By Alec Winshel
- Introduction
The National Collegiate Athletics Association (“NCAA”) has opened an investigation into the University of Tennessee for potential violations of the league’s name, image, and likeness (“NIL”) policy.[1] The investigation will probe the recruitment of starting quarterback Nico Iamaleava and the involvement of an NIL collective that remains is closely associated with the University of Tennessee athletics program. The school has denounced the allegations as “factually untrue and procedurally flawed.”[2] Only days after news of the investigation became public, the Attorney General of Tennessee filed a complaint in federal court challenging the validity of the very regulations that the NCAA seeks to enforce. As the concurrent investigation and lawsuit unfold, the claims against the University of Tennessee are turning into a potential flash point for antitrust scrutiny against the NCAA. The NCAA’s attempt to rein in the influence of booster money in recruitment might instead upend the regulations that the league currently imposes on prospective students.
- Allegations Against The University of Tennessee
Last month, bad news reached Knoxville. The University of Tennessee received notice from the NCAA that it was investigating allegations that the school violated its policies regarding player recruitment.[3] History was repeating itself. Last year, the NCAA fined the University of Tennessee more than $8 million for violations of its regulations concerning impermissible benefits for recruited athletes.[4] Now, the NCAA is investigating the Volunteers’ football program for similar infractions. The allegations center on Spyre Sports Group, a marketing group that operates a name, image and likeness collective representing more than 200 athletes at the University of Tennessee.[5]
The NCAA is focusing on Spyre Sports Group for alleged benefits given to prospective students during their recruitment process. Nico Iamaleava, the University of Tennessee’s quarterback, may have flown to the school’s campus on a private jet paid for by the Spyre Sports Group during his recruiting visit.[6] Representatives for the company claim that they entered a contractual relationship with Mr. Iamaleavea that included a limited assignment of his NIL rights regardless of which school he chose to attend, and that the agreement disavowed any form of inducement.[7] It may be true that Mr. Iamaleava signed a contract that did not determine which college he would attend, but the other signatory to the agreement was a Knoxville-based organization operating the nation’s leading NIL collective that is called the “Volunteer Club.”[8] The relationship is undeniable.
If the assignment of Mr. Iamaleava’s rights to the Spyre Sports Group was part of his recruitment, the University of Tennessee faces serious consequences. The NCAA prohibits the use of NIL opportunities “as a recruiting inducement or as a substitute for pay-for-play.”[9] As a would-be repeat violator, the NCAA is empowered to impose significant penalties against the University of Tennessee for its failure to comply with the policy.[10] The University of Tennessee’s chancellor, Donde Plowman, has denied any wrongdoing and challenged the NCAA’s inconsistent guidance related to NIL activity.[11] Spyre Sports Group denies misconduct on its behalf, too, and emphasized that it was not acting on behalf of the university.[12] The NCAA has remained quiet as its investigation unfolds, and it has not announced any findings as of the publication of this article.
- Collectives in College Athletics
In 2021, the name, image and likeness era of collegiate athletics began. The Supreme Court’s holding in NCAA v. Alston precipitated the seismic change by permitting colleges and universities to extend education-related benefits to recruited athletes.[13] The question before the court was narrow, but Justice Kavanaugh used his concurring opinion to signal suspicion about whether the NCAA’s other limitations on athletes’ compensation would withstand antitrust scrutiny.[14] The NCAA responded days later by issuing its interim name, image and likeness policy.[15] The policy permits college athletes to “engage in NIL activity” including the “[u]se of a professional services provider” to license their rights in connection with endorsements, sponsorships, and other brand deals.[16] Yet, the NCAA’s policy maintains that its prohibitions on pay-for-pay and improper inducements during the recruiting process are in full effect.[17]
Athletes quickly began licensing their publicity rights in response to the NCAA’s policy, and collectives soon joined the fray.[18] Collectives are organizations that facilitate NIL deals for students participating in the athletic programs of colleges and universities. They operate independently from schools, but they are often funded by and closely associated with alumni of schools.[19] Collectives are typically registered as nonprofits for tax purposes, although the IRS has indicated that it may no longer be amendable to that generous tax classification.[20] There are more than 200 NIL collectives operating at colleges and universities[21] and nearly every school in the Power Five conferences is home to a collective.[22] Large collectives, including Spyre Sports Group, distribute millions of dollars to students at their associated school.[23]
In some ways, collectives occupy a traditional role: the influence of money in college athletics is no innovation.[24] Collectives may even be funded by the same donors that have traditionally directed their funds directly to schools’ athletics departments.[25] “A collective is nothing more than pooled booster money,” says Professor Richard Karcher, professor of sports management at Eastern University. The promise of the collective, however, offers distinct advantages compared to traditional donations that might be used to improve team facilities, establish scholarships, or pay coaches’ salaries. The collective cultivates direct, financial relationships that place money in the students’ hands. An NIL collective allows a wealthy alumnus to pay one—or many—students enrolled at their alma mater to nominally promote a business or charity of choice. At a glance, the result seems to be a pecuniary reward for the students’ enrollment. Direct transactions are the sine qua non of the NCAA’s regulations and, nevertheless, collectives continue to flourish.
Collectives would deny any characterization as their enterprise as a modern pay-for-play scheme, much like the more overt arrangements that have existed in college athletics’ shadowy corners since its inception. Collectives maintain that their agreements with students are not conditional on their selection of any particular school.[26] There is no inducement and, therefore, no violation of the NCAA’s recruiting rules.
Yet, the NCAA’s allegations against the University of Tennessee are not the first sanctions against a school for NIL-related conduct. In 2023, the NCAA penalized the University of Miami for its involvement in facilitating a meeting between a wealthy alumnus, John Ruiz, and two basketball players that had recently transferred to the school.[27] Mr. Ruiz has signed more than one hundred of the school’s athletes to promote his company in exchange for financial compensation.[28] More recently, the NCAA punished Florida State University after an assistant football coach at the school drove a prospective transfer student to a meeting with a person affiliated with Rising Spear, the school’s NIL collective.[29] The student was offered an agreement worth $15,000 per month.[30] And, most recently, the allegations against the University of Tennessee were made public only days after a similar investigation into the University of Florida was announced.[31] The NCAA is currently investigating the Florida Gators football program after a recruited student decommitted from the school amidst a strained relationship with the now-defunct Gator Collective.[32] These two investigations mark the NCAA’s most high-profile attempts to crack-down on perceived impropriety in the burgeoning NIL system.
The influence of booster money has been a persistent force in college athletics. “It won’t go away,” said Dr. B. David Ridpath, a professor at Ohio University. Athletic departments have always relied on significant revenue from wealthy, interested third parties as an integral part of their business plan. In major Division I programs, like football and basketball, success may be impossible without a consistent influx of cash that helps to draw top recruits. “It’s about how we manage that,” said Dr. Ridpath. “Sunshine is the best disinfectant.”
The NCAA is trying to place guardrails on the influence of outside cash in player recruitment, but its attempt to reign in the ever-expanding power of NIL deal-making reflects the persistent tension in collegiate athletics: the irony of amateurism. The doublethink of the ‘student-athlete’ has provided a framework for the NCAA’s many restrictions on students and schools alike. “‘Student-athlete’ is a term of control,” said Dr. Ridpath. “It’s about suppressing economic rights that other students have as a matter of course.” The University of Tennessee has expressed its dissatisfaction with the NCAA’s continued regulation of its students’ personality rights, even after NCAA v. Alston. They aren’t the only ones. It was only days after the NCAA’s announcement of its investigation into the school that the state’s attorney general joined the fray.
- Challenging the NCAA’s Restraints on NIL
On January 31, 2024, the attorneys general of Tennessee and Virginia filed a lawsuit against the NCAA alleging that its remaining NIL restrictions on students are violations of federal antitrust law. The complaint, filed in in the Eastern District of Tennessee, frames the Supreme Court’s decision in NCAA v. Alston as “reject[ing] the NCAA’s long-held arguments about why its amateurism rules are exempt from the Sherman Act.”[33] Their claim targets the NCAA’s remaining restrictions on prospective athletes, including students seeking transfers, that prohibit any discussion of NIL agreements prior to signing with a school.[34] Those sorts of agreements, in the NCAA’s own language, “improperly induce matriculation” and remain prohibited.[35]
The lawsuit claims that these restrictions on recruited athletes constitute an illegal boycott against students that fails the rule of reason analysis applicable to claims arising under Section 1 of the Sherman Act.[36] Recruited athletes’ bargaining power can be welded to negotiate favorable NIL deals with collectives that are eager to see the student select their school; if those discussions cannot occur prior to committing with a school, the prospective students’ leverage disappears and they must instead select a market without knowledge of their own value.[37]
The NCAA released a public statement in opposition to the lawsuit. In their view, lifting NIL restrictions on prospective athletes would “diminish[] protections for student-athletes from potential exploitation” and “further tilt[] competitive imbalance among schools.”[38] Tennessee and Virginia share a different view than the NCAA on the degree of control that students should exercise over their own image. Both states have statutes that expressly protect the right of “student-athletes” to earn compensation for their name, image and likeness and, in fact, prohibit the NCAA from interfering with the exercise of those rights.[39] As for concerns that unfettered NIL deal-making will result in deeper imbalances between schools, commentators say this argument rings hollow. “Competitive equity is a complete myth,” says Professor Ridpath. Parity amongst collegiate athletic programs is unrealistic and, explains Professor Ridpath, operates as a thin excuse for the NCAA’s restrictions.
On February 6, 2024, District Judge Clifton L. Corker denied the states’ motion for a temporary restraining order.[40] The plaintiffs failed to convince the court that recruited athletes would suffer irreparable harm and that a restraining order was appropriate.[41] One week later, Judge Corker heard oral arguments on whether a preliminary injunction should be granted.[42] As of this writing, an order has not yet been issued. Based on Judge Corker’s prior ruling, the prospect of a preliminary injunction appears unlikely.
Judge Corker’s order denying the temporary restraining order contains clues as to how the case may develop. In discussing the likelihood of the claim to succeed on the merits, the court briefly walked through a rule of reason analysis. As a preliminary matter, it found “sufficient evidence that the NCAA’s NIL-recruiting ban likely harms competition.”[43] The court evaluated the NCAA’s procompetitive justifications for the ban and, after dismissing its arguments about competitive balance and student exploitation, accepted its arguments that the restriction promotes amateurism and the “integration of academics and athletics.”[44] However, the court suggested that NCAA regulations—requirements that students maintain progress towards graduation and prohibitions on NIL deals with athletic performance as compensation—accomplish the same procompetitive goals without burdening students’ economic choices.[45] Judge Corker determined that the states’ claim is likely to succeed on the merits.[46]
The NIL-related lawsuit is only one of many antitrust claims that the NCAA faces. A class-action lawsuit in California is challenging the NCAA’s refusal to share revenues from television rights with athletes.[47] In Philadelphia, a lawsuit has been filed claiming that students in athletics programs are owed hourly wages.[48] Another lawsuit is aimed squarely the NCAA’s transfer rules.[49] Meanwhile, the National Labor Relations Board has announced that members of the Dartmouth men’s basketball teams are employees eligible for unionization.[50] The tide continues to rise.
The NCAA is no stranger to legal battles. “Defending antitrust lawsuits is just a necessary part of doing business in the operation of league sports,” says Karcher. “[T]he NCAA has always navigated through district court proceedings and rulings, sometimes they settle and sometimes they wait to see what the appeals courts have to say, and sometimes they tweak their rules pending a court’s decision.”
The University of Tennessee is hoping that this lawsuit will be different. After Alston, the tide of antitrust scrutiny has placed the NCAA in an increasingly precarious position. The league is looking for solutions. Last October, NCAA President Charlie Baker testified before Congress and urged the legislative body to carve out a statutory antitrust exemption for the NCAA that would preclude judicial review of its regulations.[51] Without legislative action, the lawsuit before Judge Corker is only one of many that could result in a significant adverse ruling for the NCAA.
- Conclusion
The NCAA’s investigation into the University of Tennessee might be understood as merely another instance in a long history of a powerful league policing the recruiting practices of its member schools. Set against the backdrop of rising judicial hostility to the league’s practices, however, the picture changes. This investigation may signal a tipping point in collegiate athletics. The challenge of carving out permissible behavior for students and schools in the NIL space has become too strained, too muddled, and too unfaithful to the league’s purported virtues of amateurism. This investigation may conclude with sanctions against the University of Tennessee but, more likely, it will conclude with the collapse of the NCAA’s remaining restrictions on prospective students’ ability to license their likeness as they see fit.
[1] Interim NIL Policy. https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_InterimPolicy.pdf
[2] https://www.wvlt.tv/2024/01/30/factually-untrue-university-tennessee-chancellor-responds-ncaa-president-amid-nil-investigation/
[3] https://www.si.com/college/2024/01/30/sources-tennessee-under-ncaa-investigation-for-nil-violations-in-multiple-sports
[4] The NCAA concluded that the University of Tennessee had distributed more than $60,000 in impermissible inducements to recruited athletes. Id.
[5] https://www.knoxnews.com/story/sports/college/university-of-tennessee/2023/09/08/tennessee-athletes-score-big-nil-deals-with-spyre-sports-collective/70700420007/
[6] https://www.nytimes.com/2024/01/30/us/ncaa-tennessee-booster-group-violation.html?smtyp=cur&smid=tw-nytimes
[7] https://twitter.com/TomMarsLaw/status/1752488548777746830
[8] https://www.nytimes.com/2024/01/30/us/ncaa-tennessee-booster-group-violation.html?smtyp=cur&smid=tw-nytimes
[9] NIL Q&A. https://perma.cc/4QJ4-R332 [look at BRIEF FOR CITATION]
[10] https://www.espn.com/college-football/story/_/id/39423331/sources-ncaa-investigating-tennessee-nil-violations
[11] https://www.espn.com/college-football/story/_/id/39423331/sources-ncaa-investigating-tennessee-nil-violations
[12] https://www.cbssports.com/college-football/news/tennessee-based-nil-collective-spyre-sports-lawyer-releases-statement-amid-ncaa-investigation-into-volunteers/
[13] Nat’l Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141, 2166 (2021).
[14] Id. at 2167 (Kavanaugh, J., concurring).
[15] https://www.ncaa.org/news/2021/6/30/ncaa-adopts-interim-name-image-and-likeness-policy.aspx
[16] NIL Interim Policy. https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_InterimPolicy.pdf
[17] Id.
[18] https://www.insidehighered.com/news/students/athletics/2023/06/07/two-years-nil-fueling-chaos-college-athletics
[19] https://www.on3.com/nil/news/what-are-nil-collectives-and-how-do-they-operate/
[20] https://www.sportico.com/leagues/college-sports/2024/blueprint-sports-nil-collective-nonprofit-1234761748/
[21] Id.
[22] https://www.on3.com/nil/news/what-are-nil-collectives-and-how-do-they-operate/
[23] https://www.on3.com/nil/news/spyre-sports-tennessee-football-volunteer-club-hits-membership-goal-13-5-million-nil-deal/
[24] The Supreme Court has pointed out the same. NCAA v. Alston [2148] (“From the start, American colleges and universities have had a complicated relationship with sports and money.”).
[25] https://www.sportico.com/leagues/college-sports/2024/college-sports-donations-nil-money-1234763721/
[26] https://www.nytimes.com/2023/10/21/us/college-athletes-donor-collectives.html
[27] https://www.espn.com/womens-college-basketball/story/_/id/35727606/ncaa-sanctions-miami-women-hoop-nil-related-infraction
[28] Id.
[29] https://www.sportico.com/leagues/college-sports/2024/ncaa-fsu-punishment-nil-1234762667/
[30] Id.
[31] https://www.cbsnews.com/miami/news/florida-is-under-ncaa-investigation-a-year-after-a-failed-nil-deal-with-qb-signee-jaden-rashada/
[32] Id.
[33] Complaint at 1. https://www.bloomberglaw.com/product/blaw/document/X7NM9B4L2UT9SO9SGU9JDQJ7LPT/download?imagename=1
[34] Complaint at 2.
[35] NCAA, Name Image and Likeness Policy Question and Answer (Feb 2023), https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_QandA.pdf. [perma.cc/4QJ4-R332].
[36] Complaint at 15.
[37] Complaint at 11 – 13.
[38] https://apnews.com/article/tennessee-lawsuit-ncaa-recruiting-violations-nil-df83bc5b39c46476ea1682a96c5d5a2f
[39] Complaint at 2.
[40] https://apnews.com/article/ncaa-tennessee-lawsuit-a5b9872d6fb4f7717bcfd12009d434ec
[41] Doc 29 on Docket, page 12.
[42] https://apnews.com/article/ncaa-tennessee-lawsuit-dca14f14dae3352842d669b7568df157
[43] Doc 29 on Docket, page 7.
[44] Id. at 9.
[45] Id.
[46] Id.
[47] https://apnews.com/article/college-athletes-nil-eb702d33a87bca98084ea492eccdf84c
[48] https://apnews.com/article/sports-college-3d98cd455c2ed1c636ce46d8dd322100
[49] https://apnews.com/article/ncaa-transfer-rule-lawsuit-ed99948447479e34f6edfec4e94412af
[50] https://www.nytimes.com/2024/02/05/business/dartmouth-basketball-nlrb-union.html
[51] https://www.sportico.com/law/analysis/2023/ncaa-congress-baker-senate-judiciary-hearing-1234742345/
