By Steven Neocleous*
*Steven Neocleous is currently a full-time third-year student at Touro College Jacob D. Fuchsberg Law Center. He last worked for the Nassau County Attorney’s Office in the Municipal Transactional/ Real Estate/ Financial Bureaus. Steven has a passion for sports which inspired him to use his knowledge from Constitutional Law and Sports Law to write this note. He hopes to use his law degree and prior work experience for a position at a real estate or corporate law firm after graduation.
Imagine a situation where you are a star high-school athlete. You recently received a full athletic scholarship to attend a prominent Stanford University, an institution, which you otherwise would not have had the opportunity to attend if it was not for your incredible athletic abilities. However, that is not all the school has awarded you. Not only do you have free housing, but you also have a full meal plan paid for by the University. Following an arduous day of practice, you are tired from all of the hard work you put in while you were basking in the hot summer California sun. All you want is a tasty beverage, so check your bank account and in it, is the image of $10,000 recently deposited by Hanes as payment for having your image on their new T-shirt. While for years, this appeared to be the work of fantasy, the recently passed California Senate Bill 206, more commonly known as The Fair Pay to Play Act, indicates that collegiate athletes are allowed to acquire endorsements and sponsorships while still maintaining athletic eligibility by prohibiting any California postsecondary education institution and athletic association or group to uphold rules, requirements, or limitation on the ability for California student-athletes to use their name, image, or likeness for their own profit.[1] While this decision may be satisfying on its face, its effects on a national scale are threatening the system created for universities in other states, student- athletes in those states, and the NCAA by violating the Commerce Clause and Sherman Anti-Trust Act.
This note is broken into seven sections which will determine the constitutionality of Bill 206 and the bill’s effects on the American student athlete. Section I will discuss a breakdown of the NCAA. It will highlight its structure, functions concerning procedure, and discuss the power the NCAA has over the student-athlete and university relationship. Section II of this note will discuss the meaning and legislative history of the Fair Pay to Play Act. The explanation of Bill 206 will highlight the contradictions it imposes on the NCAA. Section III of this note will discuss the cases dealing with Bill 206 in the context of the Commerce Clause and how Bill 206 violates the Commerce Clause. Section IV will discuss the cases dealing with Bill 206 in the context of the Sherman Antitrust Act and how Bill 206 violates the Sherman Antitrust Act. Section V concludes how if the legislation were challenged in court it would be declared unconstitutional. Finally, Section VI provides for a difficult yet conceivable alternative for the nationwide dilemma.
I. What is the NCAA?
The NCAA is an association of over 1,100 private and public colleges and universities organized into three divisions based on the nature of their intercollegiate athletic programs.[2] Division I (D-I) offers full or partial athletic scholarships to many of its athletes and is the highest level of competition in most sports; Division II (D-II) also offers athletic scholarships and competes at an intermediate competitive level; Division II (D-III) does not offer athletic scholarships and is the most student-centered completive level.[3] Schools have different divisions for different sports. Most NCAA member schools are members of regional athletic conferences throughout the U.S.[4] Some popular conferences include the ACC, the Big Ten Conferences, the Big 12 Conference, the Pac- 12 Conference, and the South Eastern Conference.[5]
The internal structure provides a board in order to govern the procedural functions of the NCAA. The board consists of the president and chancellors, Leadership Team, and Board of Governors. The president and chancellors goal is to keep campus executives informed and to promote their engagement.[6] Over time, the role of the president has increased in involvement over NCAA athletics. The Leadership Team is the group of close advisors to the president who are tasked with ensuring accountability in management and operations.[7] The Board of Governors is charged with ensuring that each division operates consistently with the basic purposes, fundamental polices and general principles of the Association.[8] These three groups work together in ensuring the regulation between student athlete and the school, creating and enforcing rules of conduct that regulate the relationship among the member schools, and regulate the relationship between its members and outside entities such as television providers.
The express contractual relationship between a student-athlete and his or her institution arises out of the Statement of Financial Assistance, the National Letter of Intent, and policies and procedures governing student-athletes.[9] These documents are standard contracts that come from the NCAA. These document along with the NCAA by-laws, largely define the nature of the obligations that student-athletes owe to their colleges or universities and the obligations these educational institutions owe to their students. In interpreting issues within these contracts and policies, courts first address the interpretation of the by-laws or contract. Once the provision is interpreted, the courts look to see whether it was applied fairly. If it were applied fairly, the courts look to see if it conflicts with any other laws. With the current passing of the California Senate Bill 206, the issue arises of whether a student athlete can be paid for to use their name, image, or likeness for their own profit as this law conflicts with NCAA Bylaws, Article 12 Amateurism and Athletics Eligibility. Specifically, 12.1.2 states, “an individual loses amateur status and thus shall not be eligible for intercollegiate competition in a particular sport if the individual: (a) Uses his or her athletics skill (directly or indirectly) for pay in any form in that sport”[10]. In addition, the students ability to use their name, image, or likeness is only permitted if it is used for promotional activities such as charities and nonprofit promotions. [11] In summary, the NCAA is structured so in order to enforce its rules and fulfill its commitment to amateurism in the realm of sports all while providing for its students educational goals. This can be highlighted through the NCAA’s basic purpose found in the NCAA Constitution. The passage provides, “The competitive athletics programs of member institutions are designed to be a vital part of the educational system. A basic purpose of this Association is to maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body and, by so doing, retain a clear line of demarcation between intercollegiate athletics and professional sports.”[12]
II. What is the Fair Pay to Play Act?
The Fair Pay to Play Act was introduced on February 4, 2019. Since then, it has gone through the necessary steps in reaching its goal in becoming law and more recently in its history, it has been approved by Governor Gavin Newsom on September 20, 2019 and filed with the Secretary of State of California Alex Padilla on September 30, 2019. The Fair Pay to Play Act states:
- all student athletes attending in public and private four-year colleges and universities in California are to be able to earn money from their name, image, or likeness.
- California colleges are prohibited from enforcing NCAA rules that prevent student athletes from earning compensation, and will prevent the NCAA from banning California universities from intercollegiate sports if their athletes sign sponsorship deals.[13]
The Fair Pay to Play Act allows student athletes in California to acquire endorsements and sponsorships through the use their name, image, or likeness for their own profit while still maintaining athletic eligibility by prohibiting any California postsecondary education institution and athletic association such as the NCAA to uphold their basic purpose in enforcing their rules of amateurism. By enacting the Fair Pay to Play Act, California is knowingly breaking the amateurism rules set by the National Collegiate Athletics Association, which preclude athletes from receiving compensation for their NILs beyond the cost of college attendance.[14]
III. The Commerce Clause
- Introduction to the Commerce Clause and how Congress should be Involved in the Fair Pay to Play Act
Article I, Section 8, Clause 3 of the Constitution, known as the Commerce Clause, empowers Congress “to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”[15] Congress may regulate under its commerce power (i) the channels and (ii) the instrumentalities of interstate commerce, as well as (iii) any activity that substantially affects interstate commerce, provided that the regulation does not infringe upon any other constitutional right.[16] If Congress has not acted or no preemption is found, the state or local law can be challenged on the grounds that it excessively burdens commerce among the states.[17] In other words, even if Congress has not acted – even if its commerce power lies dormant, state and local law still can be challenged as unduly impending interstate commerce.[18] The Commerce Clause thus has two distinct functions.[19] One is an authorization for congressional actions.[20] The other function of the Commerce Clause is in limiting state and local regulation also known as the dormant or “negative” commerce Clause.[21] The constitutionality of The Fair Pay to Play Act rests on the latter function of the Commerce Clause.
- H.P. Hood & Sons, Inc. v. Du Mond
The rationale behind the reasoning can be seen in the case of H.P. Hood & Sons, Inc. v. Du Mond. In this case, H.P Hood & Sons Inc., a Massachusetts corporation, has long distributed milk and its products to inhabitants of Boston.[22] That city obtains about ninety percent of its fluid milk from states other than Massachusetts. [23] Dairies located in New York State since about 1900 have been among the sources of Boston’s supply, their contribution having varied but during the last ten years approximating eight percent. [24] The area in which Hood has been denied an additional license to make interstate purchases has been developed as a part of the Boston milkshed from which both the Hood Company and a competitor have shipped to Boston.[25] Article 21 of the Agriculture and Markets Law of New York forbids a dealer to buy milk from producers unless licensed to do so by the Commissioner of Agriculture and Markets.[26] For the license he must pay a substantial fee and furnish a bond to assure prompt payment to producers for milk.[27] But here the challenge is only to a denial of facilities for interstate commerce upon the sole and specific grounds that it will subject others to competition and take supplies needed locally, an end, as we have shown, always held to be precluded by the Commerce Clause.[28] Thus, the court held, that since the statute as applied violates the Commerce Clause and is not authorized by federal legislation pursuant to that Clause, it cannot stand.[29] Thus, the Commerce Clause allows Congress to limit state and local regulation when those regulations effect interstate commerce. In relation to The Fair Pay to Play Act, Congress should then have the power to strike the bill as unconstitutional as it deals with a state regulation monitoring interstate commerce.
- Philadelphia v. New Jersey
More specifically in the context of the constitutionality of The Fair Pay to Play Act, Philadelphia v. New Jersey highlights discrimination against out- of- state commerce while protecting the local economic interest.[30] A New Jersey statute states,
“No person shall bring into this State any solid or liquid waste which originated or was collected outside the territorial limits of the State, except garbage to be fed to swine in the State of New Jersey, until the commissioner [of the State Department of Environmental Protection] shall determine that such action can be permitted without endangering the public health, safety and welfare and has promulgated regulations permitting and regulating the treatment and disposal of such waste in this State.”[31]
Immediately affected by these developments were the operators of private landfills in New Jersey, and several cities in other States that had agreements with these operators for waste disposal. They brought suit against New Jersey and its Department of Environmental Protection in state court, attacking the statute and regulations on a number of state and federal grounds.[32] The Court ultimately held that the statute was unconstitutional as it discriminated against out of state commerce stating that whatever New Jersey’s ultimate purpose, it may not be accomplished by discriminating against articles of commerce coming from outside the State unless there is some reason, apart from their origin, to treat them differently. Both on its face and in its plain effect, Chapter 363 violates this principle of nondiscrimination.[33]
Similarly, The Fair Pay to Play Act is violating the principle of nondiscrimination. The Fair Pay to Play Act is protecting the local economic interests of California at the expense of out-of-state competitors. The Act is protecting its local economic interest by allowing more California high-school students who are pursuing athletes at the college level, to have more of incentive to stay in California and attend a local university there. In addition, this protection of the state’s own economic interests is at the expense of out of state competitors because the Act would in effect attract more high-school students, pursuing athletics, to attend colleges and universities in the state of California as opposed to other states.
- How the NCAA is involved in Interstate Commerce
- Hennessey v. National Collegiate Athletic Association
Hennessey v. National Collegiate Athletic Association, deals with the NCAA’s adopted Bylaw 12-1, which limits the maximum number of assistant football and basketball coaches that institutions could employ.[34] Due to this adoption, Lawrence Hennessey and Wendell Hudson, assistant coaches for the University of Alabama, were reduced to the status of part-time coaches.[35] The two coaches bring suit seeking a ruling that the adopted bylaw was invalid or inapplicable.[36] The court rules that the bylaw is invalid and the opinion deals with a variety of issues of law surrounding the employment of the two plaintiffs such as the Contracts Clause and Equal Protection Clause of the Fourteenth Amendment.[37]
However, the significance of this case in the analysis of the Fair Pay to Play Act, is shown when the court highlights several perspectives in analyzing interstate commerce and the NCAA. The court eventually reaches the conclusion that the NCAA is significantly involved in interstate commerce.[38] The court points out that intercollegiate athletic competition, both in events sponsored by the NCAA and in games arranged by its member institutions, involve to a great degree teams from different states.[39] The court goes onto explain how the NCAA was able to profit from ticket sales and television rights due to its basketball tournaments and football games.[40] In addition, the court explains how the NCAA was distributing money to its members who had teams competing in various events.[41] Due to these facts, the court concluded that while the participating athletes may be amateurs, intercollegiate athletics in its management is clearly business, and big business at that.[42] The court goes on to say because the NCAA is significantly involved in interstate commerce, there is not a disparage of educational objectives of the NCAA itself or of its members.[43] Tournaments and games and the television broadcasting of these tournaments and games, are components that prove that the NCAA, as a business, establish the requisite of interstate commerce. In addition to these components, factors such as transportation and recruiting further prove that the activities of the business of the NCAA establishes the requisite for interstate commerce. Therefore, the NCAA is involved in interstate commerce and the Fair Pay to Play Act’s constitutionality should be determined in a court’s application of the Bill to Article 1, Section 3 of the United States Constitution, better known as the Commerce Clause.
- How The Fair Pay to Play Act Violates the Commerce Clause
- National Collegiate Athletic Association v. Miller
When the statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over pit-of state interests, the statute is generally struck down without further inquiry.[44] National Collegiate Athletic Association v. Miller addresses how if there is a state statute dealing with the NCAA that directly discriminates or regulates against interstate commerce, then there is a per se violation of the commerce clause. In Miller, the NCAA received information of possible rule violations at UNLV and, on December 17, 1990, sent a notice of official inquiry to UNLV describing the possible violations.[45] Between December 17, 1990, and April, 1991, the NCAA staff and UNLV conducted separate investigations of the UNLV intercollegiate basketball program.[46] Witnesses were interviewed, information was exchanged, and documents were secured in preparation for the official hearing before the Committee on infractions.[47] On July 19, 1991, the NCAA notified UNLV that a prehearing conference would be held September 9, 1991, and that the official hearing was scheduled for September 27-29, 1991.[48] Meanwhile, on July 1991, Defendants Tim Grguruch and Ron Ganulin, through written correspondence, demanded that the NCAA abandon its existing procedure for conducting the investigation and holding the official hearing.[49] Rather, these defendants insisted that the NCAA conduct the investigation and hearing in complete accord with a Nevada statute, which required any national collegiate athletic association to provide a Nevada institution, employee, student- athlete with certain procedural due process protections during an enforcement proceeding in which sanctions may be imposed.[50] As previously established, the NCAA is heavily involved in interstate commerce such as their abundance of tournaments where teams travel across states, national marketing of their competitions, national television and broadcasting of their games, and more. With the compliance of the request of the defendants, the NCAA, in order to avoid liability under Nevada law, would be required to adopt the state’s procedural rules for Nevada institutions. Therefore, the likely practical effect of the statute would be to compel the NCAA to adopt the procedural rules enacted by the Nevada Legislature, thereby allowing the Nevada Legislature to effectively dictate enforcement proceedings in states other than Nevada.[51] This effect is substantial. Thus, in evaluating the practical effect, the consequences of the statute as well as how the challenged statute interacts with the regulatory schemes of other states, and what effects may arise if every state adopted similar legislation are taken into consideration.[52] Therefore, the court in Miller found that if the NCAA were to adopt the Nevada law nationwide, in order for the NCAA to maintain uniformity in their enforcement procedures, then there would be violation of the Commerce Clause because it would result in a single state statute controlling commerce outside of the state’s boundaries.[53]
The precedent set in Miller would be applied to the Fair Pay to Play Act if challenged in court. Similarly, The Fair Pay to Play Act is a state statute where the NCAA is left with the question of what to do in order to preserve uniformity within how they govern the many universities apart of the NCAA. If the NCAA were to preserve uniformity and allow for all universities across the nation to implement the same standards set in the Fair Pay to Play Act, then they not only would only go against their own bylaws and basic purpose, but they would also disrupt interstate commerce. This scenario is similar to Miller as the Nevada statute in Miller gave employees of Nevada institutions certain procedural due process protections that were not included within the NCAA’s enforcement program that was applied to all schools across the nation.[54] The Fair Pay to Play Act allows student athletes in California to receive pay for the name, image, and likeness which is contradictory to the NCAA Bylaws and NCAA basic purpose which are applied across the nation. In addition, there are no other states that have enacted similar legislation to the Fair Pay to Play Act. The rationale in the ruling of Miller was that requiring the NCAA to implement different standards across all states of the nation would interfere with interstate commerce.[55] In order to provide for uniformity, the Nevada statute would force the NCAA to regulate universities across the nation to follow the Nevada statute which it would not be able to because it would result in a single state statute controlling commerce outside of the state’s boundaries.[56] Similarly, if challenged, a court would apply similar methods of reasoning as the court did in Miller. The court would apply the evaluation standard in Healy. In Healy, the evaluation standard was highlighted that the consequences of the statute as well as how the challenged statute interacts with the regulatory schemes of other states, and what effects may arise if every state adopted similar legislation are taken into consideration.[57] Here, the Fair Pay to Play Act presents consequences such as the NCAA’s inability to uniformly govern the universities that are a part of it and a contradiction of the NCAA’s Bylaws and Basic Purpose. As for the regulatory schemes of other states and the effects that may arise if every state is to adopt similar legislation, the court would use the precedent in Miller. The court would apply the standard that if the NCAA were to adopt a single state’s law nationwide, in order for the NCAA to maintain uniformity, then there would be violation of the Commerce Clause because it would result in a single state statute controlling commerce outside of the state’s boundaries.[58] In the passing of the Fair Pay to Play Act, the NCAA would then apply the California statute to all other states thus forcing other states to adopt the California legislation. Therefore, if challenged in court, the precedent set in Miller would be applied to the Fair Pay to Play Act and the Act would be struck down as unconstitutional as it is controlling commerce in other states and thus violating Article I, Section 8, Clause 3 of the Constitution or the Commerce Clause.
IV. What is the Sherman Antitrust Act and how does the Fair Play To Play Act violate it?
- Sherman Antitrust Act §1
The collective adoption and enforcement of NCAA rules by its member universities as well as other agreements concerning the production, marketing, and governance of intercollegiate athletics constitute concerted action for purposes of §1 of the Sherman Act.[59] Therefore, virtually all NCAA rules and agreements among NCAA members are potentially subject to antitrust challenges. The purpose of antitrust law is to preserve a competitive marketplace and protect consumer welfare.[60] Economic competition is harmed when anticompetitive conduct inhibits or prevents the market’s ability to achieve lower prices, better products, and more efficient methods of production, all of which benefit consumers.[61] Section One of the Sherman Antitrust Act states, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or within foreign nations, is hereby declared to be illegal.”[62] Therefore, Section One’s underlying principle is that an unrestrained competitive market is the best means of promoting consumer welfare. In determining if a restriction violates Sherman §1, there are two tests; the Illegal Per Se and the Rule of Reason. Since the issue in this note does not concern absolute illegality, then the Illegal Per Se rule shall not be applied. Therefore, the Rule of Reason test shall be applied. In determining whether the Rule of Reason test shall be applied, the restriction that is challenged is determined by whether it has a predominantly anti-competitive commercial effect that harms college sports fans (it’s unreasonable restraints of trade) or whether it is appropriate and necessary regulation that benefits fans more than unbridled market competition among universities producing intercollegiate athletes.[63] In order for a plaintiff to prevail in the Rule of Reason Test: (1) The plaintiffs bears the initial burden of showing that the restraint produces significant anticompetitive effects within a relevant market.[64] (2) If the plaintiff meets this burden, the defendant must come forward with evidence of the restraint’s procompetitive effects.[65] (3) The plaintiff must then show that any legitimate objectives can be achieved in a substantially less restrictive manner.[66]
- O’Bannon v. National Collegiate Athletic Association
O’Bannon v. National Collegiate Athletic Association demonstrates that rules regarding compensation are not exempt from antitrust scrutiny, rather they must be analyzed under the Rule of Reason.[67] In 2009, O’Bannon, a former All- American basketball player whose image was depicted in a college basketball video game, sued the NCAA and the Collegiate Licensing Company (CLC), the entity which licenses the trademarks of the NCAA and a number of its member schools for commercial use, in federal court.[68] O’Bannon’s complaint lays out that the NCAA’s amateurism rules, insofar as they prevented student-athletes from being compensated for the use of their NILs (Name, Image, Likeness), and how these rules were an illegal restraint of trade under Section 1 of the Sherman Act.[69] In addition, Same Keller, the former starting quarterback for Arizona State University and University of Nebraska football team, brought suit against the NCAA, CLC, and EA, when EA had impermissibly used his NIL in its video games and when the NCAA and CLC had wrongfully turned a blind eye to EA’s misappropriation of these NILs.[70] These two complaints were consolidated into one case.[71] In the determination of the whether the NCAA’s restrictions for a student-athlete to use their NIL for compensation, the court applies the three- step framework of the Rule of Reason presented in Tanaka.[72]
The court first addresses the significant anticompetitive effects within the market that are presented by the plaintiffs. After hearing the plaintiffs’ arguments, the district court found that the following: a college education market exists and colleges compete for players by offering scholarships, if the NCAA rules were not in place then schools would compete for students by offering them compensation based on their NILs, and compensation rules have anticompetitive effects in that they fix an aspect of “price” that recruits pay to attend college.[73] In response, the NCAA, the defendant, offered four procompetitive justifications for their compensations rules: promoting amateurism, promoting competitive balance among NCAA schools, integrating student-athletes with their schools’ academic community, and increasing output in college education market.[74]
However, the NCAA focuses its arguments to this court entirely on the first proffered justification – the promotion of amateurism – and how amateurism integrates academics with athletics and preserves the popularity of the NCAA.[75] Due to this focus, the court does not look further into the other three justifications and instead relies on the district court’s rejection of the remaining three. The court reasons that because there is no meaningful argument that those findings by the district court are erroneous, the court decides to reject them.[76] The court in O’Bannon accepts the argument for amateurism but cites Board of Regents in concluding that not every rule adopted by the NCAA that restricts the market is necessary to preserving the “character” of college sports.[77] Thus, the court moves to the third step in the Rule of Reason analysis; whether there are substantially less restrictive alternatives to the NCAA’s current rules of the prevention of student-athletes from being compensated for the use of their NILs.
The district court identified two substantially less restrictive alternatives from O’Bannon’s arguments. First, they believe that allowing NCAA member schools to give student-athletes grants-in-aid that cover the full cost of attendance will ensure the same result of the promotion of amateurism.[78] Second, the believe that allowing member schools to pay student-athletes small amounts of deferred cash compensation for the use of their NIL’s would also give the same result.[79] The court accepts the first rationalizing that all the money given to students would be going to cover their “legitimate costs” to attend school.[80] This compensation cap is less restrictive than the current rules because it accomplishes the NCAA’s legitimate procompetitive purpose in allowing the student-athletes to continue their armature status by keeping them in school. Additionally, the NCAA’s goals of amateurism and the integration of athletics and academics, while legitimate, did not justify the outright compensation prohibition because O’Bannon’s alternatives to permit payment giving scholarships up to their full costs of attendance are less restrictive means that can achieve the NCAA’s goals in upholding amateurism. Thus, the NCAA was enjoined from enforcing an outright ban on compensation to student-athletes.
In addition, the court rejects the district court’s second alternative, reasoning that the district court ignored that not paying student-athletes is precisely what makes them amateurs.[81] The court goes onto state that “The difference between offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap.”[82]
The Fair Pay to Play Act differs from O’Bannon in that the state of California is creating the restraint on the NCAA and the California universities. This restraint grants students attending universities in California to receive compensation for their name, image, or likeness while also preventing California universities from enforcing the NCAA rules against such compensation.[83] However, the Fair Pay to Play Act is similar to O’Bannon in that both rules in controversy are not exempt from antitrust scrutiny, specifically, Sherman §1.Therefore, if challenged, a court would apply the Rule of Reason test in determining if the Fair Pay to Play Act violates the Sherman Antitrust Act.
Specifically under the Fair Pay to Play Act, the plaintiff bears the initial burden in demonstrating significant anticompetitive effects that the Fair Pay to Play Act imposes within a relevant market. Specifically, an anticompetitive effect may include the imbalance of power which leans heavily toward schools in California. As students make their decision to attend college, they will most likely favor schools where they have to opportunity to obtain money through their NILs in addition to any other potential scholarships provided by the school. The most that schools not located in California can do is offer potential students scholarships as they must abide by the NCAA rules, therefore giving them a clear disadvantage in the relevant market for potential students.
In the event that the plaintiff is able to demonstrate an anticompetitive effect, the second part of the test shifts the burden to the state to demonstrate the Act’s procompetitive effects. Though the Act has not been challenged, it is likely that the state will argue that the restraint while aiding to the common student-athlete’s daily life, the Act produces procompetitive effects of integrating student-athletes with their school’s academic community, increasing output in the college education market, and promoting amateurism. This would likely serve to satisfy the defendant’s burden as these procompetitive effects as the nature of the Act would incentivize certain high-school students to attend universities and eventually obtain an undergraduate degree thus increasing the output of the college market. Furthermore, it would enable students to continue their pursuit of education as they would be paid for their work as a student-athlete.
Moreover, given that the Act would serve to incentivize a number of prospective students to pursue an undergraduate education, it will likely serve to increase the number of prospective students who are willing to commit to the criteria required of a student-athlete. Accordingly, increasing the number of students who are willing to pursue a carrier as a student-athlete will enable greater competition among student-athletes. As a result, since these incentives will serve to increase the number of student-athletes and competition amongst the schools, it will promote amateurism. Thus, the promotion of a student’s ability to obtain compensation for their NILs would serve to integrate academics with athletics, advocate the popularity of the NCAA’s product, and serve the NCAA’s goal in promoting amateurism.
Lastly, provided that the state is able to satisfy their burden of demonstrating that the Fair Pay to Play Act would result in procompetitive effects, the burden will shift to the plaintiff to demonstrate the existence of a less restrictive alternative that would serve the state’s legitimate objectives of achieving any procompetitive effect. The plaintiff will likely be able to demonstrate this in a manner that would mirror the argument brought by the plaintiff in O’Bannon. For instance, notwithstanding the defendant’s likely contention that the NILs will serve to promote amateurism, the plaintiff will still be able to use the precedent set forth in O’Bannon to demonstrate that allowing students to use their NILs for compensation represents a less restrictive alternative means for allowing NCAA member schools to give student-athletes grants-in-aid that cover the full cost of attendance. This alternative is less restrictive than the current rules as it accomplishes the state’s legitimate procompetitive purpose in allowing the student-athletes to continue their armature status by keeping them in school in order for students to cover their legitimate costs of attendance. Accordingly, this alternative remains valid as its main focus is to keep students in school and promote students to attend school by integrating student-athletes with their school’s academic community and increasing output in the college education market.
Following the passage of the Fair Pay to Play Act, it is likely that the plaintiff will be able to successfully demonstrate a less restrictive alternative while using the argument made by the plaintiff in O’Bannon.[84] Unlike the plaintiff in O’Bannon, the Fair Pay to Play Act will likely supersede the NCAA’s policies regarding amateurism. Specifically, the Act will expressly permit student’s to profit off their NIL’s while also maintaining armature status. Accordingly, given that that student-athletes will have opportunities to profit off their NILs, it will likely enable more prospective students to aspire to be student-athletes. Additionally, this will provide incentives for student-athletes to attend universities where they will gain greater recognition which will enable them to gain greater profits off their NILs. The inevitable result will be an increase in competition amongst these students to attend these universities. As a result, this will demonstrate a least restrictive means of promoting competition while also ensuring that student-athletes maintain their amateur status. Therefore, by using an argument that mirrors the plaintiff in O’Bannon, it appears likely that a plaintiff will be able to demonstrate the existence of a less restrictive alternative that will serve the state’s legitimate objective in achieving a procompetitive effect. In other words, at this time there are a number of NCAA collegiate sports whose publicity falls just short of that of professional.[85] As a result, the opportunities to gain nationwide popularity will enable these students to gain fame and worldwide recognition. Ultimately, this will likely provide greater monetary incentives for student athletes that would far exceed the amount of college tuition and outside expenses as a number of companies will desire to use these students for their brands which will ultimately lead these students to gain a profit.[86] In fact, allowing students to receive compensation for their NILs will likely serve to increase a competition amongst student-athletes to attend certain schools.
Therefore, the enactment of the Fair Pay to Play Act will serve to render any attempt of the NCAA to prevent any student-athlete to profit by their NILs a violation of the Sherman Antitrust Act §1.
V. Conclusion
There is no question that the Fair Pay to Play Act sets forth obstacles for the system created for universities in other states, student- athletes in those states, and the NCAA. These obstructions should not be overlooked as the nature of the Act violates the Commerce Clause and The Sherman Antitrust Act.
The Fair Pay to Play Act allows student-athletes in California to receive compensation for their NILs and prohibits the NCAA from enforcing their rules against such compensation.[87] Due to this, the NCAA is forced to ignore its own principles and basic purpose to make exceptions to universities in California. The NCAA is heavily involved in interstate commerce as it pays its staff and expenses through profits obtained from televised tournaments and games across state borders while effecting other local economies. In addition, universities across the country compete for upcoming high-school students around the country. Thus, Congress has the power to limit state and local regulation when those regulations effect interstate commerce. The Act violates the Commerce Clause as it is protecting the local economic interests of California at the expense of out-of-state competitors. High-school athletes in California have more of incentive to stay in California and attend a local university there as opposed to out of state schools. The state’s interests are at the expense of out of state competitors as it gives out of state high-school athletes more of an incentive to leave their state and attend a California school resulting in a single state statute controlling commerce outside California. Through the precedent set in Miller, Congress should strike the Fair Pay to Play Act as unconstitutional because the Fair Pay to Play Act would control commerce outside of California’s boundaries while protecting California economic interests at the expense of out-of-state competitors.
Virtually all NCAA rules and agreements among NCAA members are potentially subject to antitrust challenges as the collective adoption and enforcement of NCAA rules by its member universities as well as other agreements concerning the production, marketing, and governance of intercollegiate athletics constitute concerted action for purposes of §1 of the Sherman Act.[88] This is shown as the Fair Pay to Play Act is forcing the NCAA to move away from their own rules and make exceptions to schools in California. As discussed in the in the Rule of Reason Test, California’s goal in establishing procompetitive effects, such as promoting amateurism, through the Fair Pay to Play Act, can be pursued through substantially less restrictive manners. For example, schools in California can cap the permissible amount of scholarships at the cost of attendance. Instead, the Act relies on the premise that students can profit from their NILs while also maintaining their amateur status. This will increase the number of prospective students to aspire to be student-athletes at the expense of decreasing the competition in obtaining such students as larger universities with a larger spotlight allows more student-athletes to exploit the possibility of receiving more compensation for their NILs. Meanwhile, smaller schools across the country suffer as they cannot compete with the larger named schools. Therefore, the Act is creating an anticompetitive marketplace at the expense of consumer welfare.
VI. Alternatives
Though the Fair Pay to Play Act seems to run amuck of the Constitution and The Sherman Antitrust Act, we cannot help but to wonder if student-athletes will ever be able to receive compensation for their NILs in the future without disrupting the systems in place. The simplest, yet most difficult alternative to California’s Fair Pay to Play Act, would be to enact a similar statute on a national level. This statute would need the approval of all states, the NCAA organization, and all regional athletic conferences throughout the U.S. This seems unlikely, however it is possible as applying the Act on a national level would avoid the issues of the NCAA’s uniformity in Miller and avoid the issue of protecting local interests at the expense of out of state competitors as a single state statute is not in control but a federal law is being applied nationally. Thus, issues regarding the Commerce Clause are avoided. In addition, the national application would avoid antitrust issues as it completely changes the market for prospective student-athletes. Therefore, creating a whole new competitive market as all schools across the nation are on the same playing field in the pursuit of prospective student-athletes. The issue of larger schools controlling the market still persists, and therefore all schools may either dispose of scholarships entirely or proportionally. This transition of the systems in place will be costly and a more efficient solution for student-athletes will take time. This alternative will be difficult, however, the idea of this benefit is conceivable. Thus, the road for achieving student-athletes to be compensated for their name, image, and likeness will not stop with the Fair Pay to Play Act.
[1] S.B. 206, 2019 Skinner, (Cal. 2019).
[2] Matthew J. Mitten, Timothy Davis, N. Jeremi Duru, Barbara Osborne, Sports Law and Regulation: Cases, Materials, And Problems, 103 (2020).
[3] Id.
[4] Id.
[5] Id.
[6] About Us NCAA, http://www.ncaa.org/about/who-we-are/office-president, (Aug. 1 2020).
[7] About Us NCAA, http://www.ncaa.org/about/who-we-are/office-president/ncaa-leadership-team, (Aug. 1 2020).
[8] About Us NCAA, http://www.ncaa.org/governance/committees/ncaa-board-governors, (Aug. 1 2020).
[9] Matthew J. Mitten, Timothy Davis, N. Jeremi Duru, Barbara Osborne, Sports Law and Regulation: cases, materials, and problems (Wolters Kluwer 5th ed. 2020) at 109.
[10] NCAA Bylaws, Article 12 Amateurism and Athletics Eligibility, General Regulations, Amateur Status (12.1.2).
[11] NCAA Bylaws, Article 12 Amateurism and Athletics Eligibility, Promotional Activities, Institutional Charitable Educational or Nonprofit Promotions (12.5.1(h)).
[12] NCAA Constitution, Article 1 Fundamental Policy, Basic Purpose (1.3.1).
[13] S.B. 206, 2019 Skinner, (Cal. 2019).
[14] Timothy Z. LaComb, California’s College Athletes May Profit from Their Positions, Kicking Off a National Wave and a Bout with the NCAA, X The National Law Review 324 (2020).
[15] U.S. CONST. art. I, § 8.
[16] United States v. Lopez, 514 U.S. 549, 559 (1995).
[17] Erwin Chermerinsky, Constitutional Law (Wolters Kluwer ed.) at 476.
[18] Id.
[19] Id.
[20] Id.
[21] Id.
[22] H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 526, 69 S. Ct. 657, 659 (1949).
[23] H.P. Hood & Sons, Inc., 336 U.S. at 526.
[24] Id. at 526.
[25] Id.
[26] Id. at 527.
[27] Id.
[28] Id. at 542.
[29] Id. at 545.
[30] See Philadelphia v. New Jersey, 437 U.S. 617, 618-19 (1978);
[31] N. J. Stat. Ann. § 13:1I-10 (West Supp. 1978).
[32] Philadelphia, 437 U.S. at 619.
[33] Id. at 626-627.
[34] Hennessey v. National Collegiate Athletic Association, 564 F.2d 1136, 1141 (5th Cir. 1977).
[35] Hennessey, 564 F.2d at 1141.
[36] Id.
[37] Id.
[38] Id.
[39] Id. at 1150.
[40] Id.
[41] Id.
[42] Id.
[43] Id.
[44] Brown- Forman Distillers Corp. v. New York Liquor Authority., 476 U.S. 579, 106 S. Ct. 2080, 90 L. Ed. 2d 552 (1986).
[45] National Collegiate Athletic Association v. Miller, 795 F. Supp. 1476, 1480 (D. Nev. 1992).
[46]Miller, F. Supp. at 1480.
[47] Id. at 1480.
[48] Id.
[49] Id.
[50] Id.
[51] Id. at 1485.
[52] Healy v. Beer Inst., Inc. 491 U.S 336, 109 S. Ct. 2491, 105 L. Ed. 2d 275 (1989).
[53]Miller, F. Supp. at 1485.
[54] Id. at 1480.
[55] Id. at 1485.
[56] Id.
[57] Healy, U.S at 336.
[58] Miller, F. Supp. at 1485.
[59] NCAA v. Bd of Regents, 707 F.2d 1147, 1153 (10th Circ. 1983).
[60] Matthew J. Mitten, Timothy Davis, N. Jeremi Duru, Barbara Osborne, supra note 9 at 215.
[61] Sullivan v. NFL, 34 F.3d 1091,1097(1st Cir. 1994).
[62] Sherman Act, 15 U.S.C. §1.
[63] Matthew J. Mitten, Timothy Davis, N. Jeremi Duru, Barbara Osborne, supra note 9 at 216.
[64] Tanaka v. Univ. of S. Cal. 252 F.3d 1059, 1063 (9th Cir. 2001).
[65] Id.
[66] Id.
[67] O’Bannon v. National Collegiate Athletic Association 802 F. 3d 1049, 1053 (9th Circ. 2015).
[68] O’Bannon 802 F.3d at 1083.
[69] Id.
[70] Id.
[71] Id.
[72] Id. at 1070.
[73] Id.
[74] Id. at 1072.
[75] Id.
[76] Id.
[77] Id. at 1074.
[78] Id.
[79] Id.
[80] Id. at 1075.
[81] Id. at 1076.
[82] Id at. 1078.
[83] S.B. 206, 2019 Skinner, (Cal. 2019).
[84] O’Bannon 802 F.3d at 1076 (overturning the district court’s finding that allowing students to receive cash compensation for their NILs is a substantially less restrictive alternative on grounds that under the NCAA rules a student who receives compensation for their NIL is no longer an amateur.).
[85] Amanda Brooks, College Football Playoff Semifinals Average 19 Million Viewers, ESPN’s Third-Most Watched Day on Record, https://espnpressroom.com/us/press-releases/2021/01/college-football-playoff-semifinals-average-19-million-viewers/ (Jan. 14 2020).
[86] How Much Does College Cost, CollegeData.com https://www.collegedata.com/resources/pay-your-way/whats-the-price-tag-for-a-college-education (Jan. 11 2020).
Kurth Badenhausen, The NFL Players Who Make the Most From Endorsements, https://www.forbes.com/sites/kurtbadenhausen/2015/10/11/the-nfl-players-who-make-the-most-from-endorsements/?sh=e5ff7b362773 (Jan. 11 2020).
What Endorcement Deals were Signed by the Top 10 Picks in the NFL Draft, AthleteSpeakers.com https://www.athletespeakers.com/blog/what-endorsement-deals-were-signed-top-10-picks-nfl-draft/ (Jan. 11 2020).
[87] S.B. 206, 2019 Skinner, (Cal. 2019).
[88] NCAA v. Bd of Regents, 707 F.2d 1147, 1153 (10th Circ. 1983).