Can a high demand sporting event institute a random selection process to distribute tickets and create revenue while doing so? Recently, the NCAA was sued for using such a ticket distribution method (George v. NCAA, 2011). The plaintiffs to the lawsuit claimed the NCAA ran an illegal lottery by charging a non-refundable handling fee for all ticket requests, including those that were not able to be met due to the high consumer demand. Ultimately, the Indiana Supreme Court held the NCAA's actions did not legally constitute a lottery, and thus the NCAA's ticket distribution method was allowed.
Facts and Case History
The National Collegiate Athletic Association ("NCAA") is an organization that governs college athletics and hosts championship tournaments. Due to the popularity of many NCAA championship tournaments, such as the Division I men's and women's basketball tournaments, and the limited seating capacity in sport venues, ticket demand often exceeds the ticket supply. When the demand exceeds the supply, the NCAA implements a random-selection procedure (George, 2011). The ticket distribution process requires interested parties to submit an application in order to be chosen for the opportunity to purchase tickets.
The 2009 NCAA Division I men's Final Four utilized a ticket-distribution system to handle the demand for tickets. There were fewer than 5,000 tickets available to the general public and several hundred thousand people submitted offers (George, 2011, p. 152). The NCAA set the face value of $150 per ticket and the tickets were required to be purchased in pairs. Every interested person who applied for tickets was required to submit a single application with up to ten entries requesting a maximum of two-tickets per request. Each entry required a $6 non-refundable handling fee. Although an applicant could only win once for a maximum of two tickets, they could increase their odds of winning by submitting up to ten entries. By way of example, a person who applied with ten entries for two tickets would tender $3,060 (the face value of ten pairs of tickets plus the non-refundable handling fee for ten entries). If chosen, the applicant received the two tickets and a refund for the remaining balance of $2,700. If not chosen, the applicant received a refund of $3,000, representing the total cost of the tickets. In either case, however, the NCAA kept all the non-refundable handling fees (for 10 entries, this amounted to $60) (George, 2010).
The plaintiffs submitted entries to the NCAA to purchase tickets to the 2009 NCAA Division I men's Final Four but their applications were not accepted. They alleged that the NCAA purposefully advertised the limited availability of the tickets in order to increase demand and thus revenue from the non-refundable handling fees. They further alleged that these handling charges grossly exceeded any costs associated with the ticket-distribution system (George, 2010). Furthermore, applicants who were randomly chosen received event tickets via overnight delivery but those not chosen had to wait several weeks for their ticket refund (George, 2011).
The plaintiffs argued that the NCAA's ticket distribution...