The law on banning athletes from competing in rival sports leagues

EU Commission Statement of Objections in the ISU case Published 05 October 2016 By: Alex Haffner, Krish Mistry

The law on banning athletes from competing in rival sports leagues

Across many important international sports, federations and other organisations seek to asset the sole right(s) to organise professional sporting competitions, often as part of their broader regulatory governance role.

As sport has increased in its economic importance, so challenger organisations have increasingly come along seeking to set up rival leagues and competitions, often with a new or novel approach to the way in which sporting competitions should be managed and operated. Typically, though not always, they will approach the governing body in situ to seek their endorsement, thereby ensuring that participants in the new competitions do not face any sanctions. However, unsurprisingly, these approaches are not always well received leading to litigation between the parties concerned.

Two recent cases - one involving the genteel world of Equestrian, the other speed skating - show it is competition law that is frequently becoming the battleground for these dispute. This piece examines the application of competition law to the creation of and participation in rival sporting leagues, including a review of the European Commission’s recent Statement of Objections in the speed skating case. Specifically, it looks at:

  • The law on rival sporting leagues
  • Competition law and how it applies
  • Is sport a “special case” when it comes to the application of the competition rules?
  • Post Meca-Medina decision: the battle lines are drawn
  • Recent Cases: International show jumping and the Global Champions League case
  • Next off the blocks: speed skating and the International Skating Union
    • The European Commission’s Statement of Objections
    • The ISU’s response
  • Authors’ comment

 

The law on rival sporting leagues

In 1977, Kerry Packer, an Australian media mogul affronted by the Australian Cricket Board’s refusal to license exclusive broadcast rights to his Channel Nine TV station, set up a breakaway professional cricket competition known as “World Series Cricket” (WSC). With Packer offering significant sums of money, 34 players signed up to play in WSC, which was to be a series of “all-star” test matches played (initially at least) in Australia.1

Many of the players concerned were established internationals, including Tony Greig (at that time the England captain). In response, cricket’s world governing body, the International Cricket Council (ICC), decided it had to act and changed its rules so that any player who made themselves available for unauthorised matches (such as those in WSC) would be disqualified from playing in any official test match for their country.

The Test and County Cricket Board (TCCB), which was then the custodian of the game in England and Wales implemented ICC’s decision by disqualifying any player banned by ICC from appearing for any of the domestic counties.2 County cricket was (as it still is) an attractive option for overseas players to earn more money outside of their international/domestic commitments.

Backed by Packer3, Grieg and two of his fellow WSC converts (Mike Procter and John Snow) challenged the bans imposed by TCCB and ICC at the English High Court, a case which has become known as Greig v. Insole4.

Greig and his fellow claimants argued that the bans imposed on them were in breach of the English common law “restraint of trade” doctrine.5 In their defence, TCCB and ICC argued that their actions were justified on the basis that WSC threatened the continued health of the international and domestic game.

However, after a trial lasting seven weeks, the presiding judge ruled that, whereas TCCB and ICC had legitimate interests to protect (namely the proper organisation/administration of the game), their actions had gone further than was reasonably necessary in the circumstances to protect those interests. In particular, the court was not convinced that the game’s finances were (as claimed) under significant threat as a consequence of WSC.

WSC, which took place between 1977 and 1979, undoubtedly changed the cricketing landscape significantly, exposing as it did the financial inequalities of the sport.6 Since then, many different sports governing bodies have found themselves subject to similar disputes by the organisers of new competitions or leagues wishing to upset the established order of things. Similar issues are at the heart of those disputes, although it is competition law that now provides the legal backdrop.

 

Competition law and how it applies 

Article 101 of the EU Treaty7 and its equivalents under the national laws of each EU Member State prohibits anti-competitive agreements. The concept of an “agreement” is widely drawn for these purposes and, in particular, includes decisions by associations of undertakings.

Since sports governing bodies typically draw up their rules and regulations with the consent of their “members (e.g. national federations in the case of an international governing body), who each qualify as undertakings in their own right, those rules and regulations fall within the scope of the prohibition on anti-competitive agreements.8

Anti-competitive agreements are automatically void unless they benefit from an exemption, which is possible only if the agreement achieves efficiency benefits that are passed on to consumers and, crucially, that the restrictions in the agreement go no further than is necessary to achieve those benefits.

Alternatively, Article 102 of the EU Treaty9 deals with unilateral conduct by preventing an undertaking that has a “dominant position” in a market from abusing this position. Dominance in this context means a position of market power that enables an undertaking to act independently of competitors/customers. In exercising their (regulatory and/or commercial) functions, sports governing bodies are often in such a position of dominance, particularly where they assert sole jurisdiction over the organisation and promotion of their particular sport in a given territory.10

It is not possible to obtain an exemption for an abuse of a dominant position. However, conduct will not be considered abusive if it can be “objectively justified”, that is the behaviour in question is based on factors which are external to the dominant undertaking.

 

Is sport a “special case” when it comes to the application of the competition rules? 

Sports bodies are undertakings that carry on economic activities and are therefore subject to the provisions in the EU Treaty on competition law.

However, it is also generally recognised that sport has certain features that distinguish it from other economic activities. For example, the organisation of professional sport generally includes:

a pyramid structure of competitions from grassroots to elite level and organised solidarity mechanisms between the different levels and operators, the organisation of sport on a national basis, and the principle of a single federation per sport”.11

How far competition law should interfere in these so-called “specificities of sport” is a key question which has grown in importance as sport has continued to command ever more commercial significance. Prior to the landmark Meca-Medina ruling of the European Court of Justice (ECJ) in 200612, it was generally considered that certain sporting rules were immune to the application of competition law as being inherent in the good organisation of a sport. However, the ECJ put paid to that presumption and instead held that a case-by-case analysis was required to consider any sporting rule as against the following factors:

  • the context in which a rule is adopted/decision taken and, more particularly, its objectives (for example, protecting the integrity of competition, participants welfare etc); and
  • whether any restrictive effects on competition are inherent in the pursuit of those objectives and, if so, whether they are proportionate to them.

This framework is particularly pertinent when it comes to assessing decisions by sports governing bodies as to the validity of rival leagues and competitions. Just how far are those governing bodies entitled to go in preserving (what they would argue is) the “proper” structure of their sports?

 

Post-Meca Medina: the battle lines are drawn

Since the Meca-Medina ruling made clear that sports and in particular sports governing bodies were not immune to competition law, several challengers have issued complaints/proceedings to try to facilitate changes to rules which make it more difficult for them to operate rival competitions (or prohibit them altogether).

In the MOTOE case13, the Grand Chamber of the European Court of Justice was asked by a Greek court to opine on whether the body charged by Greek law with organising motorcycling events was justified in refusing a request by a private organiser for a series of events. The court confirmed in its judgment that:

a legal person whose activities consist not only in taking part in administrative decisions authorising the organisation of motorcycling events, but also in organising such events itself ... falls within the scope o f… [the competition law provisions in the EU Treaty]. Those articles preclude a national rule which confers on a legal person, which organises motorcycling competitions and enters, in that connection, into sponsorship, advertising and insurance contracts, the power to give consent to applications for authorisation to organise such competitions, without that power being made subject to restrictions, obligations and review.

What may be justified in terms of appropriate restrictions, obligations and review is, of course, at the very heart of the matter, which brings us to two very recent cases involving show jumping and speed skating.

 

Recent Cases: International show jumping and the Global Champions League case

A particularly good example of the tensions referred to above is the case fought last year (2015) before the Belgian Competition Authority (BCA)14 and the national Belgian courts15 between Global Champions League (GCL) and the governing body for equestrian, the International Equestrian Federation (FEI).

Under its Regulations, FEI has the exclusive right to approve any international equestrian competition. Horses and their riders who participate in competitions not sanctioned by the FEI are excluded from appearing in accredited FEI events for six months. Given the year-round nature of the sport, the effect of the sanction was clearly to dissuade riders from competing in non-FEI events.

GCL has been in operation for some time (since 2005), organising and operating international show jumping competitions pursuant to a memorandum of agreement with FEI.

However, when GCL decided to run a new league format to exist alongside its existing competitions and approached FEI for approval, FEI decided that it could not give its approval, citing in particular the fact that there already existed a team series (the FEI’s own Nations Cup competition), which was sufficient given the overriding need to take into account the requirements of the sport/its participants.

GCL accordingly complained to the BCA seeking various orders including an interim order suspending the application of FEI’s exclusivity clause to GCL’s new tournament.

There is little doubt that FEI occupies a dominant position in the organisation and promotion of international equestrian competitions given the way its Regulations are structured and enforced. As such, the key issue of concern for the BCA was the application of those Regulations and whether FEI was justified in its decision to refuse consent to GCL’s new competition.

The BCA considered the pattern of correspondence between GCL and FEI in some detail – the parties had been in discussions for more than a year prior to GCL making its complaint to the BCA. It found that, whilst FEI had asked a series of questions of GCL which purported to take into account legitimate concerns as to the welfare of the horses competing and the integrity of the competition, in reality the information sought went beyond what was reasonably necessary to ensure those concerns.

For example, FEI sought details of all contracts between GCL and the participating athletes as well as those for the broadcast of the new competition. Whilst FEI justified this request on the basis that it needed to understand how the competition would be operated, the BCA felt this was unnecessary given the background information already at FEI’s disposal.

In view of FEI’s conflicting role as the organiser and promoter of rival competitions, the BCA emphasised that any conditions for the approval of a new competition had to be clear and unambiguous and relate specifically to legitimate sporting considerations. In this case, it considered FEI had simply taken into account its own commercial interests (see paras 154-7 of the BCA’s decision). Had FEI applied the criteria on which it purported to reject GCL’s new competition (welfare and integrity) it was clear that GCL should received approval.

The BCA noted in particular (at paragraph 154 of the decision) that GCL already organised a professional series of events over which FEI had not previously expressed any concerns. Moreover, GCL had structured the new events to take place at the same time as its existing competitions so avoiding any concerns as to fixture clashes.

The BCA was also very critical of the approval process adopted by FEI, noting that it was not subject to any specific deadlines in responding to the GCL’s application. This no doubt helped persuade the BCA that, not only was GCL’s case a good one worth further consideration, but also GCL should be entitled to an interim injunction suspending the application of the FEI’s exclusivity clause pending the conclusion of the BCA’s investigations.

GCL wanted to be operational from April 2016 and it was clear that absent the suspension of the exclusivity clause, the organisers would have to abandon the GCL project. In view of the interim injunction granted by the Belgian courts, the new GCL competition was due to start in Miami on 7 April 2016.

 

Next off the starting blocks: speed skating

It was announced by the European Commission on 5 October last year that it was opening a formal investigation into the rules of the International Skating Union (ISU) precluding skaters from taking part in events not authorised by the ISU.16 Two Dutch speed skaters had complained that they had been threatened with lifetime bans if they participated in such events. The ban included the ability to take part in future Winter Olympics, World and European Championships.

The Commission’s initial press release noted that the ISU’s rules could

prevent alternative event organisers from entering the market or drive them out of business” and therefore “constitute anti-competitive agreements and/or abuse of a dominant position in breach of EC antitrust rules”.17

The ISU has previously made clear its stance on unsanctioned events, labelling them a risk to athletes for health and safety reasons, but interestingly claiming also that the risks posed by betting on such events was a relevant factor.18 This latter consideration has its origins in the inception by a private entity, Icederby International, of a proposed series of international speed skating events with a novel format combining both long and short track events.

Part of Icederby’s commercial proposition was the inclusion of trackside betting opportunities. This led the ISU to issue a revised Code of Ethics which emphasised that its members should refrain from participating in “betting or gambling relating to any event/jurisdiction under the jurisdiction of the ISU”.19

Icederby subsequently secured a contract to organise a speed skating event in Dubai as part of its preparations for the World Expo 2020 event, perhaps an unusual choice of venue but also very pertinent to the ISU’s concerns given that betting is strictly prohibited in the UAE Indeed Icederby confirmed to the ISU that no such activities would be permitted during the event. Nevertheless, this was apparently not enough to convince the ISU, which issued a statement expressing concern that the organiser was “possibly closely connected to betting” and therefore its event would be regarded as unauthorised and any participants subject to the above-mentioned rules on eligibility.20

Unlike that of their Belgian show jumping counterparts, the complaint issued by the speed skaters does not seek to overturn the ISU’s decision not to authorise Icederby. Rather, the focus is on the ISU’s rules and in particular their ability to impose lifetime bans on those participating in unsanctioned events, which they argue is disproportionate to any legitimate aims that the rules aim to protect (e.g. integrity of competitions).

 

The Commission’s Statement of Objections 

On 27 September 2016, the EC sent a "Statement of Objections"21 to the ISU (effectively a charge sheet) setting out the EC's opinion that the ISU's eligibility rules are in breach of EU competition law. Rule 102, Paragraph 2 (ii) of the ISU's eligibility rules provides that a person skating or officiating in an event not sanctioned by the ISU and/or its Members (i.e. the individual national associations) becomes ineligible to participate in ISU activities and competitions. Whilst it is possible to be re-instated as a member of the ISU, Rule 103 Paragraph 2 stipulates that this does not apply to skaters. In short, for skaters the ban is for life from events such as the Olympic Games, the World Championships or the European Championships.

Whilst the Statement of Objections is not a public document, it is understood that the Commission has adopted the complainants’ (the speed skaters’) key arguments that the ISU eligibility rules are disproportionately punitive and would prevent non-ISU- affiliated entities from organising international speed skating competitions due to the lack of willing participants. As a result the rules, as a decision made by an “association of undertakings” (the ISU) are in breach of Article 101 of the EU Treaty prohibition on anti-competitive agreements.

 

ISU response

The ISU believes that the claims made by the EU are unfounded. In a statement issued on 27 September 2016the ISU stated that the EU has long recognised the "autonomous governance structure of sport" and continued to say "independent organisers are able to organise international tournaments on the ISU international calendar".22

No doubt the EC will be asking themselves some questions. How easy is it to organise an event? Indeed if this process is available, why is there a potential lifetime ban from all key skating competitions for non-accreditation events?

 

Comment 

As shown by the two cases above, the issues aired in the Grieg v. Insole case are now increasingly being played out under EU and domestic (EU Member State) competition law, with competition authorities and the courts being asked to play referee.

It is also clear that these cases will have wide ranging repercussions for many different sports. A recent paper by the Asser Institute23 looked at sanctions imposed by International Sports Federations on athletes participating in unauthorised events and found a wide range of approaches being taken.

Indeed a number of those federations, whilst making it clear that participants in such events would be subject to sanction, have left the precise nature of those sanctions open-ended, further muddying the waters. It is reasonable to assume that other of those federations will find themselves embroiled in similar disputes to those that have already embroiled show jumping and speed skating.

It remains to be seen how the European Commission tackles the ISU case. One option available to it may be to seek to settle by amending its rules to satisfy any concerns the European Commission might otherwise raise. What is clearer, however, is that federations can no longer rely on their role as the “guardian” of a sport to deal summarily with the threat posed by organisers of breakaway/rebel competitions.

Competition authorities and the courts will expect federations to have in place a transparent system of authorisation and, where any non-authorisation decision leaves participants open to the threat of sanctions, the application of the rules concerned must be applied in a non-discriminatory fashion. Suspicion will naturally be aroused as to whether any rejection is motivated more by commercial concern to protect the federation’s own events than any genuine/legitimate sporting considerations.

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Author

Alex Haffner

Alex Haffner

Alex is a Partner in the Commercial, Sports and IP Team at Fladgate LLP, specialising in the sports, technology and media sectors.

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Krish Mistry

Krish Mistry

Krish Mistry is a trainee solicitor in the Sports Team at Dentons. He is currently sitting in the Competition Law department.