WORK WITH US
Court Dismisses Lawsuit Brought Against Ivy League Schools For Sport Scholarship Ban
Tamenang Choh and Grace Kirk (collectively, the student-athletes) brought a class action lawsuit against Ivy League schools based on the Ivy League Agreement not to provide athletic scholarships to Division I athletes, and not to pay Ivy League Athletes any compensation. The Ivy League Agreement allows athletes to be admitted as students and receive financial aid only on the basis of economic need. Both Choh and Kirk were admitted to Ivy League schools to play sports, but their financial aid did not cover the full cost of tuition, room, and board. Both Choh and Kirk turned down offers from other universities, where they would have received full athletic scholarships.
The Ivy League Manual explicitly states that it “stands at the pinnacle of higher education and Division I athletics, rooted in the longstanding, defining principle that intercollegiate athletics competition should be kept in harmony with the essential educational purposes of the institution.”
The student-athletes argued that the Ivy League Agreement limits their financial aid by banning athletic scholarships, and that this policy amounts to price fixing. The Ivy League schools moved to dismiss the complaint.
Under the Sherman Antitrust Act, unreasonable restraints on competition are antitrust violations. A restraint may be unreasonable because it is considered “per se” unreasonable, or because it violates the “Rule of Reason.” Regulation of league sports falls under the “Rule of Reason” as was recently confirmed by another antitrust lawsuit involving compensation for student-athletes. The Rule of Reason is a flexible standard that is used to determine whether a business practice is anticompetitive and allows the Court to consider the practice’s overall effect on competition by considering the entity’s market power, anticompetitive effects, and procompetitive justifications.
Under the “Rule of Reason,” the Court assesses whether a business practice is reasonable or unreasonable by taking a three-step, burden-shifting framework. The plaintiff has the initial burden to prove that the challenged restraint has a substantial anticompetitive effect that harms consumers. As part of this burden, the plaintiff must show a relevant market where competition will be impaired (i.e., must show that the entity has significant market power and the ability to control prices or exclude competitors). The relevant market must be defined as all products reasonably interchangeable by consumers for the same purposes.
Here, the student-athletes defined the relevant markets as: 1) the market for athletically and academically high-achieving students (AAHA) who seek to graduate from college and play Division I sports in the NCAA; and 2) the market for athletic services of the AAHA students who seek to play for the Ivy League. The student-athletes’ complaint stated that schools other than the Ivy League (e.g., Stanford, Duke, Rice, and Notre Dame) compete to offer educational services to AAHA students, and the Ivy League schools are not the only schools to which AAHA students sell their athletic services. However, these schools were not included in the student-athletes’ defined market.
The Court therefore concluded that the student-athletes failed to show the relevant market definitions, making it impossible to evaluate whether the Ivy League had the market power necessary to withhold athletic scholarships without losing the AAHA students to other excellent schools. In other words, the anticompetitive effects related to some market participants, but did not speak to the effects on the market as a whole. The Court also concluded that the Ivy League is an athletic conference with a unique brand, as stated in the Ivy League Manual, but was not a single distinct market in the industry, and therefore the Ivy League Agreement was not a horizontal agreement.
Choh v. Brown Univ. (D.Conn. Oct. 9, 2024) 2024 U.S.Dist.LEXIS 185260.
Note: The judge found that the plaintiffs failed to establish an antitrust violation and show that the league’s policies harmed competition. However, this decision may be appealed to the U.S. Court of Appeals for the Second Circuit. Schools should be aware that informal and formal agreements among schools about tuition and scholarships can result in antitrust violations.