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Sports Agents and College Athletes: Is the FTC the Answer?
When college athletes can sign endorsement deals, they will hire agents. Who should certify and monitor those agents? A debate looms.
www.sportico.com
“Once you jump in with federal regulators and the government generally, you are with them forever, for good and bad. They have proven over the course of time they are neither equipped nor nimble enough to address the challenges within higher ed or athletics. This is a slippery slope.”
—Jim Fiore, the 2012 Under Armour FCS National Athletic Director of the Year and a consultant to universities, on the prospect of the Federal Trade Commission regulating agents who want to represent college athletes
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Sports agents and college campuses have a long and uneasy relationship. Would adding federal agents to the mix help?
According to name, image and likeness legislation proposed by the Power Five conferences, the federal government would adopt an instrumental role in a world where college athletes can hire agents. The proposal contemplates the establishment of a “Certification Office” within the Federal Trade Commission, which would license and regulate agents retained by college athletes to negotiate endorsement deals.
The topic of sports agents isn’t new to the FTC. In 2004, President George W. Bush signed the Sports Agent Responsibility and Trust Act (SPARTA) into law. SPARTA made it unlawful for an agent to solicit a student-athlete through false or misleading information. SPARTA also barred agents from providing “anything of value,” such as cash or a loan. It further required agents to warn student-athletes that they would jeopardize their NCAA eligibility by signing an agency contract.
Violations of SPARTA constitute unfair and deceptive trade practices. The law can be enforced through FTC cease and desist orders and other civil penalties. States’ attorneys general can also bring cases under SPARTA.
On the surface, SPARTA seemed like a potent law. Yet the last 15 years suggest it hasn’t proven very consequential. Reviews of federal and state court rulings on LexisNexis and Westlaw fail to indicate one instance of SPARTA appearing. A search of warning letters and cases on the FTC’s website also comes up empty.
“I never heard of SPARTA when I was at the FTC,” a former deputy director of the agency admitted to Sportico. “It must not have been on anyone’s priority list.”
Would the FTC take on a more active role in player representation matters if it became obligated to certify sports agents?
“The FTC will generally do what Congress tells it to do,” the former deputy director asserts. “So, if a statute explicitly requires the FTC to oversee agents, it will find a way to do that.”
Others aren’t so sure. An experienced Washington, D.C. attorney, who regularly handles FTC matters and has represented sports industry clients, suggests the FTC is ill-prepared for regulating agents.
“They would have no idea where to begin, I’ll be honest,” the attorney insists. “I don’t mean that as criticism. It’s just they have no expertise in this area. They would need to be allocated a sizable budget and would need to hire outside experts.”
The attorney also questions how certification would work. “Would [the FTC] hold a bar exam for sports agents?” the attorney half-kiddingly wonders. Meanwhile, the FTC’s ordinary enforcement powers might also not deter wrongful agent conduct. The agency could send a warning letter or, if that fails, pursue a modest sanction. “Without involvement by the Justice Department to prosecute egregious cases of defrauding students,” the attorney surmises, “I’m not sure much influence the FTC would have [over those types of agents]—it might only lead to a blot on an agent’s name.”
The attorney also worries about regulatory capture—that given its lack of background, the FTC would rely on experienced agents to act as gatekeepers and they could in turn protect their own commercial interests.
“It has the makings of a fox guarding the hen house,” the attorney said.
A seasoned sports agent whom Sportico interviewed is similarly skeptical.
“Shouldn’t [a federal agency] be knowledgeable about a profession before [that agency] regulates it?” the agent asks. “And why is our profession one that the federal government would even want to regulate? Is there a profession other than government employees that the federal government regulates? This whole idea is kind of baffling.”
The agent stresses that regulation of attorneys, physicians and entertainers is done by individual states and professional associations, not federal agencies.
Jim Fiore, a former Division I athletic director with more than three decades of experience in college athletics, likewise expresses doubts. He believes that legislative ideas that recommend anointing the FTC as a watchdog over agents are misguided.
“The federal government inserting themselves [seemingly haphazardly] is not helpful,” Fiore warns. “It comes with as many negatives, like more regulation and scrutiny, as potential positives.”
Fiore also asserts there is a philosophical problem with Power Five conferences—and their member schools—eyeing the federal government to handle agent oversight.
“The NCAA is not led from Indianapolis,” Fiore maintains. “The NCAA are the presidents who make decisions based on where they sit and their own political landscape. All too often, these choices are not what is best for college athletics and the student athlete.”
Is the Power Five’s legislative idea doomed from the start? Not necessarily.
College sports finds itself in a muddled landscape for licensing and regulating agents. There aren’t many realistic alternatives. In professional sports, licensing and regulating agents is straightforward and predictable. This is because the athletes are employees and have unionized.
Under federal labor law, players’ associations are the players’ exclusive bargaining agents. The National Labor Relations Board recognizes these associations as unions, and they lawfully engage in collective bargaining with leagues. The National Basketball Players Association, for example, is “the agent” for all NBA players, and it bargains workplace rules with the NBA. The National Hockey League Players’ Association performs these same basic functions on behalf of NHL players.
Individual player agents can only ply their craft if the relevant players’ association licenses them. To represent an NFL player, a would-be agent must pass an NFLPA agent entrance exam, pay dues and follow numerous NFLPA regulations. Other players’ associations rely on similar procedures.
Sports agents are also regulated by state laws. Forty-two states have adopted the Uniform Athletes Agents Act, a model code, which, among other things, requires agents to provide written notice to colleges when a student-athlete turns pro and thereby relinquishes his or her remaining NCAA eligibility. Prosecutors have also used criminal laws to prosecute corrupt agents.
None of those arrangements works for the NCAA, a private association of member universities and conferences. It is not a labor organization; it doesn’t collectively bargain on behalf of college athletes and, as a not-for-profit, isn’t part of any government.
For their part, NCAA athletes can’t form a union that would in turn certify and oversee player agents. This is because NCAA athletes haven’t been recognized as employees, a necessary condition under federal labor law for unionization. The NCAA has also not authorized college athletes to engage in group licensing, through which they could establish a trade association. An association could negotiate with video game publishers, apparel companies and other businesses that wish to pay for the use of their names, images and likenesses.
A regulatory vacuum has thus emerged while the sports industry awaits endorsement deals for college athletes. It is a vacuum the NCAA has tried to partly fill by adopting an agent certification program. The program certifies agents for the limited purpose of representing DI men’s basketball players as they consider entering the NBA Draft.
The program attracted unwanted notoriety last August when the NCAA proposed that certification require a bachelor’s degree. This requirement was dismissively termed the “Rich Paul Rule.” Paul, the founder of Klutch Sports Group, is the agent to LeBron James, Anthony Davis and other NBA superstars. He also didn’t complete college. Despite his considerable success as an NBA agent, Paul would have been ineligible to represent college basketball players. The NCAA later scrapped the degree requirement.
The NCAA could conceivably expand its certification program to include the types of agents who would theoretically be certified by the FTC. Yet it’s unclear if the NCAA wants such a responsibility. Likewise, the association might be concerned about the potential legal consequences of denying certification, potentially exposing itself to claims under federal antitrust and civil rights laws.
Perhaps the FTC option isn’t so unwanted after all?
“There needs to be [a watchman] over agents who peddle false promises to naïve 18- and 19-year-olds,” the D.C. attorney notes. “Leaving it up to states and schools will lead to inconsistent results. The FTC might not be ideal, but the idea shouldn’t be dismissed.
