Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Archive for June 8th, 2022

NEW PAPER | Competition law and sports governance: disentangling a complex relationship

with 6 comments

I have uploaded on ssrn (see here) a new paper, which deals with the application of Articles 101 and 102 TFEU to sporting activities. There is no need to point out how topical and important the issue has become, given that the Court hearings in International Skating Union and Super League are around the corner.

The paper builds on some posts shared on the blog (see here and here) and, in particular, a seminar delivered in the context of the mardis du droit de la concurrence at ULB.

It would be wonderful to hear your views on the piece, the main points of which can be summarised as follows:

First, it would be incorrect to see participants in a sports tournament (such as a football team) exclusively as competitors. The worth of participants depends on their ability to rival each other. In addition, cooperation between them allows them to offer something (a tournament, a championship) that is more than the sum of its parts (a collection of disparate games).

The consequence, for the purposes of competition law, is that organised sport is best understood as a joint venture in which participants both compete and cooperate (‘co-opete’) under the umbrella of a governing body. From this perspective, they are analogous to franchising and selective distribution systems.

Second, frictions of a horizontal and a vertical nature are bound to arise in organised sports. Frictions are said to be vertical when they involve governing bodies and individual participants. As recent cases show, opportunism is a potential source of vertical frictions.

Some participants may be tempted to undermine the joint venture (for instance, by setting up competing tournaments) while simultaneously trying to benefit from it. This behaviour is common, and a fact of business life. EU competition law has form dealing with opportunistic conduct (think of cases like Remia or Cartes Bancaires).

Third: what cases like Remia and Cartes Bancaires tell us is that measures aimed at tackling opportunistic behaviour (for instance, a seller setting up shop next door to the business it has just sold) are not restrictive of competition by object.

However, these measures may have anticompetitive effects. Ordem dos Técnicos Oficiais de Contas provides a comprehensive framework for the assessment of the restrictive impact of regulatory measures such as those laid down by sports governing bodies.

Fourth, controversies in the most recent cases can be primarily explained by a tendency to conflate (i) the question of whether an agreement is objectively necessary and (ii) that of whether it has a restrictive object.

Fifth, and in the same vein: some of the most recent developments appear to have introduced a fundamental transformation. What used to be a safe harbour (a set of conditions under which the agreement escapes the prohibition altogether) is now being transformed into strict requirements that sporting organisations need to satisfy to avoid a finding of infringement.

This transformation from safe harbour to minimum requirements seems to be the consequence, at least in part, of the influence of Article 106 TFEU case law. MOTOE has been cited as a precedent in support for this stricter stance vis-a-vis sports governing bodies.

However, these references to MOTOE miss a crucial aspect of this case: the preliminary reference from the Greek court concerned the lawfulness of national legislation under Article 106 TFEU. The case was not about the legality of regulations set by an autonomous body. Accordingly, MOTOE is only of limited relevance (if at all) in the latter scenario (at stake in the most recent developments).

The application of Article 106 TFEU standards into the case law would fundamentally change the approach of competition authorities to sports governance. Inevitably, competition authorities would be frequently asked to strike the right balance between cooperation and competition. Legal considerations aside, this shift would have major consequences from a policy-making standpoint.

Finally, I draw some lessons for some of the most interesting pending issues in sports regulation, including the following:

  • Salary caps, which limit how much teams can spend, do not seem to be restrictive by object; what is more (and as per Wouters and Meca Medina), they do not necessarily have anticompetitive effects. The object of salary caps is to enhance competitive balance betwen the joint venture (see, by analogy, Cartes Bancaires, where the contentious clauses were a response to a similar concern).
  • Transfer restrictions, which would limit whether, and how, often, some teams can hire players from other participants, would not be restrictive of competition by object either. Again, the object would be to preserve competitive balance and accurately reflect interdependence.
  • Finally, competition law is agnostic about open and closed championships. Nothing in the case law suggests that Articles 101 and 102 TFEU mandate a particular model. A system of promotion of relegation, which is a key feature of the European sports model, does not flow inevitably from EU competition law.

Please do not hesitate to reach out and share your thoughts with me (via the blog or email).

And: I have nothing to disclose.

Written by Pablo Ibanez Colomo

8 June 2022 at 9:38 am

Posted in Uncategorized