Federal Regulation of Sports Agents: Sports Agents Responsibility and Trust Act (SPARTA)

CRS Report for Congress
Received through the CRS W eb
Federal Regulation o f Sports Agents: Sports
Agents Responsibility and Trust Act
Legislative Attorney
American Law Division
H.R. 361, the S ports Agent R esponsibility and Trust Act (SPARTA), would m ake
certain activities o f alleged o r actual s ports agents -- providing gi fts o r cash, inducing
a s tudent athlete t o s ign an agent contract , or providing questi onable i nformation
concerning the athlete’s possible p rofess i o n a l p rospect s -- unfai r p ract i ces t o be
regulated by t he Federal Trade Commission (FTC). Witnesses at hearings em phasized
the far reaching consequences of frequen tly “unethical” o r “unscrupulous” conduct o f
sports agents in pursuing and soliciting s tudent athletes; s uch conduct can subj ect
student athletes to penalties including loss of student eligibility and possible loss of
scholarship money, and t heir co l l eges to sanctions (monetary penalties, forfeiture of
games i n which an ineligible athlete p layed, tarnished reputations). The agents i nvolved,
however, g e n erally face no punishment for t heir offenses because, according t o
SPARTA’s p rimary sponsor, onl y 3 5 s tates regulate agent conduct at all; of that number,

18 have st at ut es t h at are consi d ered l ess t h an “tough”: a federal l aw would, he sa ys ,

provide a “uniform Federal b ackstop” to supplem ent the current patchwork o f s tate laws,1
but “not supplant” them. H.R. 361 was reported fav orably by both t he House
Commerce and J udiciary C ommittees, and passed under s uspension b y t he full House
on J une 4, 2003; it is currently pending in the S enate C ommerce C ommittee. This report
will be updated as n ecessary to reflect further C ongressional action.
“The multimillion-dollar value of professional athlete salaries, s igning bonuses, and
endorsement contracts h as resulted i n a proliferation o f unscrupulous practices by sports

1 Representative Osborne, s peech on House f loor, M ay 1, 2003, CONGRESSI ONAL RECORD, daily
ed., May 1, 2003, H3621. T he numbers va ry from s ource to source, for e ither the t otal number
of states havi ng any, or stringent r egulation of a thlete-agent regi stration and conduct, or those
whi c h h a ve e na c t e d t h e Uni f o r m At hl e t e Age nt s Ac t ( UAAA) , but a l l a gr e e t h a t t h e y a r e l o w;
some states have enacted the UAAA as subs titutes f or their own, existing statutes.
Congressional Research Service ˜ The Library of Congress

agent s .”2 That st udent at hl et es are frequent l y approached and t reat ed unet h i cal l y or
unscrupulously by either genuine or would-be s ports agents anx i ous to acquire clients was
detailed by sev eral w i tnesses before t he Subcommittee on C ommercial and
Administrative Law of the House C ommittee on t he J udici ary.3 Most often noted was t he
preval ence of instances in which t he student at hlet e himsel f or m em bers of his family4
are given either cash o r gifts to induce t he athlete t o s ign with an agent, who m any times
promises unrealistic or impossible results, i ncluding, e.g., l ucrative contract s with
professional s ports teams, or assurances of high draft p icks.
Because t h e rul es of t h e N at i onal C ol l egi at e A t h l et i c Associ at i o n (NC AA) general l y
prohi bi t s t udent at hl et es from s i gni ng agent cont ract s, or accept i n g t he “i m p erm i ssi bl e”
gratuities o ffered t o s olicit them, athletes who do accept t he gratuities o r s ign t he contracts
lose thei r eligibility to participat e i n NCAA competition and possibly, any s ch o l arship
money provided by the athlete’s college; the penalties t heir colleges may face include
repaym ent o f any m oni es recei ved from NC AA cham p i onshi p cont est s i n whi c h t he
ineligible at hlet e participat ed, forfeiture of tho s e c o ntests, loss of television revenue,
other, speci fic m on et ary penalties, and/or tarnished reputations. But unles s t he agents’
conduct o ccurs in on e o f t h e few s tates which have meaningful statutory regulation o f
sports agent activities, they are l argely free of any potential penalties.5
H.R. 361, “Sports Agent R esponsibility and Trust Act ” (SPARTA), “to design ate
certain conduct b y s ports agents relating t o t he sign ing o f contracts with student athletes
a s u n f a i r and decept i v e act s o r p ract i ces t o be regu l at ed b y t he Federal T ra d e
Commission,” was i ntroduce d j o i n t l y on J anuary 27, 2003, by former college football
coach, R epresentative Tom Osborne, and Representative Bart Gordon. Considered first
by the House Energy and Commerce C ommittee, and reported favorably on March 5, t he
bill was considered and amen d e d b y t he House J udici ary C ommittee and its
Administrative and Commercial Law Subcommittee, and reported favorably on J une 2.
Many provisions of the p roposed Act are identical to or track t hose o f t he Uniform
Athlete Agents Act (UAAA); 6 both i nclude “endorsement contracts”7 sign ed by student
at hl et es, w hi ch are d eem ed t o be i n t h e s am e cat egory and subj ect t o t h e s am e const rai nt s
as are “agency cont ract s.” T he fol l o wi ng act i ons i n t h e “di rect or i ndi rect ” s ol i ci t at i o n o f

2 H.Re pt. 108-24, pt. 1, a t 2 (2003) (report o f t he House Committee on Energy a nd Comme rce
accompanyi ng H.R. 361).
3 Witne s s t e s t i mony and Committee r eports are currently available via the House J udiciary
Committee’s web page, [ http://house.gov/ j udiciary] .
4 Pr esumably, t hose i n a position t o exercise i nfluence over the s tudent-athlete’s decisions.
5 Even if the college attended by t he student athlete i s l ocated in a state with stringent l aws, if
the athlete is approached in h i s h o me s t a t e , and it has no or l ax laws, t he agent will likely not
incur substantial ( or any) liability.
6 T he Uniform Law i s available either vi a t he website for t he National Conference of
Commi ss ioners on Uniform State Laws, [ http://www.ncculs.org] ,, or directly, a t
[http://www.law.upenn.e du/bll/ulc/uaaa/aaa1130.htm] .
7 D e f i n e d i n § 2(5) as “agreement[s] under which a s tudent athlete i s employed or r eceives
consideration f or the use by the other party of t hat i ndivi dual’s person, name, i mage, or likeness
in the promotion of any product, service, or event” (all citations are t o t he bill as amended and
reported by t he House Committee on t he J udiciary, J une 2, 2003).

student athletes to enter i nto agency contr acts would b e considered violations of an FTC
rule (presumably, although H.R. 361 does not so state, a ru l e t o b e p romulgated in
pursuance of the C ommission’s rulemaking authority, 8 i n asm u ch as no FTC rul e
speci fically direct ed at at hlet e-agen t activities currently ex ists) defining unfai r act s or
! providing anyt hing of value t o a student at hl et e o r anyone associ at ed wi t h
the s tudent at h l e t e b efore t he student athlete enters i nto an agency
contract, i nclu d i ng any consideration i n t he form of a l oan, or acting i n
the capacity of a guarantor or co-guarantor (§ 3(a)(1)(B));
! gi ving any fal se or misleading i nformation or m aking a false promise or
representation t o t he student athlete (§ 3 (a)(1)(A));
! entering into an agency contract w ith a s tudent athlete without providing
the s tatutorily pres cribed disclosure stat em en t (§ 3 (a)(2));
! pre- or post-dating agency contracts (§ 3 (a)(3)).
T h e r equired “disclosure document” would be “separate from and in addition t o a n y
disclosure which m ay be required under S tate law,” and w o u l d h ave t o contain,
“conspicuously” (i.e., n ear t h e s t udent at hl et e’s o r guard ian’s s ignature), and “in boldface
type,” the following “W arning to Student Athlete”:
If you agr ee orally or in wr iting t o be r epresented now or in the f uture you may l ose
your eligibility to compete as a student athlete i n your sport.9
Fu rther, the d isclosure document m ust war n t hat both t he student a t h l ete and the agent
signing a repres entation contract “m ust” notify t he student athlete’s athletic director “or
other i ndividual responsible for [ the college’s] athletic programs” o f t hat fact within 72
hou r s o f such sign ing “or before the n ex t ath l et i c event i n whi ch [ t he st udent at hl et e]10
would be eligible to participat e, whichever occurs first.”
SPARTA, which t reats all violations of the Act as violations of “a rule defining an
unfair act or practice p rescribed” by the C ommission pursuant t o its rulemaking11
authority, and i ncorporat es “al l appl i cabl e t erm s and provisions” o f t h e Fe d eral Trade
Commiss i o n Act (15 U.S.C .§§41et seq. ), i s t o be enforced at t h e federal l evel b y t he

8 § 4(a). T he FT C rulemaki ng authority is found at15 U.S.C. § 57a(a)(1)(B); the Commi ssion’s
ge neral “ unfairness” authority is found at 15 U.S.C. § 45, which declares “unfair acts or practices
in or affecting commerce ... unlawful.”
9 § § 3(b)(1), (3).
10 Id.
11 § 4(a); see also, note 8. However, a s t here is no ma ndate in SPART A directing t h e
Commi ssion to promulgate a r ule specifically co n c e r ning athlete-agent practices, nor any
reference t o any existing, applicable FT C unfairness r ule ( nor are we aware of any s uch r ule), we
assume that § 3 of SPART A, which s ets out the practices which constitute vi olations of the Act,
is to be cons i d e r e d the e quiva lent of an FT C r ule. As note 8 indicates, t he FT C’ s general
“unfairness” authority is found in§5ofthe FTCAct (15U.S.C.§45).

Commission.12 S t at e a t t o r n eys general m ay b ri ng ci vi l act i ons t o enforce t he
mandates/prohibitions of SPARTA “if they have reas on to believe that an interest of the
residents o f [ t h eir s tates] has b een or is [ b ei ng] adversely affected by” any practice t hat
violat es the Act , b u t m u s t n o tify t he FTC i n writing before any action i s filed, or
simultaneously with the filing i f prior notice i s not possible;13 t h e y a r e p rohibited,
however, from b ringing actions against a defendant named i n an FTC complaint “during
the penden c y of [ a C ommission] action.”14 The FTC is gi ven t he righ t t o i ntervene in a
st at e act i on, t o be heard, and t o appeal .15 S t at e at t o rneys general are s peci fi cal l y not
prevented fro m e x ercising any other rights granted to them by thei r respective states, to
investigate, administer o aths, o r s ubpoena witnesses o r documents. 16 Any action b rought
to enforce t he Act’s p roh i b i t i ons or mandates m ay be brought in federal d istrict court,
subject to the v enue requirements o f 2 8 U.S.C. § 1391.17 In other words, actions to
enforce SPARTA m ay only b e b rought in the j udicial di s t r i c t s which are authoriz ed by
t h e federal venue st at ut e.
Educational i nstitutions are given the right to bring civil actions agai nst athlete agents
“for damages caused by a[ny] violation of [ the] Act,”18 but speci fi cal l y are not rest ri ct ed
in the ex ercise of any other right or remedy “under l aw or equity.”19
The fact that the Act as introduced did not provide a right of legal action t o s tudent
at hlet es was noted and questioned during J udici ary S ubcommitt ee co n s ideration of t he
Act, and a subsequent Subcommittee amendment clarified that student at hlet es retained
thei r rights t o t ake action (i.e., s eek damages from agents) under ex i sting s tate laws; t he

12 § 4(b).
13 § § 5(a)(1), (2). Absent this authority, state attorneys general would probably not be able to
enforce SPART A’s provi sions, because nothi ng in the Federal T r ade Commi ssion Ac t may be
enforced by any entity other t han t he Commi ssion. See note 19, infra, which, a lthough i t s peaks
specifically to private enforcement of t he FT C Act , i s nevertheless i nstructive. We note t hat t he
FT C Act is not enforceable by the Department of J ustice.
14 § 5(d).
15 § 5(b).
16 § 5(c).
17 15 U.S.C. § 1391 reads, in pertinent part:
( a) A c ivil actio n whe r e in j ur isd ictio n is fo und ed o nly o n d ive r sity o f citizenship ma y ... b e
b r o ught o nl y i n ( 1 ) a j ud i c i a l d i st r i c t whe r e a ny d e fe nd a nt r e s i d e s , i f a l l d e fe nd a nt s r e si d e i n t he
same State, ( 2 ) a j ud icial d istr ict in which a sub stantial p o r tio n o f the events o r o missio ns giving
rise to the claim occurred ..., or (3) a j udicial district in whi c h t he d e fe ndants are subj ect to
p e r so nal j ur isd ictio n a t the time the actio n is c o mme nced .”
( b ) A civil actio n whe r e in j ur isd ictio n is no t fo und ed so lely o n d ive r sity o f citizenship ma y ...
[identical text as in (a)(1) and ( a)(2) above], o r ( 3 ) a j ud i cial d istrict in which any d efendant
ma y b e fo und , i f t he r e i s no d i st r i c t i n whi c h t he a c t i o n ma y o t he r wi s e b e b r o ught .
18 § 6(b)(1); but see note 20, infra. T h e UAAA also author izes actions by educational i nstitutions
against “student athletes” ( § 16(a)), recognizing t hat an educational i nstitution s hould be able t o
recover any loss of revenue arising from a failure of either the agent or the athlete to timely notify
it of a contract signing; § 16(c) sp e c i f i e s that a r emedy under i t -- a state l aw -- is not an
educational i nstitution’s exclusive remedy.
19 § 6(b)(4).

Act’s s ponsors h ad earlier i ndi c a t e d their b e lief t hat s tate contract law might provide
adequate protection. A further am endment i n t he full J udici ary C ommittee purported t o
provide student athletes with the right to sue i n federal courts, although t he effect of that
provision with respect to SPARTA i s a matter o f conjecture. 20 As H.R. 361 was p assed
by the House under s uspension of its rules, it retained the l angu age o f t he reported b ill.
The final section of SPARTA i s a “Sense of Con gr ess” provision endorsing the
UAAA: “It i s t he sense o f C ongress that States should enact the Uniform Athlete Agents
Act o f 2000 drafted b y t he National C onference of Commissioners on Uniform S tate
La w s , t o p rotect student athletes and t he in tegrity of amateur s ports from unscrupulou s
sports agents.”21

20 § 7 of t he Act s tates : “Nothing in this Act s hall be construed t o prohibit an i ndivi dual from
seeking any remedies available under existing Federal or State l aw or equity” (emphasis added).
Presumably, “an indivi dual” includes an i nj ured student athlete; whethe r, however, SPART A i s
considered either (1) t o direct the FT C to promulgate a r ule embodying its substantive provi sions,
or (2) itself t o be t he equiva lent of an FT C r ule, st udent athletes, as private parties, likely could
not, under e xisting l aw, s ue absent some more cl early articulated Congressional l anguage. It is
well established t hat “ [t]he Federal T r ade Commi ssion Act may be enforced only by t he Federal
T r ade Commi ssion. Nowhere does t he Ac t bestow upon either competitor s o r c o n s umers
standing to enforce its provisions.” (Alfred Dunhill, Ltd. v. Interstate Ci gar Co., 499 F.2d 232,

237 (2d Cir. 1974), quoted in Federal T rade Commi ssion v. Owens-Corning Fiberglas Corp., 853th

F.2d 458, 464 (6 Cir. 1988); see also, M oore v. New York Cotton Exchange, 270 U.S. 593, 603
(1925); Holloway v. Bristol Myers Corp., 485 F.2d 986, 988-989 (DC Cir. 1973)). We note t hat
t he UAAA does not ei t her , gr a nt st udent at hl et es t he r i ght t o sue under i t , but i nasmuch as i t i s
to be adopted as state law, state-law r i gh t s a n d remedies ( e.g. , contract law, any state
“unfairness” law t hat allowed s uits by private parties) would r emain available. We note f urther
t hat t he pr ovi si on i n t he UAAA r e t a i ni ng e xi st i ng “ r i ght s , r emedi e s, or def e nses under l aw or
equity” ( § 16(c)) appears i n t he section dealing with the r ight of educational i nstitutions to sue,
unlike t he similar, but stand-alone provision i n SPART A, which, presumably, i s meant t o a pply
as well to the student athletes to be protected by the SPART A.
21 § 8. According t o t he National Conference of Commi ssioners on Uniform State Laws, a bout
½ o f t he s t a t e s ha ve a l r e a d y e na c t e d t h e UAAA ( o r a r e ve r y c l os e t o e na c t me nt ) ; i t i s i n va r i ous
legi slative postures i n t he ot h e r s tates i n which it was i ntroduced. T he current NCCUSL
Legi sl at i ve Fact Sheet f or t he UAAA l i s t s t he f ol l owi ng st at e a dopt i ons: Al a b a ma , Ar i zona,
Ar kansas, Delaware, Di strict of Columbia, Flori da, Idaho, Indiana, K a nsas, K entucky, Maryland,
M i nnesota, M ississippi, M ontana, Nevada, North Dakota, Pennsyl va nia, U.S. V i rgin Is land s ,
Washington, West V irgi nia; the bill was i ntroduced during 2003 in legi slatures in Connecticut,
Georgi a, Illinois, Maine, Missouri, New J ersey, North Carolina, Oklahoma, T exas.