Some College Athletes Get NIL, Others Get Nil

The landscape of college athletics has changed considerably over the past few years, with student-athletes finally able to receive compensation for the use of their Name, Image, and Likeness (“NIL”) rights without forfeiting their amateur status. Before this change, the National Collegiate Athletic Association (“NCAA”) enforced strict rules prohibiting college athletes from receiving any sort of remuneration, imposing sanctions on the athletes and universities alike when its rules were broken. Now, student-athletes can receive millions in compensation, even before turning professional, through NIL deals and potentially a sort of revenue sharing payment from the schools themselves. But what does that mean for the college athletes who earned millions for their universities and the NCAA, not themselves, prior to the rule change? Some of them are now seeking retroactive compensation.

History of NIL Rights

The NCAA is, in essence, the sole provider of high-level amateur competition in the United States. Athletes across the country have had the opportunity to compete on the national stage, albeit as “unpaid” student-athletes. While athletes were entitled to receive scholarships from universities, they were not permitted to receive monetary payment for their play, their agreement to attend a university, or for the licensing of their name, image, or likeness for things like video games, endorsements, or advertising. Colleges, universities, and the NCAA earned billions of dollars, while often times their star athletes could hardly support themselves.

In 2009, former student-athletes brought a landmark class-action lawsuit against the NCAA, challenging the NCAA’s use of players’ NIL to earn revenues through, among others, licensing and promotion deals. In 2014, the United States District Court for the Northern District of California in the case of O’Bannon v. NCAA found that the NCAA profited off of its student-athletes’ NIL, and that the NCAA’s rules prohibiting compensation to the student-athletes were an unreasonable restraint of trade.[1] As a monopsony, the NCAA was the only buyer of the labor and NIL rights of student-athletes, and set rules to pay virtually nothing for those services. However, while colleges and universities could now compensate players up to the full cost of attendance, the NCAA could still restrict compensation for those payments “untethered to educational expenses,” such as NIL payments.

Subsequently, former student-athletes brought additional lawsuits challenging the continued prohibition on NIL compensation. In the case of NCAA v. Alston, heard by the same district court judge as in O’Bannon, the court found that the prohibition on certain non-education-related payments violated the Sherman Act and unreasonably restrained trade. Student-athletes were now entitled to additional benefits which might not be included in the cost of attendance calculation, such as post-eligibility scholarships and paid internships, laptops, and other items related to the pursuant of academic studies. The ruling did not go as far as allowing cash payments for academic purposes. The Ninth Circuit, and in 2021, a unanimous United States Supreme Court, affirmed the ruling, and left the door open for future cases to address direct compensation payment to athletes.

Seeing the writing on the wall, the NCAA did not wait long to implement rules permitting NIL payments consistent with the law of the state in which the school is located. As of 2021, student-athletes have been permitted to use their NIL rights to earn compensation for endorsements, sponsorships, television commercials, autograph signings and other licensing deals which up to this point would have made them ineligible to compete in the NCAA. But what about former student-athletes whose NIL rights were violated in the past?

Several NIL Cases Close to Settlement

Currently, several cases brought against the NCAA on behalf of student-athletes dating back to 2016 have been consolidated into an action pending before the District Court for the Northern District of California (the “House Case”). The former student-athletes seek damages from the NCAA for what has now been ruled to be an unreasonable restraint on trade, which prevented them from earning NIL compensation while in college. These complaints were brought before the new NIL rules were implemented, and the litigation has been shaped by the ultimate ruling in Alston.

The plaintiffs allege that the NCAA violated, among other things, Section 1 of the Sherman Act, by imposing rules which unreasonably restrained competition and resulted in anticompetitive effects in the marketplace. Broadly, the damages can be separated into three categories: (1) compensation that could have been earned through broadcasts of games and other television rights; (2) compensation that could have been earned from video game publishers; and (3) compensation that could have been earned through other third parties based on the student-athletes’ NIL rights. After four years of litigation, the parties appear to be on the verge of settling the antitrust allegations against the NCAA, but have run into a roadblock.

The parties to the consolidated cases submitted a proposed settlement agreement to the Court, which has declined to rule on approval of the settlement agreement until the parties address certain concerns raised by Judge Claudia Wilken, the same judge who presided over the O’Bannon and Alstoncases. Despite proposing a settlement figure in the neighborhood of $3 billion, the Court still felt that the proposal went too far in limiting athlete compensation from outside entities. The NCAA’s concern is that NIL deals from third parties could go beyond a valid business purpose, and instead pay players solely to attend the third parties’ chosen school. To combat this, the NCAA wants to enforce strict rules to ensure that players are receiving market value for the NIL rights. The Court disagrees with the scope of the NCAA’s proposed enforcement measures. For now, the parties are back to the drawing board.

To the extent any agreement is finally reached, it will take time for the parties to agree to terms, for the Court to approve those terms, and for class members to actually receive their compensation. And while we will continue to see other similar antitrust litigations between the NCAA and its current and former student-athletes, those same student-athletes have done a commendable job fighting for their rights and curbing the NCAA’s anti-competitive policies.

Lawsuit by Former University of Michigan Student-Athletes

On September 10, 2024 four former college football players for the University of Michigan, including former standout Denard Robinson, brought suit against the NCAA and the Big Ten Network (“Robinson”). The Robinsonplaintiffs, on behalf of themselves and other former NCAA athletes who played prior to 2016, seek to recover money paid to the NCAA and Big Ten Network which was earned through the alleged exploitation of the names, images, and likenesses of former college athletes.

The complaint largely tracks the allegations and arguments underlying the House case, and alleges that the NCAA requires student-athletes to waive their publicity rights to the benefit of the NCAA, and the detriment of the players. The crux of the allegations against the defendants emphasize the unreasonable restraint of trade the NCAA imposed on its former student-athletes by forcing the student-athletes to forgo their ability to, among other things, earn NIL compensation, market themselves, or receive compensation from licensing opportunities or royalties from archived footage. According to the plaintiffs, the NCAA’s and Big Ten Network’s antitrust violations have caused damages of upwards of $50 million.

Neither the NCAA nor Big Ten Network have yet responded to the complaint, but we can expect a strong defense on multiple grounds, including applicable statutes of limitations, which could protect the defendants against claims brought nearly twenty years after some of these named plaintiffs were student-athletes. To address this point, the complaint alleges that the NCAA’s continued exploitation of the plaintiffs’ NIL even to this day, without compensation, violates the Sherman Act and restarts the statute of limitations. It is also unclear how this case will be affected, if at all, by any settlement in the House case, because the Robinson case contemplates a different class of plaintiffs going back far beyond 2016.

The Robinson case will certainly not be the last case to explore the limitations of current and former student-athletes’ entitlement to NIL compensation of which they were deprived by the NCAA. Until resolution of House, either through settlement or otherwise, and the cases that follow, such as Robinson, the state of NIL entitlement will likely continue to remain in flux.

Is This New Paradigm a Good Thing or a Bad Thing?

Naturally, there are varying viewpoints on whether allowing student-athletes to receive compensation is beneficial or harmful to collegiate athletics and the student-athletes themselves. The NCAA has long defended its rules prohibiting compensation by arguing that they are necessary to preserve the spirit of amateurism and distinguish collegiate athletics from professional sports. It also argues that differences in state law could mean some student-athletes are able to receive NIL compensation while others are not, which would only hinder fair competition. Saliently, there exists the real possibility that an emboldened alumni group would pay millions of dollars to a highly regarded high school recruit in order to get him or her to attend their school, under the guise of NIL compensation. This is against the NCAA’s NIL rules, and arguably the spirit of the Supreme Court’s ruling to allow NIL compensation. And finally, detractors might argue that introducing pay-for-play could cause a severe imbalance in competition, permitting the richer schools to attract better athletes because they could pay more. But it is disingenuous to believe that the richer schools are not already at a significant advantage in attracting talent, through state-of-the-art facilities, alumni connections, and higher paid coaches.

Rather, the changes are generally seen as a positive development for college sports. Most importantly, student-athletes can now be compensated for their integral part in a billion-dollar industry. Only a very small percentage of student-athletes go on to play professionally, meaning that college could be the only time where other student-athletes can leverage their athletic success into licensing revenues. This will lead to, and likely already has led to, improvement of the NCAA product through student-athletes staying in school and competing for longer, whereas in the past they may have had to leave college to pursue a paycheck, either in professional sports or otherwise. Finally, the product can improve because student-athletes may now be incentivized to attend a smaller school where they have a better chance to earn more NIL compensation from local businesses, leading to parity and competition rather than an unhealthy concentration at the bigger schools.

Only time will tell whether this new landscape is a good thing or a bad thing, but it is hard to argue the old way was the best way. As the courts have found, the NCAA benefited from anticompetitive restraint on trade for decades, and it was finally time to correct that error. This may not be the final development, but it certainly can be seen as a step in the right direction.

[1]Federal antitrust laws such as the Sherman Antitrust Act of 1890 (the “Sherman Act”) protect against anti-competitive activity or monopolization in the marketplace. The Sherman Act prohibits conduct that attempts to unreasonably restrain trade, through activity such as price-fixing.