College Football Playoff Debate - Governmental Intervention

Governmental Intervention

According to CBSSports.com wire reports and information obtained by the Associated Press, Senator Orrin Hatch received a letter from the justice department concerning the possibility of a legal review of the BCS. The letter, received on January 29, 2010, states that the Obama administration will explore options to establish a college football playoff including (a) an anti-trust lawsuit against the BCS, (b) legal action under Federal Trade Commission consumer protection laws, (c) encouragement of the NCAA to take control of the college football postseason, (d) the establishment of an agency to review the costs and benefits of adopting a playoff system, and (e) continued legislation in favor of a playoff system. Assistant Attorney General Ronald Weich writes, "The administration shares your belief that the lack of a college football national championship playoff ...raises important questions affecting millions...." BCS Executive Director Bill Hancock responded to the letter that the BCS complies with all laws and is supported by the participating Division I universities.

Following up on Senator Hatch's actions in the Senate, in April 2011 the Attorney General of Utah announced that he would be initiating a class action anti-trust lawsuit against the BCS, despite the fact that Utah is moving to the Pacific-10 Conference, which is an automatic qualifying conference. In March 2011 the U.S. Justice Department sent a formal letter of notice to the NCAA asking for a detailed explanation about why FBS football was the only NCAA sport that the NCAA did not 1) have a playoff system in place to determine a champion and 2) why the NCAA had abrogated its responsibility to do so and given the authority to determine the NCAA Champion to an outside group such as the BCS. The Justice Department's investigation and Utah Attorney General's lawsuit are both aimed at forcing the BCS to open its books, which they are as a non-profit required to do every year and have never done, and at determining whether the BCS is an illegal trust or cartel based on Sherman Anti-Trust Act of 1890, the Clayton Anti-Trust Act of 1914 and the Robinson-Patman Anti-Price Discrimination Act of 1936. Two more states Attorneys General are said to be considering joining the Utah lawsuit, and the investigation by the Justice Department will probably include a minute and extensive examination of the Fiesta Bowl Scandal as well as conducting complete audits of the other BCS Bowls, the BCS itself and possibly even the schools of the 6 BCS Automatic Qualification Conferences.

The Fiesta Bowl scandal in particular was the catalyst that opened the BCS up to Federal interest for the first time, largely because the government is concerned not only about the BCS's stifling of fair competition, but more importantly for the Federal Government about the possibility of fraud and tax evasion, if the BCS has violated the rules governing tax exempt organizations and groups that control tax exempt organizations. If the BCS Bowls, who are each separate entities yet also part of the BCS as a whole as well were to lose their tax exempt status, they could be liable for back taxes totaling hundreds of millions of dollars. The Fiesta Bowl abuses – especially those regarding alleged illegal and improper political contributions, excessive executive compensation and unjustified reimbursement payments, and the making of excessive, interest free and un-repaid loans – are precisely the types of abuses that would justify the Internal Revenue Service in stripping the BCS, and each BCS Bowl and possibly even each BCS Conference school (although that is highly unlikely) of their tax exempt status. In the worst case scenario the BCS could also be subject to forfeiture and seizure proceedings. While the worst penalties are unlikely to be enforced, even the milder penalties, such as a determination of a cartel and trust, would have devastating consequences for the BCS and the current system. The court could also order a resolution of the current unfair competition inherent in the structure of the BCS, including ordering a playoff system and ordering the Bowls to participate as the court directs rather than as the bowls had planned in the case of the BCS's demise. Despite Big 10 Commissioner Delaney's assertion that if the BCS were to fold they would "go back to the old system" if a court ordered a solution such as a playoff the Conferences would have no choice in the matter, and would be required – especially if a determination is made that the BCS is an illegal trust or cartel – to do whatever the court says, including submitting to federal oversight of the Bowl's and Bowl teams' finances and administration, and conducting a 4, 8 or 16 team playoff, or whatever other remedy the court ordered in their holding. The structure, timing and participants in such a system would be completely out of the hands of the individuals and groups who now control those decisions, and those same individuals and groups would, in all likelihood, not be given the choice of not participating. A court ruling could require them to participate just as they are now, but they would be required to do so based on the court's rules rather than the BCS rules. This is one of the main reasons that the BCS is fighting against government intervention so strongly. The Department of Justice inquiry is far and away the most potentially dangerous legal situation that the BCS has faced to date.