Competition law and sports – a new era for sports regulation?
Competition authorities and private enterprises alike have had concerns with many different parts of the sports ecosystem over the years and there is a rich case history of competition law decisions relating to both horizontal and vertical relationships, from the sale of sports broadcasting, sale of tickets, sports betting, sale of sports equipment and sales of merchandise.[1] The market problems in the sports ecosystem have been addressed previously, such as on issues with sports agents fee caps[2] and the recent resurgence of private actions related to replica football kits[3]. However, this bulletin looks at a remaining area of concern which is the dominance of sports governing bodies and the rules they impose on the game and on the athletes, to the detriment of potential competing governing bodies or leagues in the UK and EU.
Interaction of sports with competition law
The economics of sport is unique, where cooperation between clubs, leagues and athletes is essential for organising competitions, scheduling tournaments, and establishing the rules of the game. Such co-ordination is ultimately a necessary ingredient in sports so that opposing teams can come together and play a fair match, thereby enhancing the overall appeal and integrity of the sport, even though it runs close to what some may say is cartel-like behaviour. Likewise, the dynamics of sports consumption by fans are driven not only by usual supply and demand but by deeply ingrained emotional connections, loyalty, passion, history, familial ties and a strong sense of community. Those market dynamics pose specific issues for the regulation and judicial oversight of sports markets and, in particular, defining concepts such as market definition, dominance and collusion for the effective operation of competition law in sports markets has historically been underdeveloped compared to other, more typical, markets.
It had previously been considered since 1974 that the regulation of sports fell outside of the operation of EU law because rules imposed by sports bodies were purely of a sporting character and not economic in nature[4]. It was only in 1995 after the Bosman[5]ruling that European courts showed they were willing to monitor the activities and regulations of sports bodies. Then, even though it is clear that professional sports undoubtedly involve economic activity – merchandising, ticket sales, tournament winnings, advertising and the commercialisation of broadcasting rights have all increased exponentially in recent years – we had to wait a further ten years until 2006 for the landmark ruling in Meca Medina[6] for it to be established conclusively that sports governing bodies were subject to Articles 101 and 102 of the Treaty on the Functioning of the European Union (“TFEU”) while carrying out that economic activity.
The problem with sports governance
Sports governing bodies have a clear and compelling incentive to maximise their revenue by being the only governing body in a particular sport. The common strategy employed to achieve this is the organisation of a single top-tier league, effectively monopolising the sport's organisation and revenue generation. This monopolistic tendency is prevalent in professional sports, notably in Europe, where a pyramid structure is often employed with the governing body positioned at the apex, enjoying sole oversight over their respective sports’ international or national competitions. By consolidating authority and resources, these governing bodies not only ensure standardised competition formats but also wield significant influence over revenue streams, sponsorship deals, and broadcasting rights.
The effect of a monopoly is most likely to lead to the sports governing bodies’ ability to foreclose the market to competing sports bodies and leagues, along with their ability to sanction players of a sport by prohibiting them from playing in any other league not endorsed by that governing body. Over the years, there have been attempts around the world to challenge the dominance of certain sports governing bodies by new commercial enterprises surfacing to organise competing sports leagues – so called ‘breakaway leagues’[7]. Given the recent rapid growth in the commercialisation of sport, the incentives to create commercialised competitors to incumbent league owners have increased substantially.
We recently witnessed a watershed moment with multiple legal challenges contesting the rules and existence of incumbent leagues. The resulting two decisions, discussed below, are significant as they confront the expansive powers of dominant governing bodies and lay the groundwork for potential market opening to competing enterprises under specific conditions, potentially reshaping the commercial landscape of sports in the future.
European Super League
In April 2021, the top twelve football clubs in Europe[8] publicly announced that they were creating a new European Super League (“ESL”) within which those clubs would play in and which, controversially, would never be allowed to be relegated from. This semi-closed league would operate independently to the oversight of either FIFA or UEFA, the two governing bodies for global football and European football, respectively.
FIFA and UEFA regulations, however, require FIFA and UEFA’s permission (their “prior approval”) for any international matches not organised by them but played within their territory. FIFA and UEFA therefore refused to recognise the ESL, and, as a result of their involvement in establishing the breakaway league, all twelve football clubs affiliated with the ESL, along with their players, confronted the prospect of being expelled from FIFA and UEFA competitions, which encompassed prestigious events such as the World Cup and national leagues.
The ESL complained that the prior-authorisation rules adopted by FIFA and UEFA restrict competition in the market for the organisation and marketing of inter-club football competitions in the EU, and that the threat of excluding clubs and players participating in the ESL infringed competition law. The ESL challenged the lawfulness of those rules under Articles 101 and 102 TFEU in Madrid, and the question referred to the Court of Justice of the European Union (“CJEU”) (the highest court in the EU on such matters) was whether the prior authorisation rules and the related sanctions were compatible with competition law.
International Skating Union
In 2014, two professional speed skaters complained to the European Commission (“Commission”) that the International Skating Union’s (“ISU”) (the sole federation for international ice skating and therefore holding a dominant position) so-called eligibility rules, authorisation rules and arbitration rules were incompatible with Articles 101 and 102 TFEU. The ISU rules stated that any ice skater would incur severe penalties if they participated in any ice skating competition which was not authorised by the ISU, including being banned from all ISU competitions for a specified period of time or even for life. In December 2017, the Commission found a by-object infringement[9] under Article 101 TFEU[10].
The ISU appealed the Commission’s decision to the General Court (“GC”), and on 16 December 2020 the GC issued its judgment, confirming that the ISU rules were contrary to competition law.[11] The GC scrutinised the ISU rules to determine whether there could be any legitimate objective in justifying them, considering the unique nature of sport and its societal function. In particular, the GC found that safeguarding the integrity of sports could be a legitimate goal, particularly citing the need to shield speed skating from the potential hazards of sports betting. However, the GC concluded that the sanctions imposed on the ice skaters were disproportionate in relation to this objective. Additionally, it noted that the pre-authorisation rules lacked clearly defined, transparent, and non-discriminatory criteria. This effectively gave the ISU a broad discretion to refuse to authorise events proposed by third parties.
The ISU appealed the GC’s judgment before the CJEU.
The CJEU’s decisions in ISU and ESL
The CJEU handed down judgments in both the ISU and ESL cases on the same day on 21 December 2023 and ruled in practically the same way in both[12]. The CJEU found that the discretionary power held by dominant sports governing bodies to exclude competitor organisations from the market infringed EU competition law. In essence, the CJEU held that rules that restricted new entrants to the market through prior-authorisation conditions imposed by sports governing bodies must be subject to a framework which allows those rules to be exercised in a transparent, objective, non-discriminatory and proportionate manner, and cannot simply be exercised in a discretionary, arbitrary way to foreclose the market to competitors. Further, any sanctions that are imposed for breaching the prior authorisation rules, such as being banned from playing in any authorised tournament if a player were to play in the new, competing, tournament, must also be subject to the same objective criteria and the sanctions must be shown to be justified and proportionate.
On Article 101, the CJEUs succinct conclusion in ESL was that “where there is no framework providing for substantive criteria and detailed procedural rules suitable for ensuring that they are transparent, objective, precise, non-discriminatory and proportionate […], rules on prior approval, participation and sanctions such as those at issue in the main proceedings reveal, by their very nature, a sufficient degree of harm to competition and thus have as their object the prevention thereof. They accordingly come within the scope of the prohibition laid down in Article 101(1) TFEU, without its being necessary to examine their actual or potential effects.”[13]
On Article 102, the CJEU’s conclusion, after holding that the dominant positions held by FIFA and UEFA on the market for the organisation and marketing of international interclub football competitions is such that it is impossible to set up viably a competition outside their ecosystem, was essentially the same as on Article 101, that “where there is no framework for those various powers providing for substantive criteria and detailed procedural rules suitable for ensuring that they are transparent, objective, non-discriminatory and proportionate, [the prior-approval rules and related sanctions] constitutes abuse of a dominant position.”[14]
While most commentary on these decisions has presented them as encouraging open competition and providing athletes with more opportunities to compete internationally, the decisions arguably fall short of being a resounding victory for start-up leagues and athletes everywhere. That is because the CJEU has, perhaps erroneously, made it potentially straightforward for any incumbent sports governing body to amend their rules to include some form of framework for ensuring their rules are applied in the transparent, objective, non-discriminatory and proportionate way that the CJEU has spelled out, along with making any sanctions for non-compliance proportionate. In other words, with some careful re-drafting of their governing regulations, it might not be that difficult for a dominant sporting body to continue to foreclose the market to potential new, competing startup leagues, as long as those new competitors are treated “fairly”.
However, the CJEU actually went further than this in ESL by stating that a prior-authorisation rule may even be justified, “in terms of its very principle, by public interest objectives consisting in ensuring, prior to the organisation of such competitions, that they will be organised in observance of the principles, values and rules of the game underpinning professional football, in particular the values of openness, merit and solidarity, but also that those competitions will, in a substantively homogeneous and temporally coordinated manner, integrate into the ‘organised system’ of national, European and international competitions characterising that sport.”[15]
This analysis is however tautological: prior-authorisation rules could be entirely justified by their very nature because they ensure that the competing league integrates into the existing “organised system”. The finding does not explain how the competing league can get into the system in the first place if those in charge of the system do not allow them in.
Looking ahead
The CJEU judgments do not ultimately open the floodgates for new competing sports leagues in the way some may have been hoping for, but it is clear from these decisions that sports governing bodies will face increased scrutiny regarding their regulations and practices and the decisions emphasise the importance of effective judicial oversight over the rules set by sports bodies. There is already another CJEU judgment on the horizon this year in FIFA/URBSFA v BZ[16] relating to FIFA transfer rules governing contractual relations between players and clubs. If Advocate General Maciej Szpunar’s Opinion is followed, it may prove to be contrary to the European rules on competition and freedom of movement of persons, to go along with related issues in the CJEU’s Royal Antwerp[17]ruling at the end of 2023 relating to UEFA rules on the treatment of “home-grown” players.
Even though the CJEU judgments are no longer binding on UK courts since the UK left the European Union, similar questions regarding sports governing bodies have been raised in the UK. Most recently this has been in relation to the implementation in the UK of FIFA’s Football Agents Regulations[18] where the tribunal made extensive reference to European case law. The increased proliferation of these decisions against sports bodies may encourage more sports clubs, leagues and athletes in a broader range of sports to launch legal challenges against the incumbent governing bodies and their rules in order to test where the courts’ new boundaries are. This may result in a shift in the sports market dynamics towards a more diversified sports offering, driving up the quality of sports competitions and ultimately benefitting the consumer fans.
*Jonothan Broadbent is Counsel and Natalie Jukes is an Associate in London
Footnotes
[1] For example: European Commission, 23 July 2003, Case 37.398, Joint selling of the commercial rights of the UEFA Champions League, OJ 2003 L 291/25; Case No. 1342/5/7/20 Sportradar AG and Another v Football DataCo Limited and Others; on 4 June 2024, Ticombo, a ticketing marketplace, lodged an antitrust complaint with the European Commission alleging that UEFA abuses a dominant position with its football event ticket resale policy.
[2] In our article “FFAR or Foul Play? FIFA’s Competition Law Conundrum”.
[3] In our article “A new season for replica football kit cases”.
[4] Walrave and Koch – Case 36-74
[5] Case C-415/93
[6] Case C-519/04 P
[7] For example: the European Super League (football); Liv Golf (golf); International Swimming League (swimming); The Longines Global Champions Tour (show jumping).
[8] Arsenal, Chelsea, Liverpool, Manchester City, Manchester United, Tottenham Hotspur, Inter Milan, Juventus, Milan, Atlético Madrid, Barcelona, and Real Madrid
[9] A type of infringement where the restrictive practice, by its very nature, reveals a sufficient degree of harm to competition that it is not necessary to examine the effects of that practice.
[10] Case AT.40208
[11] Case T-93/18
[12] ESL, Case C-333/21; ISU, Case C-124/21 P
[13] Para 178
[14] Para 152
[15] Para 253
[16] Case C‑650/22
[17] Case C-680/21
[18] See again our article “FFAR or Foul Play? FIFA’s Competition Law Conundrum”.
