Student Athlete Name, Image and Likeness (NIL) Alert - Tennessee and Virginia v. NCAA:  NCAA Endures Another NIL Court Setback Print PDF

NIL Landscape

       Until the last few years, the NCAA has operated under the presumption that it was exempt from Federal antitrust laws.  Since the Supreme Court’s landmark opinion in NCAA v. Alston in 2021, which opened the door for college athletes to be compensated for the use of their name, image and likeness (NIL), this presumption has been under attack.  In the wake of Alston, the NCAA adopted a NIL policy that was viewed by most as a “hands-off” policy with limited clarity (other than reiterating that the NCAA’s “pay for play” prohibition remained in full force), resulting in a flood of wide-ranging NIL deals entered into by student athletes, from social media endorsements to autograph signing to motivational speaking engagements to appearances at clinics and camps.  Further, the use of “collectives” (i.e. the pooling of funds by school alumni/donors to create or offer NIL deals to their school’s student athletes) exploded.  In response, the 2022 NCAA issued what they intended as clarifying guidance on the NIL policy, focusing mainly on how a school can and cannot provide NIL support for student athletes, boosters and collectives.  Recently, the NCAA has attempted to more aggressively enforce their NIL rules, issuing its first sanction under those rules to Florida State for an impermissible recruiting contact between a transfer prospect and a booster. 

       However, the NCAA was recently dealt another blow in connection with a lawsuit filed by the states of Tennessee and Virginia alleging that the NCAA’s enforcement of its NIL policy was a violation of antitrust laws.  In late February 2024, a federal court granted the motion of Tennessee and Virginia for a preliminary injunction against the NCAA, essentially prohibiting the NCAA and its representatives (including member schools, coaches and staff) from enforcing its NIL Policy, bylaws and any other authority to the extent “it prohibits student-athletes from negotiating compensation for NIL with any third party entity,” including but not limited to boosters or collectives. 

The Ruling

       The court initially addressed whether Federal antitrust laws even applied to the case. It held that they did apply because in the current NIL environment, “commercial activity” is clearly evident, distinguishing cases in the pre-NIL era which held that they did not apply in a collegiate setting since there was no “commercial activity” implicated.

       The court then turned to the four part analysis for determining whether a preliminary injunction should be granted, namely: (1) whether the requesting party has a strong likelihood of success on the merits; (2) whether the requesting party would suffer irreparable injury without the injunction; (3) whether issuance of the injunction could cause substantial harm to others; and (4) whether the public interest would be served by the issuance of the injunction.

        As to the likelihood of success, the court found that the NCAA’s prohibitions regarding NIL recruiting are direct evidence of harm to competition, essentially finding such prohibitions amount to an agreement that “suppresses price competition by limiting negotiating leverage and, as a result, knowledge of value.” The court was also unmoved by the NCAA’s argument that allowing collectives to offer NIL deals as a recruiting inducement would destroy amateurism and the balance between academics and athletics, holding that such matters can be addressed through less restrictive rules. It also reiterated that an antitrust exemption would need to be addressed by Congress, not the courts.

        In addressing the irreparable injury prong, the court focused on student athletes rather than the states themselves (even finding that the states would not suffer irreparable injury), and analyzing more than just the potential monetary harm. The court acknowledged that while it is nearly impossible to determine whether a student would be able to obtain more lucrative NIL deals in an open market,  “without the give and take of a free market, student athletes simply have no knowledge of their true NIL value.”  Therefore, it is this “suppression of negotiating leverage and the consequential lack of knowledge” that establishes irreparable harm, because the only time student athletes can determine their true NIL value is during the recruitment or transfer periods.

         The court then succinctly addressed the last two prongs, finding that: the NCAA failed to demonstrate how the injunction will cause harm to the NCAA or others that outweighs the irreparable harm to the student athletes in the absence of an injunction (prong 3); and the requested injunctive relief will serve the public interest because it will prevent anticompetitive behavior (prong 4). 

What Does the Ruling Mean?

• Any third party, including boosters and collectives, may directly negotiate and enter into agreements with student athletes for NIL activities during the recruiting and transfer process, expanding student athletes’ NIL rights into areas the NCAA previously has attempted to prohibit.
• The NCAA cannot enforce its “rule of restitution,” which would give them the ability to enforce any punishments for violations of its rules following any court ruling that is later reversed.
• The injunction applies nationwide, not just to student athletes in Tennessee or Virginia.
• While it does not explicitly say so, given the reference to “third party” entities and other language, the ruling appears to continue the following NCAA prohibitions:
  • “Pay for play” prohibition against schools, coaches or staff from directly entering into an NIL agreement with a prospective student athlete during the recruiting or transfer process to influence their decision to attend the school; and
  • The prohibition against school coaches or staff communicating with boosters and collectives regarding NIL deals for specific prospective student athletes.
• The NCAA is currently evaluating whether to appeal the ruling and seek a stay of the injunction, or to wait until a final decision on the case. In the meantime, the NCAA is expected to issue additional guidance as a result of the ruling.

Conclusion

        This ruling is just the latest in a line of the federal courts’ admonishment of NCAA amateurism.  The NCAA is already not enforcing certain transfer rules after a federal judge’s ruling in December in a case in West Virginia. The National Labor Relations Board also ruled in early February that members of the Dartmouth men’s basketball team are employees of the school and could vote to form a union, which the players have already done.  In addition, there are several other antitrust lawsuits against the NCAA making their way through the courts.  Unless Congress is willing to act and pass a law granting the NCAA an antitrust exemption (and it does not appear that any such law is close to being on the horizon), the age of NCAA amateurism is likely to end, ushering in a brand new landscape in college sports, where a free-market system will permit student athletes to determine their true market value free of NCAA restrictions.