Definition
In general, the Umstead Act (the "Act") prohibits North Carolina government agencies from competing with the private commercial activities of North Carolina citizens. The University of North Carolina at Charlotte and its employees must comply with the Act. Violations may be punished as a criminal misdemeanor. G.S. 66-58(a).
The Act specifically prohibits North Carolina government agencies, including UNC Charlotte from:
- directly or indirectly selling goods in competition with N.C. citizens;
- rendering services to the public that are ordinarily provided by private businesses;
- leasing space in a state owned or operated building for purposes of selling goods or rendering services in competition with private business;
- contracting with anyone to sell goods or render services in competition with private business.
However, as discussed below, numerous exceptions to the statute allow state agencies to conduct limited commercial activities.
Exceptions Involving University Activities
Five of the exceptions specifically permit the university to conduct certain commercial activities.
- The first statutory exception (G.S. 66-58(b)(8)) allows state universities to sell several things and conduct certain activities:
- providing utilities and other services operated prior to January 1, 2005;
- selling items that are incident to educational research or the operation of instructional departments; selling food, books, and minor merchandise to employees, students, and their families;
- selling food and merchandise to guests invited to the university for meetings or conventions;
- operation by the university of an inn or hotel and dining and other facilities connected to an inn or hotel.
- (statutory exception not applicable to UNC Charlotte)
- anything incident to operation of Halton Arena or other athletic facilities;
- (statutory exception not applicable to UNC Charlotte)
- (statutory exception not applicable to UNC Charlotte)
- anything related to Millenial Campus operations;
- student health services;
- (statutory exception not applicable to UNC Charlotte)
- activities that further the mission of the University;
- activities that serve students and employees and their immediate families or guests;
- providing University-related services or selling University-related merchandise to alumni of the University and members of their immediate families; and
- activities that enable the community in which the University entity is located, or the people of the State to utilize the University's facilities, equipment, or expertise.
- A second exception allows sales related to the operation of gift shops, snack bars, and food service facilities physically connected to any of the University's public exhibition spaces. G.S. 66-58(b)(8a)
- A third exception allows the sale of learned journals, works of art, books or publications of the University. G.S. 66-58(c)(2)
- A fourth exception allows state universities to operate campus stores where profits are used for student scholarships. Campus stores may sell educational supplies, gift items, and personal use items. However, a campus store may only sell to students and their families, employees and their families, and individuals who are on campus for a purpose other than just to buy goods from the university store. Only educational supplies, gift items, and personal use items may be sold. G.S. 66-58(c)(3). In 1989, the U.N.C.-Chapel Hill campus store stopped selling crock-pots and other small appliances after local merchants complained. However, in 1994, although local store owners complained, the District Attorney refused to prosecute U.N.C.-C.H. for selling such items as children's books. The statute is unclear concerning the types of items that may be sold, other than educational items.
- Another exception allows the sale of products from experimental stations or test farms. G.S. 66-58(c)(1)
Defenses
The General Assembly created the UNC Umstead Review Panel to review and determine whether or not a proposed activity violates the Umstead Act based upon the activities inclusion in one of three categories outlined by G.S. 66-58(b)(8), subsections m., n., and o., which state the following:
(m.) Activities that serve students or employees of the University or members of the immediate families or guests of students or employees.
(n.) Activities that provide University-related services or market University-related merchandise to alumni of the University and members of their immediate families.
(o.) Activities that enable the community in which the constituent institution or other University entity is located, or the people of the State to utilize the University’s facilities, equipment, or expertise.
The panel is empowered to make a determination as to whether any ongoing activity in which the University is engaged constitutes unfair or unauthorized competition
The University may rely on the determination made by the panel. Therefore, if you want to start a new activity, please discuss with the Office of Legal Affairs to determine if a presentation to the Review Panel is appropriate. See: Umstead Review Panel.
Important Questions to Ask
- Is the activity a direct or indirect sale of goods, wares, or merchandise?
- Does the activity offer a service that is normally performed by private businesses?
**If the answer to 1 or 2 is "yes," then proceed to answer 3 and 4.
- Is the activity directly related to the university's educational function?
- Would the activity fall under any other exception, such as a product of an experimental station or test farm, a learned journal, or other exception?
**If neither 3 or 4 is "yes," then the activity is likely prohibited by the Umstead Act.
IMPORTANT: Please consult with the Office of Legal Affairs if there is any question about the applicability of the Umstead Act.
Additional Concerns
An activity that is acceptable under the Umstead Act may still be inappropriate or raise other legal issues. For example, revenue from an activity that is not substantially related to the educational mission, as determined by the IRS, may be subject to Unrelated Business Income Tax (UBIT).
Last updated October 14, 2022
(Adapted with the permission of the North Carolina State University Office of General Counsel)