Chillin'Competition

As is always the case, it was a real pleasure to share my thoughts on the application of EU competition law to sports at the Institut d’études européennes. My slides can be accessed here (as usual, I have nothing to disclose).

One of the reasons why this topic is so interesting is that it forces us to think by reference to first principles. It is also one that challenges conventional wisdom. For instance, sporting activities provide many examples showing that a price-fixing agreement between competitors is not necessarily a restriction by object (let alone a cartel).

I would summarise the thrust of my presentation as follows:

Co-opetition in sports and system management through governing bodies

Participants in a championship or tournament (whether individuals or teams) are not competitors in the usual sense. They are more appropriately characterised as co-opetitors. Unlike the usual firms, a participant in a sporting competition needs its rivals. Without rivals, it is worth nothing.

Each of the participants is, in fact, a member in a joint venture that contributes an input to a good that is more than simply the sum of its parts. The UEFA Champions League, just to mention an example, is not merely a collection of matches, and the interest of the matches depends on them being part of a wider championship.

Two corollaries follow from the above. First, the word cartel seems inappropriate in this context. Any restraints imposed in this economic and legal context seem markedly different from the sort of naked restraints we witness around cartels.

Second, the creation of some governing structure seems indispensable for the appropriate organisation and coordination of competitions. The world around us confirms this conclusion. In this regard, I noted that the relationship between participants and governing bodies is not fundamentally different from the relationship that exists between franchisors and franchisees, or manufacturers and selective distributors.

Sporting activities that take place under the umbrella of an organisation is best understood as a system in which the governing body defines the appropriate balance between cooperation and competition among participants (for instance, how rivalry is limited in the name of competitive balance and ultimately the excitement that comes with the uncertainty about the outcome of a match or championship).

The application of EU competition law to sport: principles and common misconceptions

Some of the most recent developments get to the heart of the governing bodies’ activities. The case law of the Court is sufficiently developed to provide concrete answers to the issues raised. However, there are some common misconceptions that keep coming back.

Since Meca Medina, there should be little doubt that rules that are inherent to a legitimate objective fall outside the scope of Article 101(1) TFEU altogether. What if the rule goes beyond what is necessary? Meca Medina, again, provides the answer: in para 47, the Court explained that such a rule might have restrictive effects on competition and thus might be caught by Article 101(1) TFEU. In any event, an evaluation of its impact would be a precondition for the application of that provision.

Unfortunately, there is a tendency to conclude that, where a rule is not ancillary, it automatically amounts to a restriction of competition. Similarly, it is occasionally claimed that a rule that has an economic objective (say, protect an organisation’s economic interest) is ipso facto caught by Article 101(1) TFEU. The ISU case shows the extent to which these ideas (difficult to reconcile with the case law) return every now and then.

Having the cake and eating it: ISU, the Super League, and the lessons from Cartes Bancaires and Pronuptia

The central question that is common to ISU and Super League is as simple as it is exciting: is it anticompetitive for a governing body managing the system to limit competition to itself?

In essence, these cases are about participants that are interested in benefitting from the existing system while exploring opportunities elsewhere. Some participants do not want to sacrifice the positive aspects that come with participation in the incumbent championship even when they decide to take part in rival organisations. The good old (and very human) temptation to have the cake and eat it.

EU competition law has been here before and has addressed similar matters. In Cartes Bancaires, the Court ruled that a restraint aimed at fighting free-riding is not restrictive by object. In other words, measures that aim at ensuring the appropriate management of a system (and prevent imbalances within the system) are not in breach of Article 101(1) TFEU by their very nature.

In Pronuptia, the Court ruled that a franchisor may, without infringing Article 101(1) TFEU, take measures aimed at ensuring that the system and the underlying formula do not benefit competitors (or does not benefit the franchisee itself, which may be precluded from setting up a rival shop while benefitting from the system). Nothing fundamentally different, in other words, from the issues raised by the cases mentioned above.

I look forward to your comments, which will definitely improve the paper on which I am working. Thanks to all those who attended, whether in person or virtually!