This morning, California Governor Gavin Newsom signed into law the Fair Pay to Play Act—a bill that, effective January 1, 2023, will require colleges within the state of California to allow their athletes to earn money from licensing their own names, images and likenesses.
The NCAA now faces what seems to be a Hobson’s choice: either capitulate and allow college athletes to sign at least a limited range of endorsement deals, or attempt to ban California member colleges if they comply with the Fair Pay to Play Act and risk an antitrust lawsuit that could ultimately lead to the association’s annihilation.
From a rational perspective, the NCAA’s decision seems easy. The NCAA should make modest reforms to its bylaws to allow California member colleges to do what is mandated by their state law. However, if the NCAA believes too much of its own hype, it may make attempt to ban these California member colleges and open the door to an antitrust lawsuit that even the best lawyers in America could not win.
Although some federal courts have granted broad latitude to the NCAA’s amateurism rules, any attempt by the NCAA to attempt to ban member colleges that comply with California’s Fair Pay to Play Act would very likely be viewed more nefariously than other NCAA rules—perhaps as tantamount to an illegal form of wage fixing or an illegal group boycott. Enforcing such a ban would also be frowned upon by the federal courts as a private association’s attempt to usurp the power of a legally operating state government—a behavior that early Supreme Court antitrust opinions regularly condemned.
Although the NCAA has long maintained internal rules to limit athletes’ financial freedom, even the NCAA’s Principle of Amateurism—a principle that at times has been afforded great deference from certain federal courts—almost certainly cannot trump free trade principles or government mandates. By way of analogy, under federal antitrust law, if a national association of retailers with market power were to decide to ban all members that chose to operate in California and thus complied with California’s minimum wage laws, such conduct would fairly easily be recognized as an illegal restraint of trade. Any attempt by the NCAA to ban colleges that comply with the Fair Pay to Play Act would likely be viewed the same.
If American legal history teaches us anything, it is that even the most powerful industries that have longed claimed special antitrust exemptions have ultimately found themselves subject to the inevitable reach of the Sherman Act. For example, important Supreme Court decisions have found antitrust violations against the big railroads, large gasoline companies and others that were once perceived as being untouchable. If none of these other industries escaped antitrust liability forever, it would be folly to think the college sports industry will face a different fate.
Thus, it seems nearly certain that by 2023, U.S. college athletes will gain the opportunity to endorse a limited range of products and services. All that remains to be seen is whether the NCAA will voluntarily conform its practices to the Fair Pay to Play Act to avoid conflict with California members’ legal obligations, or instead risk a federal court antitrust ruling mandating that the NCAA change its athlete endorsement rules, and perhaps more.
If the NCAA opts for the reasonable approach of voluntary change, the future could move relatively smoothly for America’s monopolist college sports trade association. However, if the NCAA opts to engage in a prolonged legal battle with the hopes of preserving even its most tangential rules against athlete endorsements, a federal court might ultimately overturn the NCAA’s rules, particularly related to athlete endorsement deals, as well as take the sledgehammer to many of the NCAA’s broader rules that limit competition among schools to recruit and compensate college athletes.
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Marc Edelman (Marc@MarcEdelman.com) is a Professor of Law at Baruch College’s Zicklin School of Business and the founder of Edelman Law, where he consults extensively on sports and gaming issues. He has authored seminal law review articles on collegiate sports and athletes rights including”A Short Treatise of Amateurism and Antitrust Law” and “The Future of College Athlete Players Unions.” On July 9, 2019, he testified before the California state legislature on why it would violate antitrust law for the NCAA to ban California colleges for complying with the Fair Pay to Play Act. Nothing in this article shall be construed as legal advice.
