The long-debated topic of collegiate athletes receiving compensation in return for the revenue they bring into their respective universities has finally been settled in the United States Supreme Court. On June 21st, 2021, in the case of The National Collegiate Athletic Association vs. Alston et. al, the Supreme Court ruled in favor of current and former “amateur” collegiate athletes.
In a 9–0 unanimous decision, the Supreme Court upheld the lower court’s decision that NCAA restrictions on “education-related benefits” for college athletes violated antitrust law (1).
Ninth Circuit Judge Milan Smith, in his concurring opinion, called the NCAA “a cartel of buyers acting in concert to artificially depress the price that sellers could otherwise receive for their services” (2). Justice Gorsuch dispatched the NCAA’s argument that the court must follow its 1984 decision in NCAA v. Board of Regents of the University of Oklahoma, 468 U.S. 85 (1984), which dealt with the NCAA’s rules restricting schools from televising football games. The NCAA relied on a passage that HELD, “The NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports. There can be no question but that it needs ample latitude to play that role, or that the preservation of the student-athlete in higher education adds richness and diversity to intercollegiate athletics and is entirely consistent with the goals of the Sherman Act” (2).
Implications
By suing under Section 1 of the United States Antitrust Law, amateur athletes have finally won the battle that has been fought since the conception of amateur athletics: who gets paid from all this? The antitrust laws describe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case (3).
More specifically, The Sherman Antitrust Act, outlaws contracts, combinations, and conspiracies that unreasonably limit domestic and foreign trade. This act was passed to prevent the monopolization of American-made railroads. The definition of an unlawful monopoly, as described by The Sherman Antitrust Act provides in pertinent part “…when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct.” The NCAA model clearly violates the Act, with all the rules, restrictions, and limitations preventing collegiate athletes from providing for themselves while simultaneously generating revenue for the University (4).
The statement above could lead to utter domination by Universities with the Largest Endowments, Revenue, Donor Bases, etc. To encourage fair competition in all endeavors, the Act goes on to mention that competition is working properly when one firm’s vigorous competition and lower prices take sales from its less efficient competitors (4). This clause eliminates any University participation, including coaches, teachers, etc. from being involved in the process of athletes receiving payments. Leaving primarily the Boosters and big-time Donors as the main attractors relatively related to the University who can “recruit” athletes with stipends, payments, cash, and gifts.
Larger Universities, with larger alumni databases, and larger endowments are assumed to be the most successful in recruiting high-caliber athletes. Big cities like Los Angeles, New York, Chicago, Houston, Dallas, and Atlanta may also attract top-end athletes, artists, actors, etc. due to the networking potential and increased corporate sponsorship opportunities. Smaller universities in smaller cities may see a decline in the caliber of athletes they are able to recruit based on their financial support.
Outside of the Courtroom
Facilitation is a relevant factor in NIL following the ruling. Georgia Tech, like many other major Universities, has facilitated a partnership between TiVo and 90 of its current football players (5). This is legal because Georgia Tech does not directly touch the money, but their large platform and status allow TiVo to recognize Georgia Tech and for its athletes – who otherwise would have few financial opportunities – to receive almost 100k in value per stipend.
As a result of changes in the law, many college athletes have hired agents. Technically, under the new laws, if the agent does not work directly for the school, they can arrange any agreement between a third party and their client. Creative and lucrative opportunities have developed from this new partnership. For example, big money donors at The University of Texas formed a nonprofit charity called the “Pancake Factory” which promises $50,000 a year to all scholarship offensive linemen (6). The gray area becomes clearer here, as donors can publicly financially support collegiate athletes for the first time in history.
Rising stars, like Quinn Ewers and Arch Manning, who have not even seen a collegiate snap, have potential seven-figure deals floating around their heads at a mere 17-18 years old (7). In any normal circumstance, an adult would seek legal counsel on how to invest a newly found large sum of money, in order to not squander it. Without proper counsel, thousands of young men could be taken advantage of by signing contracts they are not mature enough to understand. Thousands of amateur athletes have already signed deals, some big, some small, since the passing of this bill (8). In the infancy of this market, development has begun to pick up significantly. With NCAA revenue approaching $ 1 billion coupled with the fanatics of college boosters, the NIL market will soar.
Contracts and the transfer of large sums of money traditionally require an attorney to perform mediation and contract negotiations in a civil and sophisticated manner. Furthermore, studies show that roughly 70% of wealthy families lose their fortune by the second generation, an epidemic that can be mitigated by financial consultation, professional and experienced management as well as ethical business partners (9). What makes attorneys more significant in this realm is that when sworn in, we pledge to follow a certain code of ethics in business called The Model Rules of Professional Conduct. At the threat of disbarment, attorneys take this code quite seriously, something unique from all other forms of representation (10). Attorney presence within the front office, particularly in compliance, will help limit and prevent NCAA violations in a changing environment, protecting both the University and its players from scandal. This is especially important given the recent accusations of coaches tampering with athletes who are not in the transfer portal, an NCAA violation. Many athletes come from low-income backgrounds and have never seen someone with the amount of money they are about to make. Like a plaintiff winning a big settlement or someone picking the lucky numbers in the lottery, newly acquired wealth can be easily squandered if not professionally advised.
Written by:
Will Finley
Law Clerk
GUERRA LLP
875 East Ashby Place, Suite 1200
San Antonio, Texas 78212
Phone: (210) 447-0500
Frank Guerra
Board Certified – Personal Injury Law
Texas Board of Legal Specialization
GUERRA LLP
875 East Ashby Place, Suite 1200
San Antonio, Texas 78212
Phone: (210) 447-0500
Be sure to follow us on Instagram and Facebook to see more Guerra LLP news!
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https://www.si.com/nfl/2021/06/29/business-of-football-supreme-court-unanimous-ruling#:~:text=In%20a%209%E2%80%930%20unanimous,college%20athletes%20violated%20antitrust%20law
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https://www.natlawreview.com/article/ncaa-may-not-sidestep-antitrust-law-scotus-holds
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https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws
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https://www.justice.gov/atr/antitrust-laws-and-you.
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https://www.espn.com/college-sports/story/_/id/31086019/everything-need-know-ncaa-nil-debate)
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https://247sports.com/Article/The-Pancake-Factory-Inside-the-NIL-initiative-that-will-let-Texas-offensive-linemen-bring-in-50000-annually-177666783/)
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https://www.dreamfield.co/resources/12-biggest-nil-deals-in-2021
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(https://nilcollegeathletes.com/deals)
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(dnuwonde0money.com/rich-families-lose-wealth/w2dene0in2e)
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https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/model_rules_of_professional_conduct_table_of_contents/). A
