Sport and competition law – the year in review 2018/19
Welcome to the sport and competition law chapter of LawInSport’s “year in review” series. This chapter provides a high-level review of the year’s key developments in the field of competition law in the sports sector. Specifically, we examine:
the way in which the rules of sporting bodies can and have been challenged under the competition law rules; and
four key cases concerning:
the dispute between FINA and the International Swimming League, a dispute that has only recently been resolved;
the European Commission's decision in relation to the International Skating Union;
the dispute between the International Equestrian Federation and the Global Champions competitions; and
the German competition authority's case regarding the Olympics and restrictions on athlete endorsements.
Application of the competition law rules to the rules of sporting bodies
In recent years, the Commission and national competition authorities have continued to demonstrate interest in investigating sports governing bodies in response to numerous complaints based on the EU competition law rules. This has included high profile cases such as those regarding the UEFA financial fair play rules and the organisation of the Formula One Championship, while others are specifically regarding the rules of certain sports governing bodies.
EU competition rules generally prohibit organisations from putting in place agreements that may affect EU trade where those agreements "have as their object or effect the prevention, restriction or distortion of competition within the internal market". The rules also prohibit organisations from abusing a dominant position in their market. Those rules are contained under Articles 101 and 102 of the Treaty on the Functioning of the EU (TFEU). The rules are mirrored in Chapters 1 and 2 of the UK's Competition Act 1998. Rules of sporting bodies which are of purely sporting interest and, as such, have nothing to do with economic activity can fall outside the scope of the competition rules altogether.
In its guidance1 on the application of the competition rules to sport, the European Commission states that: "The sporting rule must also be proportionate in relation to its objective in order for it not to infringe Articles 101 or 102 of the TFEU and must be applied in a transparent, objective and non-discriminatory manner."
The Court of Justice of the EU (CJEU) has determined that rules relating to the regulation of football player transfer periods have a legitimate sporting objective, aimed at protecting "the proper functioning of the championship as a whole".2 The objective of ensuring that negotiations with other clubs do not disrupt the proper functioning of a competition and maintain the integrity of the sport could therefore be considered a legitimate sporting objective.
It has also been acknowledged by CJEU that sporting bodies have a margin of discretion when it comes to deciding what is necessary or "inherent" in the organisation of a sport since they "normally have the necessary knowledge and expertise".
It is clear that sports bodies that cannot justify the rules they set in this way risk falling foul of EU competition laws. This could result in enforcement action by the authorities to force changes to the rules and hefty fines being imposed.
A series of key cases regarding swimming, equestrian and the Olympic rules on athlete endorsement have been running for the past few years. 2018 saw resolution of these cases, which gives a clear indication that all sporting bodies need to ensure that their rules are proportionate and necessary in the interests of the sport as a whole, rather than purely for protecting their own commercial interests.
The cases discussed below serve to highlight the scrutiny that rules set by sports bodies can come under where they impact on rival commercial events and the earning potential of athletes. They follow others in showing that sporting body rules must be appropriate under competition law. Previous cases continue to be relevant: in a case involving swimmers David Meca-Medina and Igor Majcen, the CJEU clarified that sporting rules which pursue a legitimate objective, normally relating to "the organisation and proper conduct of competitive sport" may fall outside the scope of the competition rules but that the restrictions imposed must be "limited to what is necessary to ensure the proper conduct of the of competitive sport".3
FINA v the International Swimming League
A recent intervention by swimming's world governing body to disrupt the participation of athletes in a new international swimming league highlights the potential tension between rules for sport and competition law.
In a case running throughout 2018 and 2019, FINA (swimming's governing body) has been in dispute with organisers of alternative swimming events and has publicly threatened sanctions against swimmers that participated in these "rival" events.
FINA's rules prohibited affiliated national swimming federations from having "any kind of relationship with a non-affiliated or suspended body". The rules permitted FINA to suspend individuals that breached that rule for between one and two years depending on the circumstances involved.
In 2018, this led to the short notice cancellation the "Energy for Swim" event in Turin on 20 and 21 December4. The event was intended to be the first in a new "International Swimming League" (ISL), a non-FINA event. According to media reports, FINA had warned athletes who wished to compete at the event that they would be prohibited from participating in the World Championships in South Korea in 2019.
FINA announced a month before the event that
"Coordinating events in order to ensure a coherent competition calendar adds an extra level of complexity and this is a key criterion for FINA’s sanctioning of international competitions… The project of the Italian Swimming Federation to organise a swimming competition in Turin at short notice did not meet all the necessary FINA rulebook requirements. These requirements are in place to ensure that international competitions provide the best possible conditions to all participating athletes while maintaining a healthy calendar."5
Shortly afterwards, it was reported that FINA was facing a legal challenge over its stance, and that ISL considered FINA to be in breach of EU law by "using its powers to restrict competition" and reducing the opportunity for swimmers to earn prize money. 6 A case7 was also launched under US antitrust laws by three elite swimmers8.
In January 2019, in a significant development, FINA announced9 that it would not levy sanctions on swimmers who competed in the ISL, and therefore removed the threat of exclusion from the World Championships. It did however statethat any records set in an ISL event would be "unverified" unless the competition had prior FINA approval:
"FINA acknowledges that swimmers are free to participate in competitions or events staged by independent organisers, namely entities which are neither members of FINA nor related to it in any way…FINA's business is not to punish athletes, although if the FINA rules are not met, the results of the competition will not be recognised by FINA." 10
Leading swimmers announced11 in March 2019 that they will be taking part in the ISL event, due to commence in November 2019. FINA has also launched a new event (the Champions Swim Series), but there are no details on this event at the current time.
In making this concession, FINA shows that it was aware that its policy could have breached competition law. The case shows how rules of sporting bodies must be careful to be proportionate and necessary in the interests of the sport as a whole, rather than purely for protecting a governing body's own commercial interests. If not, it is possible that such rules could be viewed as contrary to the competition rules and provoke legal challenge.
The International Skating Union case
A key case discussed in the 2018 edition of the Yearbook was the decision regarding the rules of the International Skating Union (ISU). The ISU had been subject to a complaint by two Dutch professional speed skaters regarding its eligibility rules that included sanctions for athletes who participated in speed skating competitions that were not organised by the ISU itself. The skaters argued that this amounted to an infringement of EU competition laws.
Following a formal investigation, the Commission considered13 that the ISU's eligibility rules did indeed amount to a breach of the rules. They provided for severe penalties on speed skaters that could lead to a lifetime ban from participating in all major international speed skating events. The Commission considered that these rules restricted competition to enable the ISU to pursue its own commercial interests, to the detriment of the athletes and to competing event organisers. The rules prevented independent organisers from putting together their own speed skating competitions.
No fines were imposed on the ISU but it was given 90 days to stop applying these rules or any similar restrictions. The ISU was instructed to either abolish or change its eligibility rules and to base them on legitimate objectives, excluding the ISU's own economic interests, proportionate to their aims.
In February 2018, the ISU lodged an appeal14 against the Commission's infringement decision. It has argued that its eligibility rules do not have the object or effect of restricting competition, and that the Commission’s decision rested on a "fundamental contradiction". The ISU has also raised jurisdictional arguments, including that its decision not to approve the 2014 Dubai Ice Derby fell outside the scope of the EU competition law rules.
The outcome of this appeal by the General Court of the European Union (which is likely to be heard during 2019) will provide important clarification of the application of the competition law rules in this area. It appears likely that the court will uphold the Commission's decision unless the ISU is able to argue that the restrictions imposed can be show to be proportionate in relation to the ISU's objectives in administering the sport: this seems unlikely if the Commission can successfully show (as it argued in its original decision) that the restrictions enabled the ISU to pursue its own commercial interests, rather than being required for proportionate reasons.
The International Equestrian Federation case
Similar issues have also been raised in the equestrian sector, in particular as regards a case involving the International Equestrian Federation (FEI). This case has also progressed since last year's Yearbook.
In Belgium, the competition authority considered whether the FEI rider invitation policy was anti-competitive. The policy applied to participation in the Global Champions League (GCL) and Global Champions Tour (GCT) competitions.
The complaint prompted Belgium's competition authority to impose an interim measure16 to ensure that at least 60% of invitations sent for the GCT were sent by reference to the riders' rankings and not on the basis of their GCT membership. The regulator followed up in April 2018 by imposing daily penalty17 payments on the FEI, the GCT and GCL after finding the participation rules had not been updated in accordance with competition rules.
However, in June 2018, the Belgium competition authority's interim decision was annulled by the Brussels Court of Appeal18, forcing the regulator to reconsider its case for imposing interim measures. In October 2018, the competition authority said there was not sufficient evidence to impose interim measures on the equestrian bodies. However, it stated19 at the time that its conclusions on that do not prejudge "the analysis on the merits" of the complaint raised by the rider and stable, which is to be ruled on.
In December 2018 the competition authority announced20 that it had closed its investigation into the FEI on the basis that the FEI has committed to make "procedural and substantive changes" to address the competition concerns. The FEI has indicated that it was grateful to the regulator for working with it to reach "a mutually satisfactory resolution". Although not public, it is likely that the "substantive changes" were sufficient to ensure the FEI is now in compliance with the competition law concerns raised by the Belgian authority.
The Olympics and restrictions on athlete endorsements
The International Olympic Committee (IOC) and the German Olympic Sports Confederation (DOSB) have also come in for scrutiny in relation to restrictions on athlete endorsement deals.
As discussed in last year's Yearbook, the Federal Cartel Office in Germany (Bundeskartellamt) opened an investigation in December 2017 in relation to rules imposed by the IOC and DOSB which prevent athletes competing in the Olympic Games from using their name, picture or sport performances for advertising purposes. Supporting guidelines developed by the DOSB required German athletes to apply to it at least three months before the Olympics for an exemption from the Olympic Charter rules. Exemptions were only available for ongoing advertising campaigns and they could not contain any Olympic or Olympic-related terms.
In December 2017, the Federal Cartel Office said it suspected21 that the advertising restrictions placed on athletes and companies can amount to an abuse of dominance under competition law by the IOC and DOSB and that it was reviewing the commitments which have been proposed by both sports bodies to relax the previous advertising restrictions.
In February 2019, The Federal Cartel Office (FCO) said22 it had reached a deal with the IOC, and the DOSB, which it stated will provide more scope for German athletes to benefit commercially from advertising at the time of the games: "A new DOSB guideline defines the changes and the conditions under which German athletes and their sponsors can carry out advertising activities in the future," the FCO said. "The IOC has agreed that these new guidelines take priority over the IOC rules with regard to Germany."
Under the new agreement, athletes will no longer be required to get advanced clearance for advertising activities scheduled to take place during the Olympics, and brands will be free to develop new advertising campaigns to time with the games. Social media restrictions have also been loosened to allow sponsors to send messages of greeting and congratulations to athletes and for athletes to respond and share certain content.
There has also been further relaxation of rules concerning photographs of athletes competing and of the terminology that athletes and their sponsors can use in advertising campaigns during the Olympics.
"It is now allowed to use terms like 'medal, gold, silver, bronze, winter or summer games'," the FCO said. "The catalogue of Olympic terminology which must not be used is now considerably smaller and, unlike before, conclusive."23
While the restrictions have been eased, there will still be limitations to the advertising activities athletes and their sponsors can engage in at the time of the Olympics. Under the new framework, however, athletes that breach the rules will not be subject to sporting sanctions.
Andreas Mundt, president of the FCO, said:
"We ensure that the advertising opportunities of German athletes and their sponsors during the Olympic Games, which the DOSB and IOC significantly restricted in the past, are extended. While athletes are the key figures of Olympic Games, they cannot benefit directly from the IOC’s high advertising revenue generated with official Olympic sponsors. However, as the games mark the height of their sporting careers, self-marketing during the games plays a very important role."
"Our decision grants German athletes more leeway when it comes to marketing themselves during the Olympic Games, for example as far as the use of certain 'Olympic' terms or their pictures taken in sports events, or social media activities are concerned. Sports associations pursuing economic activities are also subject to competition law,"24
While no decision was taken by the FCO against either the IOC or DOSB, the case shows how competition laws concerning abuse of dominance can apply to sporting bodies such as these and provoke policy change.
RFC Seraing’s / Doyen Sports TPO complaint
A final case of relevance this year is the complaint brought by RFC Seraing and Doyen Sports against the ban on third party ownership (TPO) of football players, which was brought in by FIFA in 2015. The case contains procedural and commercial elements that are discussed in further detail in the sports dispute and disciplinary proceedings review; however, from a competition law perspective, it also included a challenge before the Belgian courts where the parties argued that the ban on TPO violated EU competition law.
To stand a chance of success, the parties will need to be able to show that this ban (which has also been criticised by other national EU competition authorities) is not proportionate to FIFA's objective of maintaining the integrity of the sport and the transfer system (as TPO can create incentives for players to be transferred more regularly). The case is currently at a preliminary stage and a substantive hearing could occur 2019: it will be interesting to follow as it raises similar points to those cases discussed above, and the TPO ban has become a key part of the regulation of the football transfer market.
Looking forward (key themes to watch)
The cases above all follow a similar theme: that while sporting bodies have a margin of discretion when it comes to deciding what is necessary or "inherent" in the organisation of a sport (given they "normally have the necessary knowledge and expertise"), if they cannot justify the rules they set as proportionate, there is a strong risk of them falling foul of EU competition laws. The cases in 2018 (in particular the cases in relation to FINA and athlete endorsements), show how competition authorities are focussing on the interests of a sport as a whole, rather than the pure protection of commercial interests.
With an increasing number of rival events being proposed in certain sports, competition law arguments and complaints are expected to remain common. The cases we expect to conclude in 2019 (the ISU appeal, and RFC Seraing) are likely to raise similar themes, and provide further guidance on how far sporting bodies can go in setting their organisational rules. This remains an area of focus of enforcement for competition authorities, given the high profile of the sport sector and the significant commercial interests affected.
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- Tags: Belgium | Competition Act 1998 | Competition Law | Court of Justice of the EU (CJEU) | Equstrian | European Commission | FINA | Football | Global Champions League (GCL) | Ice Skating | International Equestrian Federation (FEI) | International Skating Union (ISU) | Regulation | Swimming | Treaty on the Functioning of the EU (TFEU) | United Kingdom (UK)
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Angelique Bret is a partner in the EU and Competition Law Group at Pinsent Masons.
Angelique specialises in advising clients on the application of the competition rules in the sports sector. She has acted for governing bodies, clubs and major brands across sport and in particular in relation to football, horseracing, rugby and cricket. She has been involved in the seminal cases involving the collective sale of the FA Premier League's TV rights and the defence of the Racecourse Association's sale of media rights to Attheraces. More recently, Angelique has been advising on Ofcom's investigation into the sale of the FA Premier League rights, the UEFA financial fair play rules and the State aid regime for investment in sports infrastructure.
Associate, Pinsent Masons.
Paul specialises in EU and UK competition law, and advises client on the application of the competition law rules to clients in the sports sector. He has recently advised clients on the UEFA and EFL financial fair play rules, the State Aid regime for investment in sports infrastructure, and sports media rights. Paul also has experience of working with both UK and EU competition authorities in the context of merger investigations, cartels and complaints for clients in many business sectors.