September 26, 2017 / 9:46 PM / a year ago

Breakingviews - College-sports fraud case obscures the real crime

WASHINGTON (Reuters Breakingviews) - College-sports fans just got a fresh reminder that corruption is alive and well in their field. Federal prosecutors on Tuesday unveiled criminal charges against 10 individuals, including four assistant coaches and an Adidas executive. The allegations may have merit, but the case shouldn’t obscure the real crime: a deeply flawed college-sports cartel.

Mar 16, 2017; Orlando, FL, USA; General view of a March Madness basketball prior to the game between the Maryland Terrapins and the Xavier Musketeers in the first round of the NCAA Tournament at Amway Center. Mandatory Credit: Kim Klement-USA TODAY Sports

Prosecutors allege that a network of intermediates received kickbacks in exchange for steering top athletes toward certain colleges, apparel contracts and financial advisers. In broad strokes, this sort of sleaze arises because the National Collegiate Athletic Association, which governs university sports, forbids member institutions from paying student athletes. Some within the multibillion-dollar college-sports industry therefore resort to skullduggery to attract the best student athletes.

The system itself is a rarity in the U.S. economy: a monopsonistic cartel. The NCAA gathers together different buyers (universities) in order to fix the selling price of labor (athletes). The resulting savings are huge. The fair market value of the average big-time college men’s basketball player stood at about $289,000 per year, according to a 2012 study by the National College Players Association and Drexel University. By contrast, the average full athletic scholarship is estimated to be worth around $23,000 per year. Lost earnings for men’s college basketball and football players totaled $6.2 billion from 2011 to 2015, the study estimated.

Universities get a good chunk of that. Nearly 30 institutions had athletics revenue – such as ticket sales, alumni contributions and licensing rights – of more than $100 million in 2016, USA Today found, based on public schools that are obliged to report the data. The leader, Texas A&M, raked in $194 million, $57 million more than it spent.

The NCAA says it aims to preserve amateur competition and foster an environment that prioritizes education. Fans familiar with student-athlete scandals in recent years are right to be skeptical of that claim.

There is a better path: labor-market liberalization. Universities should be allowed to attract athletes with competitive remuneration packages and let them capture the value they create. The latest corruption case will attract plenty of media attention, but it shouldn’t distract from that fundamental injustice.


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