Thursday, December 9, 2004
On November 15, the Sixth Circuit overruled a lower court's invalidation of the NCAA's two-in four rule under the antitrust laws. The "two-in-four" rule limits the number of "exempt" tournaments in which Division I men's basketball teams can participate. Exempt tournaments are those designated by the NCAA as not counting toward the maximum number of games a team can play in a season. The two-in-four rule limits teams to playing in a maximum of two exempt tournaments every four years.
The Sixth Circuit ruled that the lower court should have analyzed the economics of the rule more closely to determine its anti-competitive and pro-competitive effects and balance them. The lower court was wrong in applying what is known as the "quick look" rule of reason, under which anti-competitive effects are presumed shifting the burden to the defendant to explain the pro-competitive effects of its business practice. As the Sixth Circuit panel stated:
"Far from being a case in which 'an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anti-competitive effect on customers and markets,' here the relevant market is not readily apparent and the plaintiffs have failed to adequately define a relevant market, thereby making it impossible to assess the effect of [the rule] on customers rather than merely on competitors."
The decision, Worldwide Basketball and Sports Tour Inc. v. NCAA, can be found at 388 F. 3d 955 (6th Cir. 2004).