Chillin'Competition

I took stock of the recent case law on the relationship between EU competition law and sports at the Institut d’études européennes (ULB) earlier this week, in the context of the illustrious mardis du droit de la concurrence.

The presentation can be accessed here. It focuses on the three judgments delivered by the Court of Justice in December of last year (ISU, Royal Antwerp and Superleague).

The fundamental point made in the presentation is that these rulings are best understood as a corrective mechanism, at the margins, of the relationship between governance bodies and participants in sports competitions (that is, teams or athletes).

Economic and non-economic dynamics favour the emergence of pyramid structures in professional sports. As a result, governing bodies may have, de facto, quasi-regulatory functions. In the same vein, may enjoy a very substantial degree of market power vis-a-vis participants and other actors in the system.

The Court signals that the quasi-regulatory functions of these bodies must be exercised in a manner that reflects the degree of market power they enjoy. Accordingly, the discretionary use of these powers, or their exercise in a manner that is not objective, transparent and non-discriminatory will amount to a breach of Articles 101 and 102 TFEU.

On the other hand, the Court does not question, in and of itself, the governing bodies’ ability to introduce rules concerning the prior approval of (and/or eligilibity in) sports competitions (this is the key issue addressed in Superleague and ISU) or concerning the use of ‘home-grown’ players (at stake in Royal Antwerp).

The three judgments, in fact, expressly acknowledge that the organisation of sporting activities demands, by definition, the limitation of participants’ freedom of action in several respects (including those mentioned above). In the same vein, the Court did not enter into the legality of some practices. It just ruled on the exercise by governing bodies of their quasi-regulatory functions.

To mention a clear example, the Court did not challenge the lawfulness of joint licensing of media rights as such (which does not necessarily restrict competition and may escape Article 101(1) TFEU altogether). It merely questioned how the issue was regulated by governing bodies in the specific factual scenario at stake in Superleague.

The rulings are also valuable in that they clarified a number of issues concerning the interpretation of Articles 101(1) TFEU and 102 TFEU.

First, the Court confirmed how important the evaluation of the economic and legal context is when assessing whether an agreement restricts competition by object under Article 101(1) TFEU. In this sense, it made it clear that the degree of market power (in particular when it is very substantial) is a key factor in this assessment.

Second, it held that the Wouters–Meca Medina doctrine does not apply to ‘by object’ infringements. This interpretation of the doctrine is consistent with its original understanding. It is also consistent with other aspects of the case law, such as the fact that the ‘by object’ category is to be interpreted restrictively.

This Court’s position is only natural: where a restraint escapes Article 101(1) TFEU pursuant to the Wouters–Meca Medina doctrine, it also means that it does not restrict competition by object. Since the regulatory aim to which it relates is legitimate, the object of the said restraint must also be legitimate (that is, it does not fall within the scope of Article 101(1) TFEU by its very nature).

The Court leaves us with three important lessons for the future of the relationship between EU competition law and sports.

One of these lessons is that context is everything in EU competition law. The aim of a particular restraint (achieving competitive balance, addressing free-riding, preserving the integrity of the competition) can only be figured out if the relevant economic and legal context context is considered.

A second lesson, which follows logically from the first one, is that the formal features of an agreement are a very poor guide of its object. The experience of decades shows (and some recent judgments confirm) that a price-fixing or market sharing arrangement is not necessarily restrictive of competition (let alone by its very nature).

A third lesson is that the fact that a particular parameter of competition is affected by a restraint does not mean that the said restraint amounts to a restriction of competiton, whether by object or effect. As the analysis in the three judgments shows, a whole range of other factors must be considered.