Name, Image and Likeness: a Guide on College Athlete Compensation

·11 min read

The era of Name, Image and Likeness will soon begin in college sports.

As early as July 2021, college athletes will be able to license their NIL for use in commercial products—such as sneakers, apparel, sporting equipment, trading cards and potentially video games—as well as for influencing followers on social media and sponsoring summer camps and autograph shows. Those athletes will also be able to hire agents. The path to this new world is still under construction. Congress, state legislatures and the NCAA could all have a major say. But it is only a matter of “when”—not “if”—this era will become a reality.

This new world will represent a stark departure from decades of NCAA practices. Through claims of upholding the principles of “amateurism” and “the student-athlete”, the NCAA has long prohibited college players from compensation for their labor and NIL. The NCAA has insisted that by denying opportunities for student-athletes to gain compensation, the not-for-profit credibly distinguishes college athletes from pro athletes.

As we await the change, Sportico answers 15 key questions.

1. What is the current NIL situation for college athletes?

Current NCAA rules expressly prohibit college athletes from profiting off their name, image and likeness or accepting payment from a third party for use of the same in any capacity under the long-upheld principle of “amateurism.” Despite lawsuits dating back decades, “payments” are limited to scholarships and schools covering cost of attendance for an athlete. Pressure from outside the organization, however, began a movement now in progress in which the NCAA is working to “modernize” its rules around athlete compensation. Athletes still cannot benefit as of yet, but that’s expected to change by the 2021-22 academic year.

2. Ed O’Bannon won his case, so why can’t college athletes already profit from NIL?

Short answer: The remedy didn’t lead to that outcome. Long answer: The former UCLA basketball player’s class action lawsuit proved that the NCAA and its members unlawfully conspired under federal antitrust law to misappropriate players’ NIL in licensing contracts for video games, player jerseys, classic broadcasts and other products. To remedy this harm, Judge Claudia Wilken ordered the NCAA to allow schools to pay men’s basketball and football players up to $5,000 per year in deferred compensation. The U.S. Court of Appeals for the Ninth Circuit agreed on the law but revised the remedy. It instructed the NCAA to permit schools to provide the full cost of attendance, which incorporates cost of living and usually ranges between $3,000 and $6,000. The NCAA had already taken that step in the aftermath of O’Bannon filing his lawsuit.

3. What has the NCAA argued in court to justify denying NIL opportunities to players?

The NCAA has championed four key arguments.

First, amateurism drives consumer demand for college sports. Under this logic, paying college athletes for NIL would repel fans. This argument has failed in recent litigation. Survey data doesn’t establish that consumers would become less interested in college sports if players are paid, particularly for their NIL. Judges have also observed that fans love college sports mainly because of college spirit and affinity for alma mater or region.

Second, the prohibition on athlete compensation promotes competitive balance in college sports. This line of reasoning has flopped as well. Generally, the same top programs remain top programs, year after year. Also, schools spend vastly different—and uncapped—amounts on coaches’ salaries, stadiums and training facilities. As argued in court, if the NCAA genuinely believed that restricting pay would promote competitive balance, schools would be restricted in other types of spending.

Third, preventing athlete pay helps to integrate academic and athletic goals and thus promotes education. Judges have acknowledged education is a worthy goal but have stressed that other, non-compensation NCAA rules already advance it. For instance, the NCAA limits the number of weekly hours athletes can spend on athletics and mandates these athletes attend class.

Fourth, schools join DI because of restraints on athlete compensation and might leave DI—and take away opportunities for athletes—if those restraints were lifted. This argument has also been largely debunked. As courts have noted, DI schools have advocated that they gain greater, not less, ability to compensate athletes. Also, DII and DIII use the same basic restraints, so schools wouldn’t have joined DI on account of restraints that other divisions also use.

4. What is the NCAA’s latest position on NIL?

The NCAA approved legislation for college athletes to receive compensation for NIL-related ventures in April and on Oct. 14 its Division I council moved for official introduction of the proposed changes into the 2020-21 legislative cycle. The proposal would allow conditional athlete compensation within set “guardrails” that include restrictions around use of school marks and conflicts of interest. A formal vote comes next in January, but the NCAA is poised to modernize NIL opportunities to some extent.

5. There have been several NIL-related bills in Congress. Will any of them become law?

While the NCAA works to change its own NIL rules, it has also requested Congressional legislation to override the more than two dozen state athlete compensation laws recently passed. The individual laws create patchwork policy across the country, with opportunity varying from state to state. In September, Rep. Anthony Gonzalez (R-Ohio) and Rep. Emanuel Cleaver (D-Mo.) introduced flexible federal legislation that would allow athletes to engage in and benefit from endorsement and business opportunities. The proposed bill affords an element of adjustment in its regulations, allowing the bill to adapt as the nascent marketplace unfolds, but provides less limiting restrictions than the NCAA has requested at the Congressional level. The congressmen are working to bring the bill to a vote sometime in early 2021.

6. Why might—or might not—Congress include an antitrust exemption as part of a new law?

The NCAA and its members worry that NIL rules containing restrictions would be vulnerable to antitrust litigation. Schools and conferences are competing businesses. Should they join hands to restrict how college athletes can utilize NIL, their restrictions could be challenged as price-fixing restraints under Section I of the Sherman Antitrust Act. For instance, a restriction that prevents athletes from endorsing sports-betting companies would be subject to challenge—especially since the NCAA permits schools to sign sponsorships with those same companies. An exemption from antitrust law would extinguish that concern.

Critics insist an antitrust exemption would be unnecessary and unwise. Antitrust law permits reasonable restrictions—if the NCAA and its members devise reasonable NIL restrictions, they ought not to worry. If the NCAA and its members can only design unreasonable NIL restrictions, then it’s not clear why they should be granted an exemption.

7. California, Colorado, Florida, Nebraska and New Jersey have adopted NIL statutes and additional states are expected to do so soon. Will that development lead to legal challenges when state NIL statutes conflict with the NCAA or federal law?

Potentially. To the extent state NIL statutes clash with pending NIL rules, the NCAA could insist those statutes unreasonably interfere with interstate commerce. States are generally forbidden from enacting statutes that unduly impact the economies of other states. The NCAA could argue that a state statute which imposes a different set of NIL rules for schools and athletes than those prescribed by national NCAA rules would lead to conflict and disruption within the college sports industry. In Miller v. NCAA, the NCAA successfully invoked an interstate commerce argument in defeating requirements adopted by the state of Nevada for athletic disciplinary hearings. Those requirements conflicted with NCAA rules.

As to conflict with a possible federal NIL statute, the language of a state statute would be key. The Student Athlete Level Playing Field Act, for example, would preempt states from enforcing their own NIL statutes. The NCAA would prefer preemption be part of any federal NIL law. The power of the federal government to preempt states, however, is a complicated legal topic—as evidenced in the multiyear effort to overturn a federal ban on state sports betting—and could attract litigation.

8. If college athletes can hire agents, who would certify and oversee those agents to ensure they treat athletes ethically and competently?

As explained more fully elsewhere on Sportico, this is an unsettled and thorny topic. Pro athletes can form unions, which in turn certify and regulate agents. That isn’t an option for college athletes. Under current interpretation of the law, college athletes aren’t employees and thus can’t unionize. The NCAA’s ability to certify and oversee agents is also questionable. It isn’t a labor organization, and thus lacks the legal authority of one. The NCAA also isn’t an arm of a state government, such as a board of registration for real estate brokers—the NCAA isn’t statutorily empowered to license agents. Federal NIL proposals have suggested the Federal Trade Commission or an independent commission take on the role, but both ideas are fraught with uncertainties.

9. How do compliance officers in athletic departments fit into NIL issues?

Compliance officers have expressed concerns about NIL, in part because the work will likely necessitate areas of expertise that have traditionally fallen outside compliance (such as contract advice, intellectual property and valuation). To the extent compliance officers are charged with reviewing potential endorsement deals for possible conflicts with a school’s sponsorship or mission statement, the university’s legal counsel will likely be brought in. The same is true should questions arise about whether a potential endorsement deal pays the athlete above market and is disguising pay-for-play. To the extent compliance officers provide assistance to athletes in review of NIL opportunities, they must refrain from doing so in ways that disproportionately benefit male athletes. If they assist male athletes more than female athletes, the school could run afoul of Title IX.

10. If college athletes can sign endorsement deals, doesn’t that make them employees?

No. The school wouldn’t be paying the athletes. The payer would be a third party, such as a sneaker company, car dealership or summer camp. The athlete would also not become an employee of those endorsed companies. Endorsement deals are normally structured so that the endorser is an independent contractor, not an employee.

11. Will college athletes be able to create a union or association to sign group licensing deals?

Unless and until college athletes establish under the law that they are employees of their schools, they can’t unionize under labor law. Only employees can unionize (and only certain employees can do so, depending on whether they are employed at private universities or at public universities and in the case of the latter, whether they work in a state that permits public university employee unions).

So far, the NCAA has been resistant to an alternative vehicle for college athletes to join hands: group licensing. Athletes could form a trade association along the lines discussed over the summer by Trevor Lawrence and other star players. Trade associations can function in some ways as a union but don’t require employee recognition. A trade association could license college players’ likenesses for inclusion in video games.

12. Won’t NIL mostly benefit football and men’s basketball players and mostly stars—isn’t this about helping the elite rather than the ordinary, and won’t male athletes benefit the most?

It will definitely benefit football and men’s basketball players more than others—they’re on TV more, their games are more popular and there are billion-dollar economies around both sports. But they won’t be the only ones. In particular, expect women’s basketball stars like recent Oregon phenom Sabrina Ionescu and Olympians like swimmer Katie Ledecky to see a flood of opportunities.

13. Will college athletes be able to sell directly to consumers, or will they need an agent to sign an endorsement deal with a business?

They can do it themselves, but bear in mind that agents and representatives exist for a reason. While athletes may do autographs or social media product placement on their own, many will seek professional assistance for more complex deals. The specifics around agents and their certification will be a hot topic in the coming months, given how carefully those relationships are already scrutinized under current rules.

14. Will college athletes be able to sign endorsement deals that conflict with those of their school?

This is up to the schools, so probably not. The proposed legislation gives universities the broad right to prohibit partnerships that conflict with their own commercial deals, provided athletes are told ahead of time. Different schools may vary in how strictly they enforce that right, but we’d be surprised to see a UNC basketball player given the go-ahead sign with Adidas, or a Notre Dame football player cleared to sign with Nike.

15. Will college athletes be able to use their NIL as influencers?

Yes, and given the prevalence of social media and the rapid changes occurring in marketing, this might be one of the most lucrative avenues for athletes. Zion Williamson had 3.5 million Instagram followers before he left Duke, more than NBA playoff scoring champion Donovan Mitchell has currently. That popularity can be monetized fairly easily.

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