Exploitation of sports rights under the Hungarian Sports Act

Published 08 July 2012 | Authored by: Péter Rippel-Szabó

Optimised exploitation of sports rights is a central issue from the viewpoint of Hungarian sports rights owners. Although population of Hungary and international exposure of Hungarian competitions are rather low key, athletes, sports clubs and sports associations generate most of their income through commercially exploiting their sports rights.  This article will provide a general insight into the regulations of the Hungarian Sports Act (‘Sports Act’) on the exploitation of sports rights.  In this article, the term ‘sports rights’ refers to sports rights which have a commercial value and can be exploited in exchange for consideration by their rights holders.

Organisation of Hungarian sport serving as a basis for exploiting sports rights

Organisation of Hungarian sport, similarly to other European jurisdictions, is based on the following pyramid structure:Hungarian sport pyramid

Athletes have either membership status in or sports contracts with sports clubs. Sports clubs compete on different levels of competitions organised by the respective sports associations. Participation of clubs in competitions entails automatic membership in the sports association. Consequently, sports clubs are directly and athletes are indirectly bound by the internal regulations of sports associations.   This pyramid structure serves as the basis for the functioning of Hungarian sports and inter alia for the mechanism of exploiting sports rights.

Provisions on exploitation of sports rights

 

In the chapter ‘Commercial Agreements’ the Sports Act splits provisions into three main parts in connection with the exploitation of sports rights, as it regulates:

  1. the sponsorship and merchandising agreements;
  2. the definition of sports rights and their owners; and
  3. the joint selling of sports rights.

Sponsorship and merchandising agreements

Under sponsorship agreements the sponsor associates its commercial and marketing activity with the positive image of the person sponsored (i. e. athletes, clubs or associations).  Under merchandising agreements, on hoardings, souvenirs, clothing or other items, the sponsor uses only part(s) of the sponsored person’s image, name or likeness and the name or badge of clubs and associations. 

Sponsorship agreements have broader scope than merchandising agreements, as the sponsor is entitled to commercialise the person’s entire image in contrast to merchandising where only certain parts of the image may be associated. In practice, distinction between the two types of agreements can be made by examining whether the contract obligates the sponsored person to appear personally in public (meet and greet obligations or use of the sponsor’s products or logos during sports activity) or the association is achieved through portraying the sponsored person on various items without any personal interaction. 

Definition of sports rights and their owners

The Sports Act expressly defines the sports rights which have commercial value and therefore can be exploited. The law also sets out who owns these rights. Sports rights and their owners are:  

Sports rights

Owner(s) of sports rights

TV, radio and other digital broadcasting of sports activity and sports events

Athletes and sports clubs

Sports rights related to athletes’ sports activity

Athletes and sports clubs 

Organisation of sports events

Sports associations

Sports rights connected to matches and competitions of national teams

Sports associations

The above table shows that the Sports Act does not expressly name some of the sports rights (e. g. names or badges of sports clubs) which can be exploited in form of sponsorship or merchandising agreements. However, despite this uncertainty in law, it is clear that these sports rights also have commercial value since the sponsor is obliged to provide consideration in exchange for associating the sponsored person’s image with its products. 

Joint selling of sports rights

Sports associations, concerning the competitions organised by them, may decide to jointly exploit sports rights owned by sports clubs or athletes for a definite period of time. In this case the sports association will be entitled to enter into commercial agreements concerning sponsorship, merchandising or broadcasting.   However there is no clear provision on to which extent the joint selling of athletes’ and clubs’ sports rights in the form of sponsorship or merchandising agreements is possible if the sports association decides to collectively exploit a competition. 

The reason behind joint selling is that, in most cases, through collective selling of sports rights greater revenues can be generated than through individual exploitation and fairer distribution of revenues can be achieved. In order to realise the maximum income possible the sport association is obliged to consult with the sports clubs prior to concluding any agreements with broadcasters and sponsors.  Subsequent distribution of money generated through joint selling needs to be based on fair criteria (e. g. frequency and popularity of broadcastings, results achieved by sports clubs) and on the principle of solidarity. 

Uncertainties surrounding the exploitation of sports rights

As the provisions of the Sports Act on definition and ownership of sports rights and on joint selling are not entirely clear, there are some uncertainties surrounding the practical exploitation of sports rights. It is relatively common that sports associations, referring to the Sports Act, reserve the right to conclude any commercial agreements simultaneously prohibiting or restricting athletes and sports clubs to enter into their own sponsorship or merchandising agreements. This leads to potential conflicts and potential legal disputes. In addition, unlawful restrictive practices of associations may result in competition investigations into the sports association’s regulations.

However, legal risks can be minimised if the internal regulations of sports associations are in line with the specific nature of the sport concerned and consider the interests of all stakeholders. In this way, the number of possible disputes and likelihood of a competition investigation can be minimised.  Nonetheless, more precise provisions of the Sports Act concerning the joint selling and the definition of sports rights would be desirable, as it would make the application of the Sports Act easier for both stakeholders and their legal representatives.

Summary 

The Sports Act provides a relatively appropriate framework for balanced and fair exploitation of sports rights which seeks to benefits all stakeholders. However, similarly to other European legal systems there are some open issues particularly concerning the definition and joint selling of sports rights. In practice, the issues arising from legal uncertainty can be avoided by sophisticated regulations of the sports associations and fair distribution of income.

For further information please contact Péter Rippel-Szabó.

About the Author

Péter Rippel-Szabó

Péter Rippel-Szabó

Péter Rippel-Szabó is an attorney at law with Bird & Bird (Hungary) where he provides advice on sports law, corporate law, general commercial matters and competition law. Péter is a lecturer at the Faculty of Law of University ELTE Budapest, co-authored the textbook 'Sports Law - The Civil Law of Sport' (Budapest 2011) and has publications in law journals and on other prominent sports websites on a regular basis.

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