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NCAA Sued for Scholarship "Price Fixing"

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By CBS News' Paula Reid

Joseph Agnew, a former Rice University football player, is accusing the National Collegiate Athletic Association (NCAA) and its member institutions of engaging in a "blatant price-fixing agreement."

Agnew alleges that the NCAA has "conspired to maintain the price of bachelor's degrees for NCAA student-athletes at artificially high levels" by limiting athletic grants-in-aid and refusing to offer multi-year grants.

NCAA rules prevent student-athletes from negotiating guaranteed four year grants and individuals who are injured or do not meet certain requirements may have their grants terminated. The suit alleges that when this happens, students are forced to "pay tens of millions more for bachelor's degrees than they would pay in a competitive market."

Agnew argues such rules are not necessary to protect the amateur status of NCAA student-athletes and that they "only serve the selfish interests of the NCAA and its member institutions." The suit claims that in a competitive market schools would have to offer additional funds and more favorable terms to student athletes.

NCAA includes 1,055 active member schools which are organized into three Divisions. The NCAA states, "Our purpose is to govern competition in a fair, safe, equitable and sportsmanlike manner, and to integrate intercollegiate athletics into higher education so that the educational experience of the student-athlete is paramount."

Member schools must abide by the rules and regulations promulgated by the NCAA, but the suit claims that "There is no practical alternative to NCAA membership for any academic institution that wishes to participate at the highest and most lucrative levels of college sports."

Agnew was recruited by several Division I schools and selected Rice University based on the financial aid package they offered him. Agnew had an impressive freshman season, but struggled after the coach who recruited him left Rice and then Agnew suffered several injuries and had to undergo surgery.

Before his junior year, Agnew was told that he would no longer be on the roster and that his scholarship would not be renewed. He appealed the decision and his scholarship was reinstated even though he was no longer a member of the football team. But, after his junior year, Agnew was responsible for his own tuition and expenses. The suit alleges that Agnew's situation is not unique and claims that NCAA rules have harmed thousands of other college athletes.

Bob Williams, Interim Vice President of Communications for NCAA, said, "The NCAA is reviewing the lawsuit, however, it should be noted that the award of athletic scholarships on a one-year, renewable basis is the more typical approach taken within higher education for talent-based and academic scholarships in general."

In May, the NCAA acknowledged that the U.S. Department of Justice's Antitrust Division is investigating how athletic grants are regulated. In a statement the NCAA said, "Student-athletes must demonstrate that they deserve the merit-based award of athletics aid in two ways-by remaining academically eligible for competition and by meeting participation expectations in the sport for which aid is granted." The NCAA also states that the annual review system is the, "most appropriate way to ensure that the most deserving student-athletes receive that award each year."

In addition to the DOJ investigation, in 2008 the NCAA settled a similar antitrust class action challenging NCAA limits on athletics-based financial aid as a violation of the Sherman Antitrust Act. The NCAA settled that suit in August 2008 for $218 million.

Agnew's lawsuit is currently pending before the US District Court for the Northern District of California.