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Introduction
Over the last 30 or so years, competition law issues have been key in cases involving a wide range of sporting rules including those concerned with: bans for doping, various cases involving the joint selling of media rights, salary caps and other ‘financial fair play’ rules, rules relating to agents, ticket selling, sponsorship, multiple club ownership and the provision of state support for clubs. While many of these cases have involved football, a wide range of other sports have been involved including: the Olympic games, tennis, motor racing (various categories), rugby union, cycling, swimming and speed skating. The tension between competition and cooperation in sports often gives rise to the potential for competition law issues to arise, so professional clubs and sports associations need to be able to identify potential problem areas and take action to ensure competition law compliance given that non-compliance may mean rules are unenforceable and/or result in substantial fines.
Key issue
Unlike economic competition between enterprises, the relationship between sporting participants necessarily involves a tension between competitive and collaborative. Therefore, unlike competition between normal businesses, a degree of collaboration between participants in leagues and other competitions is an essential requirement for the sporting contest which is the economic ‘product’ of any sport.
However, competition law is suspicious of collaborations between competitors, which tend to be considered anti-competitive (infringements of the Chapter I prohibition of the Competition Act 1998 against anti-competitive agreements) unless they qualify for ‘exemption’.
In addition, many of the most prominent sports governing bodies may be considered ‘dominant’ (given that they face little or no competition as regards their respective activities) and their actions can therefore fall within the ambit of the Chapter II prohibition against the abuse of a dominant position. Abusive conduct (particularly that which excludes competitors from markets or exploits customers) will be prohibited unless it can be ‘objectively justified’.
Essential analysis
At EU level, which the UK’s approach is in line with, rather than focussing on whether agreements or behaviour may respectively be ‘exempted’ or have an ‘objective justification’, the regulators and courts have tended to consider whether sporting rules have a ‘legitimate objective’. An old (2007) European Commission Staff Working Paper helpfully describes the situation as follows:
“Legitimate objectives of sporting rules will normally relate to the organisation and proper conduct of competitive sport and may include, e.g., the ensuring of fair sport competitions with equal chances for all athletes, ensuring of uncertainty of results, the protection of athletes’ health, the protection of the safety of spectators, the encouragement of the training of young athletes, the ensuing of financial stability of sport clubs/teams or the ensuring of a uniform and consistent exercise of a given sport (the “rules of the game”). The specificity of sport, i.e. the distinctive features setting sport apart from other economic activities, such as the interdependence between competing adversaries, will be taken into consideration when assessing the existence of a legitimate objective.”
Current headline issues in football
More recently, the European Court of Justice in the European Superleague case, in which a group of clubs argued that FIFA and UEFA rules preventing them from setting up a parallel competition were anti-competitive, largely agreed with the clubs and said that such rules were anti-competitive in the absence of “substantive criteria and detailed procedural rules suitable for ensuring that [such rules] are transparent, objective, non-discriminatory and proportionate”. This case has gone back to the originating court in Madrid for further consideration.
Against this background, the most significant ongoing UK dispute is that between Manchester City and the Premier League around the league’s Profit and Sustainability Rules (aka Financial Fair Play). Without getting into the specifics, Manchester City’s argument seems to be that its owners should not be restrained from putting more money into the club to promote its success and that rules preventing them from doing that are anti-competitive. Against this, the Premier League’s position would seem likely to be that the rules ensure a fair playing field between competitors and financial stability which is to the benefit of the league (including ongoing competitiveness between clubs providing a better sporting product and preventing clubs from going out of business mid-season).
Previous cases on this have had differing outcomes. At the Court of Arbitration for Sport in 2020, Manchester City largely escaped sanction (a €30m fine and a two year ban from UEFA competitions) for alleged breaches of UEFA’s financial conduct rules essentially because UEFA brought the case out of time. However, in 2018 QPR settled its case against the English Football League’s imposition of penalty for breaking spending limits in the Championship.
It very much remains to be seen how this case will go. Given Manchester City’s public stance and the number of charges it is facing it seems unlikely that this issue will be as simply resolved. It’s a case that may well need extra time and penalties.
Conclusion
All of the above highlights that there are numerous competition law related issues that can arise from the economics of professional sport and that sports clubs and associations of all types can benefit from being alert to these issues, both in ensuring that they are compliant (given the risk of fines for anti-competitive behaviour of up to 10% of turnover) and also in ensuring that they are not being held back by anti-competitive rules which may be unenforceable.
If it would be helpful to discuss any of the issues raised in this article, please do not hesitate to contact Noel Beale or your usual Michelmores contact.
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