The Impact of Name, Image, and Likeness Rules
Fans who tune into professional sports games regularly have seen advertisements featuring popular athletes endorsing various brands. Fans may not be aware that the global sports sponsorship market was worth 57 billion dollars in 2020.[1] College athletes, although popular in the United States, have always been shut out of this lucrative industry by the National Collegiate Athletic Association (NCAA), until now. The NCAA recently faced a strong antitrust lawsuit that precipitated a significant change in how college athletes are compensated.[2] On June 21, 2021, the Supreme Court in NCAA v. Alston, denied the NCAA immunity from the Sherman Act (our governing antitrust law), among other things).[3] Justice Kavanaugh, concurring in the judgment, suggested the status quo of NCAA compensation rules must change.[4]
On June 30th, in the wake of Alston, the NCAA issued a press release detailing a new Name, Image and Likeness (“NIL”) policy.[5] This new policy allows college athletes to profit off of their NIL without sacrificing their amateur status and ability to participate in college sports.[6] The NCAA maintains that the policy is a bridge to eventual blanket federal law.[7] For now, the NCAA has left it to states and schools to dictate the parameters of NIL compensation.[8]
The NCAA’s new NIL policy allows NIL compensation but provides very little guidance on implementation. Section 12 of the NCAA bylaws has historically required that players accept only extremely limited, qualified money from outside organizations in order to retain amateur status and play college sports.[9] This included strict limitations on promotional activities under Article 12.5.[10] The key piece of the NCAA policy is that it essentially euthanizes Section 12 of its bylaws, as it pertains to NIL promotional activities.[11] The NIL policy permits NIL payments across all states, including in states that do not enact NIL legislation by declaring that NIL promotional activities will not jeopardize amateur status.[12] Student-athletes must follow existing state guidance where it is available.[13]
The NCAA policy creates room for states to apply different NIL policies as they see fit, or to pass no legislation at all without hindering NIL promotional activities for student athletes. Many state’s took advantage of the NCAA’s policy position and promptly passed laws putting this NCAA policy into effect with varying outcomes.[14]
States have taken slightly varied approaches and have delegated powers to conferences, schools, and even statewide governing bodies. A comparison of the laws in Alabama, New Jersey, and Utah highlight the difference in approach and the effects of state law. The New Jersey NIL law has a few features that are common across NIL laws. It permits compensation for NIL, does not allow schools to pay athletes directly, and requires reporting of NIL deals to the school.[15] A unique aspect of the New Jersey law is that it does not allow a school to join a conference that denies athletes NIL compensation.[16] Schools also cannot deny athletes an opportunity to get professional representation.[17] Alabama focuses on schools interaction with agents. The Alabama rules allow schools to restrict professional representation, requires that agents be registered with the state, and for players to report agency deals seven days before entering them.[18] A unique aspect of Alabama state law is the creation of the Alabama Collegiate Athletics Commission (ACAC).[19] The Alabama law creates the ACAC and vests it with power to make rules to implement NIL rules, to put forth rules to manage athletes, and to create a dispute resolution system.[20] While both New Jersey and Alabama accomplish the NCAA’s goals of allowing NIL compensation in similar ways, there are two key divergences – treatment of conferences, and in Alabama’s promulgation of a governing body.
Utah, on the other hand, has not adopted any NIL state law at this point. The NCAA still allows NIL endorsements in Utah by simply forgoing the pursuit of any section 12 action.[21] So, without some of the restrictions present in state laws, schools in Utah have room to improvise. Bringham Young University (BYU) has taken advantage of this legal landscape through a deal directly with Built Bar that provides “brand ambassador” compensation to the entire team.[22] Under New Jersey law, for example, this deal is challenging due to the provision that makes it illegal for teams to direct NIL deals to the players.[23] The BYU deal highlights a slight advantage for college programs operating in states that have not passed NIL laws. These programs are confined only by the NCAA’s NIL policy, not state law.
Alabama and New Jersey each have an impactful provision that restricts the type of businesses that student-athletes can participate in NIL deals with, but the laws go in slightly different routes. The New Jersey NIL Law does not permit endorsement deals between student-athletes and tobacco, alcohol, pharmaceutical, or weapons companies among other businesses.[24]. Alabama adds to this by granting each school the right to make a good faith judgment in disallowing an endorsement deal if such deal negatively or adversely reflects on the schools educational institution or athletic program.[25] In the absence of Utah state NIL laws, BYU has issued a school policy with strong restrictions on the businesses student-athletes can contract with.[26] BYU athletes cannot contract with any companies that do not conform with BYU Honor Code Standard, including coffee companies.[27] When engaging in promotional deals student-athletes must also comply with school grooming rules.[28]
The NCAA has made it clear that it is working with Congress towards federal legislation that will govern student-athlete compensation.[29] For now, NIL laws are highly decentralized, so, schools and individuals are taking advantage. Some schools, like Rutgers, are capitalizing on NIL policies by partnering with companies that use data to streamline NIL endorsement deals.[30] Rutgers launched its R Edge program on July 1st in which it partnered with Opendorse to leverage NIL deals for their student-athletes and INFLCR Virtual to optimize student-athlete exposure in the Tri-state area.[31] The school likely hopes that exposure will serve as a tool in recruiting future players.[32]
Individual players have also secured exciting new opportunities to get paid. Ga’Quincy “Kool-Aid” McKinstry, an Alabama Football defensive back has partnered with Kool-Aid and the partnership has taken off on social media.[33] Trey Knox, an Arkansas Football player and owner of his dog, Blue, landed a promotional deal with PetSmart.[34] Decentralized NIL rules, put forth by the NCAA, states, and schools are effectively providing a temporary, and long overdue avenue for student-athletes to profit through sponsorships.
Footnotes
