selling arrangement may “mak[e] possible a new product by reaping otherwise unattainable efficiencies.” Arizona v. Maricopa County Medical Society, 457 U. S. 332, 365 (1982) (POWELL, J., dissenting) (footnote omitted). The essential contribution made by the NCAA‘s arrangement is to define the number of games that may be televised, to establish the price for each exposure, and to define the basic terms of each contract between the network and a home team. The NCAA does not, however, act as a selling agent for any school or for any conference of schools. The selection of individual games, and the negotiation of particular agreements, are matters left to the networks and the individual schools. Thus, the effect of the network plan is not to eliminate individual sales of broadcasts, since these still occur, albeit subject to fixed prices and output limitations. Unlike Broadcast Music‘s blanket license covering broadcast rights
The District Court did not find that the NCAA‘s television plan produced any procompetitive efficiencies which enhanced the competitiveness of college football television rights; to the contrary it concluded that NCAA football could be marketed just as effectively without the television plan.52 There is therefore no predicate in the findings for petitioner‘s efficiency justification. Indeed, petitioner‘s argument is refuted by the District Court‘s finding concerning price and output. If the NCAA‘s television plan produced procompetitive efficiencies, the plan would increase output and reduce the price of televised games. The District Court‘s contrary findings accordingly undermine petitioner‘s position. In light of these findings, it cannot be said that “the agreement on price is necessary to market the product at all.” Broadcast Music, 441 U. S., at 23.53 In Broadcast Music, the availability of a package product that no individual could offer enhanced the total volume of music that was sold. Unlike this case, there was no limit of any kind placed on the volume that might be sold in the entire market and each individual remained free to sell his own music without restraint. Here production has been limited, not enhanced.54
Neither is the NCAA‘s television plan necessary to enable the NCAA to penetrate the market through an attractive package sale. Since broadcasting rights to college football constitute a unique product for which there is no ready substitute, there is no need for collective action in order to enable the product to compete against its nonexistent competitors.55 This is borne out by the District Court‘s finding that the NCAA‘s television plan reduces the volume of television rights sold.
V
Throughout the history of its regulation of intercollegiate football telecasts, the NCAA has indicated its concern with protecting live attendance. This concern, it should be noted, is not with protecting live attendance at games which are shown on television; that type of interest is not at issue in this case. Rather, the concern is that fan interest in a televised game may adversely affect ticket sales for games that will not appear on television.56
Although the NORC studies in the 1950‘s provided some support for the thesis that live attendance would suffer if
There is, however, a more fundamental reason for rejecting this defense. The NCAA‘s argument that its television plan is necessary to protect live attendance is not based on a desire to maintain the integrity of college football as a distinct and attractive product, but rather on a fear that the product will not prove sufficiently attractive to draw live attendance when faced with competition from televised games. At bottom the NCAA‘s position is that ticket sales for most college games are unable to compete in a free market.60 The
VI
Petitioner argues that the interest in maintaining a competitive balance among amateur athletic teams is legitimate and important and that it justifies the regulations challenged in this case. We agree with the first part of the argument but not the second.
Our decision not to apply a per se rule to this case rests in large part on our recognition that a certain degree of cooperation is necessary if the type of competition that petitioner and its member institutions seek to market is to be preserved.61 It is reasonable to assume that most of the regulatory controls of the NCAA are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive because they enhance public interest in intercollegiate athletics. The specific restraints on football telecasts that are challenged in this case do not, however, fit into the same mold as do rules defining the conditions of the contest, the eligibility of participants, or the manner in which members of a joint enterprise shall share the responsibilities and the benefits of the total venture.
The NCAA does not claim that its television plan has equalized or is intended to equalize competition within any
Perhaps the most important reason for rejecting the argument that the interest in competitive balance is served by the television plan is the District Court‘s unambiguous and well-supported finding that many more games would be televised in a free market than under the NCAA plan. The hypothesis that legitimates the maintenance of competitive balance as a procompetitive justification under the Rule of
VII
The NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports. There can be no question but that it needs ample latitude to play that role, or that the preservation of the student-athlete in higher education adds richness and diversity to intercollegiate athletics and is entirely consistent with the goals of the Sherman Act. But consistent with the Sherman Act, the role of the NCAA must be to preserve a tradition that might otherwise die; rules that restrict output are hardly consistent with this role. Today we hold only that the record supports the District Court‘s conclusion that by curtailing output and blunting the ability of member institutions to respond to consumer preference, the NCAA has restricted rather than enhanced the place of intercollegiate athletics in the Nation‘s life. Accordingly, the judgment of the Court of Appeals is
Affirmed.
JUSTICE WHITE, with whom JUSTICE REHNQUIST joins, dissenting.
The NCAA is an unincorporated, nonprofit, educational association whose membership includes almost 800 nonprofit public and private colleges and universities and more than
I
“While it would be fanciful to suggest that colleges are not concerned about the profitability of their ventures, it is clear that other, non-commercial goals play a central role in their sports programs.” J. Weistart & C. Lowell, The Law of Sports § 5.12 (1979). The NCAA‘s member institutions have designed their competitive athletic programs “to be a vital part of the educational system.” Constitution and Interpretations of the NCAA, Art. II, § 2(a) (1982-1983), reprinted in App. 216. Deviations from this goal, produced by a persistent and perhaps inevitable desire to “win at all costs,” have in the past led, and continue to lead, to a wide range of competitive excesses that prove harmful to students and institutions alike. See G. Hanford, Report to the American Council on Education, An Inquiry into the Need for and Feasibility of a National Study of Intercollegiate Athletics 74-76 (1974) (Hanford); Marco, The Place of Intercollegiate Athletics in Higher Education: The Responsibility of the Faculty, 31 J. Higher Educ. 422, 426 (1968). The fundamental policy
The NCAA, in short, “exist[s] primarily to enhance the contribution made by amateur athletic competition to the process of higher education as distinguished from realizing maximum return on it as an entertainment commodity.” Association for Intercollegiate Athletics for Women v. NCAA, 558 F. Supp. 487, 494 (DC 1983), aff‘d, 236 U. S. App. D. C. 311, 735 F. 2d 577 (1984). In pursuing this goal, the organization and its members seek to provide a public good—a viable system of amateur athletics—that most likely could not be provided in a perfectly competitive market. See Hennessey v. NCAA, 564 F. 2d 1136, 1153 (CA5 1977). “Without regulation, the desire of member institutions to remain athletically competitive would lead them to engage in activities that deny amateurism to the public. No single institution could confidently enforce its own standards since it could not trust its competitors to do the same.” Note, Antitrust and Nonprofit Entities, 94 Harv. L. Rev. 802, 817-818 (1981). The history of intercollegiate athletics prior to the advent of the NCAA provides ample support for this conclusion. By mitigating what appears to be a clear failure of the free market to serve the ends and goals of higher education, the NCAA ensures the continued availability of a unique and valuable product, the very existence of which might well be threatened by unbridled competition in the economic sphere.
In pursuit of its fundamental goal and others related to it, the NCAA imposes numerous controls on intercollegiate athletic competition among its members, many of which “are similar to those which are summarily condemned when
Notwithstanding the contrary conclusion of the District Court, 546 F. Supp., at 1316, and the majority, ante, at 117, I do not believe that the restraint under consideration in this case—the NCAA‘s television plan—differs fundamentally for antitrust purposes from the other seemingly anticompetitive aspects of the organization‘s broader program of self-
“to reduce, insofar as possible, the adverse effects of live television . . . upon football game attendance and, in turn, upon the athletic and related educational programs dependent upon the proceeds therefrom; to spread football television participation among as many colleges as practicable; to reflect properly the image of universities as educational institutions; to promote college football through the use of television, to advance the overall interests of intercollegiate athletics, and to provide college football television to the public to the extent compatible with these other objectives.” App. 35.
See also id., at 244, 323, 640, 651, 672. More generally, in my view, the television plan reflects the NCAA‘s fundamental policy of preserving amateurism and integrating athletics and education. Nor does the District Court‘s finding that the plan is intended to maximize television revenues, 546 F. Supp., at 1288-1289, 1315-1316, warrant any implication that the NCAA and its member institutions pursue this goal without regard to the organization‘s stated policies.
Before addressing the infirmities in the Court‘s opinion, I should state my understanding of what the Court holds. To do so, it is necessary first to restate the essentials of the NCAA‘s television plan and to refer to the course of this case in the lower courts. Under the plan at issue, 4-year contracts were entered into with the American Broadcasting Cos. (ABC), Columbia Broadcasting System (CBS), and Turner Broadcasting System (Turner) after competitive bidding. Every fall, ABC and CBS were to present 14 exposures of college football and Turner would show 19 evening games. The overall price for each network was stated in the contracts. The networks select the games to be telecast and pay directly to the colleges involved what has developed to be
a uniform fee for each game telecast. Unless within one of the exceptions, only the designated number of games may be broadcast, and no NCAA member may arrange for televising its games other than pursuant to the plan. Under this scheme, of course, NCAA members must compete against one another for television appearances, although this competition is limited somewhat by the fact that no college may appear on television more than six times in any 2-year period. In 1983, 242 games were televised, 89 network games and 153 under the exceptions provided in the television plan. In 1983, 173 schools appeared on television, 89 on network games and an additional 84 teams under the exceptions. Report of the 1983 NCAA Football Television Committee to the 78th Annual Convention of the NCAA 61-65 (1984).1The District Court held that the plan constituted price fixing and output limitation illegal per se under
In affirming the Court of Appeals, the Court first holds that the television plan has sufficient redeeming virtues to escape condemnation as a per se violation of the Sherman Act, this because of the inherent characteristics of competitive athletics and the justifiable role of the NCAA in regulating college athletics. It nevertheless affirms the Court of Appeals’ judgment that the NCAA plan is an unreasonable restraint of trade because of what it deems to be the plan‘s price-fixing and output-limiting aspects. As I shall explain, in reaching this result, the Court traps itself in commercial antitrust rhetoric and ideology and ignores the context in which the restraints have been imposed. But it is essential at this point to emphasize that neither the Court of Appeals nor this Court purports to hold that the NCAA may not (1) require its members who televise their games to pool and share the compensation received among themselves, with other schools, and with the NCAA; (2) limit the number of times any member may arrange to have its games shown on
II
“In a competitive market,” the District Court observed, “each football-playing institution would be an independent seller of the right to telecast its football games. Each seller would be free to sell that right to any entity it chose,” and “for whatever price it could get.” 546 F. Supp., at 1318. Under the NCAA‘s television plan, member institutions’ competitive freedom is restrained because, for the most part, television rights are bought and sold, not on a per-game basis, but as a package deal. With limited exceptions not particularly relevant to antitrust scrutiny of the plan, broadcasters wishing to televise college football must be willing and able to purchase a package of television rights without knowing in advance the particular games to which those rights apply. The real negotiations over price and terms take place between the broadcasters and the NCAA rather
As I have said, the Court does not hold, nor did the Court of Appeals hold, that this redistributive effect alone would be sufficient to subject the television plan to condemnation under
The Court relies instead primarily on the District Court‘s findings that (1) the television plan restricts output; and (2) the plan creates a noncompetitive price structure that is unresponsive to viewer demand. Ante, at 104-106. See,
First, it is not clear to me that the District Court employed the proper measure of output. I am not prepared to say that the District Court‘s finding that “many more college football games would be televised” in the absence of the NCAA controls, id., at 1294, is clearly erroneous. To the extent that output is measured solely in terms of the number of televised games, I need not deny that it is reduced by the NCAA‘S television plan. But this measure of output is not the proper one. The District Court found that eliminating the plan would reduce the number of games on network television and increase the number of games shown locally and regionally. Id., at 1307. It made no finding concerning the effect of the plan on total viewership, which is the more appropriate measure of output or, at least, of the claimed anticompetitive effects of the NCAA plan. This is the NCAA‘s position, and it seems likely to me that the television plan, by increasing network coverage at the expense of local broadcasts, actually expands the total television audience for NCAA football. The NCAA would surely be an irrational “profit maximizer” if this were not the case. In the absence of a contrary finding by the District Court, I cannot conclude that respondents carried their burden of showing that the television plan has an adverse effect on output and is therefore anticompetitive.
Second, and even more important, I am unconvinced that respondents have proved that any reduction in the number of televised college football games brought about by the NCAA‘s television plan has resulted in an anticompetitive increase in the price of television rights. The District Court found, of course, that “the networks are actually paying the large fees because the NCAA agrees to limit production. If the NCAA would not agree to limit production, the networks would not pay so large a fee.” Id., at 1294. Undoubtedly, this is true. But the market for television rights to college football competitions should not be equated to the markets
The television plan makes a certain number of games available for purchase by television networks and limits the incidence of head-to-head competition between football telecasts for the available viewers. Because competition is limited, the purchasing network can count on a larger share of the audience, which translates into greater advertising revenues and, accordingly, into larger payments per game to the televised teams. There is thus a relationship between the size of the rights payments and the value of the product being purchased by the networks; a network purchasing a series of games under the plan is willing to pay more than would one purchasing the same games in the absence of the plan since the plan enables the network to deliver a larger share of the available audience to advertisers and thus to increase its own revenues. In short, by focusing only on the price paid by the networks for television rights rather than on the nature and quality of the product delivered by the NCAA and its member institutions, the District Court, and this Court as well, may well have deemed anticompetitive a rise in price that more properly should be attributed to an increase in output, measured in terms of viewership.
Third, the District Court‘s emphasis on the prices paid for particular games seems misdirected and erroneous as a matter of law. The distribution of the minimum aggregate fees among participants in the television plan is, of course, not wholly based on a competitive price structure that is responsive to viewer demand and is only partially related to the value those schools contribute to the total package the networks agree to buy. But as I have already indicated, see
III
Even if I were convinced that the District Court did not err in failing to look to total viewership, as opposed to the number of televised games, when measuring output and anticompetitive effect and in failing fully to consider whether the NCAA possesses power to fix the package price, as opposed to the distribution of that package price among participating teams, I would nevertheless hold that the television plan passes muster under the Rule of Reason. The NCAA argues strenuously that the plan and the network contracts “are part of a joint venture among many of the nation‘s universities to create a product—high-quality college football—and offer that product in a way attractive to both fans in the stadiums and viewers on [television]. The cooperation in producing the product makes it more competitive against other [television] (and live) attractions.” Brief for Petitioner 15. The Court recognizes that, “[i]f the NCAA faced ‘interbrand’ competition from available substitutes, then certain forms of collective action might be appropriate in order to enhance its ability to compete.” Ante, at 115, n. 55. See Continental T. V., Inc. v. GTE Sylvania Inc., 433 U. S. 36, 54-57 (1977). It rejects the NCAA‘s proffered pro-competitive justification, however, on the ground that college football is a unique product for which there are no available substitutes and “there is no need for collective action in
It is one thing to say that “NCAA football is a unique product,” 546 F. Supp., at 1299, that “intercollegiate football telecasts generate an audience uniquely attractive to advertisers and that competitors are unable to offer programming that can attract a similar audience.” Ante, at 111 (footnote omitted). See 707 F. 2d, at 1158-1159; 546 F. Supp., at 1298-1300. It is quite another, in my view, to say that maintenance or enhancement of the quality of NCAA football telecasts is unnecessary to enable those telecasts to compete effectively against other forms of entertainment. The NCAA has no monopoly power when competing against other types of entertainment. Should the quality of the NCAA‘S product “deteriorate to any perceptible degree or should the cost of ‘using’ its product rise, some fans undoubtedly would turn to another form of entertainment. . . . Because of the broad possibilities for alternative forms of entertainment,” the NCAA “properly belongs in the broader ‘entertainment’ market rather than in . . . [a] narrower marke[t]” like sports or football. Grauer, Recognition of the National Football League as a Single Entity Under Section 1 of the Sherman Act: Implications of the Consumer Welfare Model, 82 Mich. L. Rev. 1, 34, n. 156 (1983). See National Football League v. North American Soccer League, 459 U. S. 1074, 1077 (1982) (REHNQUIST, J., dissenting from the denial of certiorari); R. Atwell, B. Grimes, & D. Lopiano, The Money Game 32-33 (1980); Hanford, at 67; J. Michener, Sports in America 208-209 (1976); Note, 87 Yale L. J., at 661, and n. 31.
The NCAA has suggested a number of plausible ways in which its television plan might enhance the ability of college football telecasts to compete against other forms of entertainment. Brief for Petitioner 22-25. Although the District Court did conclude that the plan is “not necessary for effective marketing of the product,” 546 F. Supp., at 1307, its
IV
Finally, I return to the point with which I began—the essentially noneconomic nature of the NCAA‘s program of self-regulation. Like Judge Barrett, who dissented in the Court of Appeals, I believe that the lower courts “erred by subjugating the NCAA‘s educational goals (and, incidentally, those which Oklahoma and Georgia insist must be maintained in any event) to the purely competitive commercialism of [an] ‘every school for itself’ approach to television contract bargaining.” 707 F. 2d, at 1168. Although the NCAA does not enjoy blanket immunity from the antitrust laws, cf. Goldfarb v. Virginia State Bar, 421 U. S. 773 (1975), it is important to remember that the Sherman Act “is aimed primarily at combinations having commercial objectives and is applied only to a very limited extent to organizations . . . which normally have other objectives.” Klor‘s, Inc. v. Broadway-Hale Stores, Inc., 359 U. S. 207, 213, n. 7 (1959).
The fact that a restraint operates on nonprofit educational institutions as distinguished from business entities is as “rele-
Professional Engineers did make clear that antitrust analysis usually turns on “competitive conditions” and “economic conceptions.” 435 U. S., at 690, and n. 16. Ordinarily, “the inquiry mandated by the Rule of Reason is whether the challenged agreement is one that promotes competition or one that suppresses competition.” Id., at 691. The purpose of antitrust analysis, the Court emphasized, “is to form a judgment about the competitive significance of the restraint; it is not to decide whether a policy favoring competition is in the public interest, or in the interest of the members of an industry.” Id., at 692. Broadly read, these statements suggest that noneconomic values like the promotion of amateurism and fundamental educational objectives could not save the television plan from condemnation under the Sherman Act.
When these values are factored into the balance, the NCAA‘s television plan seems eminently reasonable. Most fundamentally, the plan fosters the goal of amateurism by spreading revenues among various schools and reducing the financial incentives toward professionalism. As the Court observes, the NCAA imposes a variety of restrictions perhaps better suited than the television plan for the preservation of amateurism. Ante, at 119. Although the NCAA does attempt vigorously to enforce these restrictions, the vast potential for abuse suggests that measures, like the television plan, designed to limit the rewards of professionalism are fully consistent with, and essential to the attainment of, the NCAA‘s objectives. In short, “[t]he restraints upon Oklahoma and Georgia and other colleges and universities with excellent football programs insure that they confine those programs within the principles of amateurism so that intercollegiate athletics supplement, rather than inhibit, educational achievement.” 707 F. 2d, at 1167 (Barrett, J., dissenting). The collateral consequences of the spreading of
For all of these reasons, I would reverse the judgment of the Court of Appeals. At the very least, the Court of Appeals should be directed to vacate the injunction of the District Court pending the further proceedings that will be necessary to amend the outstanding injunction to accommodate the substantial remaining authority of the NCAA to regulate the telecasting of its members’ football games.
Notes
“It is clear from the evidence that were it not for the NCAA controls, many more college football games would be televised. This is particularly true at the local level. Because of NCAA controls, local stations are often unable to televise games which they would like to, even when the games are not being televised at the network level. The circumstances which would allow so-called exception telecasts arise infrequently for many schools, and the evidence is clear that local broadcasts of college football would occur far more frequently were it not for the NCAA controls. This is not a surprising result. Indeed, this horizontal agreement to limit the availability of games to potential broadcasters is the very essence of NCAA‘s agreements with the networks. The evidence establishes the fact that the networks are actually paying the large fees because the NCAA agrees to limit production. If the NCAA would not agree to limit production, the networks would not pay so large a fee. Because NCAA limits production, the networks need not fear that their broadcasts will have to compete head-to-head with other college football telecasts, either on the other networks or on various local stations. Therefore, the Court concludes that the membership of NCAA has agreed to limit production to
“Turning to the price paid for the product, it is clear that the NCAA controls utterly destroy free market competition. NCAA has commandeered the rights of its members and sold those rights for a sum certain. In so doing, it has fixed the minimum, maximum and actual price which will be paid to the schools appearing on ABC, CBS and TBS. NCAA has created the mechanism which produces a uniform price for each national telecast, and a uniform price for each regional telecast. Because of the NCAA controls, the price which is paid for the right to televise any particular game is responsive neither to the relative quality of the teams playing the game nor to viewer preference.
“In a competitive market, each college fielding a football team would be free to sell the right to televise its games for whatever price it could get. The prices would vary for the games, with games between prominent schools drawing a larger price than games between less prominent schools. Games between the more prominent schools would draw a larger audience than other games. Advertisers would pay higher rates for commercial time because of the larger audience. The telecaster would then be willing to pay larger rights fees due to the increased prices paid by the advertisers. Thus, the price which the telecaster would pay for a particular game would be dependent on the expected size of the viewing audience. Clearly, the NCAA controls grossly distort the prices actually paid for an individual game from that to be expected in a free market.” Id., at 1318.
Since, as the District Court found, NCAA approval is necessary for any institution that wishes to compete in intercollegiate sports, the NCAA has a potent tool at its disposal for restraining institutions which require its approval. See Silver v. New York Stock Exchange, 373 U. S. 341, 347-349, and n. 5 (1963); Associated Press v. United States, 326 U. S., at 17-18.
“In this case the rule is violated by a price restraint that tends to provide the same economic rewards to all practitioners regardless of their skill, their experience, their training, or their willingness to employ innovative and difficult procedures.” Arizona v. Maricopa County Medical Society, 457 U. S., at 348. The District Court provided a vivid example of this system in practice:
“A clear example of the failure of the rights fees paid to respond to market forces occurred in the fall of 1981. On one weekend of that year, Oklahoma was scheduled to play a football game with the University of Southern California. Both Oklahoma and USC have long had outstanding football programs, and indeed, both teams were ranked among the top five teams in the country by the wire service polls. ABC chose to televise the game along with several others on a regional basis. A game between two schools which are not well-known for their football programs, Citadel and Appalachian State, was carried on four of ABC‘s local affiliated stations. The USC-Oklahoma contest was carried on over 200 stations. Yet, incredibly, all four of these teams received exactly the same amount of money for the right to televise their games.” 546 F. Supp., at 1291.
As the District Court observed:
“Perhaps the most pernicious aspect is that under the controls, the market is not responsive to viewer preference. Every witness who testified on the matter confirmed that the consumers, the viewers of college football television, receive absolutely no benefit from the controls. Many games for which there is a large viewer demand are kept from the viewers, and many games for which there is little if any demand are nonetheless televised.” Id., at 1319.
Even in the context of professional football, where Congress was willing to pass a limited antitrust exemption, see n. 28, supra, it was concerned about ensuring that telecasts not be subject to output limitations:
“Mr. GARY. On yesterday I had the opportunity of watching three different games. There were three different games on three different channels. . . .
“Would this bill prevent them from broadcasting three different games at one time and permit the league to enter into a contract so that only one game would be permitted?
“Mr. CELLER. The bill does not prevent what the gentleman saw yesterday. As a matter of fact the antitrust exemption provided by the bill shall not apply to any package contract which prohibits the person to whom league television rights are sold or transferred from televising any game within any area except the home area of a member club on the day when that club is playing a home game.
“Mr. GARY. I am an avid sports fan. I follow football, baseball, basketball, and track, and I am very much interested in all sports. But I am also interested in the people of the United States being able to see on television the games that are played. I am interested in the television audience. I want to know that they are not going to be prohibited from seeing games that might otherwise be telecast.
“Mr. CELLER. I can assure the gentleman from Virginia that he need have no fears on that score.” 107 Cong. Rec. 20060 (1961).
The impact on competitors is thus analogous to the effect of block booking in the motion picture industry that we concluded violated the Sherman Act:
“In the first place, they eliminate the possibility of bidding for films theater by theater. In that way they eliminate the opportunity for the small competitor to obtain the choice first runs, and put a premium on the size of the circuit.” United States v. Paramount Pictures, Inc., 334 U. S. 131, 154 (1948).
546 F. Supp., at 1294. One of respondents’ economists illustrated the point:
“[I]t‘s my opinion that if a free market operated in the market for intercollegiate television of football, that there would be substantially more regional and even more local games being televised than there are currently. I can take a specific example from my home state of Indiana.
“I am at Ball State University, which until recently was a division one-A institution, although now is a division one-AA institution in terms of intercollegiate football. When Ball State plays Indiana State, that is a hotly contested game in an intrastate sense. That is a prime example of the type of game that probably would be televised. For example, when Ball State is playing Indiana State at Terre Haute, Indiana, that [would be] a popular game to be televised in the Muncie area, and, vice versa, in Terre Haute when the game happens to be in Muncie.” App. 506-507. See also id., at 607-608.
Market power is the ability to raise prices above those that would be charged in a competitive market. Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U. S., at 27, n. 46; United States Steel Corp. v. Fortner Enterprises, 429 U. S. 610, 620 (1977); United States v. E. I. du Pont de Nemours & Co., 351 U. S. 377, 391 (1956).
“The fact that a practice is not categorically unlawful in all or most of its manifestations certainly does not mean that it is universally lawful. For example, joint buying or selling arrangements are not unlawful per se, but a court would not hesitate in enjoining a domestic selling arrangement by which, say, Ford and General Motors distributed their automobiles nationally through a single selling agent. Even without a trial, the judge will know that these two large firms are major factors in the automobile market, that such joint selling would eliminate important price competition between them, that they are quite substantial enough to distribute their products independently, and that one can hardly imagine a pro-competitive justification actually probable in fact or strong enough in principle to make this particular joint selling arrangement ‘reasonable’ under Sherman Act § 1. The essential point is that the rule of reason can sometimes be applied in the twinkling of an eye.” P. Areeda, The “Rule of Reason” in Antitrust Analysis: General Issues 37-38 (Federal Judicial Center, June 1981) (parenthetical omitted).
Moreover, because under the plan member institutions may not compete in terms of price and output, it is manifest that significant forms of competition are eliminated. See Catalano, Inc. v. Target Sales, Inc., 446 U. S., at 648-649 (per curiam); Professional Engineers, 435 U. S., at 692-695; Paramount Famous Lasky Corp. v. United States, 282 U. S. 30, 43-44 (1930).
See United States v. McKesson & Robbins, Inc., 351 U. S. 305, 309-310 (1956); United States v. Socony-Vacuum Oil Co., 310 U. S., at 221. See also Klor‘s, Inc. v. Broadway-Hale Stores, Inc., 359 U. S. 207, 213 (1959).
The Solicitor General correctly observes:
“There was no need for the respondents to establish monopoly power in any precisely defined market for television programming in order to prove the restraint unreasonable. Both lower courts found not only that NCAA has power over the market for intercollegiate sports, but also that in the market for television programming—no matter how broadly or narrowly the market is defined—the NCAA television restrictions have reduced output, subverted viewer choice, and distorted pricing. Consequently, unless the controls have some countervailing procompetitive justification, they should be deemed unlawful regardless of whether petitioner has substantial market power over advertising dollars. While the ‘reasonableness’ of a particular alleged restraint often depends on the market power of the parties involved, because a judgment about market power is the means by which the effects of the conduct on the market place can be assessed, market power is only one test of ‘reasonableness.’ And where the anticompetitive effects of conduct can be ascertained through means short of extensive market analysis, and where no countervailing competitive virtues are evident, a lengthy analysis of market power is not necessary.” Brief for United States as Amicus Curiae 19-20 (footnote and citation omitted).
See 546 F. Supp., at 1297-1300. See also Hochberg & Horowitz, Broadcasting and CATV: The Beauty and the Bane of Major College Football, 38 Law & Contemp. Prob. 112, 118-120 (1973).
See, e. g., Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U. S., at 27, n. 46; id., at 37-38, n. 7 (O‘CONNOR, J., concurring in judgment); Fortner Enterprises, Inc. v. United States Steel Corp., 394 U. S. 495, 504-506, and n. 2 (1969).
As the District Court observed, id., at 1297, the most analogous programming in terms of the demographic characteristics of its audience is professional football, and as a condition of its limited exemption from the antitrust laws the professional football leagues are prohibited from telecasting games at times that conflict with intercollegiate football. See
We approved of the District Court‘s reliance on the greater revenue-producing potential and higher television ratings of championship events as opposed to other events to support its market definition. See 358 U. S., at 250-251.
For the same reasons, it is also apparent that the unique appeal of NCAA football telecasts for viewers means that “from the standpoint of the consumer—whose interests the statute was especially intended to serve,” Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U. S., at 15, there can be no doubt that college football constitutes a separate market for which there is no reasonable substitute. Thus we agree with the District Court that it makes no difference whether the market is defined from the standpoint of broadcasters, advertisers, or viewers.
See, e. g., Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U. S., at 24-25; Northern Pacific R. Co. v. United States, 356 U. S. 1, 7-8 (1958); Times-Picayune, 345 U. S., at 611-613. Petitioner seems to concede as much. See Brief for Petitioner 36-37; Tr. of Oral Arg. 6.
Compare id., at 1307-1308 (“The colleges are clearly able to negotiate agreements with whatever broadcasters they choose. We are not dealing with tens of thousands of relatively brief musical works, but with three-hour football games played eleven times each year“), with Broadcast Music, 441 U. S., at 22-23 (footnotes omitted) (“[T]o the extent the blanket license is a different product, ASCAP is not really a joint sales agency offering the individual goods of many sellers, but is a separate seller offering its blanket license, of which the individual compositions are raw material. ASCAP, in short, made a market in which individual composers are inherently unable to compete fully effectively“).
Ensuring that individual members of a joint venture are free to increase output has been viewed as central in evaluating the competitive character of joint ventures. See Brodley, Joint Ventures and Antitrust Policy, 95 Harv. L. Rev. 1523, 1550-1552, 1555-1560 (1982). See also Note, United Charities and the Sherman Act, 91 Yale L. J. 1593 (1982).
If the NCAA faced “interbrand” competition from available substitutes, then certain forms of collective action might be appropriate in order to enhance its ability to compete. See Continental T. V., Inc. v. GTE Sylvania Inc., 433 U. S. 36, 54-57 (1977). Our conclusion concerning the availability of substitutes in Part III, supra, forecloses such a justification in this case, however.
The NCAA‘s plan is not even arguably related to a desire to protect live attendance by ensuring that a game is not televised in the area where it is to be played. No cooperative action is necessary for that kind of “blackout.” The home team can always refuse to sell the right to telecast its game to stations in the immediate area. The NCAA does not now and never has justified its television plan by an interest in assisting schools in “blacking out” their home games in the areas in which they are played.
During this period, the NCAA also expressed its concern to Congress in urging it to limit the antitrust exemption professional football obtained for telecasting its games to contests not held on Friday or Saturday when such telecasts might interfere with attendance at intercollegiate games. See H. R. Rep. No. 1178, 87th Cong., 1st Sess., 3-4 (1961); 107 Cong. Rec. 20060-20061 (1961) (remarks of Rep. Celler); id., at 20662; Hearings, supra n. 28, at 66-68 (statement of William R. Reed). The provision enacted as a result is now found in
“[T]he greatest flaw in the NCAA‘s argument is that it is manifest that the new plan for football television does not limit televised football in order to protect gate attendance. The evidence shows that under the new plan, many areas of the country will have access to nine hours of college football television on several Saturdays in the coming season. Because the ‘ground rules’ eliminate head-to-head programming, a full nine hours of college football will have to be shown on television during a nine-to-twelve hour period on almost every Saturday of the football season in most of the major television markets in the country. It can hardly be said that such a plan is devised in order to protect gate attendance.” Id., at 1296.
Ironically, to the extent that the NCAA‘s position has merit, it rests on the assumption that football telecasts are a unique product. If, as the
NCAA argues, see supra, at 111-112, all television programming is essentially fungible, it would not be possible to protect attendance without banning all television during the hours at which intercollegiate football games are held.
See Part II, supra.
It seems unlikely, for example, that there would have been a greater disparity between the football prowess of Ohio State University and that of Northwestern University in recent years without the NCAA‘s television plan. The District Court found that in fact the NCAA has been strikingly unsuccessful if it has indeed attempted to prevent the emergence of a “power elite” in intercollegiate football. See 546 F. Supp., at 1310-1311. Moreover, the District Court‘s finding that there would be more local and regional telecasts without the NCAA controls means that Northwestern could well have generated more television income in a free market than was obtained under the NCAA regime.
Indeed, the District Court found that the basic reason the television plan has endured is that the NCAA is in effect controlled by schools that are not restrained by the plan:
“The plaintiffs and other CFA members attempted to persuade the majority of NCAA members that NCAA had gone far beyond its legitimate role in football television. Not surprisingly, none of the CFA proposals were adopted. Instead the membership uniformly adopted the proposals of the NCAA administration which ‘legitimized’ NCAA‘s exercises of power. The result was not surprising in light of the makeup of the voting membership. Of approximately 800 voting members of the NCAA, 500 or so are in Divisions II and III and are not subjected to NCAA television controls. Of the 275 Division I members, only 187 play football, and only 135 were members of Division I-A at the time of the January Convention. Division I-A was made up of the most prominent football-playing schools, and those schools account for most of the football games shown on network television. Therefore, of some 850 voting members, less than 150 suffer any direct restriction on their right to sell football games to television.” Id., at 1317.
Moreover, the District Court found that those schools which would realize increased revenues in a free market would not funnel those revenues into their football programs. See id., at 1310.
See id., at 1296, 1309-1310.
See Continental T. V., Inc. v. GTE Sylvania Inc., 433 U. S., at 54-57. See also n. 55, supra.
This is true not only for television viewers, but also for athletes. The District Court‘s finding that the television exposure of all schools would increase in the absence of the NCAA‘s television plan means that smaller institutions appealing to essentially local or regional markets would get more exposure if the plan is enjoined, enhancing their ability to compete for student athletes.