NIL Activities Leave NCAA in a Tricky Spot

Feb 25, 2022

By Patrick Stubblefield of Freeman | Lovell

Following the NCAA v Alston Supreme Court opinion, the NCAA scrapped its proposal related to name, image, and likeness in favor of an interim policy that was significantly pared down.  The policy states, generally, that NCAA Bylaws continue to prohibit pay-for-play and improper recruiting inducements.

The NCAA instructed schools and conferences to come up with their own NIL policies that were consistent with their state’s NIL law if such a state NIL law exists.  This left schools scrambling to draft their own NIL policies and has created a patchwork framework of institutional policies, conference policies, loose NCAA guidelines, and disparate state laws to contend with for anybody wishing to navigate the NIL landscape.

In a recent Inside Higher Ed article , Thilo Kunkel, a professor and director of the Sport Industry Research Center at Temple University commented, “With the lack of a framework, people are going to start bending the rules.”  In fact, accusations to that effect have already begun to occur.  In a recent interview, Texas A&M’s head football coach, Jimbo Fisher vehemently defended against such accusations amidst signing a historical recruiting class .

The NCAA’s message has been consistent since they put their interim policy in place – they are looking for federal legislation to provide a national framework surrounding NIL.  Congress does not seem to be in any hurry to pass such legislation.  According to Business of College Sports’ Name, Image, and Likeness Legislation Tracker , there are currently eight federal bills that have been proposed.  Yet seemingly none have been vigorously debated, and there will certainly be some deep-seated differences between Republicans and Democrats with regard to the substance of those bills.  Some of those differences began to emerge during the summer when democrats seemed to be in favor of larger, more sweeping legislation that addressed a range of issues in intercollegiate athletics whereas Republicans seemed more content to focus on the singular issue of NIL.  It’s becomingly increasingly clear that an NIL framework coming from Washington is unlikely, at least anytime soon.

This places the NCAA in a tricky spot.  The NCAA was heavily criticized when it initially announced that it would not pass, or even vote, on an NIL framework.  To a certain degree, those criticisms are still being levied towards the NCAA from external constituents and are growing louder from the NCAA’s membership who wants there to be a level playing field with regard to NIL rules.

The NCAA seems to be somewhat active behind-the-scenes which may signal that they are gathering information to determine what, if anything, they can do to govern NIL.  Reports began to surface that certain schools with team wide deals had received inquiries from the NCAA seeking information about those deals .  Although it was later clarified that these were not “investigations” but rather “information seeking” inquiries, team wide deals nevertheless came under greater scrutiny .  In a recent article for Inside Higher Ed, I was quoted as saying that “the line between an NIL opportunity and a pay for play and a recruiting inducement is paper-thin. ”  Using BYU’s deal with Built Bar as an example is instructive.

Earlier this year, Built Bar entered into a multi-year endorsement deal that saw all 123 players of the BYU football team sign separate deals with Built Brands, LLC.  Naturally, some questioned whether this arrangement constituted a prohibited pay for play arrangement under the NCAAs interim policies.  Some pointed out that many of those 123 players offered no significant value to Built Bar from a marketing perspective, suggesting that such an arrangement must then be a pay for play arrangement.  Conversely, Built Bar was successful in acquiring a significant amount of publicity for its arrangement with the BYU football team, and from a marketing perspective, must have considered the outcome a resounding success.  However, the NCAA has not yet publicly challenged an NIL opportunity, and how the NCAA would analyze such a case is not yet fully known.  It is also important to note that BYU is situated in Utah which currently has not passed NIL legislation.  There may exist further uncertainties in states that have passed NIL laws because these laws have not been tested in the court system yet either.

One final consideration that overshadows the entire NIL landscape is what to make of the Supreme Court’s ruling in Alston v. NCAA.  The Supreme Court declined to consider the NCAA’s argument that “because of the special characteristics of [its] particular industry it should be exempt from the usual operation of the antitrust laws ” finding that such an appeal was more properly addressed to Congress.  Thus, any rule governing student-athlete compensation will be viewed through the lens of an ordinary rule of reason antitrust analysis.  Under such an analysis, “the plaintiff has the initial burden to prove that the challenged restraint has a substantial anticompetitive effect.  Should the plaintiff carry that burden, the burden then shifts to the defendant to show a procompetitive rationale for the restraint.  If the defendant can make that showing, the burden shifts back to the plaintiff to demonstrate that the procompetitive efficiencies could be reasonably achieved through less anticompetitive means. ” 

If the NCAA overrides the business decision of a third-party company to come to the conclusion that a particular NIL opportunity is so much less than market value that it must be a prohibited pay-for-play arrangement then it risks that such determination will again subject the NCAA to antitrust scrutiny.  It is not difficult to see how a plaintiff’s initial burden to demonstrate anticompetitive effect would be met, which then would shift the burden to the NCAA to show a procompetitive rationale.  Student-athletes engaging in NIL opportunities have had little impact on the popularity of intercollegiate athletics so it may have a difficult time meeting that burden.  Thus, the NCAA may fairly believe that it has no authority to govern NIL.  The Supreme Court indicated that such authority may more appropriately rest with athletic conferences, but those conferences do not currently have the infrastructure to take on such a role.  Neither do states, for that matter.  Governance requires not only the ability to draft rules/legislation, but also the ability to monitor activities in the space and enforce sanctions when there is a violation of the rules/legislation.  Perhaps athletic conferences will start to build up these capacities or perhaps Congress will enact federal legislation first.  Either way, there is a long way to go before there is a national NIL framework in place.

Patrick Stubblefield is a business, sports, and entertainment attorney at Freeman | Lovell where he represents clients in a range of NCAA related matters, including NIL.