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Legal showdown looms over the NCAA’s ban on paying athletes

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NCAA President Mark Emmert answers questions during a news conference at the Final Four college basketball tournament in Indianapolis.

ATLANTA >> Fresh off a ruling that Northwestern University football players can’t form a union, the NCAA is about to face a more direct challenge to its longstanding policy of not letting schools pay athletes like they’re professionals.

A federal judge who issued a landmark decision against the NCAA last year is considering whether to grant class-action status to lawsuits by current and former college athletes seeking to abolish the NCAA’s prohibition against competitively paying players. Taken together, the cases carry billion-dollar implications and hinge, essentially, on whether the concepts of amateur athleticism and economic competition can co-exist.

The NCAA says its model sets a level playing field among schools and their teams. But its business model requires collusion, and critics have long decried it for hampering the competition normally considered healthy in a free market.

"These are just educational institutions who have decided to go into a business," said Jeffrey Kessler, an attorney representing former Clemson football player Martin Jenkins and two others. He has also represented labor unions for professional athletes. "That’s perfectly lawful, but you don’t get to conspire not to pay your workers anything in that business."

The Jenkins case, by far the biggest threat to the status quo, aims to strike down any compensation limits for players and let a competitive market emerge.

"I think that everyone sees this is completely in opposition to any model of college sports as we’ve ever known," NCAA President Mark Emmert said late last year.

Another lawsuit brought by former West Virginia University running back Shawne Alston seeks to allow conferences to set their own rules for paying players, and then compete against rival conferences to recruit athletes.

The lawsuits may already be having an effect. After years of debate and mounting legal pressure, the NCAA’s dominant conferences agreed to start paying their players the difference between what they receive in scholarships and what it actually costs to attend a school, one of the goals in both cases.

Those payments begin this month.

Big athletic conferences are already squeamish about even that change. The powerful Southeastern Conference proposed a rule that would force schools to inform the NCAA if their athletes get a stipend that’s bigger than the costs of attendance the schools report to the U.S. Department of Education.

While SEC officials said the rule would help maintain transparency, economists critical of the NCAA saw it as a rule designed to deter market competition.

The proposal was rejected.

Outside of college athletics, economic competition is considered good for society. Prices drop when companies compete to sell laptops, coffee and cars. When firms compete to hire the best workers, wages rise.

With some exceptions for the greater good, U.S. law generally bans companies from striking deals that curtail competition — in a word, cartels. For example, the U.S. Department of Justice is investigating whether major airlines colluded to limit available seats, making tickets more expensive. Silicon Valley workers tentatively accepted a $415 million settlement this year after accusing Apple Inc., Google Inc. and other tech firms of agreeing not to hire each other’s employees.

But for years, courts and other authorities have been nibbling around the edges of NCAA rules that limit competition. The U.S. Supreme Court stopped the NCAA from limiting the number of televised football games back in the 1980s, although Justice John Paul Stevens wrote in the same ruling that the NCAA could make a case as a legal cartel, words the organization and an appellate court have clung to since.

The NCAA settled lawsuits accusing it of arbitrarily limiting pay for assistant coaches and capping student scholarships.

It recently lost a ruling that found students were entitled to compensation when their likenesses are used commercially, a case led by former UCLA basketball star Ed O’Bannon. The NCAA has appealed that ruling.

On Monday, the National Labor Relations Board blocked football players at Northwestern University from forming their own labor union, overturning a regional labor administrator’s determination that the players were essentially school employees.

The NCAA defends its rules as upholding a tradition of amateurism. Big-money athletic teams also help support less-popular college sports and can boost educational budgets, the association has said. While star athletes would almost certainly get more money in a competitive market, economists hired by the NCAA say less-talented athletes could receive less, and schools might discontinue some unprofitable teams.

Lawyers and economists for the players dispute that. The NCAA itself reported $872 million in revenue in the 2011-2012 school year. TV rights for the NCAA men’s basketball tournament and football bowls are worth nearly $18 billion, most of which gets distributed to schools and conferences.

"They are going to field a full roster at Division I because they are going to want to compete," said Steve Berman, an attorney for Alston. "It’s lucrative enough to do so."

Expect important decisions as soon as October, when U.S. District Judge Claudia Wilken in Oakland, California, will hear arguments on whether related lawsuits should proceed as class-action cases. Wilken ruled against the NCAA in the O’Bannon case over the use of player images.

The early legal decisions are important because many such suits never reach a jury. The judge could all but kill the case by blocking lawyers for the athletes from representing a wide group of players.

On the other hand, if Wilken grants the cases class-action status, the NCAA would face increasing pressure to settle rather than risk a verdict that could blow up its business model.

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