In Re: National Collegiate Athletic Association

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In Re: National Collegiate Athletic Association Case 4:14-md-02541-CW Document 363 Filed 03/22/16 Page 1 of 161 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION : IN RE: NATIONAL COLLEGIATE : ATHLETIC ASSOCIATION : ATHLETIC GRANT-IN-AID CAP : ANTITRUST LITIGATION : : : : : : : : : : : Case No. 4:14-md-2541-CW : : : EXPERT REPORT OF DANIEL A. RASCHER : : ON DAMAGES CLASS CERTIFICATION : : : February 16, 2016 : : : : : : : : : : : : : : : : : : Case 4:14-md-02541-CW Document 363 Filed 03/22/16 Page 2 of 161 Table of Contents 1. Qualifications ...............................................................................................................3 2. Scope of Work..............................................................................................................4 3. Summary of Opinions with Respect to Damages Class Certification Issues .........6 4. Economic Facts Relevant to the Restraints in Suit ..................................................9 4.1 The Allegations Through an Economic Lens ................................................................................................ 10 4.2 Economically, Plaintiffs’ class-wide allegations are a simple matter for common analysis .......................... 11 4.3 Theory of Pecuniary Harm/Damages ............................................................................................................ 15 4.4 In an Input Market, Collective Efforts to Contain Costs are the Essence of Anticompetitive Harm ............. 17 4.5 Economic Cartels require means to Monitor and Enforce Compliance with anticompetitive agreements .... 19 4.6 Protecting Competitors at the Expense of Competition is Anticompetitive .................................................. 21 4.7 A Given Joint Venture is not necessarily 100% Pro- or Anti-Competitive ................................................... 23 4.8 Conferences, not the NCAA, play the role of football and basketball leagues .............................................. 24 4.9 Title IX creates higher demand for women’s basketball athletes than might otherwise exist ........................ 27 5. Each Step of the Primary Liability Case Analysis is Amenable to Common Proof30 5.1 Market Definition and Market Power ............................................................................................................ 31 5.1.1 A Direct Effects Analysis is Common to all Members of Each Class ................................................... 32 5.1.2 The Indirect Process of Identifying Relevant Markets (both Product and Geographic) and Demonstrating Market Power is also common to All Members of Each Class ...................................................... 33 5.1.3 Analysis of Barriers to Entry is common to each class ......................................................................... 34 5.2 Anticompetitive Harm Can Be Demonstrated by Common Proof ................................................................. 35 5.2.1 The NCAA and its Members Recognize the Restraints in Suit Cause this Harm to Market Competition by Design 36 5.2.2 The process of addressing procompetitive justifications and less restrictive alternatives is common to all class members ................................................................................................................................................... 39 6. The Restraints in Suit Caused Common Impact to All Members of Each CLASS41 6.1 Harm to the Market is a form of Common Impact ........................................................................................ 43 6.2 Pre-1973 Conduct Illustrates the Likely Impact in the But-for World........................................................... 45 6.2.1 The 1975 vote to establish the prohibition on paying COA was explicitly and exclusively aimed at collective cost containment .................................................................................................................................... 51 6.2.2 Post-1975 efforts to relax the restraint were repeatedly rejected by collective agreements (votes) of the Defendants and other NCAA members ................................................................................................................... 56 6.3 Post-2014 Conduct Illustrates (but Understates) the Likely Impact in the But-for World ............................. 69 6.3.1 The analysis of impact and damages is hampered by the fact that discovery is not yet complete ......... 70 6.3.2 Using Data on 2015-16 Conduct as a natural experiment ................................................................... 74 6.4 Unwinding a price-fixing cartel takes time.................................................................................................... 87 6.5 A categorization based on whether a school has adopted (or announced it will adopt) COA GIAs establishes a class of commonly impacted athletes in each sport ................................................................................................. 94 6.5.1 A method for categorizing schools with currently insufficient data until discovery is complete ........... 97 6.6 The Title IX impact of Full COA GIAs is working as predicted by standard economics resulting in common impact to all female class members .......................................................................................................................... 102 7. There is a Damages methodology Common to the Classes, and Capable of calculation by Means of a Class-wide Common Formula .............................................................103 7.1 But for the restraints in suit, recipients of full (pre-2015 capped level) GIAs who attended core or delayed/partial adopter schools would have received full COA GIAs ...................................................................... 108 7.2 Extrapolation beyond the production........................................................................................................... 120 7.3 Damages Do Not Hinge on an Athlete’s “COA Gap” In the But-for World ............................................... 126 7.4 The so-called “Substitution Effect” is not an impediment to certifying a damages class ............................ 127 7.4.1 Delayed exit and/or new entry does not create class conflict ............................................................. 129 7.4.2 Increased competition does not create class conflict .......................................................................... 135 7.4.3 Increased competition will not lead Defendants or their Division I co-conspirators to abandon Division I Sports................................................................................................................................................... 138 7.5 Addressing questions of Offsets/Mitigation ................................................................................................ 142 7.5.1 “The House of Financial Aid” provides a road map for evaluating potential offsets ........................ 143 7.5.2 Pell Grants ......................................................................................................................................... 145 7.5.3 The Student Assistance Fund .............................................................................................................. 152 7.5.4 Other Payments (Hope Grants, etc.)................................................................................................... 156 7.5.5 SEOG payments .................................................................................................................................. 158 7.5.6 Offsets are all based in the Actual World ........................................................................................... 159 Page 1 Case 4:14-md-02541-CW Document 363 Filed 03/22/16 Page 3 of 161 8. Numerosity and Ascertainability ...........................................................................159 9. Signature ..................................................................................................................160 Page 2 Case 4:14-md-02541-CW Document 363 Filed 03/22/16 Page 4 of 161 1. QUALIFICATIONS 1. My name is Daniel A. Rascher. I am Director of Academic Programs for the Sport Management Master’s Program and Professor at the University of San Francisco (“USF”). I teach courses in sport economics and finance and research methods to graduate students. I am also a Partner of OSKR, LLC, an economic consulting firm specializing in applying economic analysis to complex legal issues, as well as President of SportsEconomics, LLC, (“SportsEconomics”) an economic, finance, and marketing research consulting firm focused on the sports industry. Formerly, I was an Assistant Professor and Associate Professor at USF, an Assistant Professor at the University of Massachusetts, Amherst, Adjunct Professor at Northwestern University, and Visiting Professor at the IE Business School in Madrid, Spain. I was also previously a Principal at LECG, LLC, a provider of expert economic consulting and related services. I received a Ph.D. in Economics from the University of California at Berkeley, having focused on the fields of industrial organization, econometrics, and labor economics. I have published numerous articles, book chapters, and a textbook in the field of sports economics and finance and have worked on over one hundred consulting projects involving the sports, entertainment, and tourism industries. 2. I have previously submitted an expert report in this matter pertaining to injunctive class
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