Justice Department Investigation of the NCAA

So, I was looking through ESPN and saw that the Justice Department was investigating the NCAA.  Apparently this is old news, and is something that actually which began earlier this spring.  In this USA Today article, it is detailed that the NCAA is now under investigation for potential violations of antitrust laws because of the current scholarship policy for student athletes.  Currently, the NCAA policy has scholarships that renew each year for student athletes.  That means if a student athlete is injured during the off season, the school which they can play for can withdraw their scholarship, often citing that the player “broke team rules.”  While not all schools may guilty of such a malicious use of scholarships, the fact that the scholarships are not guaranteed for four or five years is something that the Justice Department is looking into.  In the article it is evident that the Justice Department is interested in this manner, and have been interviewing sport management professors, and possibly others with intimate knowledge of the inner workings of college athletics.

Now the speculation seems to be that if the NCAA were forced to allow schools to open up the ability to offer multi-year scholarships, it is believed that schools will not be able to better compete for student athletes by offering longer scholarships.  That is, the Justice Department might not force schools to give single year scholarships, but instead make the NCAA change the rule, thus allowing schools to offer a four or five year scholarship if they wished.  The Justice Department possibly believes that through doing this, they are creating more of a free market situation, where schools could potential offer different a “price” (price in regards to the number of guaranteed years of scholarship) than other schools when competing for a student to play for their school.  In this, the current state of NCAA affairs may be akin to price fixing, at least that is what the authors of this article at insidehighered.com hints.

Thinking about this from a financial standpoint, changing the rules could indeed allow schools to bid with longer scholarships for athletes, but this could also lead to higher potential costs for schools, as guaranteeing a four year scholarship to an athlete who may not be able to play the whole time because of injury or other issues could be costly to schools.  With the state of finances as they are for athletic departments (the majority of athletic departments are in the red), this move by the justice department could potentially create a more level playing field, but also could be more costly for many schools.  It will be curious to see how this plays out, its been several months now since this news was quietly broke, yet there seems to have been little progress since then.

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