Competition authorities raise the umpire’s finger against the BCCI
Published 03 May 2013 By: Alex Haffner
The Competition Commission of India (CCI) recently decided to investigate complaints that the Board of Control for Cricket in India (BCCI) was infringing competition law. The CCI decided that BCCI had been guilty of abusing its dominant position in the award of commercial contracts for the IPL and more generally in the way in which it exercised its powers to sanction cricket in India. This article looks at how the CCI reached its decision and what prospects BCCI may have on appeal.
The BCCI is nothing if not combative. Whether it be resisting the use of Direct Review System technology in matches played on its patch or refusing access to overseas broadcasters (eg Sky) that don’t comply with its demands, BCCI has often taken a belligerent approach to ensure it can get its own way.
BCCI is the custodian of the sport of cricket in a country with by far the largest target audience base for cricket in the world (no-one can yet claim that China’s population is ready to be converted to the joys of the sport). By any measure, it has been extremely successful in harnessing the commercial potential of that audience, not least in relation to the Indian Premier League (IPL) and the eye-watering deals that competition has generated.
Sports bodies elsewhere, particularly in Europe, are well used to being subject to oversight by the competition authorities. Competition law in India is somewhat less developed, but recently underwent a significant overhaul designed to encourage greater enforcement by the relevant local authorities, in particular the CCI.
Against this background, it is unsurprising that the CCI recently decided to investigate complaints that BCCI was infringing competition law, although the source of those complaints (a Mr Barmi, identified simply as a “cricket fan from New Dehli”) was somewhat unconventional.
Ultimately, the CCI decided that BCCI had been guilty of abusing its dominant position in the award of commercial contracts for the IPL and more generally in the way in which it exercised its powers to sanction cricket in India.1 This article looks at how the CCI reached its decision and what prospects BCCI may have on appeal.
Some more background
BCCI is registered under Indian law as a private society. It exists as an autonomous body and takes its legitimacy as the controller of the game of cricket in India from both its own Memorandum of Association and its full membership of the International Cricket Council, whose rules state that members are designated as the “custodians” of the sport in their respective territories.
The initial complaint that instigated the CCI’s investigation alleged irregularities by BCCI in the grant of franchise, media and sponsorship rights to the IPL. As is well known, those rights contracts have already been the subject of litigation and government sponsored investigation, much of which is ongoing. Nevertheless, it is obvious from reading the CCI’s final decision that it took it upon itself to look more broadly at BCCI’s role and the competition law consequences arising from the exercise of its various powers.
The competition law analysis carried out by the CCI
Is BCCI subject to the competition rules?
In most systems of competition law (including in India), there are two key prohibitions that can bite: those against anti-competitive agreements and those against abuse of a dominant market position, of which the latter was relevant here. However, these prohibitions only apply to commercial entities (in European parlance “undertakings”) as competition law is concerned only with practices that have an economic impact on consumers.
BCCI argued that, as a not-for-profit society whose aims were to encourage and promote cricket, it was outside of the competition rules. Not surprisingly, the CCI gave that argument short shrift on the basis that, although BCCI has regulatory functions, many of its activities had a clear commercial impact, in particular through the grant of media and sponsorship rights and ticket sales to domestic/international matches. There are many decisions by the European authorities and courts that have reached the same conclusion in relation to sports governing bodies, one of which (MOTOE v. Elliniko Dimosio2) was cited by the CCI in its decision.
Is BCCI dominant on any “relevant market”?
The CCI concluded that a market exists for the organisation of private professional cricket leagues and events in India. In so doing, it relied in particular on cricket’s special ability in India to attract TV eyeballs as compared with other forms of sporting and general entertainment content (eg Bollywood films).
This analysis bears similar hallmarks to that which the European Commission previously carried out in relation to Premier League and Champions League football (in those cases relying on top-level football’s ability to attract otherwise hard-to-reach viewers whose spending power was coveted by advertisers). It is also interesting to note in passing from the CCI’s decision that the most viewed sporting event in recent years in India (the Cricket World Cup) generated twice as many viewers as the next event on the list (the Olympics).
Within this “market”, BCCI’s dominance was not in doubt given its gatekeeper role in Indian cricket.
Had any abuse taken place?
In assessing the allegations raised by Mr Barmi, the CCI noted the failure of the Indian Cricket League (ICL), a privately-funded rival to the IPL which BCCI had refused to sanction, although this was apparently not factored into the CCI’s final decision since ICL’s demise predated the competition law legislation.
Instead, the CCI focused on the US$1.02 billion agreement which BCCI had previously entered into with World Sports Group and Sony for the international media rights to the IPL over a period of 10 years. By clause 9.1(c) of the agreement, BCCI agreed that it would not:
“organise, sanction, recognise, or support during the Rights period another professional domestic Indian T20 competition that is competitive to the [Indian Premier] league”.
In the CCI’s view, BCCI was only able to make this contractual commitment because of its dual role as the sanctioning authority for professional cricket competitions in India and the owner of the commercial rights. In so doing, it was denying access to the market to other participants in a way contrary to competition law because:
“the game of cricket and the monetary benefits of playing professional league matches must be spread out and not concentrated in a few hands, in a few franchisees … BCCI in its dual role of custodian of cricket and organiser of events has … restricted competition and the benefits of competition. The objective of BCCI to promote and develop the game of cricket has been compromised.”
With those harsh words, the CCI concluded its decision and found that BCCI had abused its dominant position contrary to the Indian Competition Act. A fine of 6 per cent of BCCI’s previous three years’ turnover was imposed and BCCI was ordered both to delete clause 9.1(c) from its media agreements and to ensure it uses its regulatory powers in the future in a manner consistent with competition law.
Referral to the third umpire?
Whereas the CCI’s decision on BCCI’s status for competition law purposes is well founded and set out in some detail, the relevant analysis on abuse is sparse to say the least (three pages of a 47-page decision). As a consequence, it fails adequately to consider the balance that has to be drawn between sporting organisations’ regulatory and commercial functions. The CCI appears instead to consider that where the two collide that of itself is likely to amount to competition law breach.
Had it considered in more detail the EU precedent which it relies on elsewhere in the decision, the CCI would have had the benefit of a line of cases that have considered these issues in some detail. Competition authorities and courts in the EU recognise that there are certain regulatory decisions taken by sports governing bodies which, while having commercial consequences, are necessary for the proper functioning of their sports. Where the body concerned goes further, competition law will apply, but only once a detailed balancing analysis has been carried out (see, for example, in London Welsh’s successful appeal of the RFU’s decision not to ratify its promotion to the rugby Premiership at the start of the 2012/3 season).3
Almost immediately after the CCI decision was made public, BCCI announced it would be seeking an appeal.
This author’s view is that such an appeal stands a good chance of at least some measure of success. There are clearly valid reasons why BCCI should wish to refuse to ratify competing leagues and/or to limit the number of IPL franchises in the interests of preserving a viable and competitive tournament. Where BCCI did go wrong, however, was in suggesting that it would never even consider sanctioning any rival tournament and/or reassess the number of franchises awarded. A commitment on its part in the future to do so (subject to the principles set out above) would seem to be the best outcome for all concerned.
In the meantime, sports bodies elsewhere will need to ensure they too are able to justify their own decisions along similar lines.
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