[Senate Hearing 111-352]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-352
 
    THE BOWL CHAMPIONSHIP SERIES: IS IT FAIR AND IN COMPLIANCE WITH 
                             ANTITRUST LAW?

=======================================================================

                                HEARING

                               before the

                       SUBCOMMITTEE ON ANTITRUST,
                 COMPETITION POLICY AND CONSUMER RIGHTS

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 7, 2009

                               __________

                          Serial No. J-111-35

                               __________

         Printed for the use of the Committee on the Judiciary



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                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 JEFF SESSIONS, Alabama
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
RUSSELL D. FEINGOLD, Wisconsin       CHARLES E. GRASSLEY, Iowa
CHARLES E. SCHUMER, New York         JON KYL, Arizona
RICHARD J. DURBIN, Illinois          LINDSEY O. GRAHAM, South Carolina
BENJAMIN L. CARDIN, Maryland         JOHN CORNYN, Texas
SHELDON WHITEHOUSE, Rhode Island     TOM COBURN, Oklahoma
AMY KLOBUCHAR, Minnesota
EDWARD E. KAUFMAN, Delaware
ARLEN SPECTER, Pennsylvania
AL FRANKEN, Minnesota
            Bruce A. Cohen, Chief Counsel and Staff Director
                  Matt Miner, Republican Chief Counsel
                                 ------                                

   Subcommittee on Antitrust, Competition Policy and Consumer Rights

                     HERB KOHL, Wisconsin, Chairman
CHARLES E. SCHUMER, New York         ORRIN G. HATCH, Utah
SHELDON WHITEHOUSE, Rhode Island     CHARLES E. GRASSLEY, Iowa
AMY KLOBUCHAR, Minnesota             TOM COBURN, Oklahoma
EDWARD E. KAUFMAN, Delaware
ARLEN SPECTER, Pennsylvania
AL FRANKEN, Minnesota
       Carolina Holland, Democratic Chief Counsel/Staff Director
                 Jace Johnson, Republican Chief Counsel


                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page
Kohl, Hon. Herb, a U.S. Senator from the State of Wisconsin......     1

                               WITNESSES

Brett, Barry, Esq., Partner, Troutman Sanders, New York, New York     8
Monts, William, III, Esq., Partner, Hogan and Hartson, 
  Washington, D.C................................................    12
Perlman, Harvey, Chancellor, University of Nebraska-Lincoln, 
  Lincoln, Nebraska..............................................    10
Young, Michael, President, University of Utah, Salt Lake City, 
  Utah...........................................................     6

                       SUBMISSIONS FOR THE RECORD

Brett, Barry, Esq., Partner, Troutman Sanders, New York, New 
  York:
    statement....................................................    33
    FoxSports.com, December 12, 2008, article....................    61
    FoxSports.com, November 25, 2008, article....................    65
    FoxSports.com, March 13, 2006, article.......................    66
    FoxSports.com, July 20, 2007, article........................    68
    FoxSports.com, BCS Chronology, article.......................    70
    Global Competition Policy, May 2009, article.................    78
    Rush, Hon. Bobby L., a U.S. House of Representatives from the 
      State of Illinois, statement...............................    86
    Bleymaier, Gene, Director of Athletics, Boise State 
      University, Boise, Idaho, statement........................    88
    Fox, Derrick, President and Chief Executive Officer, Valero 
      Alamo Bowl, San Antonio, Texas, statement..................    91
    Troutman Sanders, charts.....................................    99
    Hatch, Hon. Orrin, a U.S. Senator from the State of Utah, 
      news release and letter....................................   106
    Troutman Sanders, charts.....................................   108
    Mountain West, Colorado Springs, Colorado, proposal..........   110
    Troutman Sanders, charts.....................................   123
    Law360, New York, New York, article..........................   127
Kaplan, Paul Michael, Esq., Partner, and Jennifer L. Bougher, 
  Esq., Associate, Arent Fox LLP, Washington, D.C., statement and 
  attachments....................................................   137
    Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah, 
      and Hon. Robert F. Bennett, a U.S. Senator from the State 
      of Utah, May 8, 2009, letter...............................   163
    Frohnmayer, Dave, President, University of Oregon, and John 
      D. Swofford, Commissioner, Atlantic Coast Conference, June 
      9, 2009, letter............................................   165
Kustra, Bob, President, Boise State University on behalf of 
  Presidents and Chancellors, Western Athletic Conference, 
  statement......................................................   171
Monts, William, III, Esq., Partner, Hogan and Hartson, 
  Washington, D.C., statement....................................   174
Perlman, Harvey, Chancellor, University of Nebraska-Lincoln, 
  Lincoln, Nebraska, statement...................................   185
Swofford, John D., Commissioner, Atlantic Coast Conference, 
  Greensboro, North Carolina, statement..........................   195
Thompson, Craig, Commissioner, Mountain West Conference, Colorado 
  Springs, Colorado, statement...................................   207
Young, Michael, President, University of Utah, Salt Lake City, 
  Utah, statement................................................   230


    THE BOWL CHAMPIONSHIP SERIES: IS IT FAIR AND IN COMPLIANCE WITH 
                             ANTITRUST LAW?

                              ----------                              


                         TUESDAY, JULY 7, 2009

                                       U.S. Senate,
             Subcommittee on Antitrust, Competition Policy,
                                        and Consumer Rights
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 2:30 p.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Herb Kohl, 
Chairman of the Subcommittee, presiding.
    Present: Senators Kohl, Schumer, and Hatch.

 OPENING STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE 
                       STATE OF WISCONSIN

    Chairman Kohl. Good afternoon to everybody here today. 
Today we will examine the state of competition in the college 
football Bowl Championship Series. College football is a sport 
enjoyed by millions of fans and is the central focus of the 
athletic programs at dozens of colleges and universities across 
our great Nation.
    I myself, of course, am a Badger fan and a fan of the Big 
10. The revenues derived from participation in the end-of-year 
college football bowl games are essential to supporting college 
athletic departments. Dozens of lower-profile sports enjoyed by 
thousands of students are funded by successful college football 
programs.
    The Bowl Championship Series was created more than a decade 
ago in an effort to find a fair and equitable way to select 
universities to participate in the lucrative end-of-year bowl 
games and in order to have an objective means to select teams 
to participate in a National Championship game.
    While many believe this system is working well, critics of 
the BCS argue that it unfairly disadvantages those universities 
that are not aligned with the large athletic conferences.
    Today's hearings will be an examination of whether the 
current BCS system truly serves the interest of competition of 
universities and of millions of college football fans. Today's 
hearing was called at the request of Senator Orrin Hatch, and 
so I will now turn over the gavel to my good friend and our 
esteemed Ranking Member who will chair and conduct this 
hearing.
    I thank Senator Hatch for his work on this issue, and I 
also thank our panel of witnesses for the testimony that they 
will be offering today.
    Senator Orrin Hatch.
    Senator Hatch [Presiding.] Well, thank you, Mr. Chairman.
    Mr. Chairman, I appreciate your willingness to schedule 
this hearing because I believe it will address a number of 
important issues, not the least of which is the legality of the 
Bowl Championship Series. I continue to enjoy our long service 
together on this Committee, Mr. Chairman, due in large part to 
your willingness to work with those of us on both sides of the 
aisle to address a wide variety of issues. Indeed, your 
willingness to address the concerns of members from both 
parties is almost unheard of in today's very partisan climate.
    Turning to the BCS, I think we all know Congress' interest 
in this issue in not a recent development. In the 10 years the 
BCS has been in existence, numerous congressional committees 
have held hearings to examine the legal and consumer protection 
issues associated with the BCS system. In fact, I chaired a 
hearing in the full Judiciary Committee on this issue in 2003. 
And over the years some changes have been made to the BCS 
system. Ostensibly, the system is now more open to non-
preferred conferences than it once was. However, even with 
these changes in place, the BCS continues to place nearly half 
of all the schools in college football at a competitive and, 
perhaps more importantly, a financial disadvantage.
    These disadvantages are not the result of fair competition, 
but of the inherent structural inequities of the BCS system. 
And for these reasons, I believe that this hearing is necessary 
today. There is no shortage of opinion and ideas on how the BCS 
system should be changed. Indeed, I think any time college 
football fans gather together to watch a game, one of them has 
a playoff idea that they believe will solve all of college 
football's problems.
    For today I think our time would be best served by leaving 
the debate over such alternatives in the living rooms of our 
country and instead focus on answering one question: Does the 
BCS comply with the law?
    The law requires that all business enterprises meet certain 
standards with regard to pro- and anticompetitive behavior. Our 
focus should, therefore, be on comparing the current system 
with the standards required by our Nation's antitrust laws.
    Personally, I believe there are enough antitrust problems 
with the current BCS system that we will have more than enough 
material to cover during the course of this hearing. Put 
simply, Section 1 of the Sherman Antitrust Act prohibits 
contracts, combinations, or conspiracies to limit competition. 
I have said before that I do not believe a plainer description 
of the BCS exists.
    The system itself is an agreement between the preferred 
conferences and the major Bowl Games as to how they will 
compete with one another and, more apparently, how they will 
compete against the non-preferred conferences. More still, 
under the current BCS regime, each of the six privileged 
conferences is guaranteed to receive a large share of the BCS 
revenue to distribute among their member schools.
    The remaining five conferences, which include nearly half 
of all the teams in Division I, all share a much smaller 
portion of the BCS revenue, even if one of their teams is 
fortunate enough to play their way into a BCS game.
    Over the lifetime of the BCS, the preferred conferences 
have received nearly 90 percent of the total revenues. These 
disparities are explicit in the BCS arrangement. It brings to 
mind the major Supreme Court decisions prohibiting price fixing 
and horizontal restrictions on output. Under Section 1, such 
arrangements are prohibited.
    Section 2 of the Sherman Antitrust Act is violated when one 
is in possession of monopoly power and uses that power in a way 
not associated with growth or development as a consequence of 
having a superior product or business acumen. I think there is 
a strong argument that the BCS may very well be in violation of 
that provision as well.
    Practically speaking, there are two relevant markets in 
question here. Given the drastic difference between the 
revenues and the prominence of the BCS bowls when compared to 
other bowl games played throughout late December and early 
January, I think it is safe to conclude that the BCS bowls 
constitute a market that is all their own. And if Supreme Court 
precedence has any relevance here, the National Championship 
game also constitutes a separate market.
    The BCS enjoys a monopoly over both these markets and has, 
through what appears to be deliberate action, restricted the 
ability of teams from non-privileged conferences to 
participate.
    The BCS selects participants primarily through the use of 
subjective polling, complex computer ranking systems, and a set 
of biased selection criteria. Not surprisingly, this system 
expressly limits the number of outside teams that are able to 
qualify for one of the lucrative and prestigious BCS bowl 
games.
    Take last year, for example. In 2008, two teams--Utah and 
Boise State--met the qualifications for the automatic BCS 
berth, but under the rules only one of them, the University of 
Utah, was invited to play in a BCS game. Furthermore, four 
teams--Utah, Boise State, Texas Christian, and Brigham Young--
finished the season ranked higher in the BCS' own standings 
than at least one of the teams that received an automatic bid.
    Clearly, the BCS bowl games exist in a category all their 
own, and the architects of the BCS system appear to have 
intentionally excluded teams from non-privileged conferences, 
not on the basis of competition, but due to prearranged 
agreements.
    The Section 2 problems continue with regard to the National 
Championship game, as the current system ensures that only 
teams from the BCS' preferred conferences can qualify to play 
in the National Championship game. This is evidenced by the 
fact that although several teams from non-preferred conferences 
have gone undefeated over the years, none of them has even a 
remote chance of qualifying for the National Championship game.
    Indeed, last season alone, two teams--Utah and Boise 
State--finished the regular season with better records than any 
team from any of the preferred conferences. Yet neither was 
even a consideration when it came to crowning a national 
champion. The University of Utah finished the season by routing 
a team that had been ranked number one for much of the season. 
It is hard to imagine what more Utah could have done with its 
season in search of a National Championship. Yet under the BCS 
system, they were eliminated from such consideration before the 
season even started.
    Section 2 was specifically intended to prevent such 
exclusionary tactics on the part of monopolists. The problems 
with the BCS extend well beyond the football field and address 
more significant issues than qualifying for either a National 
Championship or participation in a BCS game.
    Ultimately, when we are talking about college football and 
the BCS, we are talking about institutions of higher learning. 
Each of these schools faces unique challenges when it comes to 
funding athletics and academic initiatives. The purposeful 
disparities in funding created by the BCS ensure that schools 
in privileged conferences, even those whose football teams are 
not all that competitive, enjoy advantages in offering 
scholarships and providing staff and facilities for their 
athletic programs.
    The increased visibility that a company's automatic 
qualification into a BCS game guarantees that the teams from 
outside conferences face disadvantages with regard to 
recruiting players and hiring top coaches. This would be 
tolerable if the inequities were the result of inferior 
performance on the part of the teams on the outside, but I do 
not believe that the evidence really supports such a claim.
    In addition to facing unique financial challenges, colleges 
and universities are charged with a unique mission: educating 
our young people and preparing them for their careers. In 
addition, they are in large part subsidized by the taxpayers, 
either through the receipt of funds or by enjoying tax-exempt 
status. That being the case, I believe they should be held to 
the highest legal and ethical standards.
    For these reasons and others, the BCS has garnered the 
attention of Congress and the President, not to mention the 
dissatisfaction of fans throughout the country. Yet after the 
2008 season, when the flaws in the BCS system were made all the 
more obvious than ever, the architects have sought to extend 
the status quo for the foreseeable future.
    Of course, the new agreement is even more lucrative and 
quite likely promises to expand the divisions between the 
privileged and the non-privileged programs. It is my 
understanding that even as Congress has focused its attention 
on the system, the BCS appears to be attempting to strong-arm 
those in weaker bargaining positions into signing a new 
agreement by July 9, many months before the current contract 
expires.
    Given the widespread public criticism of the current system 
and its obvious flaws with regard to competition, I had hoped 
that going forward would see a greater willingness to adapt on 
the part of the BCS. However, that does not appear to be the 
case.
    Now, I am certain that some members of today's panel 
disagree with my conclusions. I welcome their testimonies and 
will give them ample opportunity to make their case to change 
not only my mind but the minds of, I think, millions of others 
as well. I am hopeful that rather than being just another 
chapter in the endless BCS debate, this hearing will shed some 
real light on the legal issues surrounding these matters. And 
toward that end, I want to thank all members of the panel for 
their attendance here today, and I particularly want to thank 
the distinguished Chairman for allowing me to conduct this 
hearing.
    Now I would like to just introduce our panel of 
distinguished witnesses.
    Our first witness to testify today is President Michael 
Young. President Young is the president of the University of 
Utah. He is the former Dean and Law Professor of the George 
Washington University Law School. In addition, President Young 
was a professor at Columbia Law School. He also is a graduate 
of Harvard Law School, where he was note editor of the Law 
Review.
    Next we will hear from Mr. Barry Brett. Mr. Brett is a 
partner of Troutman Sanders in New York. He is also chairman of 
the American Bar Association's Antitrust Section Committee on 
Sports, Labor, and Entertainment. Mr. Brett represents the 
Mountain West Conference here today, as I understand it.
    Also testifying today is Harvey Perlman, the Chancellor of 
the University of Nebraska at Lincoln. Chancellor Perlman is 
the former Dean of the University of Nebraska College of Law. 
Chancellor Perlman currently sits on the BCS Oversight 
Committee, and we are grateful to have all of you here today.
    Our next witness will be Mr. William Monts. Mr. Monts is a 
partner at Hogan and Hartson in Washington, D.C. He has 20 
years of experience in litigating antitrust cases, and for 18 
of those years, Mr. Monts has represented various interests in 
post-season college football.
    I want to thank you all for appearing today. We want to 
welcome you to the Subcommittee's hearing, and after each of 
you gives your testimony, we will proceed to questions. I do 
not know who is going to show up here today, but if they do 
not, I will have plenty of questions.
    However, before I swear in today's witnesses, I would like 
to thank Mr. Paul Michael Kaplan, a partner at Arent Fox, for 
his assistance to the Subcommittee in preparing for today's 
hearing. I would also note that the Subcommittee was looking 
forward to hearing the testimony of Bob Kustra, the president 
of Boise State. Unfortunately, due to a family emergency, he is 
unable to be with us today. Accordingly, I ask for unanimous 
consent that President Kustra's and Mr. Kaplan's testimony to 
the Subcommittee be included in the record and, without 
objection, so ordered.
    Now, if I could ask all of the witnesses to rise and raise 
their right hand as I administer the oath, I would appreciate 
it.
    Do you affirm that the testimony you are about to give 
before the Committee will be the truth, the whole truth, and 
nothing but the truth, so help you God?
    Mr. Young. I do.
    Mr. Brett. I do.
    Mr. Perlman. I do.
    Mr. Monts. I do.
    Senator Hatch. Thank you.
    So, President Young, we will proceed with you first, and we 
will just go right across the table. We are very grateful to 
all of you for being here, and we look forward to taking this 
testimony, and hopefully it will answer some of the questions 
that many of us have.
    President Young.

STATEMENT OF MICHAEL YOUNG, PRESIDENT, UNIVERSITY OF UTAH, SALT 
                        LAKE CITY, UTAH

    Mr. Young. Senator Hatch, thank you very much for holding 
this very important hearing.
    I would not be here today if all universities had a 
realistic opportunity to compete for the National Championship 
and if the BCS revenues were equitably distributed among the 
institutions. If those were the facts and the only question was 
whether the correct teams were chosen to play in the 
championship each year, then the commissioners of the 11 
Football Bowl Subdivision universities and conferences could 
adequately address any necessary tweaking to the BCS. But, 
unfortunately, that is not the case.
    I am here this afternoon to talk to you about the inherent 
unfairness of the BCS. The BCS embraces favoritism rather than 
fairness in three critical respects, among others.
    First, the champions of six of the 11 conferences that play 
major college football called the Automatic Qualifying 
Conferences--or, as you have so eloquently put it, ``the 
privileged conferences''--automatically receive berths in the 
five most prestigious and lucrative bowls each year, known as 
the BCS bowls. The champions of the other five conferences, 
called the non-AQ Conferences, must earn a place in the BCS 
bowls, and practically speaking, at most, as you have pointed 
out, only one non-AQ team will receive such a berth. The AQ 
Conferences, along with Notre Dame, effectively guarantee 
themselves nine of the ten berths in the top bowls every year, 
regardless of their performance on the field.
    Let me explain what I mean by that. Performance should be 
the measure by which all conferences, AQ and non-AQ alike, 
receive BCS bowl berths. If performance were the governing 
criteria, the Mountain West would be entitled to AQ Conference 
status. Over the past 2 years, the Mountain West has had a 
better record in interconference games against the AQ 
Conferences than any of the other ten conferences. Over the 
past 4 years, the Mountain West has been extremely competitive 
against the AQ Conferences, as I have indicated in my written 
testimony. Off-the-field agreements should not, as the BCS 
mandates, trump on-the-field performance.
    Second, the BCS has provided major college football with a 
dubious distinction: it is the only sport that effectively 
eliminates half of its teams from the championship before the 
season even begins. The BCS system effectively tells the 
world--and, more importantly, the pollsters--that non-AQ 
Conference teams are undeserving of an automatic bid to a BCS 
bowl.
    Coaches and administrators from AQ Conferences perpetuate 
the stereotype by frequently denigrating the non-AQ 
Conferences, stating, for example, that they are not real 
conferences. As a consequence, non-AQ teams are never 
appropriately ranked in the pollster popularity contests.
    Cementing the fate of non-AQ Conference universities is the 
fact that just two teams are selected at the close of the 
regular season to compete in the championship game. This fact, 
combined with second-class status of the non-AQ Conferences 
mandated by the BCS, leads to the inevitable exclusion of non-
AQ Conference teams from competing for the National 
Championship.
    In 2008, as you pointed out, Utah was denied an opportunity 
to compete for the National Championship. When your conference 
has the top interconference record against AQ Conference teams, 
and your university from that same conference has the top 
record in the country, you should have a chance to compete for 
the title. Championships should be decided by competition, not 
conspiracy.
    Third, the revenue inequities under the BCS system are 
stark. In 2008, Mountain West Champion Utah was ranked far 
ahead of the ACC and Big East Champions. Mountain West went 6-1 
in regular season play against the PAC 10. And all four of 
these conferences sent one team to a BCS bowl game. Yet the 
three AQ conferences each received $18.6 million from the BCS, 
whereas the Mountain West received only $9.8 million.
    The story over time is even more telling. During the past 4 
years, the Mountain West has competed very well against all six 
AQ Conferences, yet over that same period of time, Mountain 
West has received an average of $18 million, or 75 percent less 
than the six AQ Conferences. And over the past four seasons, 
the AQ Conferences have received $492 million, while the non-AQ 
Conferences have received less than $62 million.
    Simply stated, the competitive and revenue inequities of 
the BCS system condemns the non-AQ Conferences to a permanent 
underclass. Non-AQ Conferences struggle to build new 
facilities, pay competitive coach salaries, finance effective 
recruiting, and fund student scholarships. These economic 
inequities harm football programs, but also harm other sports 
that rely heavily upon the revenue from football.
    Student athletes can see these economic disparities between 
the programs, and they hear the message loud and clear from the 
AQ Conference coaches, that playing for a non-AQ team means no 
chance for a National Championship experience.
    Finally, and in my judgment, most importantly, as educators 
we work hard to teach the right values in the classroom. We 
want our students to take away from their college experience 
the belief that hard work and skill are the necessary tools to 
achieve. We want our students to strive to make all playing 
fields in life level and to give everyone the same 
opportunities to succeed.
    It is tough, however, to make these values stick when we 
teach a different message on the playing field. A BCS system 
that relegates non-AQ Conferences to permanent second-class 
status, that denies nearly half the schools of any opportunity 
to compete for the National Championship, and rewards nearly 87 
percent of the revenues to the AQ Conferences, regardless of 
their on-field performance, sends the wrong message to our 
students.
    The BCS changes the old saying, ``If you can't beat them, 
join them,'' to this: ``If you can't beat them, eliminate 
them.'' This is a bad message and actions, after all, speak far 
louder than words.
    A variety of justifications for this system have been 
offered in the past by representatives of the BCS. As outlined 
in my written submission, in my judgment, none of these even 
pass the straight-faced argument test. And, in fact, some even 
cut entirely in the opposite direction. But the essential point 
is simple and straightforward. This is a system designed to 
channel money to certain universities based on an agreement, 
not on achievement. Championships and opportunities are made 
available by conspiracy, not by competition. It harms higher 
educations, our student athletes, and the American public.
    Thank you. I would be delighted to take questions.
    [The prepared statement of Mr. Young appears as a 
submission for the record.]
    Senator Hatch. Thank you, President Young.
    We will turn to Barry Brett now, a distinguished attorney.

STATEMENT OF BARRY BRETT, ESQ., PARTNER, TROUTMAN SANDERS, NEW 
                         YORK, NEW YORK

    Mr. Brett. Thank you, Mr. Chairman, and thank you for 
inviting us to speak today on this very important issue and for 
holding this hearing.
    I am the chair of the antitrust practice group of Troutman 
Sanders. I was chair of the Sports and Entertainment Committee 
of the American Bar Association Antitrust Section and of the 
New York State Bar Association Antitrust Section. I was on the 
governing committee of the ABA Forum of Sports and 
Entertainment. In short, I am an antitrust lawyer by trade and 
a sports junkie by choice.
    I am very gratified to see the Committee addressing the 
Bowl Championship Series, which controls major post-season 
college football bowl games, controls the fictional National 
Championship, and uses this control to exclude all but its 
founding members from fair access to this competition and the 
hundreds of millions of dollars involved. The system offends 
the most basic antitrust law principles of competition.
    There are 88 playoffs run by the NCAA covering college 
sports. All can accommodate the needs of the students and 
academia. In what was just historically called Division I 
college football, however, the NCAA does not act. Instead, it 
allows a self-designated cartel, created and controlled by six 
conferences, to set the rules for access to major post-season 
football games and its National Championship. It allows these 
conferences to control the enormous revenue they generate and 
to prevent the playoff desired by the public.
    It is estimated that a playoff system would produce twice 
the current revenues of the BCS system. In antitrust terms and 
in the jargon of my business, the BCS system ``limits output, 
limits consumer choice, and restrains competition in violation 
of the Sherman Act.''
    Our written submission details the history and workings of 
the BCS and sets forth many of the applicable legal precedents 
and principles. The BCS guarantees each of its six conferences 
a place in one of the major bowls and a large payday based on 
agreements rather than performance. In practice, the 
foreclosure has been almost complete.
    Teams from other conferences face great barriers to qualify 
for one of the major bowls, and they face what effectively have 
been insurmountable battles to qualifying for a chance at the 
fictional National Championship. The six conferences have 
reserved for themselves approximately 87 percent of the BCS 
revenues.
    There have been 90 major bowl appearances by the original 
conference teams and only four appearances by non-original 
conference teams during the history of the BCS. Every 
contestant in the National Championship game has been from one 
of the original conferences. We have set forth in our printed 
materials data and studies showing this inequity and the manner 
in which it is not justified by performance.
    By any objective criteria, the excluded teams are as good 
as many of those included. Yes, the anticompetitive effects and 
economic disparities are dramatic.
    Some months ago, the Mountain West Conference submitted to 
the BCS a detailed proposal which provided for a playoff system 
that would finally yield a national champion based on 
competition and equal opportunity rather than reliance on 
poorly drawn, rarely understood, and deeply flawed formulae. 
The proposal would preserve the historic bowl games, add 
exciting games, and generate much more income for all 
concerned.
    On June 15th, USA Today reported that the proposal was not 
even put on the BCS agenda, and it has been summarily rejected.
    When rebuffed, the Mountain West Conference asked my 
partner Roy Bell and me to analyze and discuss with them 
whether the BCS structure violates Federal antitrust law. We 
have prepared a report, which has not been adopted as a 
position of the Mountain West Conference, but has been codified 
into a detailed legal memorandum to this Committee.
    In the words of the Supreme Court, ``The Sherman Act was 
designed to be a comprehensive charter of economic liberty, 
aimed at preserving free and unfettered competition as the rule 
of trade.''
    The BCS offends everything the Sherman Act is designed to 
accomplish. Instead of competition on the merits, the BCS is a 
commercial enterprise which flouts the Sherman Act and 
sacrifices on-field competition in order to protect an enormous 
revenue stream. The BCS has nothing to do with amateurism or 
education, but is a commercial venture based on barriers to 
competition. The BCS has negotiated a new TV contract for 
almost $500 million. Each of the six controlling conferences is 
guaranteed at least $18 million a year.
    From the point of view of fans and players, the goals and 
barriers of sports are corrupted by commercial goals. 
Competitive success does not yield access to the National 
Championship.
    Twenty-five years ago, the Supreme Court established that 
NCAA rules limiting the televising of games was a violation of 
the Sherman Act. The NCAA fought vigorously to protect its 
restrictions, just as the BCS now defends its restrictions. The 
finding of a violation of Section 1 of the Sherman Act in that 
case was one of the great foundations for college football as 
we know it today and its enormous popularity.
    Every element of a violation of the Sherman Act is present 
in the BCS. The agreement required for a Section 1 violation is 
clear. The anticompetitive effects are manifest and shown in 
study after study. Price competition among the bowls is 
eliminated by agreement. The claimed benefits of the 
arrangement are illusory and easily achieved by less 
anticompetitive alternatives.
    Similarly, all of the elements of a Sherman Act Section 2 
violation are apparent. The BCS has secured, maintained, and 
exercised the power to exclude competition and control price, 
which are the hallmarks of the offense of monopolization. It 
has reserved for itself the spots in the major bowl games 
without regard to competitive success. The BCS will not even 
consider a playoff, and it reflects all of the evils of 
monopoly power that the Sherman Act prohibits.
    The competing teams, the schools, the student athletes, and 
the public want a playoff and the competition on the merits, 
which the Sherman Act requires. A group of competing businesses 
would face criminal antitrust scrutiny if they tried a stunt 
like this. Antitrust principles require that it end and that we 
bring back the principles of equal opportunity, competitive 
reward, and fair play on and off the field.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Brett appears as a 
submission for the record.]
    Senator Hatch. Well, thank you. We appreciate your 
testimony.
    Chancellor Perlman, we will take your testimony now.

    STATEMENT OF HARVEY PERLMAN, CHANCELLOR, UNIVERSITY OF 
              NEBRASKA-LINCOLN, LINCOLN, NEBRASKA

    Mr. Perlman. Senator Hatch, thank you.
    I acknowledge that there are football fans and sports 
writers who believe the ideal system to crown a national 
champion is an NFL-style playoff. Unfortunately, those of us 
responsible for our universities' involvement in post-season 
football must try to craft a system that reflects the 
restraints of the real world.
    In my written statement, I have discussed those realities 
at length, and I will only highlight three of them here.
    First, any system of play must recognize that athletes who 
play football are also students. For the vast majority of them 
their success in the classroom will have far more to do with 
their success as adult citizens than their performance on the 
football field. As presidents and chancellors, this reality 
must be our highest priority.
    Second, not every school in Division I is equal on the 
football field or in any other field of endeavor. Each 
university has pillars of strength that were created by 
conscious investments, hiring of great leaders, natural 
advantages, significant philanthropic donations, dumb luck, or 
a combination of these factors.
    All students, like student athletes, can make individual 
choices among the strengths of the various institutions in 
which they could enroll, and these choices may enhance or 
diminish their future opportunities. This is a reality that 
cannot be ignored, nor is it one that can be easily changed.
    Third, any system designed to determine a national champion 
in intercollegiate football can only come about through the 
agreement of those universities who consistently field highly 
ranked teams. A system that did not involve schools from the 
six automatic qualifying conferences and Notre Dame could not 
claim to be one that is likely to produce a national champion. 
This is not true of other conferences.
    To secure the participation of these essential conferences, 
the system must provide revenue in excess of their other 
opportunities, must be consistent with their academic values, 
must take into account the impact on the fans who provide their 
schools with support, must preserve the excitement of the 
regular season, and must honor the long-standing relationships 
that they have had with the bowls and the communities those 
bowls support.
    The current BCS is able to satisfy those requirements; we 
have yet to see an alternative arrangement that does the same. 
This has not worked out to the disadvantage of the five 
conferences that do not automatically qualify for a BCS bowl. 
Before the BCS, none of the teams in these conferences had 
agreements with any of these major bowls, and these teams 
seldom played in them. Since the BCS, they have had more access 
to these bowls.
    Because of the BCS, these conferences also receive 
considerably more revenue than they did under the old system. 
In fact, we know informally from media experts that the 
payments we make to these conferences is, in fact, a subsidy of 
their athletic programs because the access we have provided 
does not increase the market value of the BCS product.
    The bottom line is that with the BCS these conferences have 
increased their access to and exposure in national television 
markets, and they have substantially enhanced the revenue 
available to them from post-season football. There might be 
many concerns expressed about the BCS, but it is hard for me to 
see how these conferences can claim to be disadvantaged.
    Finally, there is an assumption that the uneven 
distribution of revenues generated by the BCS is responsible 
for disparity in athletic success. When considered from an 
institutional perspective, the revenue a university like mine 
receives from the BCS is a very small proportion of our total 
revenue.
    My university's athletic department budget for next year 
will be approximately $75 million. If the Big 12 Conference 
places one team in a BCS bowl, the University of Nebraska can 
expect a distribution of approximately $1.5 million. This is 2 
percent of our budget. To put this in perspective, if we added 
an additional home football game, we could more than double 
that revenue.
    To be sure, some schools are thought to have an advantage 
because of the schedule they play, their history of success, 
the size of their budgets, and the support they receive from 
fans and donors. But at the beginning of the season, every 
Division I football team has an equal chance to become national 
champion if they rank first or second in the country.
    You would not predict that the University of Nebraska would 
have enjoyed the success we have had on the football field. We 
come from one of the smallest population States in the country 
and must recruit athletes nationwide. We do not have mountains 
or seashores or large cities or a moderate climate capable of 
attracting student athletes, and we labored long in the 
obscurity of losing seasons. But we sustained a loyal fan base, 
we hired and retained gifted coaches who were skilled at 
recruiting student athletes getting them to play at the height 
or even sometimes beyond their athletic abilities.
    We built this success, as we have built our recent academic 
success, by working harder and being more creative than the 
competition. We believe these options remain open for all 
schools in Division I. We do not believe that the BCS has made 
this process more difficult. In fact, by granting greater 
access and exposure to these schools than ever before and 
providing them with more revenue than ever before, we have 
created the opportunities for them to be successful.
    Thank you.
    [The prepared statement of Mr. Perlman appears as a 
submission for the record.]
    Senator Hatch. Well, thank you, Chancellor Perlman.
    Let's go to you, Mr. Monts, now and take your testimony.

   STATEMENT OF WILLIAM MONTS III, ESQ., PARTNER, HOGAN AND 
                    HARTSON, WASHINGTON D.C.

    Mr. Monts. Thank you, Senator Hatch. I am William Monts. I 
am a partner in the law firm of Hogan and Hartson here in 
Washington, D.C. and have practiced for nearly 20 years in the 
firm's antitrust, competition, and consumer protection practice 
group.
    For roughly 18 years, I have had the privilege of working 
on various matters related to post-season college football--
first representing certain bowl games in connection with the 
Bowl Coalition, and in the past 14 years, representing certain 
conferences in connection with the Bowl Alliance and now the 
Bowl Championship Series.
    I have thought about these issues a great deal over the 
past 18 years, not merely as a lawyer, but as an avid fan of 
the game. I have spent a great deal of time studying its 
history and the athletic, economic, and legal developments that 
have shaped it.
    I am going to limit my remarks today to an analysis under 
Section 1 of the Sherman Act and will assume, for the sake of 
argument, that a number of threshold issues that I covered in 
my written statement could be proved by a complainant against 
the BCS.
    I do that because, one, if the BCS passes muster under 
Section 1, I believe it also passes muster quite easily under 
Section 2; and I want to focus on those issues that I 
understand are animating the hearing that brings us here today.
    The BCS would be analyzed as a joint venture under Section 
1 of the Sherman Act and would be reviewed under the so-called 
rule of reason under which procompetitive benefits of an 
arrangement are weighed against the anticompetitive effects. 
Only if the anticompetitive effects outweigh the procompetitive 
benefits is the agreement unlawful. So let me turn to that 
analysis. I believe there are at least four procompetitive 
effects that I would like to highlight here today.
    First, the BCS creates a guaranteed national championship 
match-up between the top two ranked teams each year. No 
conference or institution can produce that product on its own. 
It can only result from an agreement among the conferences and 
the University of Notre Dame. Without the agreement, there is 
no such game.
    Second, the BCS creates attractive match-ups between 
conference champions and highly ranked runner-up teams in the 
other BCS bowls based on the a full-season's results. The old 
bowl system often resulted in match-ups that were created after 
seven or eight games, as a bowl filled its empty slots by 
effectively committing to take a particular team. If that team 
later went on a losing streak at the end of the season, 
nonetheless, the bowl was often left with no other choice 
because other bowls had paired up with other attractive teams.
    Third, the BCS preserves and strengthens the bowl system 
overall, thus creating the maximum number of post-season 
opportunities for student athletes, coaches, and fans and the 
maximum number of post-season games. It is important to note 
that there are only five bowl games that are a part of the BCS 
and that there are 29 other bowl games that are independent of 
the BCS and make their own decisions about teams that they 
choose and conferences with which they will have affiliation 
arrangements.
    Fourth, and finally, the BCS and the bowl system generally 
enhances the college football regular season by making every 
game meaningful. Today college football is widely regarded as 
having the best regular season in all of American sport. That I 
suggest to you, is largely the result of the BCS and the bowl 
system.
    Now, against these substantial procompetitive benefits 
stand what I understand to be two alleged anticompetitive 
effects. The first is that the BCS denies conferences access to 
the BCS bowls and the National Championship; and, secondly, 
that the BCS revenue is not split equally. Neither is an 
anticompetitive effect.
    The purpose of the antitrust laws is to protect not 
producers of college football but consumers. And in this case 
the immediate consumers are the bowl organizations and 
television networks; the ultimate consumers are the fans. If 
the BCS were to disappear tomorrow, nothing would arise to take 
its place. We would return to the old bowl system in which each 
conference competed with one another for the most attractive 
bowl slots. When that is understood, it is easy to see why the 
exclusion argument fails.
    BCS bowls could today, if they wished, always demand to 
have a champion from one of the five conferences without an 
annual automatic berth. Similarly, they could take one with an 
at-large pick. They have chosen not to do so. The BCS, 
nonetheless, guarantees those conferences access to those bowl 
games under certain circumstances--guarantees they would not 
have otherwise.
    In short, it enhances their bowl opportunities over what 
would be available to it in the absence of the BCS and, 
therefore, there is no denial of access. As for the 
championship game, if there is no BCS, there is no championship 
game and, thus, there is no denial of access there either.
    On the revenue distribution point, the BCS provides the 
five conferences now with revenues they would not be able to 
obtain on their own. Thus, far from being anticompetitive, it 
subsidizes those leagues.
    In any event, revenue distribution within a joint venture 
is not the concern of antitrust law. The issue is market 
output, and here there is no negative effect on output by the 
BCS. Either the venture is lawful and does not restrict output, 
in which case how it divides up revenues among its 11 members, 
12 members in this case, is of no antitrust concern; or the 
venture is not lawful, in which case it is enjoined and there 
will not be any revenues at all to distribute.
    At bottom then, the BCS has several procompetitive benefits 
and its alleged anticompetitive effects are non-existent.
    Let me make one final point because I think it further 
demonstrates why an antitrust claim is of no benefit to the 
five conferences without annual automatic berths. Even if one 
were to assume a Sherman Act violation, the remedy for the 
prevailing party is an injunction against the arrangement. The 
BCS will go away, but no court is going to write a playoff 
system or some alternative structure, establish selection 
procedures, negotiate relevant contracts, allocate costs and 
revenues that might be earned from the arrangement; that is 
just not what courts do.
    Having declared one form of cooperation--and a very mild 
form at that--unlawful, no court is going to set about crafting 
from whole cloth a more restrictive form of cooperation that 
would be required to have a playoff. The Sherman Act does not 
give it the authority to do so, and the Supreme Court in the 
last 5 years has cautioned against these sorts of judicial 
misadventures.
    Instead, we would be back to the old bowl system--but with 
one important caveat. With the judgment on the record that the 
BCS is unlawful, I suspect that conferences would be far less 
willing to entertain the concept of a playoff which would rest 
upon an agreement among the exact same parties, with the exact 
same market power, that would be far more restrictive than BCS 
and likely to have substantially adverse effects on the bowls.
    The peculiar irony of an antitrust claim is that it is 
likely to sound the death knell of the alleged playoff that the 
critics have insisted and claimed they want. In that sense, it 
would be a pyrrhic victory and would leave those conferences 
from whom the critics profess concern in a much worse position.
    Again, Senator, it is an honor to appear before you today, 
and I look forward to answering any questions you may have.
    [The prepared statement of Mr. Monts appears as a 
submission for the record.]
    Senator Hatch. Thank you, Mr. Monts.
    Let us start with you, President Young. It is my 
understanding that privileged--I call them ``privileged''--
conferences can rely upon receiving a substantial yearly sum of 
BCS revenues. Under the BCS system, such revenues are 
guaranteed to the teams in the six privileged conferences 
regardless of how they perform on the field; and proponents of 
the BCS have implied that the revenue distribution is both fair 
and equal and that every conference that receives one bid in a 
BCS game in a year receives the same amount.
    Now, I personally think the numbers tell a different story. 
Is that true? And what are the practical effects of the current 
distribution of revenue?
    Mr. Young. Senator, let me answer that question in two 
parts, if I may. I am going start with the paragraph from an 
op-ed piece that President Robert Kustra from Boise State 
University wrote, which I think illuminates the fallacy in the 
first part of that argument.
    He says, ``To take a page from recent history, in 2004 
Boise State went undefeated and finished the season number 9 in 
the BCS, yet was excluded from a BCS bowl while number 13 
Michigan and number 21 Pittsburgh qualified.''
    ``In 2006, Boise State went undefeated and finished the 
season ranked number 8, was invited to play, and defeated 
Oklahoma in one of the greatest games ever played.''
    ``In 2008, Boise State went undefeated again and finished 
the season number 9 in the BCS, yet was passed over for a BCS 
bowl, while number 10 Ohio Sate, number 12 Cincinnati, and 
number 19 Virginia Tech were all chosen for BCS bowls.''
    And I could go on with a series of other examples even from 
our own conference. This year, three teams were ranked more 
highly in our conference alone than teams that were chosen to 
play in a BCS bowl. So it seems to me that it is challenging to 
make that argument.
    The second thing I would say with respect to revenue 
distribution, it is true if a non-automatic qualifying 
conference team does exceptionally well, much better, 
necessarily better, than a number of the automatic qualifying 
teams, and manages to work its way in, despite all these 
handicaps, it does, in fact, get less because the agreement 
within the five non-automatically qualifying is that that 
revenue will be divided up. And, frankly, we oppose that. But 
the system set up under this agreement forced us into an 
arrangement where we have to share those revenues with these 
other schools, so we get approximately half of what a BCS 
conference automatic-qualifying team would get playing in the 
same bowl game.
    Senator Hatch. Chancellor Perlman, you have argued that the 
BCS revenue distribution is not only fair but better that it 
would be under any feasible alternative or system. However, 
last year both the PAC 10 and the Mountain West had exactly one 
team qualify for a BCS game. Yet the PAC 10 received nearly 
twice as much revenue as the Mountain West. As a result, the 
team that finished at the bottom of the PAC 10, which did not 
win a single game last year, was guaranteed before the season 
even started to receive more BCS revenues than the University 
of Utah, to pick one school, which finished the season as the 
only undefeated team in college football.
    Now, tell me how that result can be justified.
    Mr. Perlman. Senator, the bowls and the conferences have 
had relationships, and you have to think of this in the context 
of multiyear relationships. The alignment of the Fiesta Bowl 
with the Big 12 is based on the proposition that every year the 
Big 12 will produce at least one or two teams that are 
significantly highly ranked. The years when Oklahoma and 
Nebraska were not playing as well as they had been, we still 
produced a Texas or a Texas A&M or a Missouri.
    These relationships reflect not only the strength of a team 
in a conference, but the depth of strength in a conference. And 
those relationships were long standing before the BCS, and it 
was based on that that these revenue distributions are made.
    The fact is we know that from our conversations, 
negotiations with the media and others, that adding the other 
five conferences did not increase the revenue available through 
the BCS. So the revenue is distributed based on the 
contribution made to the value of the product.
    Senator Hatch. OK. Well, let me go back to President Young. 
The BCS proponents have claimed that the current BCS system, 
including the distribution of BCS revenues and the system for 
awarding BCS bids, is required by the marketplace.
    Now, is that true?
    Mr. Young. Well, again, I think there is little evidence 
that that is actually true, if you look at the data. If, for 
example, you look at the opportunity for bowls for the 
University of Utah, we were selected over teams--Cincinnati and 
Virginia Teach, for example--and that Sugar Bowl, in which we 
played, had a much, much higher viewership than the bowl in 
which Cincinnati and Virginia Tech played. It just is not clear 
to me at all where one can assert with confidence that the 
marketplace drives this in that particular way.
    I think that if you actually look as well at the period 
from 1982 to 1991, you see seven of the ten teams that actually 
were ranked as national champions were not then in automatic-
qualifying conferences and were put in, in part, as 
Commissioner Swafford said, in order to bring in the teams that 
had been playing for the National Championship and designed to 
solidify and create that certainty.
    And so one could argue that these teams have these 
relationships and, therefore, the finances follow. Or, 
conversely, the bringing of the teams into it has generated the 
money itself, and the current practice that excludes 51 of the 
teams in college football from having a realistic opportunity 
to prove themselves on the field in that way, it seems to me to 
belies the notion that this is market-driven.
    Senator Hatch. Chancellor Perlman--and then I am going to 
turn to Senator Schumer--you have argued that the marketplace 
that the six preferred conferences receive automatic bids due 
to their prominence in college football and to preexisting bowl 
tie-ins.
    Now, does that apply to every one of the privileged 
conferences? For example, let me give you an example. The Big 
East has no bowl agreement and in recent years have been 
outperformed on the field by outside teams in conferences. Now, 
what is the market justification for including the Big East and 
excluding the Mountain West?
    In addition, last year, two non-privileged teams qualified 
for BCS games, but only one was invited due to the BCS rules. 
What is the market justification for excluding eligible teams 
even when they could have been invited without affecting the 
automatic bids of any privileged conferences?
    Mr. Perlman. Senator, when the BCS was formed, the Big East 
conference did, in fact, produce a number of national champions 
and teams that played with national champions. When we revised 
the BCS system in 2003 and 2004, we created a pathway for 
conferences who were not automatic qualifiers to become 
automatic qualifier based on the strength and depth of the 
conference on the field.
    The Big East went through that process and was successful. 
That process is open to the other five conferences as well. So 
we did try and create a mechanism whereby conferences, through 
the strength and depth of their success on the field could 
become automatic qualifiers in the Bowl Championship Series.
    Senator Hatch. Well, tell us about the specifics of that 
criterion because that has not been made public to my 
knowledge.
    Mr. Perlman. Well, Senator, it was part of the agreement of 
the group of five that all of them agreed to when we revised 
the system in 2003-04. I am not sure that I can give you the 
details without referring back to the contract, and I do not 
know if Mr. Monts remembers them as well. But there is a 
process, and it is one that has objective criteria for meeting 
that process.
    Mr. Monts. Senator, may I add to that?
    Senator Hatch. Certainly.
    Mr. Monts. There is a process. It relates to three 
different criteria: first is the ranking of the highest ranked 
team in the conference; second is the number of teams ranked in 
the top 25 of the final BCS standings; and then the third is 
the strength of the conference measured by the ratings of all 
of its teams from top to bottom.
    The standards work over a 4-year period. The 4-year period 
began in 2004 and went through 2007. There was a new period 
that began last year, will run through the 2011 regular season. 
And so based on those standards, we are in the new period, and 
certainly any conference that triggers them that does not now 
have an automatic berth will earn one.
    Senator Hatch. Have those criteria been made public, the 
four you mentioned here?
    Mr. Monts. I do not know if they have been made public, 
Senator. They are part and parcel of the BCS agreement.
    Senator Hatch. OK. Let me go back to you, Chancellor 
Perlman. One of the arguments made in defense of the BCS 
specifically with regard to the National Championship game is 
that it is objectively open to every team regardless of their 
conference affiliation.
    Now, put simply, if the team is ranked No. 1 or two, it 
will not play in the National Championship no matter what 
conference it hails from. However, as a practical matter, while 
this standard is theoretically objective, it eliminates most 
teams from consideration before the season even begins. Isn't 
that correct? Or, in your opinion, does every team begin the 
season with the possibility of playing in the National 
Championship game?
    Mr. Perlman. Senator, I can say certainly that the system 
allows every team an equal right to be No. 1 or No. 2 if they 
are successful on the field.
    I am not so naive as to think that, as a practical matter, 
some schools do not have, because of tradition, because of 
reputation, a better chance at it. It is the same as when 
Nebraska walks into NIH and seeks a Federal grant and we are 
competing against Harvard. Theoretically, we have the same 
opportunity. Do we as a realistic matter? I am not sure.
    But I do believe that--I mean, the problem is, of course, 
that we do not all play each other, and there is no conceivable 
way that we could play each other. And so a team that may be 
undefeated may not have played the same strength of schedule, 
may not have interacted with a sufficient number of teams to 
solicit a ranking of one or two from those people that look at 
the system and try and pick the No. 1 or No. 2 teams.
    Senator Hatch. President Young, do you care to comment 
about that?
    Mr. Young. Well, I think the key point--and I wanted to 
emphasize and appreciate Chancellor Perlman's emphasis of the 
key point--is that the system is entirely self-referential and 
so that you have at least as one of the major data----
    Senator Hatch. Self what, now?
    Mr. Young. Self-referential. That is to say, it starts with 
a series of rankings, rankings based on a great deal of polling 
data--much of it by people who confessed this year that they 
have never seen a single Mountain West team play this year--and 
create a ranking system, and from that ranking system, then, 
however you perform on the field, whatever the strength of your 
schedule, climbing up that ranking becomes, at least to point 
one or two, virtually impossible. Coupled with the dialogic way 
of discussing BCS versus non-BCS, it makes it very difficult 
for any team in a process that is based in some large degree on 
popularity polling and on historic patterns rather than actual 
on-field performance to be ranked one or two. It is simply not 
realistic.
    Senator Hatch. Well, do you think that a team from an 
outside, non-privileged conference has a realistic chance to 
qualify for a National Championship game?
    Mr. Young. Well, Senator Hatch, the University of Utah 
comes from the conference that this year had the best 
interconference record. Against the PAC 10 we were 6-1, and we 
were undefeated and unable to climb that ranking.
    I do not know what more we could do. We have worked hard; 
we have hired gifted coaches; we have invested heavily in our 
program. We have worked diligently by dint of tremendous sweat 
and labor and after a year like that could not rise.
    Senator Hatch. Well, let me just rephrase it in another way 
for both you and Chancellor Perlman. Let us take last year's 
Utah team, for example. What more could they have done to play 
their way into a National Championship game? You know, if the 
BCS system ensures that most teams will not even have an 
outside chance of playing for the National Championship, isn't 
it fair to say that it is exclusionary?
    Mr. Young. Well, if we had been part of an automatic-
qualifying conference, I suspect we would have had an 
opportunity to play for a championship.
    Senator Hatch. I see.
    Chancellor.
    Mr. Perlman. Senator, it is hard to respond to this without 
appearing to be disrespectful of Utah, which I am not.
    Senator Hatch. You do not want to be in this room.
    [Laughter.]
    Mr. Perlman. I know. I know.
    Senator Hatch. I happen to love the University of Nebraska, 
too. We have watched it for years, and your former coach was a 
good Member of Congress, and he is back with you, as I 
understand it.
    Mr. Perlman. He is.
    Senator Hatch. Well, that is going to do a lot of good, I 
think.
    Mr. Perlman. It will.
    Senator Hatch. And you have been very kind to come here and 
give us your viewpoint.
    Mr. Perlman. Well, I just want to say--I mean, there is 
realistically something that Utah could do. They could have 
played the schedule Nebraska played last year, where we played 
Oklahoma, Texas Tech, and Missouri--all of them ranked within 
the top five.
    Senator Hatch. Did they even have a chance to do that?
    Mr. Perlman. Well, they got a non-conference schedule that 
they could fill.
    Senator Hatch. Well, they played a lot of big-time teams 
last year.
    Mr. Perlman. I know, but the issue is----
    Senator Hatch. And they whipped one team that was No. 1 for 
most of the season.
    Mr. Perlman. And if they had have beaten Alabama before 
that bowl game instead of at that bowl game, they might have 
had a better shot at it.
    Senator Hatch. Well, I see. You are making my case for me.
    Mr. Perlman. You know, at some point--at some point--
regardless of what system you talk about, somebody is going to 
have to pick the teams that play and the teams that are 
excluded.
    Senator Hatch. Is it fair to pick teams when you do not 
even go and see--when the criteria does not require you to even 
go and see a game? And let us use the Mountain West Conference 
as a perfect illustration.
    Mr. Perlman. I appreciate that it may seem unfair and it 
may, in fact, be unfair.
    Senator Hatch. Well, you know it is unfair.
    Mr. Perlman. But the fact is that somebody, no matter what 
system is proposed, is going to have to pick those teams that 
get to play and those teams that do not. And we have looked at 
every system possible. And you can look at the March Madness 
basketball, NCAA, where we have 64 teams, and we have a small 
committee locked in a room over that last weekend to pick the 
teams. And there is controversy every year about who is in and 
who is out. And it may be based on----
    Senator Hatch. It is based on a playoff game, you know.
    Mr. Perlman. Well, you do, but the issue is the same.
    College baseball this year picked the 64 teams to play in 
the regionals, and there is enormous controversy about how many 
of the Big 12 got in as opposed to how many the ACC or the SEC 
got in.
    There is no perfect system in this. And do some of us start 
out with a disadvantage? As I say, Nebraska has advantages and 
it has disadvantages in all of the areas that this university 
competes with other universities. That is the way the world is, 
I am afraid.
    Senator Hatch. President Young, do you have anything to say 
about that?
    Mr. Young. Well, I appreciate those comments very much, and 
I do appreciate the tremendous football team that Nebraska 
fields and wish that they were willing to play us. If you look 
at the ranked teams in the top 20 that we played----
    Senator Hatch. There you have a challenge. Now, let us get 
this----
    [Laughter.]
    Mr. Perlman. I will report to Athletic Director Osborne 
when I get back.
    Senator Hatch. You tell Osborne I want a University of Utah 
game.
    Mr. Perlman. All right.
    Mr. Young. I have heard that before. We really appreciate 
that and the tremendous programs that those are. But given the 
rankings of the teams that we played--again, it gets very hard 
to figure out what we do in a system that inherently stacks it 
against us, and that I think becomes the most fundamental 
concern.
    We are not concerned about external constraints placed on 
our system. I envy Nebraska's athletic budget, and they produce 
tremendous success because of it.
    My athletic budget is less, but we Westerners do more with 
less, and those kinds of constraints are ones we understand. It 
is the systemic constraints where the system starts 
systemically balanced and structured against the possibilities 
that are the problem--the man-made constraints, not those 
constraints that come because of weather and mountains and my 
capacity to fundraise or not fundraise.
    Senator Hatch. President Young, I wanted to ask you about 
the message the current BCS system sends to our young people. 
As you know, a group of colleges and universities are the 
primary movers behind the current system. It is these same 
institutions that we charge with the task of educating our 
young people and preparing them for the workforce.
    What impact, if any, does the BCS have on your efforts to 
teach students the proper values?
    Mr. Young. Senator, if I may take the liberty of reading 
two things that encapsulate it a bit?
    Senator Hatch. Sure.
    Mr. Young. One comes from my written testimony, and it just 
focuses on the fact that I believe, as I believe most 
Presidents believe, that we have a paramount responsibility to 
teach our students to be good citizens, to model fairness and 
equity and to lead by example. This is true in all aspects of 
university life, but particularly true for college football, 
which creates such great interest and enthusiasm and attention 
among our student body. College sports should promote fairness 
and equity and the fundamental American concept that anyone 
with the skills and drive to succeed can achieve the highest 
level of greatness.
    These are not the messages being sent by college football 
today. The BCS system, with its stranglehold on college 
football, sends the message that economic power rather than 
athletic ability is the key to success. As Commissioner 
Swafford said, ``Fairness depends on where you sit.'' Rather 
than promoting fairness and equity, the BCS system promotes the 
status quo--a system of schools who have and those who have 
not--and virtually assures that many highly successful athletic 
programs will be forever excluded from the highest levels of 
recognition and financial gain. And these are not values that 
we want our students to really model or emulate.
    I will read one last statement, if I may, which I think is 
beautifully written, that highlights our obligation, and it 
comes from David Frohnmayer, President of Oregon State 
University, who says, ``We can easily go too far--authority is 
seductive; we can reach a personal tipping point. . . .Some 
environments blind us to the human consequences of our 
actions--so we MUST be attuned to the consequences of our 
behavior. . . .This ethical life is hard work--``knowing right 
from wrong'' requires diligence, self-scrutiny and looking into 
a very well-lit and refractive mirror.'' And, of course, 
President Frohnmayer is the most recently retired Chair of the 
BCS.
    I agree wholeheartedly with his statement and what we ought 
to be teaching our students, and I do not believe that the BCS 
does that.
    Senator Hatch. Thank you.
    Chancellor Perlman, our State universities were created so 
each student would have an opportunity to attend college. Now, 
getting an education has increasingly become a prerequisite to 
achieve the American dream, which says if you work hard enough, 
you too can be a success and enjoy the fruits of your labor. 
But under the BCS system, it does not matter how good of a team 
you are. In the BCS system, there are significant and largely 
insurmountable obstacles at play in the so-called National 
Championship.
    Now, if your school does not belong to a privileged 
conference, that becomes even harder. Therefore, does not the 
BCS system violate the intellectual and ideological foundation 
which was the basis for the creation of State universities?
    Mr. Perlman. Well, Senator, of course, it is always--it 
depends on your perspectives on these matters. As I tried to 
indicate in my testimony, both written and oral, universities 
come with a set of endowments, some of them that they have 
earned, some of them that they acquired through luck. We are 
all different. It seems to me that one of the things that 
universities ought to teach students is the fact that, however 
the natural set of endowments are arrayed against you, hard 
work and creative activity can cause you to rise to the top.
    Bowl Championship Series gives every school an opportunity 
to play for the National Championship. It has increased the 
access of students and schools that did not have it before. It 
has increased the revenue of schools that have aspirations for 
playing at the highest level of college football. I do agree 
that the issue is one about students, and if you would permit 
me to also provide you a quote, it is from Gary Patterson, 
football coach at TSU, which I believe is a member of the 
Mountain West Conference:
    ``Obviously, a true playoff gives you a national champion. 
But my answer has always been it's for the kids. And bowl games 
are for the kids. If you're in the playoff, you spend all week 
at your place, and if you get beat, you're done. You never 
experience a new place; you never see new things. For me, the 
key to the bowl games is you get to experience another place; 
you get to learn about another program. A lot of our kids never 
get to go to the West Coast. In all this arguing, we tend to 
forget about the kids, about their academic load and everything 
else that comes with being a student-athlete. I have a tendency 
to stick with the bowls.''
    I think that is the attitude in most of the university 
presidents I come in contact with.
    Senator Hatch. Well, let me go back to President Young. 
Both Chancellor Perlman and Mr. Monts, in his testimony, in his 
written testimony, have stated that the BCS is needed to 
protect the overall bowl system and to preserve the exciting 
nature of the regular season.
    Now, in the past, proponents of the BCS have also argued 
that any playoff proposal would harm the schools' academic 
missions. Do you agree with any of those claims?
    Mr. Young. Not a single one of them, as it turns out. If 
you actually look at the regular season, I think March Madness 
in basketball certainly created a lot of excitement in a 
particular of period of time. But, in fact, because selection 
into March Madness depends in some large measure on performance 
on the court during the regular season, in fact, there is some 
substantial evidence that TV revenues for the regular season 
have actually gone up, not down, as has attendance as well.
    I think in addition, if you look at the regular season at 
the moment, given the way the system is structured, there are 
comparatively few games that have actual National Championship 
implications. I included this in my written testimony. If you 
go to a system, even a modified playoff system like ours--as we 
have suggested from the Mountain West--and I am not in any way, 
as I do not think the conference is, wedded to that particular 
system but simply trying to show there are alternatives that 
achieve all the objectives without engaging in harm. If you 
look at that system, it basically would extend the season by a 
week for two teams, and that hardly seems problematic, 
particularly given what Division II and Division III do in 
terms of their playoffs, where it is extended by 21 to 29 days, 
respectively.
    Eighty-eight NCAA sports, and only one without a playoff. 
My suspicion is if I were to ask any one of the students from 
any one of the non-BCS automatic qualifying conferences, 
``Would you like to go to the West Coast and go to a party, or 
would you like to actually compete for the National 
Championship? '' I doubt there is little disagreement among the 
2,000 athletes who are currently largely precluded from 
participating in that.
    And, finally, with respect to destroying the bowls, in 
fact, since the BCS system has been created, there has been an 
addition of a number of bowls. The revenue for the existing 
bowls has actually gone up. There is very little evidence that 
that has harmed the bowl system. In fact, it appears by all 
evidence to have increased the number of bowls, enthusiasm for 
bowls, revenue for bowls in the United States as well. I think 
that is unarguable.
    Senator Hatch. I am going to get to you antitrust lawyers, 
so do not worry. I know President Young has to leave by 4, and 
I am trying to cover as much as I can with these two great 
presidents.
    Let me go to you again, Chancellor Perlman. Do you care to 
respond to that? It seems to me that the bowls outside the BCS 
exist on a completely separate plane and would not be affected 
by the establishment of a playoff. Also, under the current 
system, most teams are eliminated from National Championship 
consideration if they lose a single game, and their games fall 
off the national radar after that loss occurs.
    Now, wouldn't the establishment of a playoff mean that more 
regular season games have championship implications because 
teams would remain in contention even after they have suffered 
a loss?
    Mr. Perlman. Senator, I think with respect to the impact on 
the bowl games, I think in at least all of the proposals I have 
seen for a playoff, it would be inconceivable how that would 
work and still retain the bowl system as we know it. You cannot 
run--I do not think you can run Nebraska in the Rose Bowl 1 
week and if we win we go to Orlando the next week, and if we 
win that we go to the Cotton Bowl in Dallas and play for the 
National Championship. I do not think our fans are going to 
travel that much in December and January. I do not think they 
can afford to travel that much, which means that those teams 
will then be playing on their home fields.
    That withdraws a number of teams from the bowl system that 
currently are playing in bowls, and we can right now barely 
fill out the bowls that we have. I do not think you can think 
it will not have a diminished impact on the bowls across the 
country if we went to a playoff system.
    Senator Hatch. President Young, we will end with you and 
let you catch your airplane.
    Mr. Young. From 1999 to 2009, it increased from 23 to 34 
bowls. The March Madness actually has increased the number of 
basketball tournaments around the country by a substantial 
margin, not decreased it.
    It is possible everybody will say these bowls, while they 
have been great for the thousand sponsors of these bowls--and 
it is about a thousand sponsors--will say, What were we 
thinking? This has not been good for the economy of our city. 
These teams that otherwise are not in this playoff system, we 
do not want to see them play; we do not want to have them; they 
are second and third in their conferences, so we are just going 
to cancel the bowl because there is now a playoff system.
    It is possible. But it strikes me as enormously unlikely. 
Possible, but I would be stunned if that is what happened.
    Senator Hatch. Well, thank you. You need to catch a plane. 
But, you know, there are some university presidents who would 
not want to testify in this hearing. Do you understand why?
    Mr. Young. I do not, really, and I will tell you why I do 
not: because this is part of a broad dialog. I have enormous 
confidence in my fellow presidents and chancellors that they 
understand that open, honest disagreement is the stuff of which 
great systems and great countries and great universities are 
made. If the notion is that somehow the University of Utah will 
be viewed badly because we aired these concerns, it strikes me 
as entirely implausible. I have the utmost respect for my 
fellow presidents, their athletic directors. I cannot imagine 
that they would stand back and say we are not going to schedule 
Utah. In fact, I think I just got an agreement we were going to 
be scheduled.
    Senator Hatch. All right, Perlman. I want to see this----
    [Laughter.]
    Mr. Young. So I appreciate that, Senator, but I think the 
great gift to America is higher education, and, for those who 
stand at the top of those institutions, I have enormous 
respect. I cannot imagine that these respectful disagreements 
on these issues will do anything other than deepen our 
collaboration, cooperation, and camaraderie.
    Senator Hatch. Well, thank you.
    Mr. Perlman. Senator, if I might just be permitted, I want 
to indicate the same thing. This is a conversation that has 
been going on for a long time. Any conversation depends on the 
perspective you have. It will not in any way diminish our 
respect for presidents that testify from a different 
perspective.
    The universities around this country have an enormous range 
of relationships. Intercollegiate football is just one. And, 
frankly, I do not think it is the most important one, and I 
think we engage collaboratively in a wide variety of areas for 
the good of the country, and I am sure that will continue 
regardless of what position is taken with respect to post-
season football.
    Senator Hatch. Well, thank you. I expect that to be the 
case. I appreciate both of you being here. You need to catch 
your plane, and I would be happy to let you go at this time.
    Mr. Young. Thank you, Senator. I would be deeply grateful. 
I have a son getting married, and if I miss his wedding, I just 
have a feeling he will be very huffy.
    [Laughter.]
    Mr. Young. So I very much appreciate your indulgence. Thank 
you so much, and thank you for the privilege of testifying and 
for the opportunity to be with this enormously distinguished 
panel.
    Senator Hatch. I just want to tell everybody what a great 
university president you are. You are a terrific human being, 
and you have got a terrific intellectual background as well, 
which is always nice to see in a university president.
    Mr. Young. Will that be in the record, Senator?
    [Laughter.]
    Senator Hatch. It is on the record. We will send it to you.
    All right. Now, let me go to Mr. Monts, and we will excuse 
you, President Young. We appreciate your efforts in being here, 
especially with the family problems.
    Mr. Monts, in your written testimony, you purposefully 
limit your antitrust analysis to only a discussion of Section 1 
of the Sherman Antitrust Act. However, I believe that an 
analysis of both Sections 1 and 2 is required to fully 
appreciate and understand the legal arguments for modifying the 
BCS system. Now, how can one argue the BCS system does not 
violate Section 2?
    And let me just add one other thing. The Supreme Court in 
U.S. v. Grinnell lays out a two-part test for determining if a 
Section 2 violation has occurred. The first prong of the test 
asks if there is a monopoly power in the relevant market. Well, 
does not the BCS exclude competition by limiting the number of 
non-privileged conference teams which can qualify for the BCS 
bowl? And regarding the question of relevant markets, who would 
argue the vast sums expended to acquire the exclusive 
television rights for broadcast of the BCS bowls and the 
National Championship game is not evidence of distinct markets?
    Now, the second part of the Grinnell test, if the willful 
acquisition or maintenance of that power is distinguished from 
growth or development as a consequence of a superior product, 
business acumen, or historic accident, now here, again, I 
believe the Supreme Court's criteria is met. Has not the BCS 
acquired and maintained its monopoly power by limiting the 
participation of non-privileged conferences in the management 
of the BCS structure? And does the BCS not limit the five non-
privileged conferences collectively to a single vote, whereas 
the privileged conferences get one vote each? Now, how can you 
say that Section 2 is not violated under those circumstances?
    I asked a number of questions there, and I would be happy 
to repeat them if----
    Mr. Monts. I may need you to unpack them again for me, 
Senator, but I will address those, because I think the first 
question or the question you raised about the question of 
governance is not really an antitrust issue at all. There is a 
BCS Presidential Oversight Committee. That committee was 
created with the agreement of all conferences, all 11 
conferences and the University of Notre Dame. At the time it 
was created, that was a request that was made by those five 
conferences to have one seat on that committee, and that was 
agreed to.
    Senator Hatch. I understand that if the University of Notre 
Dame finishes eighth or better, it will qualify for one of 
the----
    Mr. Monts. If the University of Notre Dame finishes eighth 
in the Nation or better, it in that season will earn an 
automatic berth in a BCS bowl game.
    Senator Hatch. That is my understanding.
    Mr. Monts. Just as if a team in one of the five other 
conferences finishes 12th or better, a champion finishes 12th 
or better, or 16th and higher than one of the champions from 
the annual automatic qualifying conferences, it, too, will earn 
an annual automatic berth.
    Senator Hatch. Right.
    Mr. Monts. Now, I think the way to look at this, Senator, 
is to look at it in comparison to what we would have without 
the BCS, and this is where I think the antitrust argument falls 
flat, and it is this: Without the BCS, we would simply be back 
in the old bowl system in which each conference makes its own 
bowl arrangements. That is what we had for many, many years 
prior to 1991 with the formation of the Bowl Coalition and what 
we would return to if the BCS went away. We would have each 
conference negotiating for the best bowl deal it could arrange 
for its champion and for its runner-up teams, just as we have 
today.
    Senator Hatch. Not if you have a playoff system.
    Mr. Monts. No court is going to write that, Senator. None 
whatsoever. That is not what courts do.
    Senator Hatch. There are some that would.
    [Laughter.]
    Senator Hatch. I can even name the judges.
    Mr. Monts. But no court has the authority, in my view, 
under the antitrust laws, and it would be extraordinary, in my 
view, because the BCS is a form of cooperation today if we 
assume a Section 1 agreement.
    Now, what we are asking, what is being asked of the court 
is to enjoin the BCS and then replace it with another form of 
cooperation. That is not what the antitrust laws do. Courts do 
not sit there and serve as super-regulatory bodies or public 
utility commissions to deal with post-season college football 
or any other----
    Senator Hatch. No, but they can decide what is right and 
wrong.
    Mr. Monts. Pardon?
    Senator Hatch. They can decide what is right and wrong.
    Mr. Monts. Certainly, Senator. They will decide----
    Senator Hatch. Once they do that, then you have to comply.
    Mr. Monts. But the remedy that would be issued by a court 
is simply an injunction against the BCS agreement, and then 
each conference would be on its own in terms of negotiating its 
bowl arrangements. That is essentially what happened with the 
NCAA v. Board of Regents case. The Supreme Court issued a 
decision, the NCAA television agreement was enjoined, and each 
conference is now selling its own regular season television 
rights individually. The same thing would happen with the BCS 
if it were to go away.
    Senator Hatch. Mr. Brett, do you agree with that?
    Mr. Brett. No, I do not, Senator Hatch.
    Senator Hatch. Would you hit your button there?
    Mr. Brett. I am sorry. I do not. The fact is that in all 
the years that I have been practicing--and it is, 
unfortunately, a lot longer than Mr. Monts. In fact, I was in 
the Grinnell cases way back when. And I know how in each one of 
those cases and in every monopoly case the defendant will 
invariably claim that this is the only way to do it, we must do 
it, this is the best system, and we are doing something good.
    It is unheard of, in antitrust parlance, for a group of 
competing entities to form their own cartel, set up a series of 
rules, and say this is the best way to do it, therefore, allow 
us to do it.
    We have abundant evidence that their claim that this is the 
best system and the only system is a flawed premise. In fact, 
there are 88 playoffs run by the NCAA. It is very curious that 
in the most lucrative of sports, the NCAA has stepped out of 
the picture and allowed this separate cartel to function. The 
NCAA has rules operative in the basketball program which 
require that all teams involved that are invited, participate 
and play within that structure.
    A structure administered by the NCAA, for example, could 
very easily adopt a playoff system and implement a playoff 
system.
    The suggestion that this is the best or the only way to do 
it is not a decision that should be made by a group of 
competitors by agreement in a manner which excludes competing 
companies and excludes others who are not involved. The data as 
to the impact of this system is abundant. The data to show the 
discriminatory and anticompetitive effects is abundant. The 
impact on the public, which is the primary concern of the 
antitrust laws, is dramatic.
    There can be little doubt that if there were a playoff 
system or some free competition, every school in the country 
would want to participate. Can one imagine USC and Texas, which 
were so indignant at not having the opportunity to compete for 
the National Championship last year, saying that they would not 
want to participate in that competition? And we would have all 
liked to see those games, see USC, see Texas in there.
    Their system is one that does not make sense, but it just 
simply follows the practice of every monopolist of saying we 
have to do it. Those arguments were made by the NCAA in the 
Board of Regents case. They were made more recently in a case 
where they tried to limit the compensation given to coaches. 
And, again, in all those circumstances the courts evaluated and 
rejected the arguments of the NCAA that, ``Our way is the best 
way and the only way to do it.'' The evidence does not support 
it, and the fact that they can do 88 playoffs in other sports 
suggests that there is no reason that it cannot be and should 
not be done in this sport as well.
    Senator Hatch. In your testimony, Mr. Brett, you argue the 
BCS violates Section 1 of the Sherman Antitrust Act. In his 
written testimony to the Committee, Mr. Paul Kaplan of our very 
important law firm down here, one of the important firms, Arent 
Fox, agrees with your analysis that there is a Section 1 
violation. However, Mr. Kaplan argues the BCS construct should 
be evaluated under a per se rule.
    Now, he argues the BCS system is an illegal horizontal 
constraint. On the other hand, you argue for a rule-of-reason 
analysis, as I understand it. Why do you believe the 
Subcommittee should evaluate the BCS system using the rule of 
reason? And if we use the per se rule, do we reach a different 
conclusion? In addition, do you believe the BCS system violates 
the rule of reason?
    Mr. Brett. I do believe it violates the rule of reason. I 
think that there are certainly indicia of the BCS system which 
reflect areas to which the per se rules apply. Certainly there 
is an absence of price competition with respect to bowl games, 
bowl televising of games, and they are sold as a package. Those 
are certainly areas of practice which could be subject to per 
se consideration.
    We in our submission took a more conservative view of 
saying that we do not have to deal with the per se rules which 
the Supreme Court has sought to narrow, which were not applied 
in the Board of Regents case and the more recent law case; so 
that without dealing with that controversial proposition, we 
think it is very clear under the rule of reason that it is a 
violation of Section 1 of the Sherman Act, and we think it is 
also very clear that it is a very, very obvious violation of 
Section 2 of the Sherman Act; that there is absolutely no doubt 
that this monopoly was illegally acquired and maintained and it 
continues to be maintained by exclusionary conduct. The 
relevant market is easy. The monopoly power is manifest. And I 
do not know even know what the arguments are that would be 
advanced in defense.
    Senator Hatch. Well, so would it not be safe to say that a 
reasonable case can be made under both the per se and rule-of-
reason analysis that there is a violation here?
    Mr. Brett. Absolutely.
    Senator Hatch. If you have a----
    Mr. Monts. I do, Senator, because I do not think there is 
any credible case to be made on the per se rule. There would be 
no BCS without an agreement, and there would be no other 
alternative system without an agreement among the conferences 
and the participants.
    In fact, the only way that we can have any kind of post-
season structure of any sort, no matter how it is structured, 
is through an agreement of the parties. So the suggestion that 
there is a per se violation in any way here strikes me as 
simply flatly wrong.
    In terms of the rule of reason, the question in antitrust 
is output, and there is no game that I am aware of that is not 
played; there is no conference that is not playing--no team 
that is not playing the maximum number of games it is entitled 
to play under NCAA rules.
    The fact of the matter is there is just no output 
restriction here whatsoever, and that being the case, there is 
no violation at all.
    Senator Hatch. Mr. Brett.
    Mr. Brett. There is certainly restraint on output. If there 
were a playoff system as proposed by the Mountain West, for 
example, there would clearly be two or three additional games 
played each year, and one can imagine the revenues that would 
be generated by games that would have that kind of imprimatur 
of a genuine National Championship. If they are paying half a 
billion dollars for these games, imagine what they would pay 
for the Super Bowl of college football. So that there is a 
restraint on output. There are less anticompetitive 
restrictions or restraints on matters in which the same results 
can be achieved, and those have to be considered. And not only 
is there a restraint on output, there are exclusionary rules 
adopted by this self-designated group, with no portfolio and no 
authority such as the NCAA or any other group would have. They 
designated themselves as the arbiters of what is necessary to 
create a system where they get 87 percent of the revenues. That 
is just directly contrary to the spirit and objectives of the 
Sherman Act.
    Senator Hatch. Let me ask both Mr. Monts and Chancellor 
Perlman, if you care to comment, Chancellor. Many have argued 
that a playoff system would mean more money not only for the 
privileged BCS conferences but for all the schools in the 
country. I have to assume that television networks, 
advertisers, and sponsors would welcome some sort of a playoff 
system if for no other reason than it would mean a few more 
games.
    Now, wouldn't that be the case? Wouldn't the playoff system 
mean more money for everybody?
    Mr. Perlman. It might, Senator, but I do not think you can 
be assured of that. If we are right that the value of the 
regular season would decline with a broader playoff, then it is 
not clear the total amount of money would be the same.
    But as a university president sitting between two antitrust 
lawyers, I would just comment that I think university 
presidents that I talk to are legitimately concerned about the 
number of games that you can ask student athletes to play under 
these circumstances and at this level, not only for the health 
of student athletes but for their academic success.
    These athletes are strong, they are fast, and they get beat 
up in these games. And I think that there are limits to how 
many they would play, and I guess I would argue that at least 
that output restraint would have some basis in reason.
    Senator Hatch. OK. Mr. Monts.
    Mr. Monts. I certainly agree with Chancellor Perlman, but 
the question is the overall revenues from all of college 
football, regular season and post-season.
    I part company with Mr. Brett, I think, on a couple of 
avenues. The argument that output is restricted because if we 
had a playoff there would be more games is a little bit like 
saying, well, we would have more games if the National Football 
League extended its season to 18 games or 20 games rather than 
the current 16; or we would have more output if the NCAA did 
not limit regular season games to 12--or 13 for those who 
travel to Hawaii--but had 15 or 16. There must be some limit on 
that, and so no matter what the structure is, one could always 
hypothesize a different format that would come up with more 
games.
    The difficulty, I think, again, Senator, is going back to 
what would we have if there were an antitrust injunction 
entered against the BCS, and the answer is we would have each 
conference selling its own bowl rights individually, and the 
only way we could have any kind of structure that would create 
any sort of National Championship playoff or any alternative 
structure to the BCS would be through some other agreement of 
those conferences and Notre Dame.
    This is the agreement that the conferences and Notre Dame 
can reach. To have a National Championship requires the 
participation of each and every one.
    Now, several conferences have alternatives. For example, 
the Big 10 and PAC 10 have played for many, many years in the 
Rose Bowl, going back to January 1, 1947. Those conferences 
have that alternative, and if they wish to simply go back to 
the Rose Bowl and not participate in the playoff, that will be 
their prerogative, and there will not be a National 
Championship structure. It will be very difficult to go to any 
sort of television network or even to the public at large and 
say, ``We are going to have a National Championship 
arrangement, but we will not have USC, Michigan, Ohio State, 
Penn State''--or many other fine teams.
    The same thing would be true if the Big 12 or the 
Southeastern Conference decided for whatever reason it wanted 
to continue individually its own bowl arrangement with its 
historic bowl partners. So the only way are going to have a 
championship is by the participation of all conferences.
    Now, let me address one other point that Mr. Brett made, 
because I think it actually makes my point rather than his, and 
that is, the NCAA's rule requiring mandatory participation in 
the Men's Basketball Championship. That rule was tested in the 
Metropolitan Intercollegiate Basketball Association v. NCAA 
case in New York. MIBA was the former operator of the NIT, the 
National Invitational Tournament, which was a competitive post-
season tournament with the Men's Basketball Championship. The 
specific challenges that MIBA raised in that case were to the 
mandatory participation rule and to the one-post-season-
tournament rule that the NCAA had imposed.
    Now, MIBA survived a motion for summary judgment, meaning 
that the NCAA was going to have to try that case and at the 
risk of losing its mandatory participation rule, which is 
crucial to the playoff. So it settled it for $57 million.
    Now, the bowls would be in the exact same position today as 
the NIT if there were a playoff and they were deprived of 
teams. They would be deprived of the ability to compete for 
teams. That litigation playbook, I think, has been written, and 
I believe it cuts far more in favor of our position than it 
does Mr. Brett's. So we must respectfully disagree on that 
point.
    Senator Hatch. Mr. Brett, do you have any comments?
    Mr. Brett. Well, first, I am quite familiar with Judge 
Cedarbaum's decision in the MIBA case, and it was not settled 
for $57 million. The NCAA bought the National Invitation 
Tournament, so there was no payment made and there was 
certainly no adjudication that the rule we referred to was 
incorrect.
    But I think more fundamentally, Senator, the real problem 
here is that what we have before us at the BCS now is a group 
of competitors who have formed a cartel which has worked out to 
their great advantage. They have managed to secure for 
themselves 87 percent of the revenues and 90 of the 94 spots in 
the major bowls. And now they come in and tell us you must 
allow us to make the decision as to how these revenues are 
distributed, how these people are selected for the bowls, 
because we know the best way to do it. The fact that it works 
out to our great economic advantage is almost coincidental, but 
trust us, trust us to make the best decisions.
    That is directly contrary to what the Sherman Act requires, 
and it is directly contrary to the jurisprudence under 
antitrust law, where every single case will see a defendant 
coming in and saying, ``What we did was good and wholesome. We 
really did not mean to do anything harmful.'' And the NCAA has 
lost again and again in asserting that its views as to the way 
to restrict competition were essential.
    The law is that competition, and not a group of self-
designated competitors who should be competing, makes the 
rules. And it is not coincidental that the rules which they 
make, when we look back at their effect, have been dramatically 
in favor of those six conferences. And antitrust jurisprudence 
is to look for anticompetitive effects, and these effects have 
been dramatically and offensively anticompetitive.
    Senator Hatch. Well, let me just say, this has been a very 
interesting hearing for me, and you all have been excellent 
witnesses.
    I have to say I am having a lot of troubles with the BCS 
approach because, you know, Mr. Thompson comes up with some 
ideas, and maybe they were not what the BCS wanted, but they 
just kind of dismissed it without argument. And there is kind 
of an arrogance there that I see that just should not be there. 
And you know who I am talking about, too, and you are not it. 
But the fact of the matter is that I am really concerned about 
it because I think it is really the wrong example for our young 
people, and it is certainly not working well. And I do 
believe--I hate to say it to you, Mr. Monts. You have been very 
loquacious, and you are undoubtedly a good attorney. But I 
believe there are real antitrust issues here that are not going 
to be solved unless the folks at BCS start to work to resolve 
these matters.
    And, Mr. Perlman, I know a lot about you. You are a very 
fine man and a very good university administrator. I want you 
to go back and argue with these people and let them know that, 
hey, we are sick of it, to be honest with you. And I think Mr. 
Brett has made a pretty darn good case here today.
    Did you have something you wanted to say? I do not want to 
cut you off.
    Mr. Perlman. I am sorry. I just wanted to clarify the 
record.
    Senator Hatch. Sure.
    Mr. Perlman. The BCS agreement that will start in 2011 was 
agreed to by all the conferences in November of 2008. The 
Mountain West proposals were brought to us after we had reached 
that agreement, and it was the position of the ten conferences 
that we would honor our commitments to ESPN and not review the 
Mountain West proposals at that time. But they have not been 
summarily rejected and, indeed, what we have stated publicly is 
that when the next BCS agreement is negotiated, we will 
consider the proposals of the Mountain West as well as any 
other proposals for changing the Bowl Championship Series to 
make it better.
    Senator Hatch. That is a long time away.
    Mr. Perlman. Well, it is actually not as long as you might 
think, because we start renegotiating the agreement about a 
year into whatever agreement we have. It is not immediate, but 
the fact is that all ten conferences have made a commitment to 
the current system, and we have signed an agreement to that 
effect with ESPN. And all of us thought that we did not want to 
upset that agreement and we thought we ought to honor our 
promises.
    Senator Hatch. Mr. Brett, do you have any comment about 
that?
    Mr. Brett. There is right now a July 9 deadline for the 
signing of the agreement. Counsel for the Mountain West has 
requested that that deadline be extended to allow everyone to 
digest and take into account these proceedings and other events 
which are now going on.
    The ESPN agreement contemplates that it would be revised if 
the current system has to be upset for any reason, and it 
contemplates the possibility of it being upset for antitrust 
violations implicitly.
    There is no reason that that deadline cannot be lifted and 
there be given time for everyone to work out a more equitable 
system that does not violate the antitrust laws. Unfortunately, 
as history teaches us, one of the great evils of monopoly power 
is the arrogance and the willingness to move ahead and exercise 
that power. And that is what happens when you have a 
monopolist.
    Mr. Perlman and his colleagues are fine people, and I have 
been very impressed and very privileged to sit with him here 
today and hear his views. But they have gotten themselves into 
a situation where they have made so much money, they have got 
an economic interest that they want to keep, and it is being 
protected by a group of competing companies that have avoided 
competition. It is time that that stopped, and I think your 
observations were appropriate. There is no reason that contract 
has to be signed now.
    Senator Hatch. Well, thank you. I want to thank all three 
of you, and certainly President Young as well, for being here. 
This has been one of the most interesting hearings to me that 
we have had around here in a long time, and it is great to have 
great witnesses who could testify. So I appreciate your being 
here. You have not changed my viewpoint. In fact, it is 
reinforced, and in all honesty, I am very, very concerned about 
it as a Pitt graduate, you know, the law school.
    All I can say is that this has been an informative hearing, 
and I am grateful for the four of you for taking your time to 
be with us today.
    With that, I am going to have to end the hearing. Thanks so 
much.
    Mr. Brett. Senator Hatch, thank you, and thank you for 
allowing us to participate in this great exercise in democracy 
not available anywhere else. We appreciate the opportunity and 
the privilege.
    Mr. Monts. Senator, it has been an honor. Thank you very 
much.
    Senator Hatch. An honor for us. Thanks so much.
    [Whereupon, at 4:11 p.m., the Subcommittee was adjourned.]
    [Submissions for the record follow.]

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