BILL ANALYSIS Ó SB 101 Page 1 Date of Hearing: June 14, 2011 ASSEMBLY COMMITTEE ON JUDICIARY Mike Feuer, Chair SB 101 (Corbett) - As Introduced: January 11, 2011 Proposed Consent SENATE VOTE: 36-0 SUBJECT : Athlete Agents: Conflicts of Interest KEY ISSUE : should the conflict of interest provisions regarding athlete agents be updated to address conflicts related to AGENCY representation teams and leagues in matters unrelated to athlete employment? FISCAL EFFECT : As currently in print this bill is keyed non-fiscal. SYNOPSIS This non-controversial bill updates the conflict of interest rules in the Miller-Ayala Athlete Agents Act to remedy potential conflicts arising from an agency's representation of professional teams and leagues in situations unrelated to on-field employment of athletic talent the agency simultaneously represents. Under existing law an athlete agent cannot have any ownership or financial interest in any entity that is directly involved in the same sport or activity as a person that the agent represents. Further, under existing law athlete agents cannot divide fees or receive compensation from a professional sports team, league or other organization if the agent represents an athlete involved in the same sport or activity. The author notes that since the enactment of existing law the talent agent industry has expanded dramatically, and agents now represent clients in marketing, licensing and other business development opportunities wholly unrelated to on-field activity and the employment of athletes. This bill seeks to provide more flexibility in the industry by prohibiting an agent from having a financial interest or business relationship with an entity if that entity directly employs an athlete in the same sport as a person with whom the agent has entered into an agreement with. Additionally, this bill lessens the restrictions on agents receiving compensation from sports teams and leagues whereby such conduct is barred only when the fee compensation is the SB 101 Page 2 "direct product" of on-field activity of athletes. This Committee previously considered and supported these provisions as a part of its consideration of SB 1098 (Corbett, 2010), which was vetoed by the previous governor. This bill is narrower, focusing solely on conflict of interest provisions. This bill is sponsored by the Association of Talent Agents and it has no known opposition. SUMMARY : Clarifies the relationship between talent agencies, teams and leagues with regards to procuring and negotiating sponsorship agreements, media rights, endorsements and sales of a team. Specifically, this bill : 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. EXISTING LAW : 1)Regulates athlete agents regarding the representation of professional and student athletes. (Chapter 2, Division 8, commencing with Section 18895 of the Business and Professions Code. All references are to this code section unless otherwise noted.) 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 SB 101 Page 3 athlete. (Section 18895.2.) 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. A talent agency is considered an "athlete agent" if they engage in above defined activity. (Section 18895.2.) 4)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. (Section 18897.27.) 5)Requires an athlete agent, if providing financial services to the athlete, to disclose potential conflicts of interest, as specified. (Section 18897.3.) 6)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. (Section 18897.47.) 7)Makes the violation of any provisions of the Act a misdemeanor offense. (Section 18897.93.) COMMENTS : This non-controversial bill seeks to update current athlete agent conflict of interest rules to address actual conflicts of interest related to employment activity, while still allowing talent agencies to service teams and leagues in situations unrelated to on-field employment of athletes. According to the author: Under current law, an agent is prohibited from having an ownership or financial interest in any entity that is directly involved in the same sport as a person the agent represents. SB 101 Page 4 However, in the past 15 years, the talent agent business has grown and expanded beyond traditional television, film and music businesses. Talent agencies now represent athletes, corporations and non-traditional TV personalities and broadcasters. They also provide services that include marketing, licensing and business development. Senate Bill 101 clarifies that talent agencies can represent leagues and teams for procuring and negotiating sponsorship, endorsements, media rights, and purchase or sale of a team. Representation of leagues and teams are not in connection with the representation of professional athlete for on-field services and does not present a conflict of interest. Brings California Law Into Sync With Other States : In the late 1990's a series of incidents involving illegal actions by sports agents focused national attention on the need to regulate the athlete agent industry. In order to close loopholes created by variations in state law the National Conference of Commissioners on Uniform State Laws (NCCUSL) began work in 1997 on developing a model state athlete agent law. After consulting various industry groups, colleges and professional sports teams, the NCCUSL created the Uniform Athlete Agents Act (UAAA). The model law provides for important protections for student-athletes and educational institutions while assisting athlete agents by standardizing and streamlining the regulations governing the profession. Under the UAAA there are no prohibitions on athlete agents representing teams and leagues in matters unrelated to on-field employment of athletes. This bill brings California law in line with that of nearly 40 other states. Prior Legislation : SB 1098 (Corbett, 2010) which was much broader would have enacted all of the provisions of the Uniform Athletes Agents Act (UAAA) was vetoed by Governor Schwarzenegger citing opposition to new regulation in the industry. REGISTERED SUPPORT / OPPOSITION : Support Association of Talent Agents (ATA) (sponsor) Opposition SB 101 Page 5 None on file Analysis Prepared by : Drew Liebert and Nicholas Liedtke / JUD. / (916) 319-2334