By Ricky Volante, Attorney at Law, Buckley King LPA and Executive Director, Great Lakes Sports and Entertainment Law Academy, rvolante@buckleyking.com
With every passing story of a student-athlete being rendered ineligible and the continued momentum for change being built through cases like O’Bannon and Jenkins, “amateurism” is carefully scrutinized — and no longer just by those within and involved with college athletics. But also by the general public, too.
“Amateurism” — The Current Landscape of College Athletics
Whether or not you support the notion of “amateurism,” I think we can all agree that the NCAA’s fixed-compensation system — providing student-athletes with scholarships valued at up to cost of attendance (COA) — has created an economic cartel (a group of would-be competitors agreeing to fix prices). As a result of this system, non-Power 5 schools (and even the majority of Power 5 schools) are unable to consistently compete with the elite programs because they have no other option but to live within the system or face the wrath of the NCAA (i.e. they cannot go out, spend more than everyone else and “buy” a championship).
Now, if the majority of Power 5 schools cannot compete consistently and virtually none of the Mid-Major 5 schools can compete consistently, then how could the Historically Black Colleges and Universities (HBCUs) in the MEAC and the SWAC ever hope to level the playing field? With shoe-string budgets, below-average facilities, and ever-shrinking applications and student numbers, these once-great athletic powerhouses are now mired in college athletic obscurity.[1]
Worse yet than the battle for competitive parity, the student-athletes continue to be exploited, while bringing in millions (collectively billions) of dollars in revenue for the universities and the NCAA.[2] As the recently filed Spielman case exemplifies (or the now more dated O’Bannon), this exploitation does not cease when the students no longer attend the university.
According to University of Pennsylvania researcher Shaun Harper’s recent study, only 1.2 percent of college basketball players are drafted by the NBA. This means that approximately 98.8 percent of all of college basketball players will never have the opportunity to receive a salary or profit off their name, image and likeness as it relates to their basketball ability after college.[3] In the same study, Harper also found that only 2.5 percent of undergraduate students are African American men, while those students account for 61 percent of all collegiate basketball players and 56 percent of college football players.[4] The current system is failing these students.
Meanwhile, a recent ESPN report outlined the many ways in which a coach can receive compensation, allowances, and bonuses — win bonuses, player award bonuses, retention bonuses, good behavior bonuses, etc.[5] With John Calipari and Rick Pitino each taking home more $7,000,000 last year, and 41 coaches from the 68 NCAAB Tournament teams making at least $1,000,000, these salaries will continue to rise along with ever-growing basketball revenues.[6]
Breaking Down an Economic Cartel
Andy Schwarz, antitrust and sport economist with O.S.K.R., often states that there are four ways to break down an economic cartel:
Litigation
Legislation
Organization of the other side of the transaction (i.e. form a union, strike, boycott, etc.)
Competition
Enter stage right the Historical Basketball League (the HBL), a professional college basketball league comprised of predominantly HBCUs, and well-suited to compete with the NCAA.[7]
What is the HBL?
The HBL would be a 12 to 40-team basketball league where the players are eligible to receive a scholarship and a salary of approximately $50,000 to $100,000 per year, in addition to a series of other benefits, which are explored below. Each of the players would be employed by the third-party HBL and receive the academic-based aid from the respective HBCU they chose to attend. The teams would function as club sport teams at each school, rather than varsity sports (we’ll get to why shortly), thereby allowing each of the schools to choose whether or not they want to maintain a varsity team.[8]
Applicability of the NCAA Rules and Regulations to the HBL
As we know, the NCAA defines cost of attendance scholarships as the highest form of “compensation” that a student-athlete can receive while maintaining their eligibility. These “amateurism” rules have recently led to Donald De La Haye (UCF kicker) being rendered ineligible and student-athlete entrepreneurs Chris Dawson and Tom Rathbun (Iowa swimmers) almost realizing the same fate.
If a particular university happens to have a “major violation” or a recurring compliance violation (such as paying salaries to their players), the NCAA can punish the school, in addition to the involved individuals. These penalties tend to be significant, as we’ve seen at schools like SMU and Penn State, albeit for very different types of violations.
To the point now, how could these HBCUs pay players and not risk themselves to this type of NCAA penalty? Returning to my earlier point regarding club sports, the NCAA (and the NAIA) do not regulate them. Therefore, if a school were to have a professional club sport team, there could be no repercussion under the NCAA Rules and Regulations. Now obviously, players participating in the HBL could not attempt to participate in varsity athletics on campus, as their eligibility will be extinguished based on the salary they are receiving from the HBL, and an attempt to do so would result in a violation of the NCAA “amateurism” rules.
NCAA “Amateurism” vs. HBL Professionalism — Players Maintaining Eligibility
In addition to prohibiting “compensation” beyond COA to student-athletes, the NCAA does not permit student-athletes to have agents, sign endorsement agreements, or maintain their eligibility after entering the NBA Draft.
The HBL, however, would have an agent certification process, not unlike America’s professional leagues, and permit players to engage agents to guide them through the initial development of their professional career. The HBL would not only allow players to sign endorsement deals, but would encourage it. Elite high school and college athletes often have 10,000+ followers on social media, with some reaching six or even seven figures. With the guidance of the HBL (and their agent), these players would be able to leverage their name, image, and likeness in college (and even high school if they were dead-set on playing in the HBL) long before reaching the NBA, thereby increasing their earning potential well beyond the $50,000 to $100,000 salary paid by the HBL. Finally, a player’s eligibility in the HBL would not be extinguished until they were placed on a 15-man NBA roster — appearances in the G-League would not jeopardize their eligibility.[9]
Essentially, the HBL would similarly prepare their athletes like the LPGA prepares their golfers: function as a single-member LLC, whereby you act as the CEO and represent yourself to fans, corporate entities, league representatives, university administrators, etc. in a manner that best prepares your “company” for success on and off the court. Recalling the 1.2 percent statistic earlier, the HBL will work to best prepare students for life after .
Applicability of Title IX
Title IX requires the ratio of financial aid to male athletes versus female athletes be “substantially proportional” (defined as within one percentage point) to the ratio of male versus female athletic participation. If the pay provided to the HBL’s college athletes is considered financial aid, then the HBL would need to provide matching funds to the HBCUs to ensure women receive higher financial aid, which could be in the form of more generous scholarships. Title IX has safeguards against creating a separate private organization to evade its requirements, so it is possible that even though the HBL’s college athletes are not paid by their schools, they would still be required to treat that payment as subject to the financial proportionality law.
However, it is not clear that payment above what is needed to attend school would be considered “financial aid” that is subject to matching funds. The private employer status of the HBL may help make the case that the payments are outside the ambit of Title IX. A “Dear Colleague Letter” has been submitted to the Office for Civil Rights of the U.S. Department of Education seeking further clarification on this issue.
Potential Litigation
With any upstart, professional sports league, one must always be cognizant of potential litigation on the horizon. While the NCAA’s amateurism model is afforded at least partial protection by Board of Regents and O’Bannon, offering salaries but limiting the amount could be viewed as a restraint of trade in and of itself. Also, unlike the MLB, a minimum wage lawsuit would not be dismissed through an antitrust exemption. So how would the HBL protect itself?
First, it would be structured as a single entity and the sole employer of each player in the league, similar to Major League Soccer. This would also avoid any concerns about the difference between state and private schools — particularly in the context of unionization. This single entity status would provide the HBL certain antitrust protections.
Second, the HBL would like to recognize a union, perhaps formed by a partnership between the NCPA/CAPA and the NBPA. Because the athletes are employees of a single, private corporation and not public, state universities, if the HBL chose to do this, union cards could be signed in a friendly environment, and the salary structure and work environment could be worked out in a spirit of partnership. A union might help to provide cohesion to a labor pool that is frequently turning over and might also provide educational internships for non-athletes at the HBCUs to work in a labor environment within sport. Collective agreements between the HBL and the union would receive protection through the non-statutory labor exemption.
Lastly, while the HBL’s success in competing with the NCAA doesn’t hinge on litigation brought against the NCAA, there is the possibility that the NCAA would take retributive action against the HBCUs that participate in the HBL.[10] If the NCAA boycotted the HBCU’s non-basketball programs, simply because the HBCUs chose to permit the HBL to create a club basketball team and pay club athletes, this would make for a sympathetic lawsuit of David vs. Goliath.
Final Note — The NCAA’s Mission vs. the HBL’s Mission
According to the NCAA, their purpose is to govern competition in a fair, safe, equitable and sportsmanlike manner, and to integrate intercollegiate athletics into higher education so that the educational experience of the student-athlete is paramount.[11]
The HBL’s mission is to create a thriving, commercial basketball league focused on improving the educational, athletic, and non-sport career opportunities for its athletes. A secondary mission of the HBL is to change the landscape of collegiate athletics by providing college athletes with the ability to receive educational opportunities without acquiescing to a collective agreement to not provide payment for their athletic abilities.
Contemplating those missions, I’ll leave you with this: do we watch college sports because we want to watch unpaid athletes play sports or because we identify with and root for the players and schools playing the game?
Not too long ago, few Americans knew what clubs played in the English Premier League or any other European soccer league for that matter, however now, many have embraced and adopted certain clubs and support them every weekend. Assuming a high quality, on-court product, I’m willing to bet that the same type of phenomenon will occur with HBCUs in the HBL. The NCAA would argue that no one will watch as soon as it is revealed that the players receive even a single dollar above cost of attendance. Let’s put it to the test, let’s see if College + Sports is sufficient to create College Sports or whether “amateurism” is a necessary evil.
[1] Additionally, many of these schools are barred from postseason play due to their NCAA Academic Progress Rate. For example, in the 2016-17 season, twenty-two teams across seven schools were ineligible for the postseason. Available at: https://hbcusports.com/2016/04/20/several-hbcu-programs-banned-from-postseason-after-ncaa-apr-release/.
[2] According to Business Insider, the total yearly college basketball money earned in 2015-16 was $12,389,000,000. Available at: http://www.businessinsider.com/ncaa-college-basketball-cbs-turner-2016-4.
[3] The percentage is slightly smaller when you consider athletes that ultimately play professional basketball abroad or in the G-League.
[4] For those that immediately jump to the defense of the NCAA that these students are receiving a “priceless education,” only 54% of student-athletes at Power 5 schools graduated in the 2014-15 academic year.
[5] Available at: http://www.espn.com/college-football/story/_/id/20176937/college-football-coaches-perks-sweeten-deals-nick-saban-dabo-swinney-jim-harbaugh-urban-meyer-jimbo-fisher-mike-leach.
[6] Available at: http://sports.usatoday.com/ncaa/salaries/mens-basketball/coach/.
[7] The HBL will initially start with college basketball because of the smaller footprint, i.e. less expenses and smaller rosters and facilities.
[8] Author’s note — this decision is beyond the scope of the HBL
[9] This is further explored in the business plan of the HBL, but essentially, players could sign 2-way contracts between a G-League team and HBL team, allowing them to continue to receive an education.
[10] The Co-Founders and league consultants have gone to great lengths to structure the HBL in a manner that limits any potential exposure on behalf of the HBCU, however, the HBL cannot control the course of action the NCAA might eventually take.
[11] Available at: http://www.ncaa.org/.
