Boosters and collectives will be subject to mandatory disclosure of NIL transactions. Is it legal?

FILE – Wisconsin’s Traevon Jackson dribbles past the NCAA logo during practice at the NCAA men’s basketball tournament March 26, 2014, in Anaheim, Calif. A federal judge has dismissed the first objection to a $2.77 billion settlement of antitrust lawsuits by the NCAA and five power conferences, ruling against Houston Christian University’s request to intervene. (AP Photo/Jae C. Hong, File)

By RALPH D. RUSSO, AP College Football Writer

College sports leaders believe they have found a way to finally separate themselves with a massive antitrust settlement “real NIL” in the case of athletes who receive sponsorship payments, which they claim are in fact a form of pay-to-play or recruitment incentives disguised 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 conferences, which will ultimately lead to them facing new litigation.

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

Other legal experts see numerous precedents in professional sports leagues that support trying to regulate NIL.

“In my opinion, the idea that there would be a lot of litigation around this disclosure requirement was not well thought out.” said Jay Ezelle, an Alabama-based attorney who has handled NCAA and antitrust cases.

Proposed Settlement

The NCAA, Big Ten, Big 12, Atlantic Coast Conference, Southeastern Conference and Pac-12 agreed in May to settle multiple antitrust lawsuits over athlete compensation for $2.78 billion. The full term sheet was filed last week and still needs to be approved by 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 agreements between college athletes or recruits and individuals identified as school sponsors will be subject to review for “a valid business purpose related to the promotion or endorsement of goods or services provided to the general public for profit, for compensation at rates and on terms commensurate with those paid to similarly situated individuals with comparable NIL who are not current or prospective student-athletes” in 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 many things happening that we cannot control through this platform” said Schnase. “While this platform won’t have any impact on 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 in which you have to prove his fair market value is based on some comparable (contract) that is not entered into 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 no one forbids them from entering into contracts with student-athletes” he said. “They’re basically saying that the enhancer can’t enter into a contract that exceeds fair market value. So the idea that the enhancer can sue and say that I was wronged in some way because I was forced to pay less for this person’s services than I would have liked… If anything, it saves the enhancer 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 these cases,” Feldman said.

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

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AP College Football: https://apnews.com/hub/college-football

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