The BCS on Trial: Understanding the Implications

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The BCS on Trial: Understanding the Implications
(Photo by Donald Miralle/Getty Images)

Who could have guessed it would come to this?

Congressional hearings opened Tuesday to investigate possible violations of antitrust laws by college football's Bowl Championship Series.

This opens the whole can of worms again. It's one of those topics we can't help arguing about. It's a great discussion because as fans, we mostly agree—we need a playoff—and we can all be indignant together.

The hearings, led by Utah Senator Orrin Hatch (a member of the Senate Antitrust Subcommittee), take things a step further. To many people such government intervention seems unnecessary and over the top, but a little bit of digging reveals that, really, there's a point—and it's quite good.

There are two aspects of the BCS that until now have slid under the radar, but that are worth discussing: the economics of the BCS and its legality. We'll cover economics first, as this concept leads nicely into the questioned legality of the BCS system.



The Economics

I absolutely have to begin with this graph. It's astounding. It's the product of a study by Richard W. Evans, an Assistant Professor of Economics at Brigham Young University (from—you guessed it—a non-BCS conference). Read his fantastic, uber-informative report here.

What you're looking at is a graph of bowl game revenue (hopefully Dr. Evans doesn't mind that I've re-purposed it here). The blue represents revenue pulled in by schools from BCS conferences, and the red represents non-BCS conferences.

The three red lines indicate points of evolution in the college bowl system. The first, in 1992, was the formation of the Bowl Coalition, the second is the 1995 formation of the Bowl Alliance, and then in 1998 came the formation of the Bowl Championship Series, as it exists today. Prior to any governing bowl organization, the conferences formed their own contracts with the bowls.

As you can see, before the formation of any union, the non-BCS schools were pulling in maybe a third (maybe as little as a fourth) of the bowl revenue. What's startling, though, is that as bowl revenue has gone up over the years, the non-BCS revenue has been kept stagnant, while BCS schools have pulled in quite a bit more.

The four high points in the non-BCS revenue represent the four times that a non-BCS team has played in a BCS bowl. It's worth pointing out that of those four games, three were won by the non-BCS team (two by Utah, one by Boise State; the one loss was by Hawaii).

When a team plays in a BCS bowl game, their entire conference benefits—there is revenue that goes back to the conference and then is divided equally among the teams. So even the last place team in a BCS conference is always guaranteed a cut of bowl revenue, giving them a boost in possible scholarships, facilities, and all the trimmings that help build a better football program.

In turn, a highly successful team from a non-BCS conference that gets excluded from a BCS bowl doesn't even get a shot at that revenue.

That's a huge part of the discrepancy.

But it gets even better. The structure of the BCS dictates that teams from BCS conferences receive quite a bit more money for playing in the same games as non-BCS teams. Non-BCS teams receive around $4 million for their appearances (source), whereas BCS teams receive around $18 million (source).

These are just the facts to set us up for the discussion of the legality of the BCS system.

 

The Law

Senator Hatch has taken some flak for taking a stand on this issue—some complain that he should have more important things to do as a United States Senator, and some think he's just bitter because his home state Utah and BYU teams are often the ones being given the shaft by the BCS. Others speculate that he's trying to garner greater support from his constituency by pandering.

Hatch summed up his own thoughts nicely in his op-ed for Sports Illustrated.

Whatever his intentions, it's worth remembering that every court case has a plaintiff, and the plaintiff is by definition the wronged party. The plaintiff in a robbery case is the person who got robbed. The fact that Senator Hatch is from Utah seems appropriate in such context.

Plus, strangely enough, he's right.

Understanding the antitrust accusations against the BCS depends on some understanding of antitrust law. Here goes:

Antitrust law in the United States prohibits monopolies and unfair business practices and encourages free-market business competition. It clamps down on practices that hurt businesses or consumers or both, as well as unethical business practices. The flying flag of antitrust law is the Sherman Antitrust Act, put in place in 1890—well over a hundred years ago.

One of the hallmarks of U.S. antitrust law is the prohibition of group boycotts. To illustrate what a group boycott is and how it works, we can use one of its precedent cases, Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959).

In this situation, a string of several home appliance manufacturers and retailers all agreed together to not sell their products to a certain retailer, or to charge him prices so high that he couldn't afford them (they said it was due to a "private quarrel"). The targeted retailer took them to court on antitrust grounds—the group boycott was a clear violation of the Sherman Antitrust Act. The retailer won, and the group boycott was broken up, forcing those suppliers to be fair.

It doesn't take much imagination to apply this precedent to the BCS.

It can be argued that the six major conferences in the BCS have colluded to form a system that excludes the smaller conferences, much as the suppliers excluded a single retailer.

It comes wildly into focus when we consider the economic impact—by "boycotting" teams from smaller conferences, perhaps regardless of their talent or win-loss record, the BCS conferences are able to secure much higher revenues for themselves simply by excluding others that may be equally or even more qualified.

The term "anti-competitive" is often used in the context of antitrust cases, and it makes extra sense here—there is simply less competition to get into the BCS bowl games, because it's almost impossible for more than one non-BCS team to make it to a BCS bowl each year.

The case is strong, but it's not rock solid. It depends on several things:

* It's important to realize that college football teams aren't just teams; they are, in fact, businesses. They make revenue and profits just like any business you can think of and compete in extremely competitive markets.

* The NFL and MLB have received specific exemptions from antitrust law in the past, so the ruling would have to decide that antitrust law does in fact apply to college football.

* Before there was any sort of bowl organization, the conferences did individually form contracts with the bowls—a setup that guaranteed teams from major conferences in major bowls every year, resulting in significant revenues to those conferences. By contract, the Pac-10 and Big Ten were in the Rose Bowl every year, the SEC was in the Sugar Bowl, etc., etc.

The BCS isn't that much different, except that it adds a national championship game that can override some of the conference-bowl affiliations. For legal action to be taken against the BCS, it would have to be proved that non-BCS conferences are in a worse situation now.

* It's worth remembering that the non-BCS conferences agreed to the current BCS setup. It could be argued in turn, however, that they were forced to—and that not agreeing to the contract would have left them entirely out of bowl revenue, including TV contracts.

 

Speaking to that last point, it's worth reading the Mountain West Conference's acquiescence to the current TV contract, posted on the Conference's website yesterday. It indicates while that they did in fact sign the contract, it conveys that they had "no choice"— and they go so far as to mention that there are "various fundamental flaws in the current BCS system."

The antitrust proceedings, even in the unlikely case that a ruling is made against the BCS, unfortunately won't result in the formation of a playoff. If it is ruled to be a group boycott, the subsequent legal action would likely be to break up the BCS, not change its rules—putting us back where we were in 1991 before any bowl coalition was formed.

I don't think that's a good idea.

Don't forget that before the BCS there wasn't a national championship game that pitted the No. 1 team against the No. 2—both teams would play in the bowl games their conferences dictated, and then the AP voters would decide a champion.

The BCS then, even with all of its flaws, gave us a playoff—the smallest playoff possible, in that the two highest-ranked teams comprise a playoff to determine the national crown.

Despite all that is going on, with Senate hearings and economic analysis and debates across the country, we're still a long way from a solution. There are many arguments worth considering that haven't been mentioned here, both for and against, but the economics and the legal consideration both suggest that the BCS has a long way to go.

But people on all sides of the issue can still agree on one thing.

College football is awesome.

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