[By Jatin Lalwani]

The author is a student at the National Law School of India University.

 

The last month once again saw the rejuvenation of the debate around a breakaway football league with the announcement of the European Super League. However, the time bomb was diffused within 72 hours amidst widespread criticism and threats of bans despite Florentino Perez stating that they have a strong legal case. Although the proposal involved various legal issues, much of the debate surrounded Competition Law which will also be the focus of this article.

Soon after the announcement of the Super League, the UEFA President warned the clubs involved and their players of the potential bans from competitions. This was based on the controversial Article 49 of the UEFA Statutes which states that UEFA will have the sole discretion to organize or abolish any competition in UEFA territory. Further, the competitions which are not organized by UEFA but are organized on its territory must take prior permission from FIFA or UEFA. The failure to follow this would lead to disciplinary measures under various codes and will attract bans. This rule is the central point of debate around the Competition Law issues in Europe.

European Competition Law and Sports:

The application of competition regulations to sports has a long history. The judgments of the Court of Justice in the cases of Walrave,

[1] Dona,[2] Bosman[3] specified that sports will be subject to competition regulations. A sporting exception was created to exclude the activities which are purely sporting in nature and do not involve any economic element. However, the case of Meca–Medina[4] has dismissed this exception by stating that the purely sporting nature by itself is not sufficient to exclude the activities from the competition regulation.

Article 101 and 102 of The Treaty on the Functioning of the European Union (TFEU) provides for anti-competitive agreements and the abuse of dominant position respectively. Article 101 applies to both undertakings and associations of undertakings while Article 102 applies only to undertakings. The CJEU has consistently interpreted undertakings to include entities engaged in economic activity regardless of its legal status. It does not look at the objective of the entity for the determination of undertaking. Like other sports associations, FIFA and UEFA follow a pyramid structure with various clubs forming part of it and hence can be classified as associations of undertakings. Although associations of undertakings are excluded from Article 102, the Commission has clarified that sports associations normally can be considered dominant undertakings for the purpose of Article 102.

Anti-Competitive Agreements and Abuse of Dominant Position:

For any action to be covered under Article 101 there must be an agreement, decision, or concerted practice. In relation to sports, it should be first ascertained whether the rules by the sports associations regarding bans, expulsions (loyalty clauses) could be considered agreement, decision, or concerted practice. In one of the cases against FIFA, it claimed that such rules cannot be classified under the mentioned categories. However, it was rejected and held that such rules are covered under decisions by the undertakings. A similar position has since been followed by the Commission in subsequent cases as well.

The competition law in Europe does not prohibit holding a dominant position in a market. It is only when abuse of such dominance occurs that the Commission steps in. Abuse of dominant position occurs when an entity inhibiting dominance in a market uses it to eliminate an existing competitor or prevents a competitor from entering the market. For a claim of abuse of dominance, the first step is to establish the dominance of such undertaking. Most of the sports associations enjoy monopoly in the market as they are the sole organizer and regulator of the sport involved and hence are dominant. Further, even if we look at other factors such as economic strength, market structure, independent behavior, the sports association will still be considered dominant. It has been even held that undertakings enjoying super-dominance in a market which have powers like a quasi-monopoly have stricter obligations to prevent abuse.

Some authors have argued that since the clubs form the central part of the decision making in these sports associations and the threat of breakaway league have led to the meeting of demands, the associations cannot be considered dominant in presence of countervailing buying power.[5] The recent European Super League saga has although proved contrary to the assumption. Even if it were to happen, the proposition misses out on the fact that the presence of countervailing buying power only exists when multiple clubs come together. Single clubs would not have recourse to any other competitor and hence sports associations will function independently of any forces in the market even if the threat is given by a single club and hence, still hold a dominant position in the market.

Loyalty clauses as a threat to competition:

Almost all the statutes of the sporting associations at all levels provide for loyalty clauses. Since the early 2000s, these clauses have been a constant area of scrutiny by the national courts and the European Commission. Most of these cases have dealt with the rules on participation in non-authorized events or sanctioning of such events. Although, sanctioning rules are not anti-competitive by itself, they must be looked at from the lens of the objective test and the proportionality test as has been propounded by the CJEU. However, these tests have only succeeded as a defense when the rules are necessary for attaining uniformity in the sport and in the public interest such as rules of play, anti-doping etc. The sanctioning rules for a new competition or participation in them have been held to be anti-competitive in nature.

The conflict of interest between the regulatory and the commercial functions of the associations has been looked at by the courts. The first major case concerning this conflict of interest was related to Fédération Internationale d’Automobile (FIA) which is the international body for motor sport.[6] It issued a license for participation in its events. If any party took part in the events not authorised by it, they were stripped of their license. The Commission in its preliminary finding held that these rules were violative of Article 101 and 102 as they act as barriers to entry for other competitors. There exists a conflict of interest between the regulatory function and the commercial function of FIA. The case was closed with the change in rules wherein FIA would only act as a regulatory body and would not have any commercial interests. Any other competition can be organized by other parties.

A similar case came up in the year 2008 against the refusal to give consent to MOTOE for organizing an event by ELPA – the national association of Greece for motorcycling.[7] ELPA also organized various events and exploited them commercially. ELPA needed no such consent and hence the CJEU held that it gives ELPA an unfair advantage to deny others for its commercial advantage. It held this rule to be violative of Article 102 in the absence of any such restrictions for ELPA itself. There exists a conflict and it gives an unfair advantage to ELPA to distort competition in the market.

The sanctioning rules for players participating in non-authorised leagues came up recently in the case of the International Skating Union.[8] The rules provided for the ineligibility of players from participating in its events and a ban if they take part in any non-authorised events. The defence of objective test was taken by the Union to state that such rules protect integrity, health and safety and the horizontal and vertical financial solidarity. However, it was rejected by the Commission to state that neither the rule was inherent for such an objective nor it was proportional to it. It also held that this rule is anti-competitive as it is prohibiting the organization of non-authorised events and also prohibiting players from participating in them.

Similar decisions have also been given by the Belgian, Italian, Swedish, Irish courts against the national associations leading to modification of rules. Such sanctions by the sports association amount to a refusal to deal which is a common anti-competitive agreement. It is an agreement that prohibits the buyers from dealing with any other supplier. It can similarly be applied to the sanctioning rules of the sports association.

Conclusion:

All of this leads to the conclusion that the ESL had a strong legal case if the issue went to the courts. Even the court in Madrid granted an injunction to move against the club and the players. A Spanish judge has also recently referred the matter to EU for the determination of anti-competitive conduct by UEFA and FIFA for opposing the league. However, there are arguments of cartelisation because of the closed system that they proposed. The argument is a contested one because it did not completely propose to block other members. Fifteen members were permanent and five were to be selected based on a qualifying criteria each year, giving other clubs the opportunity to participate in the competition. The loss in reputation for the clubs amidst constant protests by fans could be considered as an important reason for not pursuing legal action. This would mean that fans have become an important stakeholder in the game and have even got their say in the administration of the clubs. In such a case, it would be safe to assume that the decision-making would take place in consultation with the fans in the future. Or it was just a bargaining ploy by the clubs for the UEFA to meet their demands. Backing out by the clubs has let the mystery remain unresolved.

Endnotes:

[1] Walrave and Koch v. Union Cycliste Internationale and others [1974] ECR 1405.

[2] Gaetano Dona v. Mario Mantero [1976] ECR 1333.

[3] Union Royale Belge Societes de Football Association and others v. Bosman and others [1995] ECR I-4921.

[4] David Meca-Medina and Igor Majcen v. Commission [2004] ECR II- 3291 and David Meca-Medina and Igor Majcen v. Commission [2006] ECR I- 6991.

[5] Katarina Pijetlovic, EU Sports Law and Breakaway Leagues in Football 256 [2015].

[6] Notice published pursuant to Article 19(3) of Council Regulation No 17 concerning Cases COMP/35.163—Notification of FIA Regulations, COMP/36.638—Notification by FIA/FOA of agreements relating to the FIA Formula One World Championship, COMP/36.776—GTR/FIA and others (2001/C 169/03).

[7] MOTOE v. Elliniko Dimosio [2008] ECR I – 4863.

[8] International Skating Union v. Commission Case T – 93/18.