Sport and commercial law – the year in review 2018/19
Published 20 May 2019 By: Jon Walters
Brooks Koepka, Rita Ora, Victor Ubogu, Billy McFarland, Andrea Coscelli. A formidable line up for Dancing on Ice 2019 perhaps (ITV – take note), but these are unlikely to be the names that immediately spring to mind while reflecting on developments in the commercial side of sports law in the last year. Indeed, for many, some of those names may ring hollow. A World No.1 golfer and global singer and actress stand out; for those of a certain vintage, fond memories of a dynamic prop forward (and the much missed Shoeless Joe’s) will be recalled; Netflix subscribers will have little difficulty in connecting the next name in the list with the infamous Fyre Festival; and, for close observers of the Competition and Markets Authority (CMA), spotting the Chief Executive of the CMA will be straightforward (if you were breaking into verse with “Time to Say Goodbye” at the sight of the last name, you could be forgiven).
With these names now hopefully placed, what is their connection to the topic in hand? The connecting strand is that all have featured in 2018 (or early 2019) in legal or regulatory issues concerning the consumers of sports and entertainment content. If one was to run a straw poll of lawyers advising on the commercial aspects of sport as to the primary considerations in terms of hard law or regulations, one might hazard a guess that sports specific regulations, competition law, other EU legislation such as the laws on free movement, and GDPR would feature highest. However, the last year has seen a salient reminder that at the heart of every successful sports property are the fans and, accordingly, an increasingly regulated consumer environment should be front and centre in the mind of those involved in the promotion and staging of sports events.
This review can naturally only cover a selection of the stories that caught the author’s eye over the last 12 months, but it should invite further consideration of the consumer law regime. In particular, readers are encouraged to consider the Consumer Rights Act 2015 which consolidates the UK legislation in this area, alongside unfair trading and misleading marketing regulations.1 We will focus here on:
Influencer marketing: through the CMA’s recent guidance relating to Rita Ora and other celebrities; and through consideration of the Fyre Festival;
Liability to spectators at events: in the context of the injury caused to a spectator at the Ryder Cup by Brooks Koepka’s errant drive;
Ticketing and hospitality: the application of the Consumer Rights Act 2015 and recent approaches taken by rights holders (including against Victor Ubogu’s hospitality agency); and
New regulation of payment transaction fees.
At the start of 2019, the CMA announced2 that it had secured commitments from 16 celebrities to ensure that they will now say clearly if they have been paid or received any gifts or loans of products which they endorse. This followed an investigation in 2018 and further guidance published in conjunction with the Advertising Standards Authority (ASA) on so-called influencer marketing.3
None of the celebrities were sports stars, but the conclusions of the CMA apply equally to athlete endorsements. There is already established precedent for regulators intervening in athlete brand promotion on social media, notably the ASA adjudication on Wayne Rooney’s tweet promoting Nike.4
“Influencers can have a huge impact on what their fans decide to buy. People could, quite rightly, feel misled if what they thought was a recommendation from someone they admired turns out to be a marketing ploy. You should be able to tell as soon as you look at a post if there is some form of payment or reward involved, so you can decide whether something is really worth spending your hard-earned money on. The enforcement action taken by the CMA has seen a number of social media stars pledge to be more transparent when posting online. It also sends a clear message to all influencers, brands and businesses that they must be open and clear with their followers. We will also continue our work to secure more improvement in this space.”
While the principle of transparency is incontrovertible, the means of achieving it provide a continuing challenge to brands seeking to leverage the followings of their ambassadors in a constantly evolving and diverse social media landscape. One rule for Twitter does not necessarily work for Instagram or for YouTube content. Athletes are also in a different position to some of the influencers cited in the CMA’s investigation in that their product endorsements will often occur during activity which is part and parcel of their day job as a player of sport. A footballer posting a picture on Instagram of his or her work-out clad in gear supplied by a sportswear sponsor could do so as an incidental element of a training focused post; or he or she could do so brazenly to promote the sponsor with the training element incidental to the post. On the other hand, a celebrity famed for influence or reality TV alone (take Binky "Made in Chelsea" Felstead, for example, as one of the CMA targeted figures) posting a new item of clothing may have less obvious cause for doing so but to promote the designer paying them. Context will always be key.
The CMA’s guidance can be summarised as follows:
The Federal Trade Commission in the USA polices influencer marketing in a similar way and has taken equivalent action in seeking undertakings from high profile celebrities.6 One of the criticisms levelled against Fyre Festival was the lack of transparency in the connection between the models’ Instagram accounts capturing the Bahamian getaway and the organisers of the festival itself.
The federal action and lawsuits against festival organiser, Fyre Media and Billy McFarland, also serve as a reminder of the engagement of criminal law with the most egregious instances of misleading marketing. It does not require fraud or deception akin to McFarland’s actions to create a criminal offence. Misleading marketing and trading activity has been criminalised under consumer legislation7 and the CMA is increasingly active in its intervention in the area. What might historically have been treated lightly as a matter for (non-financial) sanction by the Advertising Standards Authority is now open to the imposition of more severe, financial penalties. It is true that the CMA’s preferred approach is one of dialogue and undertakings from infringers of the law, but new statutory duties have been proposed which would require the CMA to take action on behalf of consumers and against firms supplying misleading or false information.8
Overall, as very few athlete sponsorship deals are now found without social media obligations, brands, athletes and their representatives should be wary of the risks involved.
Ticketing and Hospitality
The CMA has also intervened in the behaviour of ticketing resale sites – a market which has seen profound change during 2018. As part of a long-standing investigation into the activities of secondary ticketing sites in the UK, the CMA resorted to court action9 against viagogo to enforce undertakings regarding:10
telling purchasers of tickets if there is a risk that they will be turned away at the door;
informing customers which seat in the venue they will get;
providing information about who is selling the ticket, so people can benefit from enhanced legal rights when buying from a business;
not giving misleading information about the availability and popularity of tickets - which had the potential to lead to customers being rushed into making a buying decision or making the wrong choice;
making it easy for people to get their money back under viagogo’s guarantee when things go wrong;
preventing the sale of tickets a seller does not own and may not be able to supply.
In parallel, in an outwardly, altruistic gesture, Ticketmaster shut down its resale sites, GetMeIn and Seatwave,11 leaving only viagogo and StubHub remaining of the big four operators. Met with widespread approval by consumers, the truth is likely to be more nuanced than this simply being a case of responding to fan pressure to address excessive ticket resale prices. The lines between primary and secondary market have become increasingly blurred over time and no longer lend themselves to a Manichean (black and white) view of operators on either side of the divide.
It is apparent that primary sellers have embraced, and will continue to pursue, their own official resale marketplaces in order to give themselves greater control of the market, attendees and revenues. Importantly, this affords enhanced knowledge of the people walking through venue doors and access to their personal data to promote future events and merchandise. With enhancements in in-venue technology, the power of having customer data to push content or product offers direct to the fan’s pocket is obvious. Amongst other trends, “dynamic pricing” – an industry phrase for flexible ticket pricing in line with demand and release date, much like airlines – may become the new norm with obvious question marks over its transparency for buyers, particularly in a non-competitive market. A final observation is that new, industry disruptors are emerging, which place the consumer at the heart of their business model in sharp contrast to the reseller oriented “Big Four”. Fanpass is one such example.
The last twelve months have also seen rights holders take increasingly aggressive action against unauthorised hospitality providers. In late 2017, both the Welsh Rugby Union and the Rugby Football Union obtained High Court injunctions based on a breach of ticket terms and conditions prohibiting resale. The Welsh Rugby Union used these as the basis for cancelling 100 tickets obtained by the hospitality business, VU Limited (V.U. being the initials of its eponymous founder, former England rugby international, Victor Ubogu), which were being offered by VU Limited as part of a travel and hospitality package for the Wales England game in 2019 incorporating travel from London on a chartered Belmond Pulman train, drinks and a three course dinner at a cost of £799. In this case, the WRU had the benefit of intelligence that the tickets had been obtained from a rugby club in breach of ticketing terms, allowing it to take action. Often the inability to identify the source of tickets is a stumbling block to this type of pre-emptive action. One can only hope that travel tickets on the Pulman had been obtained in more legitimate fashion to ensure English fans swift passage back to London after the on-pitch reversal in that game.
Liability to spectators
The shocking incident in which Brooks Koepka’s errant drive at the 2018 Ryder Cup led to a spectator struck by his ball losing her sight was a sobering reminder of the inherent risks of sport for participants and fans alike. It has been reported that the victim is pursuing legal action against the event organisers and, according to some sources, against Koepka himself.12
The question of liability poses interesting questions about the choice of law and jurisdiction in cases where the claimant, defendant, event organiser and participating athlete may all be based in different jurisdictions. For the US position, a recent article published in Sports Illustrated is recommended reading.13 The emphasis in the USA, as with the UK (and one might surmise most other major jurisdictions), is on the factual matrix that gave rise to the unfortunate event in the context of whether the actions of the defendant were "negligent". This could be a classic tort of negligence action, breach of occupiers’ liability legislation claim, or in contract for breach of an express or implied term in the ticketing terms and conditions.14 In other words, did the defendant take the level of care that could reasonably be expected in the circumstances? It is beyond the scope of this article to explore these questions in depth. However, there is a significant body of English case law to assist with considering these issues from an event organiser’s perspective.15 This much is clear: simply because attending an event is inherently risky, does not excuse an organiser from liability – it simply changes the factual matrix in which a reasonable level of care is assessed.
In the case of participants, like Koepka, a standard of “reckless disregard” is applied.16 While this lower duty of care will not make an accidental injury to a spectator any easier for the athlete to process mid-tournament, it may help them sleep easily when the inevitable threats of legal action emerge in the press over the following weeks.
An oft-debated topic in the context of event liability is the effectiveness of disclaimers. Under English law, the underlying principles are well-established, and it is well-known that personal injury or death resulting from negligence cannot be excluded by event organisers. To this extent, disclaimers are completely ineffective. The coming into force of the Consumer Rights Act provisions requiring terms in consumer contracts to be “fair” and the supporting CMA guidance has brought the efficacy of limitations on liability and disclaimers into sharper focus. Where a well written “disclaimer” can assist is with discharging the duty of care to spectators at an event by drawing their attention clearly to risks and practical requirements of them for their own safety.
On a drier note, 2018 witnessed a significant change in the law on payment transaction fees. To loud cheers from Ryanair passengers across the UK and Ireland, an amendment to The Consumer Rights (Payment Surcharges) Regulations 201217 made it illegal to charge a fee to a consumer using a credit or debit card while making a purchase. The restriction applies to traditional credit and debit cards, as well as digital payment services such as Paypal and ApplePay. It should be noted that certain exemptions do apply, for example in the case of non-EEA payment service providers, but the presumption should now be that a transaction fee cannot be applied for use of a particular payment method.
Where does this leave event organisers, promoters or agents previously reliant on payment processing charges? One option, widely used, is to exclude certain payment methods which attract a higher processing fee for the organiser/promoter/agent. If costs cannot be passed on, then naturally costs can be minimised by eliminating the most expensive methods. There is also no restriction on incentivising the use of certain payment methods – for example, encouraging purchasers to double their chances of successful ticket ballot applications or offering additional rewards for choosing a preferred payment method. This approach was taken by Rugby World Cup with its Mastercard "Double Your Chances" promotion for Rugby World Cup tickets.18 This type of preferred or exclusive payment method falls outside the Payment Surcharges Regulations 2012 and instead requires consideration from a competition law perspective.
Neither are generic booking or transaction charges which do not distinguish between payment methods restricted. Subject to compliance with consumer law, particularly transparency requirements for customers as to the existence of booking fees at the start of the customer journey, payment processing fees can be wrapped up in an overall booking fee. This poses interesting questions for the draftsman of contracts involving revenue share arrangements to ensure that the accounting of gross revenues and costs accurately records the parties’ intentions as to the treatment of genuine payment processing fees and income from non-associated booking or transaction charges.
It is likely that the awareness of consumers as to their rights and the intervention of regulatory authorities is only set to increase over time as each become increasingly au fait with, and emboldened by, the legislation and remedies available to them. Sport may like to consider itself specific, but for the purposes of how it treats its audiences and the laws to which it is subject, it is no different to retail, entertainment or leisure.
This manifests itself in the uses of technology and data by sports organisations to engage with customers. Creating a closer, more organic connection to fans would surely rank as a top priority for all sports teams. Digital platforms continue to evolve to deliver this goal. But there is an inherent tension between, for example, being able to push club or sponsor content to fans via social or an app and ensuring transparency and proper data management from a legal and regulatory perspective. There have been notable GDPR breaches involving West Ham,19 Arsenal20 and Ticketmaster21 in the last twelve months, in each case involving traditional email databases. It is to be suspected that the challenges of sports teams, businesses and brands rolling out new apps, push notifications, digital content platforms, and in stadia technology will continue to occupy lawyers and regulators operating in the sector over the coming year.
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- Tags: Advertising Standards Authority | Commercial Law | Competition and Markets Authority (CMA) | Consumer Rights Act 2015 | Contract Law | Dispute Resolution | Federal Trade Commission | Governance | Regulation | Social Media | The Consumer Rights (Payment Surcharges) Regulations 2012 | Ticketing | United Kingdom (UK) | United States of America (USA)
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Jon provides commercial and corporate advice to clients. He is recognised by the directories as a “real go-to adviser” and a “commercial and regulatory expert”, with particular expertise on governance, corporate advice and commercial rights.