FTC’s SPARTA Move Suggests a College Sports Enforcement Shift

The Federal Trade Commission has signaled a new enforcement strategy in the name, image, and likeness era of college athletics: compliance with the Sports Agent Responsibility and Trust Act, or SPARTA. Last month, the FTC sent letters to 20 universities that have NCAA Division I athletic programs, seeking information on whether agents who represent student-athletes have complied with the requirements of SPARTA.

Although this inquiry isn’t an enforcement action, it signals a potentially significant escalation in federal oversight of the NIL industry. As NIL opportunities and the market have expanded, so have the number of agents and third parties involved in college sports and the range of services they offer. This broader scope of agent and third-party involvement increases the potential for SPARTA violations and FTC enforcement.

Background

SPARTA, enacted in 2004, is a federal consumer protection law designed to protect student-athletes and preserve amateurism.

It brings certain conduct by agents within the FTC’s enforcement authority. Under SPARTA, “athlete agent” is defined broadly and applies to almost anyone acting to negotiate professional sports or endorsement contracts on behalf of a student-athlete. SPARTA mandates specific obligations for agents recruiting or representing student-athletes:

• Truthful recruiting practices: Agents may not use false or misleading information or make false promises or misrepresentations to persuade a student-athlete to enter into an agency contract.
• No inducements: Agents may not provide anything of value to a student-athlete, or anyone connected to them, to persuade a student-athlete to enter into an agency contract.
• Pre-agency contract disclosures: Agents must provide the student-athlete, or their parent(s) if the student-athlete is under 18, with a specific disclosure document that is signed by the student-athlete before entering into an agency contract.
• University notification: Both the agent and the student-athlete must notify the athletic department at the student-athlete’s university within 72 hours of entering into an agency contract or before the student-athlete’s next athletic event—whichever comes first.

Enforcement and Penalties

Only agents are subject to enforcement under SPARTA. Violations of SPARTA are treated as unfair or deceptive acts or practices under federal law and may result in injunctive relief and/or civil penalties of up to $53,088 per violation. SPARTA also authorizes a state attorney general to prosecute violations in federal court. However, if the FTC initiates an enforcement action against an agent, states are barred from bringing their own action against that agent while the federal case is pending.

Additionally, universities may bring claims against agents for damages resulting from violations that lead to penalties by an athletic association, conference, or through self-imposed disciplinary measures. Notably, SPARTA doesn’t provide a right of action for student-athletes harmed by an agent’s violation.

There has been little, if any, federal enforcement of the law over the last two decades. Given the FTC’s limited enforcement history in this area, it remains unclear what its intentions are and whether it is willing and able to regulate agent conduct through the enforcement of SPARTA.

Further complicating enforcement, SPARTA has remained unchanged since its enactment, leaving some of its provisions outdated. Also, SPARTA targets agent conduct with student-athletes and doesn’t authorize FTC enforcement action against agents for unfair, or even unconscionable, contract terms.

That said, the FTC’s recent action suggests a possible turning point, with meaningful consequences for agents, universities, and student-athletes.

Universities have until March 23 to respond to the FTC’s inquiry, which requests detailed information for each agency contract that a student-athlete has entered into and a copy of each agency contract dating back to July 1, 2021. Universities likely won’t be able to fully provide the requested information,as there is no statutory requirement that universities keep these records. SPARTA also doesn’t require agents or student-athletes to provide copies of agency contracts to universities.

It remains unclear what the FTC will do with the information gathered. Even with limited information, if the FTC inquiry produces evidence of widespread non-compliance, it could pursue enforcement action against agents and agencies. The FTC also could recommend that Congress consider amending SPARTA to address the changes in NCAA rules surrounding student-athlete compensation and amateurism.

Moving Forward

The FTC’s renewed interest in SPARTA has implications for agents, universities, and third parties involved in NIL. To mitigate potential violations and regulatory exposure, stakeholders should consider the following:

Agents and agencies: It’s critical to reassess NIL-related activities and recruiting practices to ensure compliance with SPARTA’s rules on agent conduct, disclosure, and notifications. Violations may lead to financial penalties and reputational harm.

Third parties: Marketing firms, advisers, and other intermediaries should evaluate whether their services or actions could classify them as an athlete agent under SPARTA, even if they don’t formally hold that title.

Universities: Ensure protocols are in place to verify compliance with SPARTA’s notification requirements, identify agency relationships, collect complaints or reports related to those relationships, and maintain copies of agency contracts. Additionally, SPARTA requirements should be incorporated into student-athlete education and compliance programs. If concerns over agents and their compliance with SPARTA arise, universities may report them directly to the FTC.

Looking ahead, the FTC will likely remain involved in regulating student-athlete representation as Congress aims to take an active role in NIL regulation and college athletics. Neither of two recently proposed bills—the Student Compensation and Opportunity through Rights and Endorsements Act and the Student Athlete Fairness and Enforcement Act—would have repealed SPARTA. Instead, both bills expressly intended to preserve, update, and build on it.

While the outcome of the FTC inquiry remains uncertain, it signals that federal oversight may soon become a defining feature of NIL regulation. Though long dormant, SPARTA is proving to still be relevant. Whether and how the FTC achieves the goal of protecting student-athletes using SPARTA remains to be seen.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Jada Allender is a member of the Snell & Wilmer’s corporate and securities practice group and co-chair of the firm’s sports and entertainment industry group.

Kevin Kuhm is a corporate and securities associate at Snell & Wilmer.

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