Sunday, May 26

1100 Colleges and the Republic’s March to Madness

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by William Devine

As higher education’s basketball tournament for men unfolded in March, US District Court Judge Claudia Wilken ruled that the tournament’s revenue model is almost but not quite illegal.

The revenue model’s injustice seems obvious.  1100 colleges and universities earn about $800 million per year in TV money from the tournament, yet they agree to pay no wages to players who play in it.  Still, Judge Wilken let the model live on because higher education’s lawyers convinced her that people would not watch the tournament anymore if players got paid.

In legalese, she found that, while the revenue model constitutes “horizontal price-fixing [that is]usually a per se violation of antitrust law,” this price-fixing by higher education will be tolerated because it’s part of “preserving consumer demand.”

Should university trustees be relieved the model is still considered legal?  In fact, those who understand the connection between law and leadership already recognize this decision as a flashing red light, signaling that their model damages both higher education and the republic in ways that may be irreparable.

Ed O’Bannon, a former U.C.L.A. basketball star, has been a driving force in lifting restrictions on paying college athletes. Credit: Isaac Brekken/Associated Press

Ed O’Bannon, a former U.C.L.A. basketball star, has been a driving force in lifting restrictions on paying college athletes. Credit: Isaac Brekken/Associated Press

Legal Doesn’t Mean Educational

The keys to seeing the flashing red light embedded in Judge Wilken’s decision are three.  First, note that the only reason this revenue model remains legal is not because it accomplishes some fine educational purpose such as smaller class sizes.  The only reason it’s not illegal is that it’s “preserving consumer demand” for sports, which is not part of any trustee’s mandate.

Most sports universities were formed pursuant to documents that read much like the legislative act that formed the University of California in 1868:

The University shall have for its design, to provide instruction and thorough and complete education in all departments of science, literature, art, industrial and profession pursuits, and general education, and also special courses of instruction in preparation for the professions of Agriculture, the Mechanic Arts, Mining, Military Science, Civil Engineering, Law, Medicine and Commerce…

Nothing here about consumer demand for sports, or the need to preserve it.

When the only reason a higher education program is not illegal is because it accomplishes a purpose unrelated to education, the idea that the program is at least out of sync, if not out of compliance, with one’s university charter seems worth considering.

Legal Doesn’t Mean Just

Next, understand that the law is always late.  Case in point: the Equal Pay Act became law in 1963 only after years, if not decades, of women suffering the injustice of earning less than men for doing the same job.  So while Judge Wilken held that higher education’s revenue model is still considered legal, that does not mean that the model is not visiting injustice on players.

Players receive no wages while, according to tax returns and surveys, others involved in the revenue model receive windfall salaries.  $2.3 million for higher ed’s sports president.  $932,588 for higher ed’s lead sports lawyer.  Between $1 million and $7.9 million for at least 69 men who teach basketball.

And while players receive admission to college, they are not receiving education.  A 2018 report by the College Sport Research Institute at the University of South Carolina shows that basketball players at the nation’s 65 biggest basketball universities graduate at a rate that is 33.4% lower than the rate for the rest of the student body.

These facts remain the facts of this matter, regardless of whether visiting economic exploitation and educational compromise on 19-year-old basketball players is currently prohibited by law.

Legal Doesn’t Mean Good

Finally, note that higher education knows very well how law relates to leadership. Penn State’s board of trustees proved that in explaining why they fired Joe Paterno for his role in the Sandusky child sexual abuse cover-up.  The board stated, “…[H]is decision to do his minimum legal duty and not to do more to follow up [to stop Sandusky’s abuses sooner]constituted a failure of leadership.”

The Penn State trustees wrote: '[Paterno's] decision to do his minimum legal duty and not to do more to follow up constituted a failure of leadership.' Photograph: Rhona Wise/EPA

The Penn State trustees wrote: ‘[Paterno’s] decision to do his minimum legal duty and not to do more to follow up constituted a failure of leadership.’ Photograph: Rhona Wise/EPA

In implementing its basketball tournament revenue model, is higher education doing more than its minimum legal duty?  The answer is, “No,” and not just because Judge Wilken only barely deems legal a revenue model that facilitates economic exploitation and educational compromise.

Higher education basketball’s stay-in-front-of-that-cash-flow-no-matter-who-it-exploits revenue model, broadcast in prime time every March to students desperate for economic competence amid economic uncertainty, offers an unmistakable message. Talk about honesty and values is fine in those lectures on Dr. Faustus, but when dollars are on the table, employ whatever Mephistophelean mix of semi-truth and manipulation is necessary to pocket the money.

How fully do students absorb this message?  A decade ago, we witnessed how the subprime loan crisis almost cracked the world’s economy, thanks to textbook use of the exploitation revenue model in making loans to consumers who had few prospects for repaying them.

Today we see the exploitation revenue model implemented in sales of social media to buyers intent on posting hate speech, bullying and other toxic content on the platform, or committed to using it as an instrument of government propaganda or ethnic cleansing.

We also see the model implemented in sales of hotel rooms and nuclear technology to foreign governments and their agents, notwithstanding how these sales could compromise America’s national security interests or our ability to hold foreign governments accountable for the Sept. 11 terrorist attacks.

Is higher education’s basketball business the only reason the exploitation revenue model is so accepted, and so often used to achieve corrosive results?  Clearly not.  But given the enormity of higher education’s platform for influence, and the clarity of its message, university trustees cannot credibly argue that higher education bears no part of the blame, or that higher education is doing more than its minimum legal duty.

Leadership Guaranteed

So what needs to happen?

Some wring their hands, claiming that finding “a plan that makes sense” for solving the problems the revenue model presents is too complex a challenge.  But the hand-wringers are merely too attached to athletic spectacle and the hundreds of millions of dollars it yields.  Or to put it another way, now is not the time for half measures and small thinking.

Zion Williamson #1 of the Duke Blue Devils reacts after falling as his shoe breaks against Luke Maye #32 of the North Carolina Tar Heels during their game at Cameron Indoor Stadium on February 20, 2019 in Durham, North Carolina. (Photo by Streeter Lecka/Getty Images)

Zion Williamson #1 of the Duke Blue Devils reacts after falling as his shoe breaks against Luke Maye #32 of the North Carolina Tar Heels during their game at Cameron Indoor Stadium on February 20, 2019 in Durham, North Carolina. (Photo by Streeter Lecka/Getty Images)

The three principal elements of the solution are plain to see.  Higher education’s exploitation-is-ok message must end.  Higher education’s economic exploitation of 19-year-olds must end.  Education, as specifically defined by university charters, must drive all higher education programs.

If universities continue to own basketball and football teams, players—like professors, television executives, sports journalists, university lawyers, judges, athletic directors and higher ed’s sports president—must be paid free-market wages.  If the players continue to be required to go to school, they must be educated.

If, to accomplish the three principal elements of the solution, television contracts must be renegotiated or terminated, so be it.  If no one ever again makes $7.9 million a year to coach college basketball, or even $1 million, c’est la vie.

If Title IX issues require that the universities transfer ownership of the basketball and football teams to the NBA and the NFL, or to other entities, so be it.  Education must win.  If intercollegiate sports must all be offloaded to other entities, so be it.  Higher education is more than, and more important than, intercollegiate sports.

The bottom line?

Clear-eyed university trustees know that, no matter what happens, higher education will lead.  The question is simply whether higher education will help lead the world to a higher standard of living, or whether higher education will help lead the republic along on a march to madness.


About the author:

William Devine leads the Corporation in Society practice at William Devine Esquire, and is Adjunct Professor of Law at Menlo College, where he teaches Legal & Societal Issues in Sport Management.

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