How competition law is affecting sports in India: a look at the emerging case law

Published 06 September 2018 | Authored by: Saurabh Bhattacharjee

The twin forces of globalisation and commercialisation have turned sports into a global business. Yet there are a multitude of ways in which sports entities remain significantly different than other business organisations. The monopolistic nature of sports organisations and the inherent need for maintaining competitive balance between teams have resulted in emergence of many forms of economic restraints like revenue-sharing, spending caps, drafts, non-tampering clauses.1 Although these restraints are commonplace in modern sports, they have inevitably attracted the attention of competition law which aims to protect markets from anti-competitive restraints and their legality under competition laws have often been questioned in different jurisdictions on a regular basis.2 India has been no exception in this regard.

Three recent decisions of the Competition Commission of India (CCI) have thrown a renewed spotlight on the role of competition law in sports in India:

This article reviews the decisions and assesses what they may mean for the future of competition law and sports in India.

Background: The Competition Act 2002 & the IPL and Hockey India cases

Within a decade of operation of the Competition Act 2002, which effectively came into force in 2009, several high-profile disputes relating to business of sports have been adjudicated by competition regulators in India. Proliferation of professional sports leagues in cricket, hockey, football, badminton, kabaddi in the last decade has resulted in numerous controversies on assignment of media rights, restrictions on players and on rival leagues, that have raised questions on potential violations of section 3, which prohibits anti-competitive agreements, and section 4, which outlaws abuse of dominance, of the Competition Act.6

The first major intervention of the CCI in the field of sports was with respect to an investigation on the Indian Premier League (IPL) cricket league when it found that the representation given by the Board for Control of Cricket in India (BCCI) in the IPL Media Rights agreement with the broadcasters that it shall not organize, recognise or support another rival Indian T20 competition amounted to abuse of dominance.7

The other early high-profile competition case on sports pertained to a complaint filed by Dhanraj Pillay, former India hockey great, against Hockey India (HI), which claimed that the restrictive conditions imposed by HI through its revised Code of Conduct (CoC) Agreement with its players, on participation in un-sanctioned prospective private professional leagues resulted in undue restrictions on mobility of players and on prospective private professional leagues.8 The CCI ruled that while HI was in a position of dominance, it had neither abused its dominant position nor entered into any anticompetitive agreements with the players.9 Even though CCI found no violation of the Competition Act, it called upon HI “to put in place an effective internal control system” to “ensure that its regulatory powers are not used” for “deciding on any matters relating to its commercial activities.10

These two cases set the tone for entry of competition law into sports in India. The decisions signalled that, unlike baseball in United States,11 there was no exception for sports from scrutiny of competition regulators in India. Yet, the CCI also recognised “the right of self-regulation of sports bodies with regard to issues, which are purely sporting, such as selection of teams, formulation of rules of the sport etc. or, even the issues which have economic aspects such as grant of various rights related to sports events or organization of leagues etc”.12

The recent decisions in cricket, chess and athletics

The three recent decision identified in the introduction build on the principles laid down in the Dhanraj Pillay and IPL cases, and further clarify the scope and standard of scrutiny applicable to sporting bodies. While these three orders were issued within close proximity of each other, they have very separate history.

All India Chess Federation

The earliest complaint was filed against the AICF in the AICF case.13 This case is unique in so far as it emerged from the directions of the Delhi High Court in 2011 on a writ petition that had asked the High Court to direct the Ministry of Youth Affairs and Sports and the AICF to not ban or threaten to ban chess players who had associated with the rival body, Chess Association of India (CAI).14 The AICF had written to the Fédération Internationale des Échecs (FIDE), the international governing body for chess to remove the ELO ratings of several players and had banned four players for participation in unauthorised competitions organised by CAI.15 The High Court instead directed the CCI to enquire into the contravention of the Competition Act that were alleged in the writ petition.16

In its July 2018 order, the CCI came to the conclusion that the consequences of participating in any unauthorised events as per Clause (z) of the AICF Code of Conduct for the Players are very harsh since it entails a life ban and there is no provision of seeking any permission or any hearing in which players can provide an explanation. Further, it alluded to the fact that neither the byelaws nor the constitution of AICF defined what an unauthorised tournament is, nor did they lay down any parameters for grant of authorisation for tournaments.17

Therefore, the Commission concluded that the rules and restrictions imposed by AICF for participating in non-approved tournaments had the object as well as the effect of restricting free movement of chess players and thereby, foreclosing the entry of potential organisers. These practices consequently led to denial of market access and constituted abuse of dominance as defined in Section 4 (2) of the Competition Act.18

Indian Cricket League

The second complaint was filed by proprietors of the Indian Cricket League (ICL) against the BCCI in 2013.19 The ICL was a privately-owned league. They alleged that the BCCI imposed a number of restraints on them as they saw them as a rival.20 These restraints included ban on players, directives to affiliated entities to terminate employment of players associated with ICL, denial of access to cricket facilities.21 In addition, eligibility conditions for allocation of media rights for the IPL specifically excluded any bidder “involved in any litigation proceedings of any kind” with the BCCI, resulting in exclusion of proprietors of ICL. which denied them market access.

The CCI ruled that the BCCI enjoys a dominant position in relevant market of organisation of professional cricket leagues in India and had systematically excluded the complainant from participation in this market by not recognising the ICL.22 With regards to blacklisting of proprietors from bidding for the broadcast rights for IPL, it observed that “[t]he sequence of events and the nature of restriction suggests that the conditions were specifically targeted” against the company which ran the ICL and the modifications in the eligibility conditions for allocation of broadcast rights were “intended to prevent” that company from bidding for the media rights for IPL.23 Therefore, the CCI held that there was a prima facie case of abuse of dominance as defined by section 4 (2) (c) of the Competition Act and directed the DG to carry out an investigation within 60 days.24

Athletics Federation of India

The last of these three cases involved a complaint25 against the AFI relating to the decision taken in one of its 2015 Annual General Meeting (AGM) to act against its state-level member-associations, their officials, and athletes who encourage unauthorised marathons without the permission of AFI as anti-competitive.26

The CCI initially took the view that there existed a prima facie case of contravention of provisions of Section 4 of the Act by AFI and directed the DG to investigate the complaint.27 In its final order, however, the CCI did not find any violation.28 It ruled that the complaint was based on the Draft Minutes of the 2015 AGM and that the final minutes of the said meeting does not contain anything which can be said to abusive in terms of Section 4 of the Act.

The CCI also averred that the practice showed that AFI recognised only 11 marathons out of more than 300 conducted every year throughout the country. Thus, it inferred that AFI’s restriction on the organisers for conducting marathons or road races do not have the effect of limiting the market for organisation of athletic activities in India or foreclosing the market to the organisers, sponsors and participating athletes.29 Consequently, the CCI ruled that even though AFI was in a dominant position, its conduct was not abusive.

Crystallisation of Competition Law as a Source of Accountability

While very different in their underlying disputes and the reasoning forwarded by the CCI, these orders could, in the author’s view, have a momentous impact on the evolution of competition law and sports in India.

One of the major shifts they signify is the growing recognition of competition law as a legitimate and effective source of accountability for sports governing bodies (SGBs). Rivals and stakeholders aggrieved by decisions of SGBs see the discipline of competition law as a helpful tool for ensuring accountability. This is particularly exemplified in the AICF case, where the Delhi High Court itself directed an investigation by the CCI as a relief in a writ petition. Although the writ petition had sought a writ of mandamus against the AICF, the High Court opined that the allegations against the AICF might constitute a contravention of the Competition Act and needed a thorough investigation by the CCI. In view of the extensive powers that the High Courts in India enjoy under Article 226 of the Constitution30 and the prolonged recent history of judicial oversight over sports under writ jurisdiction,31 the choice of reference to the Competition Commission was, in the author’s view, remarkable. That the court chose not to intervene directly and ordered an investigation by the Competition Commission constituted a vital judicial endorsement of the role of competition law in sports.

Equally significant in this regard is the case against the AFI. The complaint was filed by the Department of Sports, Ministry of Youth Affairs and Sports (MYAS), Government of India. The MYAS has exercised fairly extensive control of National SGBs through the system of recognition, financial and infrastructure support and tax-exemptions as provided in the National Sports Development Code 2011.32 Thus, it had several weapons in its armour to confront the AFI. Yet, the MYAS opted for a complaint to the CCI. The decision of the MYAS to not use its bureaucratic powers and opt for remedies under the Competition Act 2002 is another symbolic step forward in entrenchment of Competition Law in sports in India.

These two cases demonstrate that not just aggrieved sportspersons and entrepreneurs but sections of the judiciary and the central government also view competition law as an effective tool for oversight over the functioning of SGBs. Thus, this discipline can be an additional source of accountability in sports governance in India.

Thrashing out the Impact of Pyramidical Structure of Sport

In every one of these three cases, the CCI also acknowledged the challenges posed by the pyramidical structure of sports governance under competition law, since monopoly and market dominance of SGB is an inherent product of such pyramidic model. For instance, the CCI acknowledged in the AICF case that a “system of approval under the pyramid structure of sports governance is a normal phenomenon of sports administration.33 Similarly, it observed in the ICL case that “the sports federations engaged in organization of tournaments/leagues are put to advantage if they also possess the authority to grant approval for organization of similar events by others and set conditions for such organization.34 The same refrain is found in the AFI case where the CCI noted that “since the OP is the leading organiser of athletics/ athletic activities in India as well as the apex body to control and manage the sports of athletics and related activities in India, it has a definite advantage over the other organisers of athletic events in India.35

At the same time, the CCI has refrained from terming such monopolistic model of sports governance and the associated restrictions that flow from such model as inherently anti-competitive and illegal. In fact, the CCI accepted that while some rules governing the players and the organisation of sport events/tournaments often create a restrictive environment for the economic activities that are incidental to sport but they could be justified in the context of the sport.36 So the mere fact that some of the rules of the sporting organisations have a restrictive impact on mobility of players or freedom of competition would not make those rules violative of principles of competition law. The test would be to assess whether “the restraint on competition is a necessary requirement to serve the development of sport or preserve its integrity.37

This approach is most starkly reflected in the AICF case where the Commission examined the nature of the restrictions and its impact on sports to hold that sharing of non-refundable Earnest Money Deposit and Entry Fees was not anti-competitive since such money was used for prizemoney, cash award for players and other promotional activities.38 Similarly, the CCI approved the use of grant of "wild card entries" to some players on a selective basis noting that such practices are internationally accepted part of the sport and allowed organisers to give a chance to "special talents".39 Even as it held that the harshness of the sanctions imposed for participation in an unapproved event made the measures anti-competitive, the CCI did approve the above-mentioned practices and norms since they fulfilled legitimate sporting objectives and were not unfair.

Even, the ICL order which found a prima facie case of abuse of dominant position is an example of this approach. One of the animating factors for the CCI was the fact that the sequence of events and the nature of restriction indicated that the relevant conditions were not imposed in furtherance of any sporting consideration but instead were specifically targeted at the rival league.

As such, these two decisions have further built on the earlier decisions of the CCI in the IPL and Dhanraj Pillay cases where the need for case-by-case application of proportionality standard was emphasised. The AICF order, in particular, clarifies through its separate treatment of different form of restrictions, what such case-by-case application means. These orders have reiterated that that while there may not be any special exemption for sports from competition law in India, sporting traditions and interests may indeed justify certain disabling restraints that may be considered abhorrent in other businesses.

Conclusion

The orders of the CCI in the recent cases on ICL, AICF and the AFI have reinforced the growing relevance of competition law in regulation of sports governing bodies in India. While the use of judicial review by constitutional courts to monitor SGBs has become fairly routine in India with writs being issued in several different sports by the Supreme Court and High Courts,40 growing use of competition law in the above discussed cases highlights the complementary role that the discipline can play in enhancing accountability of SGBs. Indeed, as the direction of the Delhi High Court to direct an investigation by the CCI and the choice of MYAS to file a complaint mark show, various branches of the state do acknowledge the possibilities within competition law as a source of infusing accountability within SGBs.

These cases also take forward the incipient standard of inherent proportionality that the CCI articulated in the Dhanraj Pillay case in assessing the impact of competition law on restraints arising out of pyramidic structure of sports. In their reiteration of the standard that the dominant position of SGBs does not by itself render restraints imposed by SGBs as illegal, these orders illustrate how the legality of such restraints are determined on the basis of their purported sporting justification. Thus, CCI has strengthened its flexible case-by-case approach that allows consideration of the specificity of sports.

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About the Author

Saurabh Bhattacharjee

Saurabh Bhattacharjee

Saurabh Bhattacharjee is an Assistant Professor at WB National University of Juridical Sciences (WBNUJS) Kolkata. An alumnus of NALSAR Hyderabad and University of Michigan Law School, Saurabh teaches courses on Labour Law and Law and Impoverishment at NUJS and has taught Sports Law at NALSAR as a Guest Faculty. He is currently pursuing his doctoral research on juridification of sports in India

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