Ward Coleman

“It’s chaos right now. Tampering galore. Adults manipulating young men. Education is like the last thing now.” – Dabo Swinney, head football coach at Clemson University.[1]

1. Introduction

The National Collegiate Athletic Association (hereinafter “NCAA”) is a nonprofit organization that regulates college athletics for 1,102 member institutions over three divisions.[2] The NCAA was formally established in 1906 and initially functioned as a rule-making body.[3] For example, if an institution was building a baseball field and needed to know the regulation distance from first base to second base, they would defer to the NCAA’s rules. Under this structure, the member institutions enjoyed significant freedom in establishing collegiate athletics on their campuses outside of the necessary “rules-of-play” provided by the NCAA.

The function of the NCAA began to shift shortly after its formation. In 1921 the association sanctioned its first national championship which was held in track and field.[4] This concept has subsequently been expanded to recognize numerous national championships in 24 sports over the three divisions.[5] The decision to host national tournaments bolstered membership in the NCAA and serves as a win-win for both the athletic departments of member institutions as well as higher education at member institutions. Not only is the institution’s name marketed prominently on a national stage, but their athletes are also able to compete for coveted titles and the ensuing bragging rights. Over time, the NCAA incrementally became not just a de facto regulatory body but in essence the sole proprietor of college athletics. With great power comes great responsibility, and, from the NCAA’s perspective, two core principles are essential to protect the integrity of college athletics.

The first foundational pillar of the NCAA is amateurism. Therefore, member institutions are prohibited from offering or otherwise providing a prospective athlete with a monetary incentive to attend their respective school. Further, an athlete is prohibited from receiving compensation based on their performance while playing for the member institution. The NCAA maintains that breaking these rules taints the integrity of collegiate athletics and would result in a market synonymous with professional sports. In contrast, professional sports are fundamentally driven by revenue generated, in large part, by the performance of professional athletes. The commissioner and team owners in a particular league typically negotiate a collective bargaining agreement with the players association for the league resulting in a cap on the amount of money a team can spend on player compensation. One intent of the negotiated cap is to level the playing field so that all teams in the league have the same or similar financial restraints in acquiring talent. Professional teams build their rosters through a player draft, free agency, or trading players to other teams in the league. Compensation for professional athletes is driven by their market value which is determined by negotiations between the athlete or their agent and the team who drafted them or the teams who have expressed interest in acquiring the player if they are a free agent. The NCAA has strictly prohibited member institutions from offering money or otherwise negotiating with a prospective college athlete to acquire their services maintaining that the athlete would lose their amateur status should they be paid by the school.

            The second foundational pillar of the NCAA is providing athletes with access to higher education. It is no accident that collegiate athletes are referred to as “student-athletes” rather than “athlete-students.” The optics matter and the NCAA very much wants to promote the academic opportunity it affords many individuals who may not otherwise go to college. In support of their virtuous position of emphasizing academics, the NCAA has limited institutions to 20-hours-per-week for practice, travel, and to play games so that the student-athletes have the requisite time to do their schoolwork.[6]^{, [7]} However, the rules are littered with loopholes and limited resources make enforcement difficult. As a result, mandatory practices, “optional” practices, games, travel, rehabilitation, weightlifting, conditioning, film studies, team functions, and team meetings negatively impact the quality of a student-athlete’s education.

            The two afore described core concepts of the NCAA are logical in theory. Amateurism is a vital element in maintaining an even playing field where athletes chose to compete primarily for the love of their sport. Education is critical as it provides the foundation for a successful life after the athlete’s college career has ended. The historical NCAA structure and associated regulations served to make the college product different from professional sports and have resulted in a highly desirable offering to fans. The popularity of collegiate sports has grown exponentially and resulted in massive economic benefit for the NCAA member institutions. For example, it is difficult for the modern fan to imagine that 450 people attended the first “Iron Bowl” in 1893–an annual football game between the rivaled Auburn Tigers and Alabama Crimson Tide.[8] More recognizable to the modern fan would be the 2010 Iron Bowl, which set an attendance record at 101,821 coupled with a national household rating/share of 7.3/17.[9]^{, [10]}

Similar to the massive increase in Iron Bowl attendance from 1893 to 2010, so have the profits generated by college athletics. The financial windfall is seen in facility upgrades, lucrative contracts for coaches, and the growth of the non-revenue generating sports. However, the increasing profits also place great weight on the pillars upon which the NCAA was built. As the chief regulating body of college sports, eyes are now focused squarely on the NCAA as it has been forced to wrestle with the issue of where the student-athletes fit into this multi-billion-dollar industry.  The NCAA has historically opted for increased regulation and control rather than providing a means for athletes to directly benefit financially from the market that they have a large part in creating. Predictably, the landscape has recently shifted–significantly.

In late 2019, a bill was drafted in the California legislature that prohibits institutions, conferences, and the NCAA from sanctioning a collegiate athlete for receiving compensation for their “name, image, or likeness.” (hereinafter “NIL”) The bill was subsequently passed and has been in effect since November 2021.[11] Nearly every state has followed in California’s footsteps, adopting similar legislation that provides varying degrees of freedom for collegiate athletes to receive NIL-based compensation. This has ushered the NCAA into perhaps the most critical moment of the association’s history. The NCAA is now faced with protecting competitive balance while losing some of the control mechanisms that it has traditionally relied upon. The athlete’s ability to enjoy free agency status is the biggest threat to competitive balance in college sports.

A loss of a competitive balance generates a potential threat to the product that has seen exponential growth in popularity and the platform which student-athletes rely upon to capitalize on their NIL value. The following section will provide a historical analysis of how the NCAA reached this point from losing their immunity in antitrust to more nuanced battles over NIL and the recognition of rights for student-athletes. In the final section, this article will provide a framework where the NCAA can maneuver through the unchartered waters that threaten the existence of what makes college sports unique.

1. HOW WE GOT HERE

The NCAA was initially immune from antitrust scrutiny because of its nonprofit status. However, in 1984 the Supreme Court of the United States held that the NCAA was open to antitrust challenges in NCAA v. Board of Regents of the University of Oklahoma.[12] The decision offered a crack in the NCAA’s armor and served as the basis for athletes to sue the NCAA seeking NIL-based compensation. Courts can utilize three types of analyses to determine the validity of an antitrust claim under the Sherman Act.

Per Se Rule

Under a per se analysis, the Court finds certain agreements or restraints, such as naked price-fixing, to be a violation of the Act simply based upon proof that the action has occurred.[13] The scope of agreements subject to the per se rule is narrowing, as agreements do not warrant per se treatment unless the anticompetitive effects are determined to “almost always substantially outweigh the procompetitive justifications.”[14]  Examples of agreements that remain per se illegal include those among competitors to divide markets horizontally, horizontal boycotts agreed to by a group of competitors, and vertical tying agreements between manufacturers and distributors.[15]

Rule of Reason Analysis

Unlike the per se rule, the rule of reason analysis requires thorough consideration of the effect an identified trade’s restraint has on competition. Like the per se rule, the plaintiff must establish there was an agreement between the parties. The plaintiff must also identify the relevant and cognizant market(s) to which the agreement pertains. If the plaintiff fails to present evidence in support of these required elements of their case, the court will enter and order of dismissal for failure to state a claim upon which relief can be granted.

Once the agreement and relevant market are established, the plaintiff has the burden of proof to show how the anticompetitive conduct has impacted the marketplace using the rule of reason. Anticompetitive conduct can be established by focusing on whether the defendant has the requisite power to impact a market by restricting output or increasing pricing in order to generate more profit.[16]  Anticompetitive conduct can also be demonstrated by showing an actual anticompetitive effect, highlighting the restraint on trade that reduces output or prevents other firms from entering the market.[17] Should the plaintiff succeed in showing the anticompetitive effect, the burden then shifts to the defendant, who must prove that either (1) the restraint is not anticompetitive or (2) the restraint produces cognizable procompetitive benefits.[18] If the defendant succeeds in meeting their burden, the pendulum then shifts back to the plaintiff who has the burden of presenting a “less restrictive alternative.” The proposed alternative must be substantially less restrictive than the current restraint, nearly as effective in serving the procompetitive benefit, and achieve these effects without increasing the cost burden on the defendant.[19]

“Quick Look” Rule of Reason

In certain cases, the court may consider a “quick look” rule of reason. While the Supreme Court of the United States has not relied upon the quick look rule of reason, this mode of analysis has been recognized by lower courts. Cases falling under the quick look rule of reason analysis usually bear the same characteristics as per se restraints. However, there may be complicating factors that merit additional examination.[20] The quick look approach may be employed as a means of combating the high cost and sometimes unpredictable nature of a comprehensive rule of reason analysis, even if the case does not fall directly in the per se category. The quick look rule of reason has primarily been utilized in antitrust cases involving a “joint venture, professional association, network, or other significant association whose legitimacy was not in question,” such as the NCAA, which is considered a joint venture between itself and its member schools.[21]

1. NCAA v. Board of Regents of the University of Oklahoma

After defining the Sherman Act and reviewing the three methods used to analyze claims pertaining to it, consideration of cases against the NCAA is warranted. NCAA v. Board of Regents of the University of Oklahoma is the first antitrust case where the United States Supreme Court recognized the “joint venture” structure of the NCAA, thus requiring the rule of reason be applied, regardless of the impact of the restraint that is questioned.[22] This case set a precedent for decisions in future antitrust claims involving the NCAA.

Background

The Board of Regents of the University of Oklahoma and the University of Georgia Athletic Association, both members of the NCAA, brought suit against the NCAA in 1982 in the US District Court for the Western District of Oklahoma. The plaintiffs alleged the control exerted by the NCAA with respect to televising Division-I college football games violated both Section 1 and Section 2 of the Sherman Act.[23] In 1981, the NCAA signed contracts with the American Broadcasting Companies (hereinafter “ABC”) and the Columbia Broadcasting System (hereinafter “CBS”) respectively, granting each of the two networks the exclusive right to telecast college football games on fourteen different dates each year from 1982 to 1985. The contracts provided that a “minimum aggregate fee” totaling 8% of the broadcast revenue was to be retained by the NCAA with the remaining 92% balance divided among the Division I institutions that appeared on the networks.[24]

The plaintiffs contended the NCAA acted in violation of the Sherman Act by preventing individual schools from selling broadcast rights to another network and by limiting the number of television appearances per school, citing a contract provision that provided “no one school can appear any more than six times during any two-year period, and no school can appear nationally more than four times over two years.”[25] The plaintiffs further accused the NCAA of engaging in illegal price-fixing, significantly restricting free-market forces with respect to broadcasting college football on television and exercising monopoly power over the rights to broadcast college football on television.

District Court and Court of Appeals Holdings

The District Court sided with the Board of Regents of the University of Oklahoma and the University of Georgia Athletic Association, applying the per se rule and holding: 1) NCAA controls are unreasonable naked restraints on competition, and it is clear that the NCAA violated Section 1 of the Sherman Act; 2) NCAA has monopolized the market of college football television, in violation of Section 2 of the Sherman Act; 3) NCAA contracts with ABC, CBS, and Turner Broadcast System (hereinafter “TBS”) are void, and the NCAA is enjoined from prohibiting members from selling their rights to telecast college football games in which they participate; and 4) the right to telecasts college football games is the property of the institutions participating in the games.[26] The Court of Appeals of the Tenth Circuit affirmed in part, opining the NCAA’s argument failed as the contracts effectively served to limit the number of buyers and sellers of televised NCAA football games and presented additional anticompetitive effects in the market, both horizontally and vertically. [27]However, the Court of Appeals refused to recognize the injunction granted by the District Court finding the prohibition of the NCAA from selling rights to telecast the college football games of their member institutions was too broad and vague.[28]

U.S. Supreme Court Decision

After the Court of Appeals affirmed the decision of the District Court in part, but modified the remedy, the Supreme Court granted certiorari. The Supreme Court citied the joint venture structure of the NCAA and its member schools and opined horizontal restraints on competition were essential if the product was to be available at all. Therefore, it was inappropriate to apply a per se rule. The Supreme Court found that the NCAA plays a vital role in enabling college football to preserve its character by creating and facilitating rules that the competitors agreed to and that define the competition. The integrity of the “product” can only be preserved by mutual agreement; therefore, the NCAA may act in order to preserve the character and quality of the product.[29] Based on this rationale, the Supreme Court ruled that the actions of the NCAA were not illegal per se, and the rule of reason analysis applies to NCAA restraints.

U.S. Supreme Court Rule of Reason Analysis

The plaintiffs have the initial burden to show the relevant market. The Court held “live college football television” is a reasonable and cognizable market finding the competitors are unable to offer programming that attracts a similar audience.[30] Under the rule of reason, plaintiffs then have the burden to show the anticompetitive effect in the marketplace. The Court found the NCAA’s television plan restrains both price and output. With respect to price, the Court opined “by fixing a price for television rights to all games, the NCAA creates a price structure that is unresponsive to viewer demand and unrelated to the prices that would prevail in a competitive market.”[31] For output, the Court held if member schools could sell their rights, “many more games would be shown on television.[32]

After the plaintiffs established the anticompetitive effects of the restraint, the burden shifts to the defendant NCAA to prove their action is either not anti-competitive or has pro-competitive effects. The NCAA argued its television plan is a “joint venture,” and makes possible a new product by reaping otherwise unattainable efficiencies.[33] The Court dismissed this argument, noting there is “no need for collective action to enable the product to compete against its nonexistent competitors.”[34] The NCAA also argued protecting live attendance at its games and maintaining a competitive balance among amateur athletic teams are procompetitive justifications for the television plan. The Court dismissed both arguments as it ultimately held the television plan does not have any procompetitive aspects. Therefore, the Court opted to affirm the Court of Appeals’ ruling and found the NCAA had violated Sections 1 and 2 of the Sherman Act.[35]

• O’Bannon I and O’Bannon II

The decision in Board of Regents was a significant turning point in antitrust protection for the NCAA. The decision ushered in a new era of heightened antitrust scrutiny for the NCAA. Further, the decision set the precedent that future antitrust cases brought against the NCAA must follow the rule of reason analysis in evaluating anticompetitive effects and procompetitive justifications of the challenged restraint. Prior to the O’Bannon cases, the NCAA had avoided litigation brought by a student-athlete seeking to capitalize monetarily beyond the scholarship, room and board provided for by the NCAA rules. NCAA regulations and bylaws regarding amateurism were historically deemed procompetitive because they were determined to further the goal of the NCAA to foster competition among amateur athletic teams. However, student-athletes (along with fans and the general public) logically began to take exception with the growing disparity between the value of what they receive for their services as an athlete when compared to the significant increase in revenue being generated by their services. As this disparity grew, the argument that student-athletes were being wrongly shut out of the market became increasingly persuasive.

Two landmark cases significantly impacted the direction of college athletics in regard to amateurism. The cases, O’Bannon v. NCAA (2014) (hereinafter “O’Bannon I”)and O’Bannon v. NCAA (2015) (hereinafter “O’Bannon II”), have changed the once familiar and highly regulated landscape into one that is much less regulated and still evolving.[36]^{, [37]} In these cases, the plaintiffs, a group of current and former student-athletes, filed suit against the NCAA, Electronic Arts, and Collegiate Licensing Company claiming the student-athletes are entitled to receive compensation for the use of their NIL in widely distributed and popular video games. In filing suit, the student-athletes challenged the then existing NCAA rules that prohibited student-athletes from sharing in the revenue the NCAA and their member institutions receive for use of student athletes’ NIL in video games, live game telecasts, and other footage.[38] While the Plaintiff student-athletes argued the NCAA’s rules preventing them from receiving NIL compensation violated the Sherman Act, the NCAA continued to hold firm maintaining their regulations preventing student-athlete NIL compensation were necessary to uphold and protect the widespread popularity and identity of college athletics.

O’Bannon I

The rule of reason was applied in both O’Bannon cases. In O’Bannon I,the plaintiffs successfully defined two relevant markets, the college education market, and the group licensing market. Schools compete against each other not just on the athletic field but also, and perhaps more importantly, in recruiting student-athletes to their school. In doing so, the schools offer a unique bundle of goods and services within the college education market. This bundle includes a full or partial scholarship, advanced coaching, academic tutoring, personal training, physical and mental therapists, high end facilities, and opportunities to compete in front of large crowds and TV audiences.[39] The Court of Appeals for the Ninth Circuit found the college education market, with respect to the NCAA, to be relevant and recognizable as no other collegiate division or association offers the same bundle of goods, and professional leagues do not offer the same opportunities. But for the NCAA rules pertaining to student-athlete compensation, individual players would be able to create and sell group licenses for the use of their NIL in live game telecasts, videogames, and game re-broadcasts.[40] Thus, the Court held the group licensing market to be both relevant and recognizable, as competition would exist if it were not for the NCAA’s restraint.

In considering potential anticompetitive effects, the Court found the NCAA enjoys immense power to fix prices and restrain competition in both the college education and group licensing markets because it prohibits athletes from receiving compensation based on their athletic skill from outside sources. While maintaining the procompetitive justification of their anti-compensation rules for student-athletes, the NCAA argues their regulations: 1) promote consumer demand by preserving amateurism; 2) are reasonable and procompetitive because they are needed to maintain the current level of competitiveness; 3) promote the integration of academics and athletics; and 4) increase the number of opportunities available to schools and student-athletes.

In meeting their burden of establishing a less restrictive alternative, the Plaintiffs presented three scenarios. The first is to “raise the grant-in-aid limit to allow schools to award stipends, derived from specific sources of licensing revenue, for student-athletes.”[41] The court noted this alternative would neither violate NCAA amateurism rules nor decrease consumer demand for NCAA products and would serve to abridge the limitations on the anticompetitive effect caused by the NCAA’s restraint. The second alternative is to “allow schools to deposit a share of licensing revenue into a trust fund for student-athletes [who] could be paid after the student-athletes graduate.”[42] The court opined this alternative would not harm consumer demand for NCAA products, the student-athletes would not be paid directly based on their individual athletic performance, and it would enable the NCAA to achieve its goals in a less restrictive manner. The third alternative would “permit student-athletes to receive limited compensation for third-party endorsements approved by their schools.”[43] Contrary to the first two alternatives, the court found this proposal did not offer a less restrictive way for the NCAA to achieve its purpose as it opens an avenue for commercial exploitation of student-athletes and does not provide the NCAA with a viable means of achieving its goals.[44]

O’Bannon II

While the NCAA was still able to prohibit student-athletes from entering into endorsement deals following the District Court’s decision in O’Bannon I, they could not place a cap on a student-athlete’s share of licensing revenue in an amount less than $5,000 per year. The NCAA appealed the decision to the Ninth Circuit Court of Appeals setting the stage for O’Bannon II. In O’Bannon II, the Court applied the same standard and agreed with the relevant markets, anticompetitive effects, and pro-competitive purposes found by the District Court. However, they held the District Court erred in ruling NIL payments to student-athletes untethered to their education expenses are not a viable alternative.[45]

The Court held the District Court “ignored that not paying student-athletes is precisely what makes them amateurs” and that “paying students cash compensation would not promote amateurism as effectively as not paying them.”[46] The court noted the distinct difference between offering a form of compensation that is education related and offering compensation that is NIL driven, stating “once that line is crossed, there is no basis for returning to a rule of amateurism and no defined stopping point.”[47] Ultimately, the Ninth Circuit vacated the District Court in O’Bannon I and required the NCAA to allow its member institutions to pay student-athletes up to $5,000 per year in deferred compensation.[48]

• Alston v. NCAA

The O’Bannon I and O’Bannon II cases served as a catalyst for more meaningful conversations regarding a framework for Division I college student-athletes to be compensated for their services and NIL. The most recent antitrust litigation brought against the NCAA regarding student-athlete compensation, Alston v. NCAA, built upon the O’Bannon foundations.[49]

The Alston case was filed because of the compensation limits set by the NCAA in the O’Bannon cases. The plaintiffs argued the NCAA’s limit on compensation for student-athletes violates federal antitrust law as the plaintiffs would receive greater compensation in exchange for their athletic services if the limits did not exist. To meet their initial burden of showing a relevant market, the plaintiffs defined a “student-athlete labor market,” where student-athletes sell their labor in the form of athletic services to schools in exchange for athletic scholarships and other payments permitted by the NCAA.[50] The Plaintiffs maintained there is an anticompetitive effect on the student-athlete labor market caused by schools artificially caping compensation at an amount well under a student-athlete’s actual market value. Further, the Plaintiffs claimed schools would be in a position to offer recruits compensation more closely correlated with their talent absent the NCAA’s prohibition on doing so.[51]

In presenting a procompetitive justification for its limit on student-athlete compensation, the NCAA first argued the challenged rules are at the crux of “amateurism,” which drives consumer interest in college sports.[52] The U.S. Supreme Court acknowledged the importance of maintaining a distinction between college sports and professional sports, but it did not find the NCAA’s argument persuasive. The Court found that limiting compensation unrelated to education and limiting compensation tied to a student-athlete graduating could eventually open the door for college sports to become too much like professional sports with unlimited payments unrelated to education.[53] However, limiting non-cash education-related benefits, such as postgrad scholarships, did not have the same effect.[54]

The U.S. Supreme Court continued to identify three less restrictive alternatives: 1) allowance for the NCAA to continue limiting the value of grants-in-aid to not less than the cost of attendance to an institution; 2) allowance for the NCAA to continue limiting compensation and benefits unrelated to education; and 3) the NCAA being enjoined from placing limits on most compensation and befits that are related to education. The Court rationalized these alternatives would be just as effective as the challenged rules in preserving amateurism, holding the restrictions on education-related benefits were in violation of the Sherman Act and, as a result, the less restrictive alternatives were to be implemented.

• The Result

The series of antitrust cases against the NCAA from Board of Regents, to O’Bannon I & II, and then to Alston resulted in an evolution of opinions that negated longstanding rules against compensation for student-athletes. As new opportunities for student-athletes began to take shape, uncertainty filled the vacuum caused by the significant changes and left the athletes unsure of how they could capitalize on their NIL value without risking their eligibility. Clarity was provided between 2019 and 2020 when California enacted the Fair Pay to Play Act, which prohibits institutions, conferences, and the NCAA from sanctioning collegiate athletes for receiving compensation for their NIL.[55] The impact was immediate and prolific. Athletes quickly moved to monetize their popularity on social media platforms and retained agents who began negotiating commercial and brand endorsements.[56] The only NCAA restriction was that an athlete could not receive strict “pay-to-play” compensation.[57] The intent of prohibiting pay-to-play compensation is to prevent the act of paying athletes to attend a specific institution. However, the current lack of direction and leadership from the NCAA has led some to describe the current era of college sports as the “wild west.”[58]

1. WHERE WE SHOULD GO

Following the California legislation, many NCAA member institutions have worked diligently to secure NIL opportunities for prospective student-athletes in order to secure the player’s services. College athletes who for generations were prohibited from receiving money even for ordinary living expenses now have the opportunity to create substantial wealth. On February 18, 2022, the NCAA announced that it would be reviewing NIL policies based on their significant impact after just one season and also to address reports of recruiting violations.[59] The Chair of the Division I Board of Directors, Jere Morehead, President of the University of Georgia, claimed the NCAA wants to “preserve the positive aspects of the new policy while reviewing whether anything can be done to mitigate negative ones.”[60]

The NCAA’s well-founded concerns stem primarily from alleged recruiting violations amounting to pay-to-play, unregulated agent representation of student-athletes, and institutions guaranteeing recruits a certain amount in NIL income to secure a commitment to their school.[61] Subsection A will explore how institutions have used NIL legislation as a loophole for pay-to-play which directly threatens what makes collegiate sports unique. Subsection B will consider options that may be available to the NCAA to help provide more oversight. Subsection C will offer suggestions as to what the NCAA should do in light of the recent judicial and legislative actions that have framed the current state of college athletics.

1. The Art of the Transfer Portal and NIL Guarantees

Recruiting is the lifeblood of college athletics and is unique because the athletes have the freedom to select what institution they choose to play for. The athletes typically select an institution after going through what is commonly referred to as the “recruiting process.” Previously, the recruiting process involved institutions calling an athlete and their family members, sending letters, visiting the athlete, paying for the athlete to come on a visit, building nice facilities that offer amenities to benefit the athlete, and offering scholarships to reduce the cost of attendance. Careful consideration of the traditional model brings to light how little education plays in the recruiting process. For the institutions, the intent is to get the best athletes to attend their school thus giving them the best chance to win games. For the athlete, it is all about finding the institution that is going to provide the best opportunity for them. The very best athletes usually place great weight on which institution will provide the best opportunity for them improve and gain exposure so they can play professionally. In the past, athletic improvement and exposure were largely based on coaching, facilities, the talent level of other players on the team, and playing time. Now, the new opportunity for compensation via educational spending or NIL deals may serve to alter the traditional recruiting considerations and place a greater emphasis on how much money the student-athlete can earn while in college as opposed to which institutions have the best coaches, facilities, or players.

In 2018, the NCAA introduced an element of free agency in college sports when it created the “transfer portal.” The transfer portal allows an athlete to register with a database maintained by the NCAA with said registration serving to provide notice to other member institutions that the player wishes to transfer to another institution. New rules concerning transfers were ushered in along with the transfer portal and mostly did away with the longstanding requirement that transfers sit out of competition for a year. For example, of the 324 Division I men’s basketball transfers during the 2018-2019 season, only 35 had to sit out for the season.[62] Member institutions now have a database of potential players they can select to recruit to fill their immediate needs. Many of the players in the portal have a track record in college and their experience is often attractive to institutions looking to fill a specific need with someone who can step in and play right away. The recent ability to sign transfers who are immediately eligible is a significant change and, coupled with the new NIL opportunities, is reshaping the recruiting process.[63]

The transfer portal has been both criticized and praised since its inception. Critics point out that the portal functions as a quasi-free agent pool, providing athletes with a means to bounce around institutions without repercussions.[64] The onslaught of transfers supports the claim that both institutions and student-athletes have lost touch with the historical connection between a collegiate athlete and their school. Anther logical, and perhaps unintended, consequence of the transfer portal and NIL opportunities is the need for coaches to continually “re-recruit” their best players every day or face losing them to other institutions. Supporters of the transfer portal cite its transparency and the ease student-athletes have in leveraging it for their benefit.[65] As a result of the transfer portal, student-athletes have enjoyed newly found freedom to find the right school. The transfer portal provides a “second bite of the apple” when a student-athlete finds themselves unhappy at their original institution whether it be based on a lack of playing time, being asked to play a different position, a coaching change, family issues or some other reason. However, the infusion of NIL opportunities provides another facet to the transfer portal and raises serious concerns regarding the integrity of the transfer portal as well-heeled boosters of an institution can essentially buy a roster full of proven talent under the auspices of NIL compensation.

In Columbus, Ohio, the nation’s top high school quarterback prospect skipped his senior high school season in so he could immediately start earning endorsement money based on his NIL.[66] A Miami Hurricanes booster promised any football player on the roster a $500 monthly check if they endorsed his business.[67] In a 2021 message delivered to hundreds of influential businesspeople gathered to learn more about the Louisiana State University football team, the team’s head coach, Ed Orgeron, stated, “[w]e’re paying our players now … [s]o if you guys wanna start paying our players, you can go ahead!”[68]

Not surprisingly, the NIL gold rush started quickly and continues to build steam as many booster groups are forming “collectives” to raise money for the sole purpose of paying student-athletes to attend their institution. This begs the question of how a collection of boosters of a specific institution benefit from an athlete’s NIL. Arguably, the collective is disguising its engagement in pay-to-play practices, which remains a violation of NCAA rules, via purported payment based on NIL deals. Further, the NIL market is continuing to be set in an absence of meaningful NCAA regulation. Texas A&M is alleged to have paid $30 million dollars to secure the top ranked football class in 2022.[69] Tennessee received a commitment from a top high school quarterback in the class of 2023 who allegedly secured an $8 million NIL deal from prominent boosters.[70] Where is the ceiling? More importantly, where is the NCAA?

• The Options Available to the NCAA

There are three options currently available to NCAA to address the lack of regulation and uncertainty caused by NIL opportunities as well as the potent combination of NIL opportunities and the transfer portal. First, the NCAA could target the source of NIL opportunity, state legislation. If successful, the NCAA could regain some semblance of regulatory control over NIL compensation for student-athletes. Under this option, the NCAA would bring federal dormant Commerce Clause claims challenging the constitutionality of each state’s NIL legislation.[71] Second, the NCAA could try to regulate NIL compensation by stepping in as an overseer of NIL deals.[72] Under this approach, the NCAA would remain within the confines of applicable state legislation by facilitating deals but still regulate by barring deals that undermine the values that make the NCAA unique.[73] Under the third option, the NCAA would work with the United States Congress to create federal legislation that brings structure and uniformity to NIL compensation for college athletes.

Option 1: Dormant Commerce Clause Claims

            The first question a court must consider when faced with a Dormant Commerce Clause claim is “[d]oes the state statute: (1) regulate or discriminate against interstate commerce or is its effect to favor in-state economic interests; or (2) merely indirectly affect interstate commerce, despite an evenhanded state law?”[74] If the statute satisfies the first prong, it is considered a per se violation of the Commerce Clause.[75] If the statute falls under the second prong, the court utilizes a balancing test as provided in Pike v. Bruce Church, Inc.[76]

When scrutinized using the precedent established by the Ninth Circuit, the California legislation would likely be considered to be a per se violation of the Commerce Clause as the Circuit has held state regulation of nationally uniform businesses violates the Constitution.[77] There are two key factors to support this notion. First, the United States Supreme Court referred to the NCAA as an interstate regulating body in Board of Regents, noting their vital role in marketing and promoting the product of college athletics on a national stage.[78] Second, subsection (a)(2) of the California statute clarifies its intent to regulate the NCAA by specifically identifying the NCAA as an entity that may not prevent a student-athlete from receiving compensation based on their NIL.[79] Therefore, it is likely the NCAA would prevail in a dormant Commerce Clause claim alleging the California NIL statute, as it relates to collegiate sports, is unconstitutional.

            Many states have followed California’s lead and enacted their own unique NIL legislation. As a result of the uniqueness, the legislation from each state must be reviewed independently to determine if it can withstand dormant Commerce Clause constitutional scrutiny. While the California legislation could be in jeopardy as discussed above, other states, like Nebraska, have enacted legislation that is more likely to withstand scrutiny.[80] For example, the Nebraska statute does not specifically name the NCAA as an entity prohibited from restricting student-athletes from being compensated for their NIL.[81] To the contrary, the Nebraska legislation only applies to schools within its borders, which does not facially discriminate against interstate commerce.[82] A decision with respect to the constitutionality of the Nebraska legislation hinges on whether the Eighth Circuit would recognize the NCAA as a de facto regulator of interstate commerce as it pertains to the NIL rights of student-athletes.[83]

This analysis supports the notion that the NCAA would likely face a split among the Circuit Courts of Appeal regarding the applicability of the dormant Commerce Clause as it pertains to the respective states’ NIL legislation unless the courts recognized the NCAA as an interstate regulator of student-athletes’ NIL rights, an area of lawmaking that has historically been left to the states. There are potential detrimental ramifications for the NCAA should it follow this approach. The current trend in judicial opinions is clearly that courts are less inclined to recognize regulatory actions taken by the NCAA that are aligned with their traditional “retaining amateurism” position. Therefore, the NCAA should be hesitant to bring a cause of action based on the dormant Commerce Clause.

Option 2: The NCAA as an Agent

            This option appears to be the most viable because it gives the NCAA autonomy in how NIL deals are agreed upon within the confines of state laws. The various state NIL statutes prohibit disqualification from participation in collegiate athletics should a student-athlete receive compensation based on their NIL. However, NIL statutes remain silent as to how NIL deals may be negotiated or valued. Many of the student-athletes who are able to capitalize on their NIL lack the requisite market knowledge, skill, and legal acumen to best represent their own interests. Therefore, the NCAA is well positioned to act as an agent on behalf of the student-athletes who could request help.

            Under the most restrictive regulatory structure, the NCAA could attempt to require student-athletes to use the NCAA as their sole agent for reaching NIL deals. While this approach would add a degree of standardization and uniformity, it would also raise some speculation as to how hard the NCAA would actually work to maximize the return for a particular student-athlete and also add an undesired layer of intrusiveness. There is already an element of distrust between student-athletes and the NCAA. As a result, it is difficult to imagine a way for the NCAA to make student-athletes feel like they were properly represented by the NCAA. This approach could subject the NCAA to further litigation from dissatisfied student-athletes.

Alternatively, under a less restrictive form of this option, the NCAA could act if it was a player’s association for student-athletes. The burden of obtaining their own NIL deals would continue to fall on the student-athletes. However, the NCAA would facilitate the negotiation and, as part of their service, confirm the NIL payment is not exploitive or considered to be pay-to-play. The benefits of this approach are twofold: 1) it is more likely the NCAA would withstand legal challenges to this approach, and 2) it provides an opportunity for the NCAA to bring some degree of uniformity to NIL deals by partnering with student-athletes as they seek to maximize their NIL value. To achieve success under this approach, the NCAA must remain cognizant of the need to foster a healthy relationship with their student-athletes and to build trust by being consistent in reviewing NIL deals, all of which is a tall order.

Option 3: Congressional Action

Federal intervention into the newly available and lightly regulated NIL opportunities for student-athletes is an option available to Congress should it decide to a rely upon the authority provided in the Commerce Clause. While the NCAA has expressed interest in achieving uniform NIL regulations via federal legislation, Congress has shown very little interest in legislating in this area. The prevailing view is that when a state’s NIL legislation is challenged under a dormant Commerce Clause claim and determined to be constitutional, the NIL legislation could be: 1) gutted by Congress via federal legislation through Commerce Clause authority, or 2) allowed by Congress via non-action. Notably, legislation in the area of NIL has been by achieved at the state level as Congress has not yet asserted its Commerce Clause authority to impose federal regulation. Therefore, while the NCAA should continue to pursue uniform NIL federal legislation and maintain there is a federal interest compelling federal action, especially when considering the significance of what the market is already generating, it does not appear federal action is likely, at least not in the near future.

• Suggested Course of Action

Until recently, the NCAA enjoyed antitrust protection based on their longstanding and successful position that intercollegiate athletics is rooted in amateurism with education being a sufficient payment (in the form of a scholarship) to the extent that student-athletes rendered services to an institution. Over time, the product that has been developed, in large part, by the NCAA has gained in popularity and in profit at a rate that has far exceeded the rate in which the cost to attend college has grown. The widening gap has resulted in a windfall for most of the larger universities who field Division I teams. In the wake of Alston, it has become clear that some of the traditional NCAA defenses are no longer viable. Therefore, is perspicuous that the NCAA opt to conform its ideological foundation to now prioritize the increasingly cognizable rights and equities of student-athletes. The decisions handed down by the U.S. Supreme Court from Board of Regents to Alston have echoed the need for such ideological shifts, but the NCAA has not budged. This is a moment for leadership from the NCAA and their continued failure to act de-legitimizes their authority and standing as the definitive regulatory body for college athletics.

However, there is evidence that the NCAA is waking up to the reality that college sports has been changed forever. Externally, it appears the NCAA’s primary focus is to address the exploitive practices that are allegedly occurring in the uber competitive world of recruiting. What happens when the quarterback who has signed a multimillion NIL deal before he enrolls proves to be a flop and not worthy of playing time? What happens when an entity promises NIL money to secure a commitment but then fails to pay the student-athlete after they enroll in school? What about the booster collectives that are signing prospective student-athletes to NIL deals when there is no real value to the collective in compensating a student-athlete other than winning games – in other words pay for play? As it navigates in the uncharted water, the NCAA should be generally wary of becoming too intrusive in whatever regulations they eventually employ to reduce the size of the litigation target that always sits squarely on their back. However, this is not to say the NCAA should be passive as inaction will accelerate the issues it is facing.

The NCAA must implement some regulation soon, and their actions should be tied directly to a clearly defined intent to protect student-athletes from exploitation and to reign in pay-to-play recruiting. The proper tact for the NCAA is to attempt to gain a seat at the NIL negotiating table with the intent of protecting the student athlete. The NCAA should tailor all regulation in the NIL space to be aimed at the prevention of exploitation of student-athletes and prohibiting pay-to-play recruiting. However, the NCAA must be careful to not be too intrusive while their relationship with student-athletes becomes less of a dictatorship and more of a partnership. Understanding student-athletes are not unionized, the NCAA’s role should morph into one analogous to the various player’s associations in professional sports who exist to protect the best interest of the players. This is a fine line for the NCAA to walk but their success in doing so may determine their very existence.

Under the suggested approach, student-athletes would still be able to retain agents to represent them in NIL negotiations. Once a deal is offered, there should be transparency between the student-athlete and the NCAA. The NCAA would then conduct a review of the proposed NIL deal to confirm the deal does not lead to exploitation of the student-athlete in any way or constitute pay-to-play recruiting. In conducting their review, the NCAA must also perform due diligence on the entity wanting to pay the student-athlete to ensure the entity is legitimate, able to meet its financial obligation, and stands to truly benefit from the NIL of the student-athlete. The NCAA review process must also be fair, uniform, transparent, and quick, all of which are in direct opposition to how the NCAA has historically conducted business. This suggested shift in mentality for the NCAA would lead to rebuilding trust with student-athletes, protect the popular product that generates revenue to the benefit of all parties, and allows the NCAA’s labor force, the student-athletes, to more fairly participate in the market.

1. CONCLUSION

To cement its position as the regulatory body for college athletics, the NCAA must embrace the changing times and shift their foundational ideology away from amateurism and educational opportunity and toward partnering with student-athletes with the intent to protect them from being exploited. Under this approach, the NCAA retains the ability to regulate its unique product while, at the same time, create a new relationship with student-athletes that has a positive impact their lives. The approach also protects the integrity of college athletics, and thus the market, which is vital to the continued financial reward for most who participate in the market.

Recent judicial decisions and state legislation concerning NIL opportunities for student-athletes have indeed opened a new frontier for all concerned in college athletics – the institutions, the student-athletes, coaches, fans, boosters, entities wishing to secure NIL services, the courts, and government at both the state and federal levels. Uncontemplated ramifications of the new NIL opportunities, both positive and negative, are emerging on a regular basis. All eyes are on the NCAA who has generally remained silent while eye popping NIL deals are becoming routine. The NCAA faces its biggest challenge with not only its reputation but its very existence potentially hanging in the balance. The time to act is now and the stakes could not be higher.

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NOTES

[1] Hayley McGoldrick, Swinney criticizes transfer portal: ‘It’s chaos right now’, The Score, https://www.thescore.com/ncaaf/news/2252129.

[2] NCAA Member Schools, NCAA (2021-2022), https://www.ncaa.org/sports/2017/11/28/ncaa-member-schools.aspx.

[3] History, NCAA, https://www.ncaa.org/sports/2021/5/4/history.aspx

[4] Timeline – 1920s, NCAA, https://www.ncaa.org/sports/2021/6/14/timeline-1920s.aspx.

[5] Khadrice Rollins, What Does NCAA Stand For?, Sports Illustrated (March 15, 2018), https://www.si.com/college/2018/03/15/what-does-ncaa-stand-for-march-madness-tournament.

[6] Division I 20/8-Hour Rule Materials, NCAA, https://www.ncaa.org/sports/2013/11/19/division-i-20-8-hour-rule-materials.aspx.

[7] Andrew Zimbalist, The NCAA Sports Model Is Broken, And It’s Time For Congress To Step In, FORBES (Dec. 20, 2019, 8:00 AM), https://www.forbes.com/sites/andrewzimbalist/2019/12/20/the-ncaa-sports-model-is-broken-and-its-time-for-congress-to-step-in/#4888baeb3d09.

[8] The History of the Iron Bowl: Alabama vs Auburn, Angel Fire, https://www.angelfire.com/al/bamacrimsontide/ironbowlhistory.html.

[9] Cam Newton leads Auburn back from 24-point deficit to beat Alabama, ESPN (November 26, 2010), https://www.espn.com/college-football/recap/_/gameId/303300333.

[10] College football facts & figures: Attendance, viewership keep going up, Hootens.com (March 23, 2011),https://www.hootens.com/03-23-2011/college-football-facts–figures-attendance-viewership-keep-going-up/335.html.

[11] Cal. Educ. Code § 67456 (West).

[12] Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Oklahoma, 468 U.S. 85, 104 S. Ct. 2948, 82 L. Ed. 2d 70 (1984).

[13] Herbert J. Hovenkamp, The NCAA and the Rule of Reason. Faculty Scholarship at Penn Law. 1796 (2017).

[14] Adam Weg, Per Se Treatment: An Unnecessary Relic of Antitrust Litigation, 60 Hastings L.J. 1535, 1 (2009).

[15] Id.

[16] Hovenkamp,“The NCAA and the Rule of Reason,” 1.

[17] Id.

[18] Cameron D. Ginder, NCAA and the Rule of Reason: Analyzing Improved Education Quality as a Procompetitive Justification, 57 Wm. & Mary L. Rev. 675, 683 (2015).

[19] Ginder, supra, 684.

[20] Herbert J. Hovenkamp, The Rule of Reason. Faculty Scholarship at Penn Law. 1778 (2018).

[21] Hovenkamp, “The Rule of Reason,” 129.

[22] NCAA v. Bd. of Regents.

[23] Bd. of Regents of Univ. of Oklahoma v. Nat’l Collegiate Athletic Ass’n, 546 F. Supp. 1276, 1276 (W.D. Okla. 1982), aff’d in part, remanded in part, 707 F.2d 1147 (10th Cir. 1983), aff’d, 468 U.S. 85, 104 S. Ct. 2948, 82 L. Ed. 2d 70 (1984).

[24] Bd. of Regents v. NCAA, 546 F. Supp. 1276, 1289.

[25] Bd. of Regents v. NCAA at 1293.

[26] Bd. of Regents v. NCAA at 1319, 1324, 1328.

[27] Bd. of Regents v. NCAA, 707 F.2d 1147.

[28] Bd. of Regents v. NCAA, 707 F.2d 1147, 1162.

[29] NCAA v. Bd. of Regents, 468 U.S. 85, 102.

[30] NCAA v. Bd. of Regents at 95.

[31] NCAA v. Bd. of Regents at 106.

[32] Id. at 105

[33] Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1982).

[34] NCAA v. Bd. of Regents at 105.

[35] NCAA v. Bd. of Regents at 120.

[36] O’Bannon v. NCAA, 7 F. Supp. 3d 955 (2014). (Hereinafter “O’Bannon I”).

[37] O’Bannon v. NCAA, 802 F.3d 1049 (2015). (Hereinafter “O’Bannon II”).

[38] O’Bannon I, 7 F. Supp. 3d 955, 963.

[39] O’Bannon I at 966.

[40] O’Bannon I at 985.

[41] O’Bannon I at 982.

[42] O’Bannon I at 982.

[43] O’Bannon I at 982.

[44] Id. at 984

[45] O’Bannon II, 802 F.3d 1049.

[46] O’Bannon II at 1076.

[47] Id.

[48] Id. at 1078

[49] Nat’l Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141, 210 L. Ed. 2d 314 (2021).

[50] NCAA v. Alston, 141 S. Ct. 2141, 2152.

[51] NCAA v. Alston at 2152.

[52] NCAA v. Alston at 2152.

[53] NCAA v. Alston at 2153.

[54] Id.

[55] Cal. Educ. Code § 67456 (West).

[56] Luke Tepen, Pay to Play: Looking Beyond Direct Compensation and Towards Paying College Athletes for Themselves, 65 Wash. U. J. L. & Pol’y 213 (2021).

[57] Michelle B. Hosick, NCAA adopts interim name, image and likeness policy, NCAA (June 30, 2021 4:20:00 PM), https://www.ncaa.org/news/2021/6/30/ncaa-adopts-interim-name-image-and-likeness-policy.aspx.

[58] KC Ifeanyi, How NCAA athletes are taking creative control in the Wild West of name, image, likeness deals, Fast Company (March 3, 2022), https://www.fastcompany.com/90725103/ncaa-athletes-creative-control-wild-west-name-image-likeness-deals-march-madness.

[59] Paolo Uggetti, NCAA to review NIL policies, including impact on student-athletes and potential recruiting violations, ESPN (February 18, 2022), https://www.espn.com/college-sports/story/_/id/33323409/ncaa-review-nil-policies-including-impact-student-athletes-potential-recruiting-violations.

[60] Id.

[61] Uggetti, supra.

[62] Greg Johnson, What the NCAA Transfer Portal Is… and What It Isn’t, Champion Magazine (Fall 2019), https://s3.amazonaws.com/static.ncaa.org/static/champion/what-the-ncaa-transfer-portal-is/index.html, see “DI Men’s Basketball Transfer Waivers for the 2018-19 Season.”

[63] Johnson, supra, see “The Story Behind the Portal.”

[64] Id.

[65] Johnson, supra.

[66] Johnson, supra.

[67] Ross Dellenger, The First Thing to Understand About NIL Is That Nobody Fully Understands NIL, Sports Illustrated (August 26, 2021), https://www.si.com/college/2021/08/26/ncaa-recruiting-name-image-likeness-daily-cover.

[68] Id.

[69] Cydney Henderson, Texas A&M football coach Jimbo Fisher fires back at Alabama’s Nick Saban over NIL comments, USA Today (February 2, 2022 8:51:00 PM), https://www.usatoday.com/story/sports/ncaaf/sec/2022/02/02/jimbo-fisher-texas-am-football-recruiting-nick-saban/6641974001/.

[70] Andy Staples, Nico Iamaleava has arrived. If he’s the $8 million QB recruit, he’s the best gamble, The Athletic (April 11, 2022), https://theathletic.com/3241640/2022/04/11/nico-iamaleava-tennessee-nil/.

[71] Tepen, supra, 229.

[72] Id. at 237.

[73] Id. at 225-26.

[74] Tepen, supra, 229.

[75] Id.

[76] Pike v. Bruce Church, Inc., 397 U.S. 137, 141, 90 S. Ct. 844, 847, 25 L. Ed. 2d 174 (1970).

[77] Ass’n des Eleveurs de Canards et d’Oies du Quebec v. Harris, 729 F.3d 937, 949 (9th Cir. 2013).

[78] NCAA v. Bd. of Regents at 102.

[79] Cal. Educ. Code § 67456 (West).

[80] Tepen, supra, 234-35.

[81] Neb. Rev. Stat. Ann. § 48-3603 (West)

[82] Tepen, supra, 234-35.

[83] Id.