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This article has been written by Apurva lahoti LL.M (Corporate and Commercial Laws from National Law School, Kolkata [WBNUJS]) 2018-19, B.S.L LL.B (ILS Law College, Pune) 2013-18

Competition is the spice of sports, but if you make spice the whole meal, you will be sick[1]

George Leonard

Brief background

The domain of sports can said to be one of the largest industries among the other industries that prevail. The sports diaspora has brought along with it not only the gaming activities but served other purposes such as recreational, political, cultural and business purposes as well. The sporting industry has always received encouragement from all the directions. However, with a proliferation in globalization and other developments, the sports industry is emerging to be one of the most commercialized industries. The economic aspects in this industry have received a major boom over the course of time. The essence of sports which used to revolve around gaming at some point of time has majorly transformed today into a money-making business. On the other hand, commercialization is coupled with the competition. Wherever commercialization comes into the picture, competition law also comes into picture.

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One argument regarding the commercialized nature of the sports industry is that the industry being a unique one deserves a differential treatment and should, therefore, be kept out of the clutches of competition law in the country. The sports industry follows a pattern in the structure of the pyramid in which at the apex lies the sole international federation who shelters the National sports bodies. For instance, in the game of cricket, the apex body constitutes International Cricket Council (ICC) and the national sports body in India which represents this apex federation is the Board for Control of Cricket in India (BCCI).

The pyramidical pattern of working is followed in the sports sector. The contemporary legal framework which administers sports in India is “National Sports Development Code of India 2011” but the matters of concern which fall within the territory of competition law are absent in this legal framework.

 A trend of monopoly has always been prevalent in the field of sports owing to the existing pyramidical structure, in order to preserve the elements of integrity and uniformity associated with the field. The competition law in the jurisdiction of USA and EU grants certain immunity to this sector from the applicability of competition law framework, taking into consideration certain distinctive features that the industry posseses. However the more the sports industry is turning to be commercially viable, the purview of the immunity is becoming narrower. In recent times the activities of various sports organizations have been under the radar of the competition law.

The major goal of the Competition Act in India is to protect the market from anti-competitive practices. In recent times certain renowned sports organizations have turned monopolistic in nature and they are alleged to have taken undue advantage of their monopoly in the relevant industry. The underlying problem in such a situation is that there exists no express body to watch over the practices of these sports organizations and this gives them the leeway to act in an arbitrary manner.  These organizations have been alleged to impose different forms of economic restraints like revenue-sharing, spending caps, drafts, non-tampering clauses etc. 

A few esteemed names in the sports federation which involves Board for Control of Cricket in India (BCCI), All India Chess Federation (AICF) and Athletics Federation of India (AFI) etc have been dragged into the latest controversies relating to their engagement in anti-competitive practices, capitalization of intellectual property rights, abuse of their dominant position, media rights etc. Section 3 and section 4 of the Competition Act which pertain to the prohibition of anti-competitive behaviour and misusing the dominance held by them respectively are more often questioned in cases of sports commercialization.

Economic conflicts

Competition Act is not applicable to the rules of play in the sports. The provisions of the Act shall be attracted only where economic interests are involved in the play. The concern of the commission is to keep an eye on the economic practices indulged into the play game. The Competition Act bears intolerance towards activities such as-

  • Obtaining an undue advantage of the dominance
  • Secretly conspiring business activities
  • Cartelization in business practices as well as in the process of bidding

In India, two cases are majorly responsible to bring sports commercialization within the realm of competition law as these cases formed the starting point in making the provisions of the Competition Act potentially applicable to the practices of the sports authorities which seemed anti-competitive in nature. The case which needs a primary mention in this research is the Indian Premier League (IPL) and the Indian Cricket League (ICL) controversy[2] and the second mention is of the complaint against Hockey India (HI)[3].

BCCI & IPL conundrum

In the segment of the game of cricket, BCCI holds a supreme position in the administration of the game since 1929. Though BCCI carries the status of a private body as decided in the Zee Telefilms case[4], a recognition has been granted to it that the functions carried out by the body falls under public duties. In 2008 BCCI introduced a novel T20 cricket tournament, namely Indian Premier League (IPL). The league started off with a total of eight teams which consisted a mix of players having different nationalities and the number of teams could increase to a maximum of ten over the course of time. The selection process of the Board of Directors (BOD) of IPL is effectuated by the BCCI. BOD is entrusted with several tasks such as framing regulations pertaining to the concerned T20 league.   

With the entry of IPL in the world of cricket which went on to become extremely popular, BCCI has benefited in a humongous way raking in thousands of crores every year. The source of these benefits lies in the very commercial nature of the game. There lies an agreement between BCCI and IPL according to which a certain percentage of income earned in the course of the league must be shared by the BCCI, IPL and franchisees in a fixed specific number. The incomes of the league flow from television rights, sponsorship rights, broadcast rights, gate receipts etc. Therefore the more the tournament is popular and successful, the more is BCCI in a profitable position. And therefore constant efforts are taken on the part of BCCI to make the game better and better. 

A complaint was filed against BCCI before the Competition Commission of India (CCI) by a cricket fan alleging infringement of S.4 of Competition Act 2002 in the year 2010. He lodged a complaint against BCCI primarily raising objection on three aspects. The first objection pertained to the “grant of franchise rights for team ownership.” Secondly, he alleged asymmetry in the “grant of media rights to make full coverage of the league”. And thirdly he raised an objection with respect to the “sponsorship rights in addition to local contracts related to the organization of IPL”. The issues in consideration along with the conclusions arrived at by the CCI in the following case are put forward as follows-

  • BCCI’s status as an enterprise– One defence which was put forth in favour of BCCI was that it cannot be categorized as an enterprise, a requirement which is necessary in order to be ruled by the Competition Law. In this controversy the defence of BCCI was that it is not an organization driven to earn profits but its major objective is to foster participation in the cricket game and endorse it extensively. However the findings of the DG and commission clarified that the activities and practices entered into by BCCI has a revenue aspect to it and thus conveniently falls within the scope of economic activities. BCCI was thus held qualified to attain the tag of an enterprise. 
  • Dilemma around the relevant market[5]– Every game be it cricket or hockey or tennis even though sheltered under the broad category of sports and serves a common ultimate purpose of entertainment has a different flavour to it and thus stands in a non-substitutable position with each other. In addition, various rights which formed the basis of complaint stand in a similar position. Even under the category of cricket, two different sub-categories were looked at separately. The first category was the international format wherein ‘Team India’ plays and the second category was private T20 league like IPL organized by BCCI. TRPs (Target Rating Points) in determining the dilemma was also made a decisive element. After analysing the above prongs, the relevant market was finally held to be “underlying economic activities which are ancillary for organizing the IPL T-20 cricket under the aegis of BCCI”.
  • Position of Dominance– The roots of BCCI’s dominance sprouts from the fact that it is the sole regulator for the game in the country. Section 4 of the Act chalks out the meaning of dominant position in the words “dominant position means a position of strength, enjoyed by an enterprise in the relevant market”. BCCI handles all the major aspects of the game ranging from providing organizational facilities to exercising complete control over the participants in the game. The adjudicating authority while assessing its position also considered BCCI’s attitude towards ICL.   

IPL and ICL were at loggerheads with each other

The problem arose with a new entrant in the cricket world namely ICL which was brought on board by the Zee group. To some degree, the entry of ICL had the potential to jeopardize the dominant position enjoyed by BCCI in the relevant market as it came into the market as a rival competitor. For the purpose of maintaining its gate-keeping, BCCI resorted to certain harsh practices against those players who decided to participate in ICL and against the ICL itself. Such harsh practices firstly include discontinuance of the journey of such players from playing in the Indian Cricket team as well as in the domestic matches permanently. Secondly, BCCI denied ICL the access to use the stadiums and other essential facilities which are in complete control of it whose access if not provided can create a substantial barrier for ICL. This constituted as one of the strong reasons for ICL turning into a catastrophe.

Owing to the above reasons, BCCI was clearly held to stand in a dominant position. 

  • Abuse of dominance-

An entity enjoying the privilege of dominant position in the market is not ipso facto a competitive concern. The concern arises when such entity misuses and abuses the position of dominance enjoyed by it. 

Such dominance is abused as per S.4(2)(c) of the Competition Act, 2002 “if the enterprise indulges in practice or practices resulting in a denial of market access in any manner.”

Dealing with the issue of franchise rights, the Commission remarked that the provisions carved in the franchise agreement were designed to benefit BCCI and no opinion in the making of the provisions was obtained from the franchisee teams.  Further examining the issue of the media rights agreement, the adjudicating authority quoted Clause 9.1(c)(i) of the respective agreement which laid down the following words-

“BCCI represents and warrants that it shall not organize, sanction, recognize, or support during the Rights period another professional domestic Indian T20 competition that is competitive to the league”[6]. A scrutiny of the same suggests a plain and clear denial on the part of BCCI to make an entry into the market of any potential rival.  

CCI thus passed an overall concluding remark that BCCI did abuse its dominant position by acting in a contrary manner as envisaged under S.4(2)(c) of the Act and it was slapped with a fine of Rs 52.24 crores towards the end of 2017.

The hockey India controversy[7]

The apex position in the pyramid structure in the game of hockey is throned by International Hockey Federation (FIH) who administers in India through the body Hockey India (HI). In addition, it is also affiliated to Indian Olympic Association (IOA) and Asian Hockey Federation (AHF). Indian Hockey Federation (IHF) who is a party in this controversy is recognized only by IOA and is excluded from recognition by the other two bodies namely FIH and AHF.

A sports marketing company “Nimbus Sport” jointly with IHF introduced a franchisee model World Series Hockey (WSH) which is similar like the format of IPL. WSH was supposed to begin in the month of November 2011. Nimbus and IHF had initiated certain steps in the direction of WSH such as they were in talks with a few players in order to select them in the series. In the time being a notification pertaining to “Regulations on Sanctioned and Unsanctioned events” was issued by the FIH which was forwarded to all its affiliations. This notification carried a prospective effect beginning from the last day of March 2011 and excluded its application to any prior participation commitments entered into before the above mentioned date. 

In accordance with the directions issued by the notification, HI with immediate effect amended Code of Conduct Agreement (COC) between itself and the players. A provision of COC highlighted mandatory disqualification of a player in the event of him joining hands with any unsanctioned events. Such a provision deprived IHF associated personalities proper market access.  In the background of such facts, a complaint was furthered by the coveted Olympian Dhanraj Pillay together with a couple of other hockey players alleging the conduct of HI to qualify as an exclusive supply agreement which runs contrary to the provisions of the Act. 

The findings of the adjudicating authority were that the conduct of HI was quite in harmony with the functioning of the pyramid structure-based model. The Authority gave due consideration to the proportionality principle originated in the European case of Meca-Medina. Moreover HI had a genuine reasoning to bar certain players from playing in the Indian team which did not in any way depend upon their tie-up with WSH. Thus the authority even though did not dispute HI’s dominant position, it passed an order that there was no abuse of such position on the part of HI.

Case of infringement by all india chess federation (AICF)[8]

AICF was declared to be an enterprise by the Delhi HC. In this case, AICF by virtue of the authority that it possesses imposed arbitrary requirements to fulfil on its registered players. These players were required to put a signature on a declaration document which consisted restrictions in it for them such as-

  • Refrain completely from taking part in any of the unsanctioned events
  • As a consequence of their inability to abide by the above rule, 3 outcomes would follow. Firstly they would be barred from taking part in any event organised by AICF for a period of one year; secondly in the event of them gaining any monetary reward through their participation in the unsanctioned event, they should handover half the income to AICF; and lastly they would lose their significant ELO ratings.

The findings of the Authority disclosed AICF having abused its dominant position. The reasonings accounted for- an outright prohibition on the players from participation lacking any criteria, absence of any explanation or definition to the expression “unsanctioned events” giving AICF the leeway to make decisions arbitrarily and no option for the aggrieved players to prefer an appeal.   

Conclusion

The forums in competition law come to the rescue of individuals who stand aggrieved by the decisions granted by the SGBs.

The conclusions arrived at by the Competition Commission of India (CCI) in the discussed cases implied that the self-regulation of the sports authorities to a permissible extent can go hand-in-hand with the competition laws in the country. CCI while respecting this right of self-regulation in the words “the sports bodies have the right of self-regulation 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” also made it clear that the commercialization in sports industry can very well fit in the competition regulations. The remarks made by the CCI in the above mentioned cases reflects the opinion of the CCI on the impugned intersection that “certain sporting activities are excluded from the purview of competition and the other being the activities generating commercial gain will be within the ambit and the scope of the competition statute”.

Endnotes

[1] Rishika Mendiratta, ‘A Take On India’S Emerging Competition Law Jurisprudence: Deciphering India’S Leading Sports Law Cases (Part 2)’ (KhelAdhikar, 2018) <https://kheladhikar.com/2018/08/25/a-take-on-indias-emerging-competition-law-jurisprudencedeciphering-indias-leading-sports-law-cases-part-2/>.

[2] Sh.Surinder Singh Barmi v. BCCI, Case No 61/2010, (Competition Commission of India, 08/02/203)

[3] Dhanraj Pillay & Ors v. M/s Hockey India, Case No. 73/2011 (Competition Commission of India, 31/05/2013)

[4] Zee Telefilms v. Union of India, (2005) 4 SCC 649.

[5] Ibid.

[6]  Ibid.

[7] Dhanraj Pillay & Ors v. M/S Hockey India (CCI, Case No. 73/2011)

[8] Hemant Sharma and others v. All India Chess Federation (CCI, Case No 79/2011).

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