In May, Governor Brian Kemp signed House Bill 617, which goes into effect on July 1, 2021. In doing so, Georgia has joined several other states with “Name, Image, and Likeness” (“NIL”) laws that take effect on this date. The Georgia law, like others around the country, allows student-athletes to profit from their name, image, and likeness through sponsorships, endorsements, personal appearances, autographs, and social media marketing.
Georgia’s NIL law, however, contains a few unique provisions. For example, Georgia’s NIL statute allows universities to elect an option that requires student-athletes to share up to 75% of an athlete’s NIL compensation. These shared (or “pooled”) funds would be deposited into an escrow account, which would be entrusted to the school’s athletic director as trustee. Student-athletes would then be eligible to receive their pro-rata share of the pooled funds one year after the student has graduated. Despite the availability of this option, the University of Georgia has already expressed disinterest in requiring Bulldog athletes to pool any individual compensation, and other Georgia universities are expected to follow their lead. In addition to the pooling option, the law also mandates that universities provide a minimum of five (5) hours of financial literacy and other “life skills” coaching for all student-athletes during the student’s first and third academic years.
Legal Considerations for Athletes
As brands and businesses begin to engage student-athletes to be paid as spokespersons and brand ambassadors, athletes should consider and be aware of a wide range of legal concerns that may arise from such engagements. For instance, brands will want to execute a formal contract that not only memorializes the athlete’s service-related obligations and the financial terms of the deal, but will likely include brand favored concepts such as (1) industry and territorial exclusivity, (2) intellectual property ownership, control, and usage, and (3) behavioral limitations (sometimes known as, the “morality clause”). While all such contractual terms are common to endorsement deals, the scope of these terms is often subject to rigorous negotiation and should be carefully considered before accepting any engagement.
Importantly, student-athletes must also be cognizant of the robust regulatory framework surrounding celebrity endorsements and consumer advertising campaigns. In recent years, federal and state regulators have focused increased attention on consumer advertising campaigns and the parties that participate in such activities. Aiming to ensure that consumers are not misled or deceived by their favorite sports personalities, regulators are certain to monitor the activities of college stars as they enter the advertising market. In such instances, the responsibility to ensure legal compliance rests with both the advertiser and the student-athlete. As such, the obligations and related compliance protocols are important concepts for the parties to address in the definitive contracts as well.
As a practical matter, while legal risks and financial burdens may be allocated by the contract terms, the potential non-pecuniary damage to one’s name and reputation is not so easily deflected. Indeed, the bad press associated with a “false and deceptive” advertising claim is likely to be a nagging distraction for a young athlete, if not a substantial blemish on a rising star’s public reputation. It is clear that the proliferation of NIL laws in favor of student-athletes will prove to be a financial boon for the college athletes that secure deals, but with such fortune comes additional responsibility. As a preliminary matter, all endorsement partnerships and compensation arrangements should be carefully considered and vetted. Furthermore, athletes and their families should enlist the counsel of experienced advisors before accepting and signing any formal agreements.
Looking forward, student-athletes and universities should continue to monitor developments on NIL issues at the national or federal level. For example, on June 21, 2021, the Supreme Court issued a major decision that will have significant implications both on universities and student-athletes. In National Collegiate Athletic Association v. Shawne Alston, the Court ruled unanimously against the NCAA and held that student-athletes were entitled to additional education-related benefits, including scholarships for graduate school, internships, or computer equipment. Although the decision was narrowly based, the opinion will open the door to significant additional litigation for universities and the NCAA, including whether student-athletes should be compensated. The Court’s ruling appears to be a signal that the Court considers the NCAA a monopoly that has engaged in price-fixing and that the Court will be inclined to support payments to student-athletes in the future. This would include endorsements and direct compensation for services.
Given the variety and inconsistency of laws at the state level, it is also possible that Congress will pass a federal version of NIL legislation that will preempt the various state laws, including the new Georgia law. As such, student-athletes and universities, along with the brands that seek to engage them, should continue to closely monitor congressional developments on this important topic.
Jeffrey S. Jacobovitz is a former antitrust attorney at the Federal Trade Commission and is currently chair of the firm’s Antitrust group.
Matthew V. Wilson is a partner and co-chair of the firm’s Sports and Entertainment industry team.