MINNEAPOLIS, MINNESOTA – APRIL 04: (L-R) Senior Vice President of Basketball for the NCAA Dan Gavitt and NCAA President Mark Emmert speak to the media ahead of the Men’s Final Four at U.S. Bank Stadium on April 04, 2019 in Minneapolis, Minnesota.
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According to a USA Today article, NCAA president Mark Emmert has sent a letter to the California state legislature threatening to ban California schools from postseason events if the state passes a bill that would allow college athletes to earn money for the use of their own name, image or likeness.
Although this threat is rightfully scary to some California member colleges, it is doubtful whether the NCAA could truly enforce a postseason ban on these grounds. Banning a member college for allowing athletes compensation in compliance with state law is likely an act that would violate federal antitrust laws, as well as California’s common law right to good faith and fair dealing.
As many college sports fans already know, the National Collegiate Athletic Association has long maintained a series of bylaws that disallow college athletes from accepting “payment” for participation in their sport. The NCAA’s definition of “payment,” nevertheless, has changed throughout time. At present, “payment” includes not only direct sums of money provided by colleges to athletes but also the receipt of proceeds derived from the licensing of one’s name, image or likeness to third-party endorsers such as Nike or Coca-Cola. This is the very right that California state law seeks to allow state athletes to control and monetize.
As a private trade association, the National Collegiate Athletic Association is generally free to adopt any bylaws that it wants. But there are two important caveats to the general principle of non-interference with trade association rules. First, a trade association such as the NCAA may not enforce any bylaw that violates federal or state law. Second, a trade association must enact its bylaws in good faith, and in compliance with the “basic rudiments of due process.”
With these two caveats in mind, there is a strong argument that any attempt by the NCAA to ban California member colleges from competing in postseason events based on their compliance with state laws around names, images and likeness would violate both federal antitrust laws and state common-law rights.
First, a reasonable interpretation of Section 1 of the Sherman Act would likely conclude it be both an illegal form of wage fixing and an illegal concerted refusal to deal if the NCAA were to ban California colleges from post-season tournaments for complying with state laws that grant additional financial rights to athletes. Although the NCAA has long maintained its rules to limit athlete financial freedom, the NCAA’s internal rules 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. The NCAA’s proposed conduct — to ban all California member schools that seek to operate in California and comply with California state law — for all intents and purposes, should be viewed the same way.
In addition, the NCAA’s attempt to ban California colleges from postseason tournaments in retaliation for the State of California passing a bill to increase the financial rights and economic well-being of college athletes is likely to be deemed to violate the implied common law rights of good faith and fair dealing that exist in every contract. This is because the NCAA, as a monopolist trade association, is punishing several of its private members for doing exactly what their state law requires them to do.
Of course, there is nothing per se illegal about NCAA President Mark Emmert sending a letter to the California legislature arguing against the change of its current state laws. Even under federal antitrust law, the existing Noerr-Pennington exemption preserves behavior that constitutes bona fide government lobbying.
But there is still a big difference between lobbying against a state’s changing of its laws and seeking to ban an association member for complying with an enacted law. Not only would banning a California member college for complying with state name, image and likeness laws likely violate Section 1 of the Sherman Act, but such conduct would also seem to violate other common law principles including, among others, California common law’s implied duty of good faith and fair dealing.
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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.” Nothing in this article shall be construed as legal advice.
