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EU League Saga : through the lens of Competition Law

October 12, 2021
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This article is written by Pushkaraj Ghorpade, pursuing Certificate Course in Competition Law, Practice And Enforcement from LawSikho. The article has been edited by Zigishu Singh (Associate, LawSikho) and Ruchika Mohapatra (Associate, LawSikho).

Introduction

The importance of sporting events in a country’s growth of economy must not be understated. According to a 2018 estimate by the European Commission, sporting events tend to contribute close to eighty billion pounds which amount to close to two per cent of the gross domestic product of the European Union. Furthermore, this business of sporting events provides employment to around 5,666,195 individuals, or close to three per cent of the overall workforce.  In the year 2019, our country’s famous Indian Premier League (IPL) contributed one hundred and eighty- two million dollars to the country’s gross domestic product.  Sport(s) is increasingly gaining societal and economic relevance. As a result, many of the issue(s), including concern with respect to competition law, is now at the vanguard of regulation of sports.

This growth tends to mostly coincide with that of the growing importance of sport(s) organisations on a worldwide and national scale. Behaviour by such organisations which is considered to be anti-competitive, such as agreements entered into which could and would be anti-competitive in nature or the sustenance of them abusing their position deemed to be one which is “dominating”, is the focus of scrutiny under the competition law. Issues of such domain in law are certain to develop as a result of an all-encompassing hold which such sport(s) organisations tend to retain over varied aspects of such sporting events like that of sponsorship(s), participating in sporting events which are competitive in nature, drug testing, and so on and so forth. Furthermore, because the majority of the nations do not have a codified framework of law governing sport(s), the influence exerted over the fate of many parties by such sport(s) organisations is immense.

Not just in our country, but also in more developed jurisdictions practising competition law such as the United States of America and the European Union, this domain in law has tended to intersect with the regulation of sporting events. While antitrust investigations in sporting events dating back to the early twentieth century in the United States of America, the competent regulatory authority of India- Competition Commission of India has determined the number of historic judgments in its brief history. This figure of lawsuits in the domain of competition law is likely to grow, as regulation of sports organisations’ control becomes more extensive.

On the 18th of April 2021, twelve clubs of football gave a major announcement. They announced the formation of the European Super League. The EU Super League may have only lasted a few hours, but the legal issues it created will be remembered for a long time. There is a lengthy history of competition restrictions being applied to sports which have been long debated and analysed within the courtroom. Similarly, a major issue is the hold of dominant organisations of sports like Fédération Internationale de Football Association(FIFA) or Union of European Football Associations(UEFA) over the fate of sports clubs and players. The author seeks to offer comments on the controversy whereby these organisations sought to impose a ban on the participating sports clubs and players from the perspective of competition law and present what lessons we can take back home from such an issue with a focus on the Indian Premier League (IPL).

The EU Super League Saga

On the last day of the week on the 18th day of April of the year 2021, twelve clubs of football gave a major announcement. They announced the formation of the European Super League (ESL). The majority of the clubs have now withdrawn, but the concept of a break-away league has raised the debate of whether such a league can be contested legally, and if UEFA  and FIFA  can prohibit future rival competitions.

Very quickly after such a major announcement of the formation of the European Super League (ESL), the President of UEFA  issued a warning to the players and clubs participating that they may face sanctions in the form of being banned from the varied competition(s). Such warning is based in the contentious Article 49 of the Statutes of Union of European Football Associations whereby it is mentioned that UEFA  has exclusive authority over the organisation or cancellation of any competitive event being held on the territory of the Union of European Football Associations. Furthermore, competitive events that are not organised by the Union of European Football Associations but are held on its territory must get authorization in advance from FIFA  or UEFA. Failure to comply will result in the action of disciplinary nature under different codes, as well as bans. This regulation is at the heart of the European Union’s competition law dispute.

There is a lengthy history of competition restrictions being applied to sports. Sporting events and the game will be subject to competition rules, according to the Court of Justice’s decisions in the instances of Walrave, Dona, Bosman. A sports exemption was designed to exempt activities that are “solely sporting” in nature and have no economic component. However, in the instance of Meca– Medina, the learned court denied this exemption, noting that the activities’ exclusively sporting in nature is insufficient to exclude them from the purview of competition law.

Anti-competitive agreements and abuse of positions deemed to be dominant are covered under Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). Article 101 is applicable to both enterprise organisations in addition to enterprises, but Article 102 solely applies to enterprises. Regardless of their legal structure, the Court of Justice of the European Union has consistently understood enterprises to encompass such enterprises which are involved in economic activity. It does not consider the entity’s goal when determining the scope of the project. FIFA and UEFA, like other sport(s) organisations, have a structure like that of the pyramid with the different club(s) as members, and so maybe classed as undertaking associations. Despite the fact that associations of undertakings are exempt from Article 102, the Court of Justice of the European Union has emphasised that sports organisations are generally considered to be such undertakings that are dominant for the purposes of the Article.

Antitrust Angle on EU League

There must be a decision, agreement, or concerted practice in order to classify any such conduct which could be considered to be within the purview of Article 101. In the case of sport and sporting events, it is first necessary to determine if the sports organisations’ regulations involving expulsions and bans (“loyalty clauses”) may be deemed such a decision, agreement, or concerted practice. It was alleged in one of the claims against FIFA that such restrictions could not be classed under the above-mentioned classification. It was, however, denied, with the court ruling that restrictions of such nature are covered by the undertakings’ judgments. The Court of Justice of the European Union has now taken a similar stance in other judgments as well.

Holding a dominating spot in a market is not prohibited by competition law. It is only when such a position deemed to be dominant is abused does the Commission intervene. When an entity holding such position, which is deemed to be dominant utilises the position to work towards the destruction of a competitor entity that already exists in the market or to stop a new competitor entity from entry into the market in which they are deemed to be dominant, it is known as “abuse of dominant position”. The primary stage in an allegation of the act of dominant position being abused is to prove that the entity in question does hold such a position that could be deemed to be dominant. Just for the mere fact that they are the sole regulator and organiser of the sport in question, the majority of the sports organisations have control over their respective market and are thus deemed to occupy such a position that is considered to be dominant in nature. Furthermore, the sports organisation will be considered to occupy such a position that is deemed to be dominant even if other variables such as independent conduct, market structure, and economic power are taken into account. It has even been argued that companies with market super-dominance and quasi-monopoly capabilities are subject to stronger anti-abuse duties.

Certain scholars even claimed that because sports club(s) are at the heart of decision-making in various sport(s) organisations, and the prospect of a break-away league has resulted in requests being met, the sport(s) organisations cannot be deemed to occupy a position to be dominating in the face of opposing “buying power”. However, the latest European Super League scandal has proven the opposite to be true. Even if this were to take place, the proposal overlooks the reality that “countervailing buying power” is only possible when several club(s) band together. Single club(s), in reality, do not hold any kind of choice to any further rival, and therefore sports organisations would operate independent of any pressures by the market, even if the danger is posed by a lone sports club, and thus would be able to maintain their dominance in the market.

EU League as a Cartel

Due to the fact that the purview of competition law is extended to sport(s) and sporting events and that restricting acts need to be essential along with being appropriate to attaining a legal purpose, it could be claimed that the core character of the EU Super League drives it much outside the limit to what is permitted by the contours of the competition law. Fair-mindedness and teams’ ambition to climb up in the league(s) and attain greatness at the top level is critical to the validity of the game.

The question is whether selecting merely only five out of the twenty qualifying clubs on the basis of success in the past season is enough to maintain the prestige of the game and whether the resulting restriction of playing could be deemed to be appropriate. The model of the EU Super League might effortlessly be demarcated as a “cartel”, given the huge awaited jump in income through media rights for the fifteen sports club(s) which would be qualifying irrespective of how they have played, while in the old-style UEFA  Champions League, a club qualifies solely on the basis of their position in the national top-flight league  (for example, best four teams out of Europe’s best five leagues domestically).

The club(s) are basically attempting to raise as well as preserve earnings by using their “collective market power”, which the club(s) have earned as a result of their performance in the exact sports competition that they are now attempting to deprive of rival teams. The grade to which it assures sustainability – economically speaking for those clubs irrespective of their skill of playing football puts it distinct from the appropriate and natural necessity for having obstructive rules in sport(s).

Lessons learned from this issue : Indian Premier League

According to Article 267 of the “Treaty on the Functioning of the European Union”, the Madrid Commercial Court has filed a preliminary referral to the Court of Justice of the European Union. The question is whether Articles 101 and 102 of the “Treaty on the Functioning of the European Union” prevent UEFA  from obtaining advance approval from a third party before launching a new pan-European club(s) championship for football.

The preliminary judgement of the Court of Justice of the European Union might have a significant influence on FIFA  and UEFA’s governance of the sport of football in Europe. A decision against UEFA  and FIFA  may pave the way for tournaments such as the Super League, which are neither sanctioned nor organised by UEFA  and FIFA.

When contemplating the implementation of requirements of being eligible, bodies governing the issue made up of particular associations or companies must be aware of the danger of undue restriction of competition- specifically its negative impact on growth. The Court of Justice of the European Union will in due course decide whether sporting organisations have the authority in law to prohibit planned rival tournaments.

This would be crucial for sports organisations all over the world, including India whereby the Board of Control for Cricket in India(BCCI) through the Indian Premier League (IPL), controls the entire market of cricket in India. The  BCCI  has butted heads with the domain of competition law often in the past.

The BCCI  has been accused of indulging in anti-competitive activity in the process of bidding for the Indian Premier League in the past. In the matter of Surinder Singh Barmi Informant v. Indian Premier League & Anr., the Competition Commission of India issued a judgment in the year 2013. In a nutshell, Shri Surinder Singh Barmi filed a lawsuit against the Board of Control for Cricket under Section 19(1)(a) of the Competition Act of 2002 claiming that the Board of Control for Cricket’s Indian Premier League procedure of bidding breached the Competition Act of 2002. The absence of transparent behaviour and granting of sole rights of media for a long period of time were two of Barmi’s main complaints.

Conclusion

The legitimacy of the decision of UEFA  and FIFA  to reject the EU Super League and impose punitive sanctions on the club(s) and player(s) is examined through the prism of competition law. This involves assessment of   being compliant with Article 101. Despite opposition from fans of football, the author is of the belief that the EU League is consistent with the principles stated in the Article and recent EU Court case judgments.

The response of antitrust legislation against the EU Super League in the event of the formation of a cartel could turn out to be a key factor. Break-away leagues also tend to impinge on one of the cornerstones of competition law: free marketplaces. As a result, it is critical that monopoly is not formed in an effort to “rescue” football since monopoly prevents growth. Even though the EU league caved in to pressure from fans after, law is skewed against arguments by UEFA  from a competition law standpoint. The ultimate judgment would be crucial for sport organisations all over the world, including India whereby the BCCI  through Indian Premier League (IPL), controls the entire market of cricket in India.

References

[1] New Study on the Economic impact of Sport released by the European Commission (2018), EU OFFICE (25 September 2021, 5:00 PM), http://www.euoffice.eurolympic.org/blog/new-study-economic-impact-sportreleased-european-commission.

[2] Manas Tiwari, IPL economy: What the cash-rich league adds to India’s GDP, FINANCIAL EXPRESS (25 September 2021, 5:00 PM), https://www.financialexpress.com/sports/ipl/ipl-economy-what-the-cash-richleague-adds-to-indias-gdp/1025063/

[3] Saksham Malik, Role of Competition Law in Sports, 2, PenAcclaims Volume 8, January 2020.

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

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

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

[7] 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.

[8] Jatin Lalwani, “European Super League: Competition Law Perspective”, The CBCL Blog, June 2, 2021.

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

[10] Surinder Singh Barmi Informant v. IPL & Anr., Case No.61 of 2010.

[11] Surinder Singh Barmi Informant v. IPL & Anr., Case No.61 of 2010 (Dissenting Opinion).

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


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