The Fair Pay to Play Act and Antitrust Laws

California Governor Gavin Newsom recently signed The Fair Pay to Play Act (“FPTPA” or the “Act”), or California Senate Bill 206, to go into effect on January 1, 2023.  The FPTPA will allow college athletes to benefit from the use of their name, image, or likeness, and many any states, including New York, are following with similar legislation.  The Act will make it illegal for California colleges to prevent their athletes from profiting from their images and identity and also authorizes the athletes to retain agents to represent them in procuring, securing, and negotiating commercial opportunities on their behalf.  California colleges and the National Collegiate Athletic Association (“NCAA”) currently prevent athletes from commercializing their identities.

The Sherman Antitrust Act regulates competition amongst enterprises and prevents them from entering into agreements that lead to anticompetitive practices.  Some argue that the NCAA and certain colleges have made agreements that are anticompetitive in nature and violate the Sherman Antitrust Act when they prohibit college athletes from monetizing their identity rights.

The FPTPA was inspired by a lawsuit by former UCLA basketball player, Ed O’Bannon, against the NCAA for violations of federal antitrust laws when the college denied him the ability to profit from his image and likeness.  The lawsuit argued that the NCAA and UCLA were jointly and illegally setting the value of his services to zero dollars in violation of federal antitrust laws.  The U.S. Court of Appeals for the Ninth Circuit agreed that it was a violation of antitrust laws to deny O’Bannon from profiting from the use of his identity rights.

The Act takes the O’Bannon decision one step further and creates a statutory right under California law.  The Act prohibits colleges from enforcing NCAA rules that restrict college athletes’ ability to earn money from their identity.  Under the FPTPA, college athletes will still be eligible for their scholarships.  Detractors of the Act argue that allowing commercialization of athletes’ identity will hurt the culture of scholarship and college sports by introducing commercialization.  Proponents of the Act argue that the NCAA already reaps the benefits of commercialization off the backs of athletes, while unfairly denying them the same profits.

The NCAA may challenge the constitutionality of the FPTPA or may change its bylaws to allow colleges to let their athletes profit off their identities.  If the NCAA continues to enforce its ban on colleges from allowing its athletes to profit from their identities, it may face antitrust lawsuits similar to the O’Bannon case. The NCAA’s ban will likely be an illegal restraint on trade or wage fixing.

Many other states are contemplating initiating similar legislations; therefore, it remains to be seen which approach the NCAA will take; one that enforces the current ban or one that succumbs to the trend and allow athletes to gain an opportunity to sign limited endorsements.

The legal team at SFMS has significant experience litigating antitrust matters.  If you have any questions regarding this subject or this posting, please contact John Roberts (jroberts@sfmslaw.com) or Alec Berin (aberin@sfmslaw.com).  We can also be reached toll-free at 866-540-5505.

Shepherd, Finkelman, Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, and Pennsylvania.  SFMS is an active member of Integrated Advisory Group (www.iag.global), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe.  For more information about our firm, please visit us at www.sfmslaw.com.