NCAA v. Alston: A Changing Landscape for College Sports

     

The Supreme Court recently handed down a decision that will have major implications for the college sports industry. The case of NCAA vs. Alston represents an important antitrust development that will compel rules changes and new business practices surrounding student-athletes’ ability to profit off their names, images, and likeness. In this interview, Scott Wagner, antitrust litigator in Bilzin Sumberg’s Litigation Group, discuss the background of this case and the implications of this ruling moving forward for college sports programs and student-athletes.

Transcript:

TRUJILLO: Hello, everyone. My name is Brian Trujillo, and I'm an attorney in Bilzin Sumberg's Litigation group. I'm joined by Scott Wagner, a Partner in Bilzin Sumberg's Litigation group. We're happy to welcome you to a discussion on an important antitrust development from the world of college sports: The Supreme Court's recent ruling in the case of NCAA versus Alston, and the NCAA’s subsequent rule changes allowing student-athletes some ability to profit off their names, images, and likeness.

WAGNER: The case and the name, image, likeness rule changes made by the NCAA on the heels of the Supreme Court's decision have significant implications for college sports that will affect both student-athletes and the institutions they compete for. The Supreme Court's decision is a highly technical legal opinion, and we're not going to bore you with all of the legal intricacies, but Brian, why don't you start to take us through the highlights of the decision. And then we'll dive into the NCAA, recent changes to its name image-likeness-policy, and talk about some of the things that student-athletes should be on the lookout for as they begin entering into name-image-likeness deals.

TRUJILLO: Yeah, sounds great. So one of the things to keep in mind is that the issue before the court was really just on the education-related benefits, such as tuition, room, and board and incidentals. And while Justice Kavanaugh's concurrence does get into some of his skepticism towards the rest of the NCAA restrictions, that's what's presently before the court, just education-related benefits. The plaintiffs and the NCAA did not have a factual dispute before the court. The true debate was really over the legal issue, and specifically, some of the different standards that the court could apply.

WAGNER: Yeah, and courts and antitrust cases apply different levels of scrutiny. And here, the central question was really whether the court should do a deep dive analysis weighing the pro-competitive benefits of the NCAA education-related benefits against the potential anti-competitive effects. The NCAA argued that the court shouldn't go through that deep dive and afforded great latitude in its own rulemaking.

TRUJILLO: One of the great things about this case is some of the interesting arguments the NCAA offered in support of its position that it should be given a relaxed standard. One of the things that it led with was trying to draw a parallel or an analogue to the baseball exemption. That was a judicially created exemption under the antitrust laws of the United States. Why don’t you tell us a little more about that, Scott.

WAGNER: Yeah, the baseball exemptions are a really interesting aspect. For those of us that are both sports junkies and antitrust lawyers, the baseball exemption was created by a case that's approaching its 100 year anniversary. And what the court said is that baseball is essentially outside of or excluded from a lot of the antitrust laws. And since that decision, both major league baseball and other sports leagues have gone back to the court, asking it to expand the baseball exemption. And the court really never has; in fact, the court even refused to expand the exemption into minor league baseball. And so it's a really limited exemption. The court has never retreated from it. But it is still limited just to Major League Baseball and only applies to certain aspects of Major League Baseball.

TRUJILLO: That’s interesting two of the arguments that the NCAA kind of led with are what I'm calling the “I-am-not-a-big-bad-commercial-actor card that they played where they said ‘Well, you know, we should be afforded special latitude because, you know, we're a nice organization, right? We exist in the intersection of sports and education. And you know, we exist to benefit these athletes.’ The court quickly rejected that because earlier in the case, the NCAA conceded that they were really a revenue-generating organization, and they didn't truly exist in that space. But even if they did, that didn't allow them the latitude they were asking for.

But perhaps my favorite argument, and the most interesting one, is actually one that comes from a similar case NCAA v. Board of Regents of University of Oklahoma, where the NCAA picked up on this language, where the court, in that case, had said that the NCAA
“sells a particular brand of football in which athletes must not be paid, must be required to attend class and the like.” In other words, what they were saying was that the product we sell, amateur sports, that product is valuable, because it's an amateur sports product. In other words, it's one where the compensation necessarily must be restricted. So that's what they were saying. They're redefining the product they sold, repackaging it in a very interesting way. The court ultimately rejected that; they treated it that way, saying that wasn't a binding sort of definition on the court in later years. But Kavanaugh really treats this very elegantly when he says, "price-fixing labor is price-fixing labor in businesses; the NCAA cannot avoid the consequences of price-fixing labor by incorporating price fixed labor into the definition of the product." That's one of my favorite quotes from the case. And I think it really summarizes what the court did with that argument very well.

WAGNER: That's probably even more interesting to the non-legal professionals who are in our audience. But when Brian was talking about the language that was relied on from Board of Regents, the court, in addition to its legal argument, also said when we were looking at that, I think it was 20 years ago, the world and the NCAA looked one way. Things look different today. And the NCAA may even look more like a commercial enterprise than it did then. And it's just a nice point to make that sometimes, when courts look at things later, and we talk about binding precedent, they do take into account changed circumstances. And that was one of the things that the court did in this opinion. But just to sort of tie this all back, the court ultimately rejected the NCAA's arguments about the level of scrutiny to apply to the case and found that just like any other commercial enterprise, it would be subjected to this detailed analysis of the pro-competitive versus anti-competitive effects of their rules.

TRUJILLO: So Scott, looking beyond the decision itself, what's the impact of the Alston decision on the NCAA and student-athletes?

WAGNER: Well, the most immediate impact isn't just from the decision; it's to the changes in the name, image, and likeness rules that the NCAA made just a few days after the opinion was issued. And the NCAA did it on its own. But I believe it was probably likely because the NCAA had seen the writing on the wall. And we should probably take a step back and explain what we're talking about when we say name, image, and likeness. And prior to the rule change, the NCAA had very strict rules in place that prevented college athletes from making any money off of their name, image, or likeness. So if they wanted to appear on a commercial or a sports video game wanted to pay them to use their name, that was prohibited by the NCAA rules. And after the Alston decision, the NCAA changed those rules to start allowing for the athletes to do some things to profit off of their name, image, and likeness.

Now it wasn't just a completely gratuitous thing that the NCAA did. Several states had already passed laws that would allow athletes to use their name, image, and likeness for their personal profit. California, for example, was the first, but many states, including Florida, and Texas, and Alabama, followed suit with similar laws. So the NCAA made the change. But it certainly saw which way the winds were blowing; I think they wanted to be a little bit ahead of the curve. The new policy allows athletes to participate in these types of activities that we're talking about, assuming that they comply with all the laws and institutional rules as well. And what we're starting to see is that athletes are taking advantage of it. We're here in Miami, and we know that Derek King and Bubba Bolden from the University of Miami have entered into deals that will pay them $20,000 each.

And perhaps my favorite example is that there were rumblings that Bryce young, the Alabama quarterback, was offered upwards of a million dollars before he took a single snap. And we're also seeing, and I think this is probably the most interesting aspect of this, is that it's not just the traditional money sports like football and basketball where athletes are taking advantage. We're also seeing deals in some of the lesser-known sports like women's basketball, women's volleyball, where you have athletes that have large Tik-Tok or Instagram followings. So they're able now to cash in on their name, image, and likeness where they weren't able to before. And there was a big rush of these deals right after the rules came into effect. I think they've sort of petered out a little bit more sort of getting to an equilibrium now, but it'll be interesting to see how these deals develop and evolve as time progresses.

TRUJILLO: So now that student-athletes are kind of, you know, stepping into this new world given these rule changes, what are some of the things they should be mindful of?

WAGNER: The new rules provide great opportunities for student-athletes. But there's really a lot to look out for. We've handled a number of contracts and litigations for professional athletes and professional actors, and celebrities who have great representations. And those deals still go sideways. And so, while the enticement of making money while you're still a college student is very high, you still need to be very careful.

TRUJILLO: And what about as it relates to the kind of, you know, the name, image, and likeness aspect of the deal? Are there interesting issues there?

WAGNER: Yeah, I mean, there are certainly things that the athletes want to be looking out for. And the first thing is, you want to make sure that you're only giving up what you intend to give up. So if you're entering into a deal to run a campaign with an energy drink company, and they want to use your picture, you want to make sure that they only have the right to use your picture in association with that campaign, you don't want to be in a situation where you think you're entering into a deal to promote a product. And all of a sudden, you're giving away the full right to someone else to control the right to use your name and image.

We actually handled a case like that for an NBA superstar, where he entered into a contract and believed it was a very limited contract. But then the other side took the position that they had full control over every picture he took, every autograph he signed, and thankfully, we did a good job for him in that litigation, and it worked out okay for him. But it's something you certainly want to be careful about. You also want to make sure that the payment terms are clear and that the entity that you're entering into the contract with has the capacity to pay you. That's something we often see as well where a celebrity or an actor or an actress or an athlete enters into a deal to promote a product, but they're actually not entering into a contract with the company that makes the product they're entering into a contract with a shell company that may not have any assets. And if they don't get paid, it's sometimes very hard to sue or collect for a breach of contract when the entity you've signed the contract with doesn't have any assets.

And I think the last point I touch on here is that student-athletes should try to avoid deals that are anything other than you get paid a certain amount for a certain amount of time. You don't want to be in a situation where your compensation is tied to profits or sales or clicks, or things like that because it gets very hard to verify. And it really allows companies a lot of opportunity to take advantage of the student-athlete or whomever they're contracting with. So if you're going to enter into one of these deals, you want to make sure that one, the payment terms are finite, and you know how you're going to get paid and how much you're going to get paid, and two that the company that is paying you has a capacity or that's supposed to pay you has a capacity to pay you.

So some of the other things to think about as you're entering into the name, image, and likeness deals are the university's branding and trademark. You may be famous because you're a University of Miami athlete, or you may be well known because you're a Florida Gator. But you may not be able to wear any of your Gator or Hurricane gear when you're appearing in an advertisement. So it's important that you know the rules of the road from your university or college when you're entering into any of these deals. The scope and the extent of the name, image, likeness deal should also be considered, and think about: are you going to have final approval over the product that is put out into the world, or do you just show up and take pictures and someone else gets to choose how you're portrayed in the advertisement or whatever promotional campaign that you're a part of.


It's also important to watch out for the NCAA rules; the NCAA has not allowed full sail entry into the name, image, and likeness market. And there are a few NCAA rules that you want to be cognizant of. The first is that any compensation for these contracts cannot be contingent upon enrollment at a particular school. Second, the agreements cannot be linked to athletic participation or a specific achievement. So name, image, likeness deals can't have a bonus for scoring a certain number of touchdowns or scoring a certain number of points during a basketball game. And the last one is that the institutions themselves cannot provide compensation to the athletes; it has to be an outside party.

Putting all the rules aside, one other thing athletes should look out for is now that they're going to have this sort of newfound wealth and income, they need to manage their money. And I would suggest that, as the funds come in, they look to financial professionals to help them manage the money, the tax implications, and all the things that go with it. And I think that's one thing that we really want to highlight. If there's one takeaway from this podcast, if you're a student-athlete listening to this is that you should get professional help in hiring the right professionals to assist you in these deals- it’s super important. And even if it's not a very financially lucrative deal, and you might think, ‘well, do I really need someone to look at it.’ You don't want to be in a position where you do a small deal today, and you give up something that you didn't realize you were giving up just to learn later, when you get a bigger deal that you may not be able to do it, because of something that happened in an earlier deal. And one thing that I think is going to be very interesting is to see how the NCAA institutions, as well as the NCAA, offer to assist athletes. The University of Miami, for example, has what it calls the Ignite program, which is already starting to think about ways in which you may help athletes with these types of deals; I suspect we'll see other things like that around the country. And you know, I'll make a pitch for emerging law students. This is a great way to set up a clinic and give law students some real-world experience in negotiating contracts while helping out their fellow classmates.

TRUJILLO: Sounds like there's a lot to think about. It sounds like if you're a student-athlete looking to profit off your name, image, and likeness, ‘Congratulations, you've done well, that's great.’ But we have to be careful. And it seems like we're just scratching the surface of what student-athletes should be thinking about. And the rules that are going to change and evolve over time and how different organizations across the country are going to respond, and even Congress, how Congress might respond to try to unify some of the state laws. But it's a new era, and it's appropriately being called the new era of name, image, and likeness deals. And I think that's a welcome change. To our audience, thank you for tuning in. We look forward to bringing you more informative and timely podcasts on issues of importance to you. All of our podcasts can be found on the Bilzin Sumberg Lawcast at bilzin.com.