Restraint of Trade. The National Collegiate Athletic Association (NCAA) coordinates the intercollegiate athletic programs of its members by issuing rules and setting standards governing, among other things, the coaching staffs. The NCAA set up a Cost Reduction Committee to consider ways to cut the costs of intercollegiate athletics while maintaining competition. The committee included financial aid personnel, intercollegiate athletic administrators, college presidents, university faculty members, and a university chancellor. It was felt that only a collaborative effort could reduce costs while maintaining a level playing field. The committee proposed a rule to restrict the annual compensation of certain coaches to 16,000. The NCAA adopted the rule. Basketball coaches affected by the rule filed a suit in a federal district court against the NCAA, alleging a violation of Section 1 of the Sherman Antitrust Act. Is the rule a per se violation of the Sherman Act, or should it be evaluated under the rule of reason? If it is subject to the rule of reason, is it an illegal restraint of trade? Discuss fully.
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