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Sports Law Part II: An Introduction to College Sports Issues

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Sports Law Part II: An Introduction to College Sports Issues

Most sports fans know what the NCAA does and does not do. For many years, the NCAA's autonomy regarding college sports was unchallenged. However, in recent years, courts have become more conscious of the serious antitrust concerns arising out of NCAA policies and starting earlier in this decade, the courts began to seriously apply antitrust law rules to NCAA conduct. This presentation will discuss the background of the Alston case, the rulings by the lower court, the Supreme Court's ruling and concurring opinion by Justice Kavanaugh and world of college sports after the Supreme Court's seminal ruling in NCAA v. Alston.

Transcript

 Hello and welcome everybody. This is Sports Law part two, An introduction to College Sports Issues. My name is Mark Conrad and I teach sports law and sports business courses at Fordham University's Gabelli School of Business. This is going to be the second part of a group of CLA courses on sports law. The first portion had to deal with governance and future portions will deal with labor issues in professional sports. But this particular area is going to deal with the college sports space. And just as a quick introduction, I teach and write about sports law at Fordham Gabelli School of Business, where I direct its sports business program. I've also taught as an adjunct at Columbia University and at St. John's School of Law. So moving on to the next slide and let's go through our learning objectives. And there is so much here that we can discuss and this could probably be a three hour class. So this is just going to be a general overview of the tumultuous events happening in the college sports space in the last year. So, our learning objectives. We'll be discussing a background and structure of the NCAA, or dare I say, the traditional NCAA because it may be changing. Illustrating the case NCAA versus Alston and its road to the Supreme Court. Analyzing the ruling and how it solidified antitrust law with sports, and I'll talk about rule of reason in a little bit. Surveying the post-Alston environment and the beginning of a new era of monetization for college athletes. And we'll focus on Justice Kavanaugh's concurring opinion in that ruling because it is significant and we'll discuss why. We'll end talking about the new NIL universe. NIL stands for name, image, and likeness. And yes, the cat is out of the bag. And we also will talk about the potential of student athletes being employees under the labor law. The one area we will not discuss is Title IX, because that is a separate area and a separate subject with its own complexities and its own history. So while Title IX issues can affect some of what we are dealing with at this point, we're not going to delve into them. Moving on to the next slide and starting really with our lecture. The basics of the NCAA. And you may say, "Why do we get to this?" Because there may be some of you out there that really may not be that familiar with the NCAA and exactly what the NCAA does. Well, the National Collegiate Athletic Association is a member-led organization that regulates college athletes and athletics. Note the term, member-led. This is an organization of colleges and universities. They make their own rules. It's not a government. It's not a state agency. It's not a regulatory body. It's an internal body and it covers both private and public colleges and universities throughout the country. It is not a state actor for Constitution law purposes. The Supreme Court has made that ruling in NCAA versus Tarkanian back in 1988. So, the NCAA traditionally has had a fair amount of leeway in how it run its organization. And noting that all that was needed really was consensus of its member schools regarding its policies. Because there's so many different colleges and universities in this country, the NCAA is divided into three divisions. Division I, which is the most well-known, has some of the larger programs, but there're also smaller programs and smaller schools in Division II and III. In addition, there are 100 athletic conferences that are a part of the college sports space. And some of them are very well-known, like the SEC, Southeast Conference, but others may not be as well-known, but just about every college athletic program is part of a conference, but we are not really going to discuss much on that today. Note, that the NCAA regulates, if you will, nearly half a million college athletes. A pretty good number with almost 20,000 teams. And there are 90 championships across 24 sports. We know, of course, the big basketball tournaments, but the NCAA also has annual tournaments in other sports as well, such as hockey and basketball. One area it doesn't control is football anymore. Football is really run by a consortium of the major conferences. And the college football space or at least the championship space is not part of the NCAA's jurisdiction for many years. But just about every other sport in its 24 sport grouping has its championships run by the NCAA. So next slide, the, as we said, Division I has the largest programs. Members must offer at least 14 sports as varsity sports, seven and seven or in some cases, eight for women six for men. There must be a number of team sports, as we said. And also participating numbers of male and female teams for fall, winter, and spring seasons to comply with Title IX standards. Division I is also known for the fact that its schools may offer athletic scholarships for its programs and many of them do. Divisions II and III, next slide, involves schools with smaller numbers of teams and generally more limited financial aid in Division II and no scholarships in Division III. And I know I'm summarizing this very quickly, but we have a lot to cover and this is not going to be a pure NCAA governance lecture. So, moving to the next slide. The regulatory authority of the NCAA. And because it is an internal body or a body that issues internal rules and regulations, most courts are going to give deference to the internal regulations of these bodies, whether they are religious organizations, clubs, various civic organizations that are not state actors. However, the NCAA has one very, very big albatross around its neck and that is, it is a cartel. It dominates the market for collegiate athletics. And because of that, there are antitrust concerns and the way it has been run. And adding to that in more recent years, the NCAA will can say or we can say that the NCAA has a labor force. Meaning the students who participate in the sports, especially in the big money sports. And we're just seeing the kind of money that cable and broadcast properties are paying for the rights to broadcast these events. So with that in mind, these students are not just competing for the glory of athletics for their college or university, but also to a very strong degree, to get the university's reputation out there, to get ratings, to get interest and get money from various television contracts. So, many have been arguing that the NCAA student athletes are really not pure amateur athletes as the NCAA thought they are, but a labor force as such. And that's especially acute, as I said, in the major sports of football and men's and to a greater extent women's basketball too. But traditionally, the NCAA's rules, its bylaws, had very, very severe restrictions on what student athletes could do and could not do with their expertise. And the biggest restriction was they had to accept limitations on compensation and monetization based on their athletic skill. They could get scholarships. They could get certain fees that represent cost of attendance, but they could not actually give lessons in the past. They could not get paid for what they do. They could not have do advertising for noting their expertise. And that was a significant and is or a significant restriction in a general sense. And something that has been more and more controversial and certainly the subject of some of the decisions that we'll discuss today. Unlike professional sports, in professional sports we'll see also have a cartel. But with professional sports, the labor space is generally out of the antitrust sphere because of labor agreements. The major sports have athlete unions. They negotiate collective bargaining agreements. And as part of the labor law, antitrust law is subjugated. So, it's not as much of an issue as it is in the college sports arena, where of course there is no union. There is no labor agreement. And therefore, the restrictions on the student athletes and their compensation, because it is really nationwide in the large market of the dominant market, presents significant antitrust concerns. Think about it in this way. Go in to the next slide. On their face, the NCAA rules are anti-competitive. And let's go to an example of what I mean by that. In my prior life, I had studied music and that's actually true. And if I was a music student at a conservatory or a college and I wanted to make extra money, playing the piano, or the violin, or doing a pickup job and making some extra bucks, the school would not stop me from doing that. I could do that. My teacher could be angry. My teacher can tell me, "I'm not gonna teach you if he keep doing this. And as my condition, you have to stop." That's fine. That's not an antitrust issue because theoretically, I could find another teacher. I could even go to a different school. No problem. With the NCAA, however, as pretty much a system wide restriction that existed on student athletes making money on the side in their trade presents significant antitrust problems. So on its face or on their face, these rules are anti-competitive. The questions going to be, are they illegally anti-competitive? That's the thing because students are prohibited from profiting. They sign a contract or did sign a contract saying they could not do that when they first came to the college or committed to the college. And that was a standard agreement. So, there was restrictions in what they could earn. There were restrictions in educational expenses and they could not monetize their name, image, and likeness. And it didn't matter if they went to university X or college Y, or school Z, they had those restrictions. They had no choice. And when you lack that choice on that kind of scale, you get to see what the problem can be. So, the question is, next slide, it's anti-competitive but is it illegal? And here is where we have the complexities of antitrust law. Certainly, there's a lack of choice and the market is dominated by the NCAA. They really do control the college sports space, but do they have some justification? And their justifications were the following. If we don't have these uniform rules, big schools are going to dominate. And some have argued, looking what's happened in the last year or so, that we may be getting in that direction. Furthering the notion that student athletes are students first and obtaining an education is paramount. And that's something that university athletic directors do believe in. We believe in that. I am a professor at a university. I teach student athletes. And yes, we're there for an education. So, that is an argument to be made. We're not a trade school teaching them to be athletes. And therefore, it's a major component in that system that they're amateurs. In addition, the NCAA has argued that the audiences make a difference in looking at amateur sports as opposed to the professional sports. That this is something that clearly differs in the type of audience in terms of the type of product. So, we wanna keep that because we, the NCAA, don't wanna be confused for the NBA. And so, those are some of the arguments the NCAA has made for years. And the question is, are they illegal? Moving to the next slide. The ghost of Board of Regents. And I say that because this is an old Supreme Court ruling that hovers or as hovered over the mantra of the NCAA for many years, at least the NCAA thought so. Board of Regents had nothing to do with athletes' rights. Board of Regents had to do with restrictions on broadcast of college football games back in the early 1980s, when the NCAA did control college football and wanted to limit broadcast. And of course, the Board of Regents, and this was University of Oklahoma, a powerhouse school at the time, wanted to broadcast more events, more games. And in its decision, even though the Court did rule that this arrangement violated antitrust law, notably Section 1 of the Sherman Act, but it made the following statement. And it talked about the crucial role of a revered tradition of amateurism in college sports. And this became an important goal, at least the Court thought so, in its statement right here. And the NCAA is to preserve that tradition that may otherwise die. And this language has been bandied about for a long time. And there was a serious question of whether this is really a legal statement or is it dicta, or is it just flowery language. But the NCAA relied on this language very strongly in its arguments in the Alston case. For the NCAA, it didn't go too well. So the next slide. Ultimately, we get to the major issue that has affected or haunted college sports, and that is the restrictions on student compensation. And to do those restrictions violate Section 1 of the Sherman Act, which is a antitrust law passed in the area of the great trust, in the era of the great trust that dominated the US economy. It was not intended to govern sports, but because this arrangement could have anti-competitive implications, indeed it can. And it has in many a case involving pro sports, as well as college sports. So the language is very much that says, "Every combination in restraint of trade by two or more will be illegal." Kind of a simple statement, but subject to a lot of interpretation. So, the question is how do we interpret it? And for the most part, the Courts have interpreted Section 1, in the next slide, subject to an unreasonable and standard. It's not that clearcut and because of that, the courts have developed several tests to determine illegality under Section 1, and they're listed in the next slide. The per se test, the rule of reason test, and the quick look test. Now, I realize this is not an antitrust law class and law school. So I'll try to be quick and simply say that the rule of reason test is the predominant standard in sports. The per se test is limited to flagrant price fixing. The kind of situation where the big five auto manufacturers decided to divide up their territories throughout the United States and say you can only buy Hondas in the Northeast and only buy General Motors cars in the South. That's a rare thing. And in sports, it just does not apply. The rule of reason test is a balancing test. It says once the acts are deemed anti-competitive, the defendant can make arguments to balance that with pro-competitive justifications. And that's what the courts do and have done in the cases that we will discuss. There's also something called a quick look test, which is a kind of modified version. Where it's a more superficial look not with the level of analysis that the rule of reason test has, and I'm going through it quickly because of time and it's just not that important in sports. So, but it's there as well. So, we have one of these three tests. So to our next slide, the rule of reason is the standard in sports. And basically what it does it looks at several things. One, the definition of what is a relevant market and a geographic market. For our purposes for the NCAA, the relevant market is college sports. And the two, the market power of the defendants in the relevant market, tremendous. I don't think anybody's gonna doubt the NCAA has a huge role and dominates college sports. There are a couple of other organizations by the way, that deal with non-NCAA schools. One, I think, for Christian colleges and one called the NIA, but they're really small and they're no way near with the kind of market effect the NCAA has. So certainly in terms of dominance, the NCAA dominance this relevant market for college sports and I think that's a given. The question then we get to the existence of the anti-competitive effects. And then, we get to the next slide which goes into those steps. So first, a plaintiff challenging the NCAA rule must prove the restraint has a substantial anti-competitive effect. Then if the plaintiff succeeds, the burden shifts to the defendant to show that this is really good. This has good economic effects. This makes the organization run well. It makes the product better. And that's what the defendant will have to show. And then, if the defendant shows that, the ball goes back to the plaintiff to show, yeah, you may be right, but these benefits could be achieved with less restrictive means. So I cite a note that was came out from the Harvard Law Review after the ruling on Alston, which is actually a very, very good note, if you do wanna read it. So this sort of gives you the roadmap of what we're dealing with. So let's talk about the modern era of cases here. O'Bannon sounds like almost a granddaddy case. I'll go through it very quickly. It was a precursor case in a way to Alston. O'Bannon challenged the NCAA's name, image, and likeness rules by a former player whose image was on one of these video games. And ultimately, after a long period of lower court determination and then the Ninth Circuit, it was said that nevertheless, there was some amateur rules under the NCAA that could violate federal antitrust law. It was the first time a court actually said that, but the remedy that the Court sought was fairly limited and it didn't really deal with name, image, and likeness compensation. It said just with additional compensation to make up for the full cost of attendance. So in a sense, it was a disappointment because it didn't really get to the major issue about NIL. But it did say the NCAA is subject to antitrust litigation. Coming at the heels of that comes Alston. And Alston was a broader attack on the NCAA's compensation rules. This was a class action, as many of these cases are. And basically, it limited the, it challenged a whole schema of the restrictions of the cost of attendance standard and argued was a horizontal price fixing system violated Section 1 of the Sherman Act. So the plaintiff's argument was saying, in next slide, the NCAA system of capping the value of these scholarships prevents the colleges and conferences from competing for talent. But they compete in other respects. They're paying top dollar for coaches. They build state of the art facilities. The athlete gets nothing. The athlete gets the crumbs of it, where many people are making a lot of money. And they're saying the athletes labors subsidize the earnings for the other stakeholders. And you think about it. You know, it is an attractive argument on that end. Because think about it, the colleges quote unquote, make money. The coaches make money. The broadcasters make money. The people who actually broadcast the games make money. Sponsors make money. But the student athletes didn't make money for their services where in some cases, millions of people be watching them. So clearly, there was a very attractive aspect of this argument. Moving on. The defendants of course were saying like, "Look, we are a college system, a university system. We do compensate students in terms in the Division I level in terms of grant and aid, i.e. scholarships. The athletes are not intended to be pros. It's part of their educational system. They get a great experience. They learn to compete. They take courses and they work and they learn life skills. And if we decide to actually open the door and make them de facto employees, that could harm everybody, including the student athletes from job security, taxation, changing the spirit of college sports, and the rich sport schools are gonna get richer." And these are arguments too that the organization did profer in its arguments as a defense to the claim. So, the interesting strategy is, moving to the next slide, is that Alston's and the class sought injunctive relief, not money damages. Kind of interesting strategy because they wanted the change. They didn't want to have juries compute, calculate damages, which is really difficult to do. It gotta be three times the amount of actual loss. So they said, "Let's get the injunction." A very interesting strategy. And moving on to the court rulings. Okay, the lower court ruling rule that certain rules were preemptively illegal, but some were not. That's the thing. So they said, "The problematic rules had to deal more with the educational related compensation." But the Court did uphold the rules on banning other compensation, such as NIL. It was not a complete victory by any means for the class. The NCAA won quite a bit, even though the Court noted that it had near dominance and exercise of what's called monopsony power, which is control over the labor force in the relevant market. But did say, "No, there's an argument here." Applying the rule of reason in our next slide that some of these outside limitations, outside benefit limitations were justified based on the NCAA's arguments. So, the NCAA did not lose. And I would say, did not lose that much in this ruling, but they appealed. And so did the class, of course, as well. It goes to the Ninth Circuit. And the Ninth Circuit essentially affirmed the district court. It said they struck the right balance. And it said, "You know what? There's some rules like regarding educational compensation that were way too restrictive or too restrictive. But the limitations on outside income, shall we say, are justifiable." Okay, that's how the Ninth Circuit phrase it. They affirmed the lower court ruling and made the conclusion that it was pro competitive, as noted in the next slide, to keep the distinction between college sports and professional sports. And did say that, "Ultimately, the student athletes could receive some more money in academic and graduation awards as a less restrictive alternative." But did not get to this idea of that students are workers or the students can make lots of money on the side with their craft. No, the Court didn't rule that way. And then, I inexplicably in some ways the NCAA and the NCAA alone appeals to the Supreme Court. Not the original plaintiffs. And when you do that, you are throwing the dice and the NCAA through the dice. And I think we all know that the dice did not come up all that great for the NCAA and the organization came to regret this decision. So as we move to the next slide, the arguments for the NCAA were very much like what we said, except I want to add one point. And the point was that they relied on the Board of Regents quotation that we discussed a few minutes ago. Talking about how the Supreme Court felt, it should be deferential to amateurism based on that language and amateurism with great component. And don't destroy the system because in 1984, this very court said that it's so important for college athletics. That was a big argument, as well as the others. Well, the decision comes down. It comes down in late June, 2021. In our next slide as you see, 9-0. 9-0 and it was a complete blowout for the NCAA. A victory for the plaintiffs, pen by Justice Gorsuch. And it only focused on the educational related benefits because remember this, the class didn't appeal this. So, it focused on what restrictions were, could have been easily ameliorated by the NCAA in its schools. But it said, "The NCAA exercises monopoly control." Moving to the next slide. It justified the full rule of reason standard. Again, saying that these were anti-competitive rules. The pro-competitive justifications were not adequate because they were too restrictive and it rejected the quick look standard. That third standard at the NCAA said, "Give us a cursory presumption that we are correct." And the Court said no. No, it's a full rule of reason standard. And once the Court said that, the NCAA lost. So moving to the next slide, it's clear the NCAA acted as a monopsony, controlling its labor market if you will. And even accepting those restrictions may have had so some competitive effects. The opinion noted they were less restrictive alternatives to achieve those benefits. Why limit a graduate school scholarship? Why limit it maybe benefits for computers and extra things like that? It didn't make a lot of sense. And also these next slides I will go to quickly because they cite other opinions. Just reiterating the rule of reason standard that's the American Express case. If wanna read it, you can at your leisure. And the same thing here, this slide just repeats what we've said earlier. So, it's just kind of a reinforcement. So we don't really have to get into more of that right now. So ultimately, let's sum up on the slide that says application of facts of the case. So the district court held the student athletes met their burden of showing that there's anti-competitive effect. And the district court found that some of those rules had pro-competitive effects to the extent that they prohibit compensation that's out of the realm of educational benefits. But it was only after finding the restraints were strictly the necessary did the Court consider the educational benefits restrictions too broad. Again, not so broad a decision and it would've kept a lot of those rules. And I'll just skip the quick look standard for a second. And here, again, looking at the pro competitive effects, they said it was an issue of amateurism, and they understood that. The Justice did say that. But nevertheless, it didn't justify these rules. So, I do wanna get to the slide that says the Board of Regent's language, because that is what's somewhat a key point. At least one of the key points. And the NCAA used that as a way to sort of gloss over the rule of reason issue and said, "You know what? You admitted that there's a strong amateurism basis. Why do we have to even go into anything else? It's a basically a quick deferential read." And the Court did not see it that way. On the next slide, the language is merely dicta. The opinion strongly rejected that view. And it was very apparent in the oral argument, the Court would reject that view because many justices asked about that in the oral argument. So here's our quote, "Given the sensitivity of antitrust analysis to market realities and how much has changed in this markets since 1984, we think it'll be particularly unwise to treat as an aside the Board of Regents as more than that." An aside and that was really the end of the house of cards. The house of cards fell for the NCAA right there. It was the coup de grace for their argument. And it means that it was well, not a broad decision, but certainly a legal washout for the NCAA. And of course the indeed the market has changed as you can see by this slide. Just think about this. From 1982 to 1984, CBS paid a whopping $16 million a year to televise the March Madness Division I Men's Basketball Tournament. So let's say in today's dollars, let's even say it's a hundred million in today's dollars. That does not compare to 1.1 billion in 2016. That says it all. And the Court even said the NCAA has liberalized a few rules during those ensuing years as well. And it is an economic juggernaut much more than it was. So, 1984 is ancient history. Even if that view had merit in 1984, it is almost irrelevant today. And indeed the NCAA, the next slide, is a commercial enterprise. The NCAA had the temerity to argue it was not, but indeed it is. And ultimately the Court said, "If the Congress wants to impose an antitrust exemption for the NCAA, it could do so. But it would not be the Court's business to do so." I don't think it's gonna be very likely that Congress is going to do so, given the fact that both sides of the aisle are not huge fans of the NCAA at this point. So the next point is, again, the district court injunction was limited. This sums it up. And the NCAA basically overplayed its cards as you can see by the result in this decision. What it may result in is that the individual conferences could be free to reimpose some of these restraints in and of themselves because there's so many other conferences out there. I'm not necessarily sure that would be a necessarily antitrust violation because the relevant market definition would be different. But we shall see. At this point, that has not happened. So, let's move on before we leave this Supreme Court ruling to Justice Kavanaugh's concurrence. And this opened a lot of eyes and probably opened up a lot of eyes in Indianapolis. It was a single concurrence. It doesn't have the weight of presidential law, but oh, is it a warning. It was broader and more critical of the NCAA. And if he had his way, he could throw out even the restrictions on NIL, but that was not part of the appeal. The key languages and it's been quoted in the media an awful lot, "The NCAA's business model would be flatly illegal in almost any other industry in America." That language was ringing forth. "There's serious questions as to whether the remaining compensation rules can pass muster under the ordinary rule of reason scrutiny." There you go. So, what was the effect of this? And there's more quotes as you can see right here regarding the concurring opinion, "Price fixing labor is price fixing labor. And price fixing labor is ordinarily a textbook antitrust problem because it extinguishes the free market for individuals to work. The bottom line is the NCAA and its member colleges are suppressing the pay of student athletes, who collectively generate billions of dollars in revenue for colleges every year." He could have taken this language probably from the brief, from the NCAA. And it goes on and on and on. Now at this point, I probably should have mentioned it earlier, but I'll mention it now is that I did take a position in the Supreme Court case. I was a signatory of an amicus brief for one of the sides in that case. And the brief indeed was cited in the opinion. I'm not going to say more about that, but I do want to disclose that fact. So, moving on. As you can see, there could be serious restrictions about many other of these regulations in light of Justice Kavanaugh's concurring opinion. And that certainly had an effect on some of the policy or subsequent policies that have occurred by the NCAA since this ruling. So it does say that even for the other rules, if they were appealed, that is the outside compensation rules, the Supreme Court could use a rule of reason standard. And it would be a good bet that those rules could be thrown out as over broad as well. And that so if I were the NCAA, the language is very concerning. And I think given the weight of the ruling and excuse me, and given the unanimity of the Court, this will be a serious, serious issue. So, what were the implications? The NCAA probably met right after the ruling. And a few days hence, they negated their NIL restrictions. They did a temporary negation of the bans in place for name, image, and likeness. And it's very clear they did that to avoid potential antitrust litigation. Because I think, and it was a good bet, they would've been a lawsuit the next week if they continued. And as of July 1, 2001, an open market exists for NIL for student athletes as far as the NCAA a is concerned. And that's a key point. As far as the NCAA is concerned, as far as state law is concerned, that could be, that is a different situation. But for the NCAA at as of now, they're out of the NIL business or were until somewhat recently. And right now, what we have found in the last, since that time is been a wild west in this area. It has gone from night to day or day to night, depending on your view. And it's gone to a kind of a laissez faire system in many, many states where for the first time you are seeing college athletes in some cases commanding lots of money for NIL deals. And they're not just the football players, the basketball players, this has been a way for women's athletics to grow. And a number of female athletes in say volleyball and sports like that have had their own NIL deals. And some have been lucrative, but most have been modest. And some athletes in other sports, male and female, have made more modest deals. More limited deals that could be more specific to a local type business or to the social media influence space, which has become quite big. And so, you may see in that sense what the ideal was meant for. That student athletes would make a little bit of money on the side, but they're not gonna get huge amounts of money. And also, I think one effect we'd have to see is whether these liberalized rules will keep students in school. And sort of limited this one and done mentality that you found in some cases in college basketball, because it may be now worth it to stay in school, make some money, maybe under maybe a little plus pressure than being say 19 or 20 and going to the NBA draft. So, it does create more opportunities. It creates opportunities also in the gymnastics space, an area where women have thrived more than men. And we're seeing some deals as well there. So, it does present a new universe, a new set of opportunities, which I think can help, but also has created a slew of issues too. And so, we are going to actually move in, leaving the court side, so to speak, the Supreme Court side we're talking about and moving on to some of the ramifications. So, let's move on to the next slide and look about the difficult, at the difficult questions that we face. And Kavanaugh noted that in his opinion. So, what about the greater compensation for student athletes affecting non-revenue raising sports? This could be the day where student athletes could negotiate possibly quasi employment or independent contractor deal with the school and get paid for their services. And that would raise a lot of issues. And raise a lot of issues regarding labor law, regarding tax law. And it's an issue that we may find in the next few years. Could student athletes compete in some sports and not others receive compensation? I think the answer we may see, yes. How would compensation comply with Title IX? That is a subject in itself and create very interesting issues. Because let us say that more money may go to men's teams and men's players than women's teams. Could that be a Title IX problem? Possibly, it could but a subject for another day. And what about labor law? What about unionization? What about unionization and salary caps for sports? So, I'm combining two of the bullet points that you see in the slide. It is a distinct possibility that sometime in the future that some student, some students could be considered employees in certain schools for certain teams. And if you're an employee, it's a very different thing than you are, if you are a student. So, what is gonna be the ramifications of that? And what about all the Division I student athletes, 180,000 of them, can they still get scholarships and get paid? Or are scholarship's going to be eliminated and say, well, you're now an employee. You get paid. We don't know this. I suspect in the majority of Division I schools, you're not gonna see that much of it, like the so-called mid-majors. But I think in the big schools, the powerhouse schools, it's very, very possible. And indeed, this is something that Justice Kavanaugh looked at and basically said, "Well, you know what? We open the door. And the NCAA and the schools, you'll have to deal with it." So, what's also happened, moving to the next slide, a new NCAA Constitution takes place on August 1st, 2022 after some months in a fairly quick process for the NCAA. There's gonna be some streamlining of the organization and numbers of members. And you can take a look at that at your leisure. And in terms of some decision making, it's going to leave more autonomy to conferences from what I understand. But the most important bullet point that we'll look at is the middle one, prohibiting pay for play. Literally pay for play like we'll pay you to recruit you to this school, but embracing additional educational and other benefits, including those of name, image, and likeness. Because in so many words, the NCAA had to do that. They had no choice, but to do that. We'll see how that works. As I said, this is going to take place on August 1st, this new Constitution. And I think it will be a change from the strong dominance of the NCAA in the past. And in addition, since I draft these slides, they're gonna have a new president because president Emmert decided to resign his position despite some extra time in his term. So, there is going to be new leadership at the NCAA. So, we will move on and move on to the last major area of our discussion. Some more details on name, image, and likeness laws and how they can affect college athletes. So, let's move on and go to a bit of a primer on the right of publicity. And some of you may be familiar with this if you went through a intellectual property law class in law school or practice in the area, for sure. Or even in a tort class, you may have gone through this a little bit as well. The right of publicity is the backbone of name, image, and likeness. And the right of publicity has started out as a tort about a hundred years ago as one of the four privacy torts or branches of privacy in the area of torts, as Dean Prosser mentioned in his great treatise. But it gradually evolved into an intellectual property right. And most states recognize it as a distinct intellectual property right and a broader right than in the tort sphere. It is not a copyright because it does not involve works in a fixed, tangible medium. It is not a trademark per se. It's not a logo. Although one's face can be a logo under trademark as well for commerce and commercial purposes under the Lanham Act. But we're gonna just focus on the pure use of one's name, image, and likeness. And unlike the rest of intellectual property law, right to publicity is a creature of state law. So, we have potentially 40 some odd different state laws in right of privacy. Many states have a statutory base, like California and New York. But others are common law based, go from common law court decisions, such as Georgia and also California I would add. Because California has a common law component to the right of publicity that's a little bit broader than the statutory component. Getting all this, you get the idea. This is a confusing area. So, I'll just give you the simple definition of right of publicity from Section 46 of the Restatement of Unfair Competition, "Appropriating the commercial value of a person's identity by using, without consent, one's name, likeness, or other indicia of identity for purposes of trade." So essentially, it is a commercial basis to use one's name, image, and likeness. So if one wants to use my name or image in a news story, I don't have an economic right to that. But if one wants to use my name or image in a billboard advertising for a certain good, or a soft drink, or whatever it may be, you bet I have a right to that. And if they use my name, image, and likeness, without my permission, I can sue for damages for that based on an appropriate state law. And many state laws, by the way, have rights, disability rights, meaning after the person dies, or postmortem rights that the state can sue for decades after that. Some states up to a hundred years. So moving to the next slide and talk about this involving college athletes in post-Alston. As we said, the board of directors adopted the so-called temporary waiver of its rules at the end of June. And at this point, states have enacted, in addition to their general right of publicity rules, NIL rules for college and in some cases, high school athletes. And there are a grad bag of rules. And this is the problem when you're dealing with state by state law. The law in Alabama can differ than the law in Florida, that can differ than the law in New York. And some states don't have any laws, which means it's completely deregulated since the NCAA is not acting on it. So for example, a few high states allow high school students to have NIL deals and a few have. Many don't. Their statutes would not require it. Some require agents to register with the state under uniform agent laws. If you're gonna represent a student in a NIL deal, you have to register. Many states require that, but others don't. Some states prohibit outright employment with NIL sponsor, but allow an independent contractor basis. But others allow that. So, take your pick. And you talk about recruiting issues between schools and these states, you can just see what a mishmash this can be. So the next slide. Just go to Florida, for example, because Florida is a big state in many ways. And certainly with college athletics, it certainly is with major schools. And the Florida NIL law says that athletes can have agents, but they have to be licensed by the Florida Bar. All deals should be reported to the institution. Athletes under 18 must have deals approved by parent or guardian. Makes sense. And here's an interesting thing, "Compensation must be commensurate with the athlete's fair market value and not be contingent on attendance or performance." You get what they're saying, but I really don't know how that's gonna be interpreted by a court. And, "No school can pay athletes or cause compensation for athletes." In other words, basically the schools can say, "Come to our school. We'll pay you this for an NIL deal." So that's Florida statutes, you see the citation. California, the first state to do this. Now, it's in the California Educational Code. Also allows student athletes to earn income from these sponsorship and endorsement deals and could even operate as a business or work as a coach for compensation. Set up an LLC, for example. But also they can, they prohibit the high schools from getting involved or high school students from getting involved in this. And the final point is prohibits a deal that conflicts with the school's endorsement deal. School has endorsement deal with Nike, Nike shoes. The student athlete cannot have a deal with Adidas, under California law. Some states do not have this connection. So, you see a lot of issues found in the next slide. Will these laws help in recruiting athletes? The official standard should be no, they won't. Will student athletes transfer to schools and states with more lenient laws? Well, you're seeing more lenient transfers already because the NCAA ended its redshirt one year ban on transfer. So, you can transfer and you are seeing liberalizing transfer rules. I believe two of the biggest endorsees, they were two sisters who played at Fresno, California, transfer to a school in another state. I think you also seen some successful student athletes in smaller programs transferred to bigger schools, generally. So, that opens a door to under table, under the table deals to entice recruits. That is a real concern. And that is one of the concerns that advocates for the old system did say. Look, you're gonna have a free for all like this. You're gonna have the rich get richer and you're gonna have quasi professional operations in these schools where the mid-majors are gonna shrink, kind of like the middle class, and then it's gonna be harder to control. So in addition, there could be Constitutional issues. That's in federal constitutional issues to the hodgepodge of laws, NIL laws in the given states and the effect that interstate commerce. And there would some talk that the NCAA would challenge California's law under the Dormant Commerce Clause. That is the clause that sort of impede, prohibit states from impeding interstate commerce by certain laws that it makes. It's kind of a generalized concept. And some of you remember it from constitutional law, but that has not come to pass at this moment. So right now, we have not heard that at this particular point, but it's a potential issue there too, from the constitutional side. So now, to what's been happening. The collectives, and we're not talking about soviet history here. Although ironically, it's acting almost like a collective operation there. So we are talking about this term collectives that have sort of risen out out of the dust of Alston and what is happened here. And the general definition, although models can vary, is that some alum or group of alums from a school band together to form a company whose goal is to provide NIL opportunities to student athletes. Now, it's not the institution doing it. It's kind of the boosters or boosters plus doing it, but it raises all kinds of issues of what's gonna happen. And no one really knows what to do in this situation because it's resulted in the next slide, in this jointed system. And this is something that I just saw the other day and just wanted to quote. So 37 of the 65 schools in the five richest conference have at least one collective. 10 more have similar deal facilitating entities. I don't know what you call that. If it's not a collective, what is it? A soviet? I don't know. And 12 schools have more than one collective. Along with five universities have three a piece. So it, as I said, it's a wild west. And now, the NCAA feeling it's been hamstrung by the Supreme Court ruling saying, what do we do? So here's a couple of examples of what we have. And I just took some of these from that, from an article cited below. Gonzaga has something called Friends Of Spike, okay? And a few people form that to create opportunities for in-person engagements with the community, with the athlete, from meet and greet, watch parties, charity work, and do other things with youth programs, et cetera. And it opportunities in the future for exclusive student athlete content, merchandise, and giveaways. Take from that what you will. Another example, Florida State. Florida State, a big school. Something called Rising Spear founded by the former chairman and the treasurer of Seminole Boosters among others. Two options. Gold standard for profit opportunities and Garnet spirit, a not for profit platform, create opportunities to engage student athletes for appearance fees, clinics, et cetera, et cetera. And it's very nice that they want to have them go to the hospitals and the like, but you do wonder like, are they going to be paid for that and how much in this kind of environment? So, we'll see how that goes . So as a response to that, the NCAA came up with rules in May of 22 regarding the idea of these boosters being involved. And the rule that we see so far, it's generally pretty vague. It's case by case basis to see if this is a pay for play issue, as opposed to just trying to find opportunities but we don't know how this is gonna go. It elaborates on some of the earlier rules on recruiting inducements. And the key point is that no compensation is allowed for paying, playing and the staff cannot help student get deals. So the staff may not help the students get deals, but the collective can. And the collectives or boosters could end up being very powerful. The students have to disclose into the school and the income excluded from financial aid determination. Now, don't be surprised if there could be an antitrust lawsuit on this as well. So just stay tuned. I mean, it's just super early. We don't know what's gonna happen, but what we know it's kind of crazy. So we don't know how it's gonna be implicated as the next slide points out. What is representation? And we don't know. Absent state laws and previous clarity, several schools have begun designated certain staff members to help athletes get deals and have procured some of them already. Will the NCAA investigate this? Will they take action against this? Well, they afraid. Now, actually risk adverse because of what happened in Alston. I don't know that. Don't know the answer to the question. I wish I did, because if I did, I would probably consulting and doing quite well in addition to my university pay, my teaching pay. Okay. Then, the final question in our presentation. Are student athletes employees? And this is the next wave of litigation because it is here. It's not in the future. And we have two rulings that are very interesting in one to watch and those to watch. Johnson versus NCAA. Court denied a motion to dismiss the claim that college students are employees under the Fair Labor Standards Act and could be owed minimum wage. The trial court said, "You know what? There could be a cause of action here under various tests that the court utilized under labor law." It's a long decision. You can look at it at your leisure. It's presently on appeal to the Third Circuit. And it'd be very interesting what this Circuit is gonna rule because the Ninth Circuit issued a somewhat contradictory ruling in Dawson in 2019 to dismiss the FSLA and state claims. We may have a conflict in the circuits. We may have a case going to the Supreme Court. And ultimately, we may just have a system one day that does treat what used to be called student athletes as employees. Because it may be the easier way to deal with all this in a collective bargaining setting. Because the one advantage of labor law is that you don't have to worry about antitrust. If there's a labor agreement negotiated by a union representing these students and the college that talks about all the conditions and may limit compensation for this that or the other thing, or may limit outside work, or may be quote competitive, it is perfectly legal because the labor laws have an antitrust exemption. So, a lot of the doubters in the past saying, "No, don't get unions in sports. Don't get them in colleges. This just wrecks the notion of the of student athletes," and whatever. There may not be a choice because it is at least going to be the safest way legally to indeed deal with this kind of issue. So, that is something to watch both cases. I mean, Dawson, I think is not been appealed to the Supreme Court to my knowledge. But there'll be other cases that are gonna be filed. So, it's something to look to for the future. And then our final slide or at least I believe our final slide or close to it, the Federal Trade Commission may be getting involved here. Restrictions on influencers. The FTC regulates advertising. And for a number of years, it had regulations on those who endorse products. And it is actually just issued new, at least I so request for review of some sort, for new regulations that deal with influencers that will profit on their Instagram post, tweets, et cetera. And that may affect college athletes. So if you're going be representing college athletes in the influencer space, take note because the FTC can go down hard on these people if they find that there's no disclosure or things are not accurate. And then, we get to the tax implications. At least last but not least, if a student is gonna be an employee of the school, well, Uncle Sam is gonna be interested. And the states that have state income tax will be interested as well. So, get your tax consultants involved as well. And then if they're international students involved, we have an issue whether their visa restrictions could apply and they could be paid or not. Usually, they're not. If they come into student visa, they cannot earn compensation with very limited exceptions. But what if this international student is a star in country X and gets an influencer deal for $50,000? Well, does that person have to A, pay tax? Probably. But B, is it violating that particular student's visa? So on that note, we come come to a close. I thank you for your time. If you have more questions or you want more information, you have my email. Please follow me on Twitter. I'd like to get as many followers as I can. And I thank you again for listening in and until next time. Have a good day.

Presenter(s)

MCJ
Mark Conrad, JD
Associate Professor of Law and Ethics
Fordham University’s Gabelli School of Business

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