NCAA Has No Comment for Justice Department Probe of Football Championship Series

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Earlier this month, U.S. Attorney General Eric Holder confirmed at a Senate Judiciary Committee oversight hearing that the Department of Justice was looking into college football's Bowl Championship Series (BCS) system. In response to questioning from Sen. Orrin Hatch (R-Utah) at the May 4 hearing, the attorney general disclosed that the Justice Department had sent a letter to the National Collegiate Athletic Association (NCAA) seeking feedback on the BCS system.

Yesterday, the NCAA released a letter from Mark Emmert, its president, to the Justice Department, stating that the association could not comment on the BCS. The May 18 letter suggested that questions about the BCS system and to what extent an alternative system could better serve the interests of fans, colleges, universities, and players would be best directed at the BCS and the group of institutions that operate the BCS system.

"Inasmuch as the BCS system does not fall under the purview of the NCAA, it is not appropriate for me to provide views on the system," Emmert said in the letter. The letter went on to say that the NCAA had no plans for an NCAA Football Bowl Subdivision (FBS) football championship, unless the association's membership "decides to discontinue the existing BCS systems and formally proposes creation of a championship for FBS institutions." While Emmert has in the past expressed a willingness to help create a championship, he noted that "without membership impetus for a postseason playoff, the NCAA has no mandate to create and conduct an FBS football championship."

The disclosure of the inquiry into BCS comes after years of calls for an investigation into the legality and fairness of the BCS from Sen. Hatch and other congressional lawmakers. Sen. Hatch has suggested that the BCS violates the Sherman Act. At the May 4 oversight hearing, the senator called the BCS "a mess."

The BCS is described as "a five-game showcase of college football . . . designed to ensure that the two top-rated teams in the country meet in the national championship game, and to create exciting and competitive matchups among eight other highly regarded teams in four other bowl games." Some argue, however, that has not always been the case and have called for a single elimination post-season playoff system.

Under the current BCS system, there are five bowl games are the Tostitos Fiesta Bowl, the Discover Orange Bowl, the Rose Bowl, the Allstate Sugar Bowl, and the BCS National Championship Game that is played at one of the bowl sites.

“Final Four” Ticket Distribution Process Might Be Illegal Lottery

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

The National Collegiate Athletic Association and Ticketmaster could have conducted an illegal lottery by charging nonrefundable “handling fees” to unsuccessful applicants for tickets to the 2009 NCAA men’s basketball “Final Four” games, the U.S. Court of Appeals in Chicago has ruled.

Unsuccessful ticket applicants who forfeited fees brought a proposed nationwide class action. They seek a declaration that the ticket allocation process constituted illegal gambling under Indiana law and assert violations of the Indiana Deceptive Consumer Sales Act, as well as common law claims of unjust enrichment, civil conspiracy, and monies had and received.

Nonrefundable Fees

According to the complaint, each person who applied for tickets to Final Four games submitted a single application with up to 10 entries. Each entry was a chance to win, at the most, two tickets and required a payment of a $6 “non-refundable handling fee.”

An applicant could win only once but was required to submit the full face value of the tickets for each entry. In order to maximize the chances for winning a single pair of $150 tickets, an applicant would have to submit $3,060 (the face value of ten pairs of tickets plus a $6 handling fee for each of 10 entries).

A successful applicant would receive a pair of tickets via overnight mail and, eventually, a $2,700 refund (the total ticket price for the remaining nine entries).

The $60 in handling fees would be forfeited to the NCAA. An unsuccessful applicant would receive a $3,000 refund (the entire up-front investment minus the handling fees).

Prize, Chance, Consideration

Under Indiana law, three elements are necessary to establish a lottery: (1) a prize, (2) an element of chance, and (3) consideration for the chance to win a prize. The NCAA argued that its ticket distribution process only granted an opportunity to purchase tickets at full price, which was not a prize.

The court held that the unsuccessful applicants alleged all elements of a lottery. They allegedly paid a per-ticket or per-entry fee (consideration) to enter a random drawing (chance) in hopes of obtaining scarce, valuable tickets (a prize).

The NCAA sought to rely on the bona fide business transaction exception to Indiana’s gambling statutes. However, Indiana law made it unlawful to conduct a lottery without regard to statutory provisions defining “gambling,” according to the court.

In Pari Delicto

Finally, the suit was not barred by the equitable doctrine of in pari delicto—“where the wrong of both parties is equal, the position of the defendant is the stronger.”

Indiana law made it unlawful to conduct lotteries or otherwise gamble knowingly. As alleged, the NCAA’s acts of knowingly conducting an unlawful lottery demonstrated a greater degree of fault than the applicants’ acts of unwittingly entering that lottery, the court determined.

The decision by federal district court in Indianapolis, holding that the doctrine of in pari delicto barred the unsuccessful applicants from seeking relief, was reversed and remanded on all counts. The claims under the Indiana Deceptive Consumer Sales Act and the common law all incorporated and to some extent relied on the lottery allegations, the appeals court noted.

The July 16 opinion in George v. National Collegiate Athletic Association will be reported at CCH Advertising Law Guide ¶63,913.