This morning I chatted with Sporting News Radio’s Steve Czaban about the looming DOJ-BCS antitrust war. The are three basic points —essentially the “academic” arguments against college football’s current postseason — that I reviewed with Czaban, and which I’ll elaborate on here. The first is the notion that the BCS is an “illicit group boycott” that improperly distributes money and access unequally and without just cause. This is the crux of the Utah attorney general’s grievance that prompted the DOJ’s interest. Utah’s three major universities play in lower-tier conferences that don’t automatically qualify for the major BCS bowls. The six conferences that do automatically qualify are thus “boycotting” the five smaller conferences by not allowing them to participate on equal terms.
There is a thread of antitrust theology that seeks to convert any popular business or idea into a de facto public utility. A recent example of note is the Federal Trade Commission’s backdoor nationalization of real estate brokerage services. For years private broker groups developed and maintained, at their expense, multiple-listing services that allowed brokers in a given market to pool their listings. The FTC decided it was unfair that one had to be a broker to access these private databases; the FTC wanted any individual, even those persons who wanted to sell their house without a broker, to have equal access. So the FTC forced the brokers to sign “consent orders” changing the terms by which people could access what was previously a wholly private service.
Certainly it wouldn’t be a stretch to apply this “reasoning” to college football. The major football powers are themselves state-operated institutions (for the most part), so the DOJ could plausibly maintain it has a public-interest duty to ensure equal access to college football’s postseason.
But like the real estate brokers — who were forced to subsidize a service for the benefit of those who didn’t want to pay market value — the BCS powers maintain there’s nothing inequitable about a system where the more popular programs earn the lion’s share of the revenue. As former NCAA President Myles Brand told a congressional committee in 2003, BCS revenue “goes to those who make the greatest commitment and whom the market rewards. In other words, the current revenue structure is a result of the free-market at work.”
And the issue here is money, not the lack of a particular postseason structure. If Utah’s universities simply wanted to participate in a playoff, they could join one of the other three NCAA divisions that hold such tournaments. Or they could do what the University of Utah just did — join the Pac-10 Conference, which has an automatic berth in the BCS.
The truth is that the “Big Six” BCS conferences aren’t boycotting their smaller brethren; they’re subsidizing them. For all the media carping about the injustices done to the Utahs and Boise States of the world, if there was ever an NCAA playoff that regularly featured small-school champions, there would be exponentially greater media complaining — and substantially diminished fan interest. Just look at any professional sports league when the playoffs produce small-market winners; the first thing you hear out of every commentator’s mouth is, “It’s bad for the league when big-market teams play for the title.” Even the current rage against the BCS isn’t driven by the perceived injustice against the small schools. Media folks just want a playoff because it would be better for them to cover.
The second argument I addressed with Czaban is that the BCS is somehow an illegal “price fixing” arrangement, i.e. a cartel. The theory here goes that prior to the BCS, individual bowl games negotiated their own deals with football conferences and television networks. The BCS eliminated this “competition,” and antitrust must therefore restore it.
This is a fairly conventional antitrust theory. If one defines a distinct market for “postseason major college football,” then the BCS can be labelled a cartel that acquired monopoly power through the deliberate suppression of the previously “competitive” market. Clearly, antitrust requires the cartel’s breakup.
Of course, that doesn’t get you to a playoff — the not-so-secret objective of any potential antitrust lawsuit. Even most attorneys will tell you an antitrust lawsuit doesn’t make a playoff a fait accompli. (Kristi Dosh, a sports attorney in Atlanta, has a good explanation of why this is so.)
Furthermore, a playoff is just a cartel by another name, just one run by the NCAA as opposed to the BCS. That’s what makes Christine Varney’s letter to NCAA President Mark Emmert so hilarious. She’s asking him to explain why there’s no football playoff. Emmert could respond, “Because then you’d label us a monopolist who eliminated competition.”
Practically speaking, the DOJ is unlikely to pursue this “price fixing” line of attack because there’s no victim for the Antitrust Division to align itself with. If there’s price-fixing, someone has to be getting “overcharged.” In this case it would be the television networks that were deprived of the opportunity to “compete” for individual bowl contracts. ESPN currently holds the BCS rights, so they aren’t going to complain. Maybe Fox or another network would, but that just doesn’t seem likely.
And as much as BCS opponents claim the current system hurts individual fans of college football, there’s simply no evidence of that. Most of the BCS complaining, as I’ve said repeatedly, comes from media members who want a playoff out of professional self-interest. Sure, lots of people don’t like the BCS, but disliking something is not akin to a legal injury, even by antitrust standards. Furthermore, it’s illogical to claim customers are harmed by the absence of a product that never existed. It’s not as if the BCS took away a playoff. The BCS replaced a decentralized bowl system that people seemed to dislike just as much if not more.
The final BCS antitrust argument I’ve heard — which Steve Czaban reiterated to me this morning — is that the Big Six conferences are “leaving money on the table” by rejecting a playoff. This seems to be an academia-generated talking point. Some economists pulled numbers out of a hat and said, “We think a playoff will make more money than the BCS.” Ergo, the BCS is an antitrust violation because its members aren’t trying to maximize their profits. Which seems to go against all the prior antitrust arguments that claim the BCS is too greedy.
This really goes to the heart of the economic fallacy of antitrust. The regulator starts with a presumption of what an individual or firm should value and then punishes them when they deviate from that expectation. In this scenario, it’s wrong of the BCS leaders to value their control under the present system over a playoff that could make more money. This is why many media members portray the BCS as “evil,” not merely illogical, because they maintain college officials are simply holding on to their petty power at the public’s expense.
And if that is the case, then so what? Individuals often turn down higher paying jobs because they assign a higher value to other needs, such as living in a particular community or passion for a particular cause. (Trust me, I could probably make more money by doing something other then writing about antitrust!) If you apply the “leaving money on the table is illegal” argument consistently, you’d have Antitrust Division lawyers second-guessing everyone’s personal decisions about where to work and live. To simply declare, “This is what you must value!” is an attack on the very soul of free-market economics.
Finally, I did want to address a commenter to my last post, who asked, “What exactly is so bad about the government bringing “anti-trust” lawsuits against itself?” In other words, isn’t it better for the DOJ to prosecute government-run universities as opposed to private businesses? My response is simple. If the government says it’s developing a biological weapon, I don’t respond by saying, “I hope they only use it against other governments.” I don’t want the government to have a biological weapon in the first place.
Remember, the Antirust Division doesn’t make the same public-private distinction that libertarians do. Any new mutant theory of antitrust developed in a case against the BCS could easily be adopted for use against a mom-and-pop store down the street. I’ve never subscribed to the view that you need to wait for the “perfect” victim before attacking the antitrust system.
If anything, it’s more important to attack these sorts of cases, because they serve as propaganda for the antitrust establishment. My friend Steven Czaban is Exhibit A. I’ve known him for years. He’s a conservative with decent libertarian economic instincts. Yet he admitted this morning that ideology takes a backseat here to his hatred of the BCS. If antitrust will rid him of this scourge — and I maintain it won’t — then he’s all for it.
And that’s a pretty typical view among the media intelligista: The ends justify the means. Which is precisely why it’s important for those of us who understand economics and oppose antitrust to redouble our efforts, even if the target is one that even libertarians may dislike.