“I’m not an agent. . . I’m not an expert on intellectual property . . . I don’t know how to value an endorsement deal . . . This really isn’t my thing.”
—Compliance officers for Division I athletic programs, on the question of reviewing college athletes’ endorsement deals.
As Congress debates whether to pass a federal law that would guarantee college athletes the right to negotiate the use of their name, image and likeness (NIL) in apparel, merchandise, video games and other goods and services, three states have their own legislation in the works. In the middle of it all are university compliance officers, who are beholden to NCAA regulations.
Sportico spoke with five current or former compliance officers for Division I schools about the impact of NIL rights on their responsibilities. Their responses suggest a turbulent period awaits.
To understand the looming issues requires an understanding of the NCAA’s amateurism rules, which deny athletes the right to profit from their celebrity and thus distinguish them from professionals.
The NCAA portrays amateurism as: protecting college athletes from exploitation by unethical agents and opportunistic boosters; ensuring that consumers view college sports as superior to minor league sports; increasing the focus of student-athletes on academics rather than making money; and creating a campus environment where college athletes are treated the same as their classmates.
There are skeptics, including Ed O’Bannon, Shawne Alston and other athletes who have successfully sued the NCAA over amateurism rules. Legislators in California, Colorado and Florida recently passed laws that will make it illegal for colleges to deny their athletes NIL opportunities. While California and Colorado’s laws go into effect in 2023, Florida’s starts on July 1, 2021.
The NCAA has softened its views on NIL in recent months. In April, it expressed support for college athletes to profit from NIL and to employ agents. At the same time, the NCAA voiced the need for “guardrails” to ensure that core values be upheld. One guardrail would ensure that schools regulate “the role of third-parties in student-athlete NIL activities.”
Under the NCAA’s current timeline, each of the three divisions should have NIL rules proposed by October and enacted by next January. However, officials from athletic departments tell Sportico that might be pushed back on account of the COVID-19 pandemic. Regardless, no new NIL rules will go into effect until at least the start of the 2021-22 academic year.
So, there remains time before the college sports world transforms. But many compliance officers are already fretting one anticipated change: Universities will have to stop athletes from signing endorsement deals that would conflict with school contracts or that run afoul of school values.
Consider three hypotheticals:
1. A college basketball player agrees to endorse New Balance, but his team is sponsored by Nike. The university could deny the endorsement on grounds that it would diminish the value of Nike’s relationship with the school.
2. A college football player agrees to endorse an adult entertainment store, but he attends a religiously affiliated college. Even though the store operates lawfully, the college could deny the endorsement on grounds that it runs afoul of school values.
3. A college soccer player agrees to endorse a local car dealership, but the dealership is owned by a booster and the endorsement would pay her well above market value. The university could deny the endorsement on grounds that it would constitute pay for play.
The “denier” in each of those scenarios will likely be the athletic department’s chief compliance officer, who, while accustomed to saying “no,” always had a strict set of bylaws to follow. They might have to tell a coach that he or she cannot engage in certain recruiting tactics or that an athlete can’t accept a cup of coffee from an alumnus or agent.
But without similar guidance on NIL issues, will an officer be as comfortable rejecting a request by an athlete to sign an endorsement deal?
“We don’t know when we’re going to find out about a [forthcoming] deal,” an officer at a state university laments. “Will it be right before [the athlete] plans to signs or much earlier on?”
The officer cautions that while some college athletes might retain agents, most probably won’t. They could instead expect the officer, after hearing of an endorsement opportunity, to offer advice or even become involved in negotiations with the company.
“I don’t think people have thought through how this is going to play out in reality,” the official said. “Some [athletes] will hire lawyers and make sure they aren’t taken advantage of. That’s good. But most will probably go-it-alone and hope whoever they tell offers advice. It’s going to lead to problems for them and us.”
Said another compliance officer, from a private university: “We’ve had talks about how sneaker companies might try to directly sign our student athletes and leave us out . . . . If Nike can get our star quarterback and wide receiver, they might not see the same need to pay us what they pay us.” From that lens, the “conflict” for the endorsement wouldn’t be an athlete at a Nike school signing with Adidas. It would be that same athlete signing with Nike.
Beyond the obvious apparel issues, universities also enter into other types of sponsorships that might complicate endorsements. Take “pouring rights agreements,” which are deals between a beverage company, such as Coca Cola or Nestlé, and schools, which grant the company exclusive access to sell on campus.
What if an athlete at a Coca Cola-sponsored school wants to sign with Pepsi? And say that athlete is an influencer on social media?
“In that situation,” a compliance officer suggests, “we’d need the [university general counsel] to figure that out. It can’t be our call.”
The role of the compliance officer as gatekeeper will also be different at private universities. While public institutions must uphold First Amendment free speech and due process rights, private schools operate in their own space. So what might be a permissible endorsement for an athlete at a state school may not be permissible for one at a religiously affiliated school.
A compliance officer at a religiously affiliated school stresses that the school’s “values” will almost certainly provide grounds to reject endorsements. The officer raises the hypothetical of an athlete who wants to endorse a lawfully operating strip club. “There’s no NCAA rule against such an endorsement, and we don’t have a rule on that either,” the officer notes. Yet the officer stresses that those who run the school would “say no way.”
“No way” to endorsement deals could extend far beyond strip club promotions. Article 31 of the NCAA Manual forbids advertising and sponsorship activities related to most types of alcoholic beverages, cigarettes and gambling. Sportico also recently detailed how athletic departments prohibit their marketing and media rights providers from partnering with companies engaged in certain products or services—including, in some instances, feminine hygiene and birth control companies.
How would a school evaluate a prospective endorsement of a firearm manufacturer? Or a cannabis distributor in a state where marijuana is legal? Or a private prison? Or some other controversial but legal industry?
Even less divisive industries, such as daily fantasy sports, could raise objections by a school due to their connection to gambling.
One could argue that a college athlete’s endorsements ought to be beyond the purview of his or her school. Consider the NBA. The league and its teams are generally comfortable with conflicting league and player endorsements. While Nike is the official sponsor of NBA player uniforms, many players have deals with Adidas, New Balance and Puma. These endorsements coexist smoothly.
David Ridpath, an Ohio University professor and president of the Drake Group, contends that compliance officers are being set up to fail. “As a former compliance officer,” Ridpath notes, “I can attest that most, if not all, compliance offices are not equipped to handle this oversight . . . . If the school is involved [in reviewing endorsements], it will be a mess.” Ridpath maintains that, with sufficient transparency, “the market should be open.”
The NCAA is clearly aware of these concerns. It recently distributed a 54-page document entitled, “Taking Action: Student-Athlete Name, Image and Likeness” to athletic departments. The document, obtained by Sportico, attempts to provide clarity on how “modernizing” NIL rules will impact compliance. In addition, the compliance officers interviewed by Sportico believe there are policies that could help:
– Disclosure requirements: Each of the officers mentioned that college athletes, like coaches, should report outside income and, in some instances, gain approval. Each expressed worry they lack the resources and expertise to monitor athletes’ NIL dealings.
– Scholarship language adjustment: One officer suggested that athletic scholarships contain clear language about when athletes must notify the school and how officers will review.
– Guidelines similar to those for social media: Athletic departments enforce social media policies for athletes. For instance, USC (a private college) has a long list of “inappropriate and offensive behaviors concerning participation in online communities.” These policies could be adapted to NIL opportunities. However, as one compliance officer at a state school noted, “we don’t have the same latitude as private schools.”
– Clear parameters: The officers worry that college athletes might ask for their assistance in negotiating an endorsement deal or in determining market value, which is beyond their skill set and could make it awkward for them to later review a deal. The officers assert they should instead enforce disclosure requirements and remind the athlete he or she cannot use the school’s logos and uniforms. In addition, the officers could educate the athlete on how taxes work—if the endorsing athlete is paid as an independent contractor, where the company doesn’t take out taxes, the athlete would be advised to save some of the money for when taxes are due.
– Don’t favor male athletes: While Title IX likely falls outside the relationship between a college athlete and an endorsed company, it could apply if the school provides advice to athletes on endorsements.
– More lawyers in athletic department. “This is legal work,” one officer insists.
As major changes await, one longtime compliance director believes the NCAA and its members created this problem. “We were too restrictive [on NIL] for too long,” he said. “There were chances to reform, but for one reason or another we didn’t. We tried to keep the water off.”
“Now the faucet is about to go full on.”