NCAA Targets Collectives With Mandatory Disclosure of Athletes’ NILs. Is It Legal?

The NCAA and college sports leaders believe they have found a way to strike a massive antitrust settlement to finally separate “real NIL” payments to athletes from sponsor-funded payments they claim are really play or recruiting incentives masquerading as sponsorship deals.

If a federal judge approves the settlement, mandatory disclosure rules, an outside clearinghouse to evaluate the deals and an enforcement process involving neutral arbitrators would be used to examine name, image and likeness transactions between athletes and third parties for fair market value, with a focus on so-called NIL class transactions.

Some believe the plan is an overreach by the NCAA and will ultimately lead to a lawsuit.

“Sincere question for those with #NIL, as well as all sports fans: WHY should a college athlete be required to submit a NIL agreement above $600 (as proposed by the NCAA) for approval by the NCAA (or other group)?” Russell White, head of The Collective Association, posted on social media.

Other legal experts see ample precedent in professional sports leagues that supports the NCAA attempting to regulate NIL.

“The idea that there would be a whole bunch of lawsuits over this disclosure requirement, in my opinion, was not well thought out,” said Jay Ezelle, an Alabama attorney who has worked on NCAA and antitrust cases.

Proposed Settlement

The NCAA and five power conferences agreed in May to settle multiple antitrust lawsuits over athlete compensation for $2.77 billion. The full term sheet was filed last week and still needs approval from U.S. Judge Claudia Wilken of the Northern District of California, a process that could take until next year.

If approved, the NCAA and conferences would change rules to allow schools to distribute about $21 million annually in athletic revenue to athletes, starting in 2025.

Under the agreement, NIL transactions between college athletes or recruits and individuals deemed to be sponsors of the school will be subject to review for a “legitimate business purpose related to the promotion or endorsement of goods or services to the general public for profit, with compensation based on rates and terms commensurate with compensation paid to similarly situated individuals with comparable NIL who are not current or prospective student-athletes” at the same school.

Enforcement will include the ability for athletes and schools to appeal to neutral arbitrators. The specifics of mandatory disclosure rules still need to be developed.

Database launched

The NCAA launched NCAA NIL Assist on Thursday, a public online database to track what athletes are earning in NIL. All information will be reported anonymously, and athlete and school information will be withheld. Users will be able to sort the reported data by sport, conference and even position, giving athletes a better idea of ​​how much they are worth in the NIL market.

NCAA vice president of academic and membership affairs David Schnase said NIL Assist is not intended to be a law enforcement tool and will not be part of mandatory reporting under the settlement.

“There are a lot of things going on outside of what we can control with this platform,” Schnase said. “So, while this platform won’t affect those results, when the (NCAA) board starts making decisions, we’ll have some pretty good data to help them make informed decisions.”

More lawsuits?

Athletes challenging NCAA compensation limits have changed long-standing principles of amateurism and moved college sports toward a more professional model.

Add the new revenue-sharing payments to what schools in major conferences currently spend on scholarships and other benefits, and athletes will receive about 51% of the revenue generated by athletic departments, a percentage similar to what professional leagues receive.

If approved, the settlement could reduce the threat of future legal challenges from college athletes who will have the opportunity to challenge the terms. If there are challenges to the disclosure rules, they are likely to come from sponsors or collectives.

According to sports lawyer Mit Winter, the disclosure issue is not as problematic as the rules surrounding what the NCAA considers doping and the difficulty of establishing fair market value.

“And the way you have to prove fair market value is through some comparable (agreement) that you don’t have with a college athlete,” said Winter, who serves on the board of Athletes.org, a group that advocates for college athletes to organize by sport and enter into collective bargaining agreements with schools or conferences.

Ezelle sees no strong case for the collectives or promoters to file an antitrust complaint.

“Because there’s nothing stopping them from making a deal with a student-athlete,” he said. “They’re just saying a sponsor can’t make a deal that’s more than fair market value. So the idea that a sponsor could sue and say I was wronged in some way because I was forced to pay less for this person’s services than I wanted to… If anything, the sponsor will save money.”

Gabe Feldman, a sports law professor at Tulane University, said it is common for professional leagues to regulate athletes’ outside sources of income to prevent teams from circumventing salary caps and luxury taxes.

“The big difference now is that the rules for professional sports are set collectively. And these are not. So there will be no antitrust immunity in those cases,” Feldman said.

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Follow Ralph D. Russo on https://twitter.com/ralphDrussoAP

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