Federal Trade Commission Testifies on Proposed Sports Agent Responsibility and Trust Act

Howard Beales, Director of the Federal Trade Commission's Bureau of Consumer Protection, presented FTC testimony today before the U.S. House of Representatives Subcommittee on Commerce, Trade and Consumer Protection on the proposed Sports Agent Responsibility and Trust Act (H.S. 4701). The testimony provided an overview of the FTC and its enforcement authority, discussed the criteria that the Commission considers in deciding whether to initiate law enforcement actions, noted certain concerns about the legislation, and suggested possible revisions that might enable it to better achieve its stated goal. Beales prefaced his remarks by saying that in fulfilling the Commission's mandate to protect consumers from "unfair methods of competition" and "unfair or deceptive acts or practices," the FTC tends to focus its resources on cases involving a large number of complaints or other evidence that the deceptive act or practice is "widespread or an emerging trend," rather than individual disputes.

The proposed legislation contains a number of provisions relating to sport agents seeking to enter into representation contracts with college athletes. For example, H.R. 4701 provides that any sports agency/representation contract with a college athlete would have to include a disclosure clearly stating that the student may lose eligibility if he or she signs the contract. It would also enact a substantive ban on any gifts by sports agents to student athletes prior to the signing of a contract. The proposed legislation also would prohibit sports agents from giving false or misleading information. The testimony noted, however, that such deceptive statements are already prohibited by Section 5 of the FTC Act, as well as by numerous state laws.

The testimony next discussed "threshold concerns," noting that certain provisions of the bill appear "to endorse and strengthen private restraints contained primarily in the NCAA's rules." The testimony noted that while many industry self-regulatory programs provide significant and desirable protections for consumers, it is important to consider whether particular private restraints may function to protect the industry rather than consumers." The public debate surrounding the effects of NCAA eligibility rules, the testimony continued, "underscores the need for the careful examination of the effects of underlying private restraints before enacting legislation that supports them."

The testimony continued by suggesting modifications to specific sections of the legislation. First, the testimony observed that while H.R. 4701 would prohibit sports agents from giving false or misleading information, such conduct is already prohibited by Section 5 of the FTC Act and numerous state laws. "If Congress sees a need for additional avenues to challenge such practices," it stated, "we believe that the most appropriate avenue would be a private right of action rather than additional public enforcement provisions." Such a private right, the testimony stated, "would enable individuals to vindicate their rights in specific cases that might not be appropriate for Commission action taken in the public interest." While Section 6 of the bill provides for such an action by universities injured as the result of an agent's conduct, the testimony states, "there is no similar private right of action provided to injured individual student athletes." Adding such a cause of action "would further the proposed legislation's purpose to protect student athletes."

With respect to enforcement, the testimony suggested: 1) modifying the current language to require disclosures before verbal commitments are reached regarding representation, in addition to requiring such disclosures before written contracts are signed; 2) modifying the section on gift-giving to include the provision of anything of value to student athletes, family members or friends who may influence the representation decision; and 3) inserting language to protect students of all ages from misleading information.

"In sum," the testimony concluded, "the FTC protects consumers from deceptive or unfair acts or practices, but it generally focuses on acts that affect a significant number of consumers or signify an emerging trend." Therefore, "we ask this subcommittee to examine carefully the need for, and the appropriateness of, the underlying private restraint before enacting it into law." It is the Commission's hope that, "based on our experience with consumer disclosures, the suggestions provided can be used to revise the legislation to better achieve its stated goal."

The Commission vote to approve the testimony and place a copy on the public record was 5-0.

Copies of today's testimony are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.