BILL ANALYSIS Ó ----------------------------------------------------------------------- |Hearing Date:April 4, 2011 |Bill No:SB | | |101 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Curren D. Price, Jr., Chair Bill No: SB 101Author:Corbett As Introduced: January 11, 2011 Fiscal: No SUBJECT: Athlete agents: conflicts of interest. SUMMARY: This bill updates provisions in the Miller-Ayala Athlete Agents Act (Athlete Agents Act) to address potential conflicts of interest related to agencies servicing professional athletic teams and leagues in situations where they are not related to the employment of athletes an agency may also represent. Existing Law, Labor Code: Defines "talent agent" as a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists. Talent agencies may, in addition, counsel or direct artists in the development of their professional careers. (Labor Code §1700.4.) Existing Law: 1) Regulates specified activities of an athlete agent in representing student and professional athletes. (Chapter 2, Division 8, commencing with Section 18895 of the Business and Professions Code (BPC)) 2) Defines "agent contract" as any contract or agreement in which a person authorizes or empowers an athlete agent to negotiate, or solicit on behalf of the person, with one or more professional sports teams or organizations, for the employment of the person by one or more professional sports teams or organizations, or to negotiate or solicit on behalf of the person for the employment of the person as a professional athlete. (BPC §18895.2.) SB 101 Page 2 3) Defines "athlete agent" as any person who, directly or indirectly, recruits or solicits an athlete to enter into any specified type of contract, or for compensation procures, offers, promises, attempts, or negotiates to obtain employment for any person with a professional sports team or organization or as a professional athlete. (Id.) 4) Includes a talent agency as an "athlete agent" if they engage in the activities of an athlete agent as defined. (Id.) 5) Defines particular types of contracts entered into by athlete agents on their own behalf or with others, and when persons may be considered as participating in negotiations to enter into a contract (Id). 6) Requires an athlete agent to file with the Secretary of State specified information about his or her background, criminal and disciplinary record, training and experience, and to advise an athlete of the availability of this information. (BPC §18896 to §18896.6.) 7) Prohibits an athlete agent from owning or having a financial interest in any entity that is directly involved in the same sport as a person with whom the athlete agent has entered into an agreement contract for the purposes of negotiating an endorsement contract, financial services contract or professional sports service contract, or providing advice concerning potential or actual employment as a professional athlete. (BPC §18897.27.) 8) Requires an athlete agent, if providing financial services to the athlete, to disclose potential conflicts of interest, as specified. (BPC §18897.3.) 9) Prohibits an athlete agent from dividing fees with or receiving compensation from a professional sports league, team, or other organization or its representatives or employee, or offer or allow any full-time employee of a union or players' association connected with professional sports to own or participate in any of the revenues of the athlete agent. (BPC §18897.47.) 10)Makes the violation of any provisions of the Act a misdemeanor offense. (BPC §18897.93.) This bill: SB 101 Page 3 1) Prohibits an athlete agent from having an ownership or financial interest in any entity, only if that entity directly employs an athlete in the same sport as a person with whom the athlete agent has entered into an agent contract. 2) Prohibits an athlete agent from dividing fees with, or receiving compensation from, a professional sports league, team, or other organization, or its representatives or employees, only if the fees or compensation are directly related to on-field activities of athletes or other representation of the league, team, or organization as it directly relates to the employment of athletes. 3) Prohibits an athlete agent from offering or allowing any full-time employee of a union or players' association connected with professional sports to own or participate in any of the revenues of the athlete agent. FISCAL EFFECT: None. Legislative Counsel has keyed this bill as "non-fiscal." COMMENTS: 1. Purpose. The Association of Talent Agents is the sponsor of this bill. According to the Author, the talent agency business has grown since the implementation of the Athlete Agents Act and many agents "now represent leagues and teams, not in connection with the employment of athletes, but for marketing, sponsorship, endorsement, media rights, and purchase or sale of a team." The Author additionally asserts that "representation in these areas does not interfere with the representation of an athlete against such teams." This measure aims to reflect these changes in the industry. 2. Athlete Agents Act. In 1996, the Senate Business and Professions Committee's Subcommittee on Sports heard testimony from university officials and coaches, interscholastic sports governing bodies, attorneys, and former college athletes. All of these witnesses spoke of a growing pattern of various abusive practices on the part of athlete agents. All emphasized that such abusive practices have great harmful effects on the athletes and their families and friends, athletic programs and schools generally, including alumni and fans. All decried the lack of meaningful oversight of athlete agents, citing insufficient penalties in current law and apparent inattention and/or inability of any agency to take action against SB 101 Page 4 athlete agents. That same year, the Athlete Agents Act was passed to enact a comprehensive set of provisions governing the conduct and practice of individuals who work as athlete agents. Included in the Athlete Agents Act was the provision that prohibits athlete agents from owning or having a financial interest in any entity that is directly involved in the same sport as a person with whom the athlete agent has entered into an agreement contract. 3. Uniform Athlete Agents Act (UAAA). Problems associated with illegal athlete agent conduct are national in scope. Far too often, the actions of athlete agents in other states results in the loss of student-athlete eligibility, the imposition of financial penalties on the student-athlete's institution and the taint of a "scandal" on both the institution and the larger intercollegiate sports community. In an effort to address these problems, the National Conference of Commissioners on Uniform State Laws (NCCUSL) began work in 1997 on developing a model state athlete agent law. At the time, there were 28 state athlete agent laws each with a different set of fees, bonding and registration requirements, and a list of prohibitive acts. Many of the laws were ineffective and, as a result, were sporadically enforced. In addition, agents expressed frustration over the differing state regulations and the time and costs associated with registering in many of the jurisdictions. Many agents simply ignored most the state agent laws and the corresponding registration requirements. After three years of work, that included input from sports agents, representatives of the professional sports leagues players' associations, the NCAA, and the NCCUSL completed its work in drafting the UAAA. The model law provides for important protections for student-athletes and educational institutions and it also seeks to assist athlete agents by standardizing and streamlining the regulations governing the profession. The UAAA has been enacted in 40 states and the District of Columbia. Conduct currently prohibited by the UAAA does not mention conflicts of interest for athlete agents who represent athletes and their employers for marketing and other related purposes. 4. Previous Legislation. Last year, this Committee heard SB 1098 , also by the Author, which attempted to conform California law regarding the regulation of athletes to the UAAA, replacing the Athlete Agents Act. After passage in this Committee, the bill was amended to add the specific conflict of interest provisions now SB 101 Page 5 contained in this bill. SB 1098 was vetoed by Governor Schwarzenegger. SB 694 (Sher) of 2001 and SB 1652 (Sher) of 2002 were also aimed at enacting the UAAA. Both measures were vetoed by Governor Gray Davis. AB 1987 (Miller, Chapter 857, Statutes of 1996) established the Agents Act in California. 5. This Measure Addresses Conflicts of Interest Which Can Arise When Agents Represent Both Athletes and the Event(s) and/or Team Sports League(s). As agencies consolidate into larger firms, there are instances where a sports agency will manage both a professional athlete as well as sporting events in which those athletes compete. In a UCLA Entertainment Law Review article in 2004, the Author considered the examples of Octogon, SFX Sports and IMG; three types of superagencies borne out of the consolidation of the sports agencies. The consolidation of different firms resulted in all three agencies being involved in the management of both golf and tennis events and athletes. These agents may be negotiating appearance fees and other agreements for both the athlete and the sporting event. In the case of Lendl v. ProServ, Inc., tennis player Ivan Lendl sued his management company for allegedly taking advantage of his star status by packaging its other clients in his merchandising contracts, appearances and events in order to increase ProServ's revenues. Additionally, in the DePaul University Law Journal of Sports and Contemporary Problems, an article was written in 2006 addressing the issue of the right to publicity in sports. The author considered the competing interests of team sports leagues, such as the NBA, NFL, MBA and NHL, which profits from marketing campaigns using players' names and likeness and players' independent endorsement efforts. Leagues and teams often retain rights to use a player's image and name to promote the sport, league or team in marketing campaigns and other promotional efforts. For example, in the NFL, the league has a separate business development division that enters into contracts with players to use their name and likeness. No other third party may use these without an agreement with the NFL. However, the player may also sign independent endorsement deals for their own profit, which often requires the services of an agent. Under the above circumstances, current law is not clear about what role an agent can play with numerous types of representation in the same sport, including events and teams, and when conflicts of SB 101 Page 6 interest may arise, this bill clarifies and restricts an agents' role in representing different types of entities to protect the interests of all parties. 6. Arguments in Support. The Association of Talent Agents believes that representation of leagues and teams are not connected with the representation of professional athletes for on-field services and do not present a conflict of interest. Rather, success in such efforts generates increased revenue for teams and leagues, which benefits athletes by keeping team franchises healthy and viable. SUPPORT AND OPPOSITION: Support: Association of Talent Agents (Sponsor) Opposition: None on file as of March 30, 2011. Consultant:Sarah Mason/Candace Choe