Explaining Exclusivity Clauses in Athlete Endorsement Contracts

By Matt Haage, Athlete Partnerships Associate

Athlete endorsement contracts have the potential to get very lengthy and complex. They can contain up to 15-20 pages of various clauses and legal language. One of the most important clauses in these agreements that every athlete should be aware of are exclusivity clauses.

In the world of sports endorsements, exclusivity clauses legally restrict athletes from promoting or using similar products from another brand. The idea is that a brand does not want to pay an athlete money and then see them wearing a competing brand’s shoes. Put simply, this is the clause that prohibits James Harden (Adidas athlete) from wearing Nike basketball shoes on the court, in public, or on social media.

Types of Exclusivity

There are two different categories of exclusivity in endorsement contracts. The first limits the deal by product type. For example, a contract can restrict an athlete from promoting or using other types of “athletic shoes,” “sports drinks,” or “golf clubs.” The second category limits the deal by company. For example, a contract using this category can restrict an athlete from promoting or using other products from other “manufacturers/sellers of athletic shoes.”

If a brand or sponsor wants to make a contract exclusive, a narrower exclusivity clause is more advantageous for the athlete. The narrower and more favorable category is almost always product type. This allows an athlete that has an athletic shoe sponsor to go sign with a different brand for clothing, eyewear, or accessories.

Company-based limitations will prevent that same athlete from entering into clothing, eyewear, or accessory deals with companies that also make or sell products in the exclusive category (i.e. athletic shoes). This may also lead to unintended consequences since many companies make and sell a very broad range of products.

A real life example of this exact scenario is when swimming legend Michael Phelps was sponsored by both Speedo and Under Armour at the same time. We all know Speedo provides racing and training equipment for the sport of swimming, but they also make and sell activewear clothing and footwear, which is exactly what Under Armour provides. The reason he was able to promote both brands at the same time was because of careful legal consideration in the exclusivity clauses in both contracts. Distinctions were made by product type that allowed him to have a “pool deck” relationship with Speedo and a “dry-land” relationship with Under Armour. If the exclusivity clauses in either one of these contracts were company-based, Phelps would not have been able to partner with both brands because they both made and sold activewear.

Limiting exclusivity clauses to narrow product types allows athletes to partner with more brands, and in turn, make more money.  

Conflicting Sponsors

Oftentimes, athletes and the teams or leagues they play for may have conflicting sponsors. For example, as previously mentioned, James Harden is an Adidas athlete. However, the NBA has a partnership with Nike to provide their jerseys. That means every time Harden puts on a Nets jersey, there is a big Nike logo right above the team name. And of course, we all remember the time Michael Jordan used an American flag to cover up the Reebok logo on his jacket at the 1992 Olympics. He did this because the USOC had a partnership with Reebok at the time and MJ famously endorsed Reebok’s competitor, Nike.

So how do athletes protect themselves in this scenario? It’s simple, all athlete exclusivity clauses should contain language that permits an athlete to wear a competing brand as long as it is mandated by the competition or event they are competing in. This type of careful legal review can be beneficial to the athlete to prevent further conflicts.

How to Avoid Issues

Due to social media accessibility and other services that connect athletes directly to brands, there has been a huge push towards modern day athletes negotiating their own endorsement deals. While this is great and can certainly lead to more revenue opportunities for athletes, there is a level of caution that needs to be taken. Without proper understanding of sponsor limitations in exclusivity clauses, it can be very easy for an athlete to accidentally breach one of their existing endorsement contracts.

The best way to prevent these scenarios can be done through an athlete’s own careful review or having an agent/attorney on your team to assist you with negotiating and tracking these clauses. Whether you are a professional athlete with dozens of sponsors or a college athlete looking to gain a sponsor or two once college NIL laws go into effect, the best way to avoid breaching your contracts and further straining your relationship with your sponsors is to be aware of the language in your exclusivity clauses.