The Downfall of Amateurism and the Rise of NIL in College Sports

Caselaw History

Name, Image, and Likeness (“NIL”) in college sports first became a talking point in the legal field with Nat'l Collegiate Athletic Ass'n v. Bd. of Regents, 468 U.S. 85, 94 (1984). The issue there was whether the NCAA restricting schools’ rights to sell their own broadcast rights as part of a larger deal with ABC, CBS, and TBS violated antitrust law.[1] Once reaching the Supreme Court, the first seed of NIL analysis was planted. The Court stated that the NCAA horizontally restrained trade by price-fixing TV deals, which required Rule of Reason analysis under the Sherman Antitrust Act.[2] Under Rule of Reason, the plaintiff has the initial task to show the restraint causes “significant anticompetitive effects within a relevant market.”[3] If the plaintiff succeeds, the defendant must show evidence of the restraint's “procompetitive effects.”[4] Lastly, the plaintiff must then demonstrate any legitimate objectives that can be accomplished in a “substantially less restrictive manner.”[5] The NCAA’s evidence for procompetitive effects was unpersuasive, so the agreement violated the Sherman Antitrust Act.[6] One quote stands out: “The NCAA seeks to market a particular brand of football -- college football. . . . In order to preserve the character and quality of th(is) ‘product’, athletes must not be paid, must be required to attend class, and the like.”[7]

Then comes O'Bannon v. NCAA, 802 F.3d 1049, 1070 (9th Cir. 2015). Ed O’Bannon, a former basketball player at UCLA, saw himself in a video game.[8] The character resembled Ed, had his jersey number, and played for UCLA even though O’Bannon never consented to have his likeness used, nor was he ever paid for it.[9] O’Bannon sued the NCAA and Collegiate Licensing Company (CLC), arguing rules forbidding paying an athlete violated the Sherman Antitrust Act.[10] O’Bannon reached the appellate courts, with the appellate court affirming that the NCAA must satisfy Rule of Reason analysis which “requires that the NCAA permit its schools to provide up to the cost of attendance to their student-athletes”.[11] According to the court, the discrepancy in “offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap.”[12] If this were allowed, the NCAA would no longer have a differentiated product and would then be no different than minor league sports.[13]

NCAA v. Alston involved current and former Division I student-athletes suing the NCAA for their compensation rules, alleging that they violated Section 1 of the Sherman Act.[14] Ultimately, the Supreme Court upheld the injunction granted by the district court which restricted cash awards to players for academic achievement by capping them at $5,980 annually.[15] The NCAA still had freedom to reduce awards and/or set the criteria for earning the awards.[16] The NCAA is free to outlaw in-kind benefits unrelated to education if they want or ask for clarification from the district court before going to the Supreme Court.[17] Justice Kavanaugh’s concurrence showed us that the Supreme Court was catching up with the times and directly called out the NCAA: the NCAA’s business model would be flatly illegal in almost any other industry in America” because it is “price-fixing labor” which is a textbook antitrust issue and that the NCAA “is not above the law.[18]

Alston’s Aftermath and the Logistics of Paying Players

After Alston, schools still cannot pay athletes directly: coaches cannot offer money to recruits to go to a certain college nor can current student-athletes get compensation for any “athletic achievements.”[19] Student-athletes CAN earn money from “endorsements, signing autographs, selling apparel, corporate partnerships, charitable appearances, teaching camps and starting their own businesses”, etc., and can also hire “professional service providers for NIL activities.”[20] Some states even allow high school players to earn NIL deals, with no risk to their eligibility: Tennessee, California, and New York.[21] Early on, the NCAA stated that collectives, or “groups of boosters and businesses”, cannot be involved in recruiting or transfers, but states soon passed laws to allow schools or third parties to give money to student-athletes through NIL, with Tennessee as a prime example, along with Alabama and others.[22]

Collectives are booming: Tennessee has Spyre Sports Group, one of three different Tennessee collectives, that works primarily with the University of Tennessee football and basketball.[23] Spyre has an annual goal of raising 25 million dollars and have raised 13.5 million dollars for confirmed NIL deals through their official collective: the Volunteer Club.[24] The Volunteer Club has one of the most high-profile deals thus far: Nico Iamaleava, the top-rated recruit out of the 2023 recruiting class, and a five-star quarterback from California.[25] On3 has his NIL value at approximately 1.2 million dollars and the deal is projected to be worth 8 million dollars over three years.[26]

Who do Schools Look to Pay and What are the Numbers?

This begs the question: what goes into a player’s value? On3.com offers a possible explanation: the Roster Value Index and the Brand Value Index, with three factors going into the calculation: performance influence, and exposure.[27] On3 notes that this dollar figure is the “optimized NIL opportunity for athletes relative to the overall NIL market and projects out to as long as 12 months into the future.”[28] College football recruiting is starting to mirror the veracious market for QB talent in the NFL. The top collectives for schools are “willing to spend at least $1 million on a blue-chip quarterback, with the market value for the position being toward the $1.5 to $8 million range once UT’s Iamaleava deal was public.[29] Lesser-rated QBs are cashing in on the booming market; according to one source one four-star QB is looking for $7-8 million, already having turned down an offer of $6 million.[30] It may be better to wait out the market so that a QB’s value continues to rise; one source said the rate could go as high as $5 to $8 million.[31]

NIL's Effect on the Law

How does all this data affect agency law? There could be a case for agents prioritizing certain positions when looking at potential clients: QB is likely given the massive growth in the market concerning the position. Moreover, agents could prioritize working in certain locations or with certain schools, given they can maximize the commission they earn because certain schools have higher budgets than others, with the Power 5 schools being an example. Furthermore, with agents that represent non-QBs, they may promote going to wherever the student-athlete can maximize their value. Agents repping QBs may prioritize player comps or the importance of garnering a social media following. Agents may also incentivize waiting to capitalize on their market value as the NIL space continues to grow.

There is also the possibility for federal legislation, and there are multiple proposals: a bipartisan bill from Tommy Tuberville, a bill from Democrat Corey Booker, and a bill from Republican Roger Wicker.[32] The Power 5 conferences have some demands and preferences for these proposals; the must-haves are preventative while the preferences are concerned with “additional student-athlete support, healthcare benefits for student-athletes and enforcement of laws in new legislation”.[33] Some must-haves are: “college athletes being classified as employees; granting athletes their name, image and likeness rights in media telecasts of competition; and NIL or third-party payments being used as ‘recruiting or participating inducements.’”[34] Others include federal legislation preempting state laws, as well as to provide ‘legal liability protection for following these provisions of the new law, at least prospectively’”, effectively an anti-trust exemption, which is unlikely after the Alston opinion.[35]

Athletes as employees is a particularly important issue. In Johnson v. NCAA, student athletes are arguing that they are employees under the Fair Labor Standards Act (FLSA), which entitles them to “minimum wage and overtime pay.[36] Hypothetically, these players could then unionize under collective bargaining and fight for revenue-sharing on their TV money, as Michael Hsu, a former Minnesota regent suggests, with the nightmare scenario being players could ask for as much as 50% during potential CBA negotiations, just like the pro players have successfully done.[37] The amount of revenue in play here would depend on the sport, so some athletes in different sports could benefit more than others, but the key is that every student-athlete would get something.[38]

Johnson v. NCAA could affect Title IX, which “bars discrimination on the basis of sex for any educational program or activity receiving federal financial assistance.”[39] If Title IX still applies to employees, it “would require the benefits that a university provides male and female athletes to be comparable, thus creating a sizable financial stress test for schools”; but if not, “women’s sports (and non-revenue sports in general) would be vulnerable to being eliminated.”[40] Even if Title IX still applies, some male athletes could challenge the proportion of revenue given to female athletes, with a reduction almost certain, since women’s sports typically do not bring in as much revenue, using basketball as an example.[41] If this is challenged, it could undo years of progress and development in women’s sports.[42] Antitrust law could be dealt yet another blow with House v. NCAA.[43] There, athletes argue denying NIL for college athletes “should, lead to monetary damages for athletes who were denied endorsement, group licensing and other opportunities that would have existed in the college sports marketplace," and so essentially granting back pay due to the lost opportunity on endorsements, apparel, autographs, etc.[44] This case has the potential to “bankrupt the NCAA.”[45]

Adam King is a recent graduate from the University of Tennessee College of Law. He is currently clerking for a practice in Crossville, Tennessee that focuses on criminal defense and estate planning, but hopes to make a name for himself in sports law. Adam can be found on LinkedIn at Adam King.

Sources:

[1] Nat'l Collegiate Athletic Ass'n v. Bd. of Regents, 468 U.S. 85, 94 (1984). [2] O'Bannon v. NCAA, 802 F.3d 1049, 1070 (9th Cir. 2015). [3] Id. [4] 802 F.3d at 1070. [5] Id. [6] Bd. of Regents, 468 U.S at 120. [7] Id. at 101-02. [8] O'Bannon, 802 F.3d at 1055. [9] Id. [10] O'Bannon, 802 F.3d at 1055. [11] Id. at 1079. [12] O’Bannon, 802 F.3d at 1079. [13] Id. [14] NCAA v. Alston, 141 S. Ct. 2141, 2151 (2021). [15] Id. at 2153. [16] Alston, 141 S. Ct. at 2153. [17] Id. at 2165-66. [18] Alston, 141 S. Ct. at 2167, 2169 (Kavanaugh J. concurring). [19] Pete Nakos, Why NIL has Fans, Coaches, Administrators Anxious about Future of College Sports, (March 15, 2023, 8:31 pm), https://perma.cc/3Q99-Q3TE. [20] Id. [21] Nakos, supra note 19; NIL High School Rules, on3.com, https://perma.cc/2TZ7-TB6A (March 15, 2023 9:01 pm). [22] Id.; see also NIL College Rules, On3.com, https://perma.cc/9WAP-8DUG, (March 16, 2023, 1:48 pm). [23] Dan Morrison, Tennessee Volunteers NIL Collective: Spyre Sports Group (March 15, 2023, 9:15 pm), https://perma.cc/6MUP-LMDL. [24] Pete Nakos, Spyre Sports' Volunteer Club Facilitates $13.5 million in NIL Deals, (March 15, 2023, 9:20 pm), https://perma.cc/C6PV-R9CG. [25] Pete Nakos, The Volunteer Club Signs NIL deal with Tennessee Quarterback Nico Iamaleava, (March 15, 2023, 9:23 pm), https://perma.cc/J658-5T2J. [26] Id. [27] Shannon Terry, About On3 NIL Valuation, Brand Value, Roster Value (March 15, 2023, 9:36 pm) https://perma.cc/EQL3-RRVU. [28] Id. [29] Jeremy Crabtree, NIL Creates Multi-Million Market Rate for Blue-Chip Quarterbacks, (March 16, 2023, 10:10 am), https://perma.cc/E6JG-5YPE. [30] Id. [31] Crabtree, supra note 29. [32] Jeremy Crabtree, Former Auburn Coach Tommy Tuberville to Introduce NIL Regulation Bill in Senate, (March 16, 2023, 12:00 pm), https://perma.cc/Z55G-TA3N; Pete Nakos, Five Senators Set to Reintroduce Athlete Bill of Rights in Congress, (March 16, 2023, 12:31 pm), https://perma.cc/EPS7-9MFD; U.S. Senate Committee on Commerce, Science, and Transportation, Wicker Reintroduces Bill Establishing a National Framework for Student Athlete NIL, (March 16, 2023, 12:43 pm), https://perma.cc/9UGY-4GQK. [33] Andy Wittry, ACC Memo: Power 5 Reach Consensus on What ACC Calls ‘Must Haves’ with Federal Legislation, (March 16, 2023, 12:04 pm), https://perma.cc/HV2Y-DZ2E. [34] Id. [35]Wittry, supra note 33; Andy Wittry, Can Congress Help with the Power 5’s ‘Must Haves’ and ‘Negotiated Issues’?, (March 16, 2023, 12:15 pm), https://perma.cc/UU4C-ZHMV. [36] Eric Prisbell, Johnson v. NCAA: Why College Sports Fans Need to Pay Attention to this Court Case, (March 16, 2023, 12:53 pm), https://perma.cc/54HA-STHD. [37] Wittry, supra note 35. [38] See Eric Prisbell, Student-Athletes as School Employees Could Lead to Interesting Negotiations, (March 16, 2023, 1:11 pm), https://perma.cc/S3M3-S5JA. [39] Prisbell, supra note 36. [40] Id. [41] David Berri, For the NCAA, Building the Business of Women’s Sports Starts With Basketball, (April 28, 2023, 10:46 am), https://perma.cc/VXD5-YYGA. [42] Prisbell, supra note 36. [43] House v. NCAA, 545 F. Supp. 3d 804 (N.D. Cal. 2021). [44] Id. [45] Wittry, supra note 35.