Turf Wars: Professional Sport and Anti Trust Law
By Abhinav Shrivastava
The emergence of anti-trust concerns in relation to the operations of sports bodies correlates with the rise of the commercial aspect of professional sporting engagement.
Anti-trust as a species of law is concerned with the development of a market economy and concurrent limitation or regulation of monopolies. The principle underlying anti-trust law is that commercial enterprises will promote innovation and reduce production cost in a competitive market environment. Anti-trust law and policy seeks to foster competition, and is thus often referred to as competition law.
Unlike normal commercial enterprises, sports governance bodies and professional sports bodies are engaged in the development of their sport and in encouraging participation in such sport. In order to widen the reach of their sport, professional sports bodies engage in the cross-subsidisation of costs related to the grass-root development of sports and maintenance of sporting infrastructure through the gains made through professional tournaments and competitions. As a measure to ensure that they have sufficient funds to sustain their developmental activities and ensure effective governance of their respective sports, sporting bodies tend towards monopolistic structures. Thus, for example, the International Cricket Council is the sole governing body for the game of cricket in the world and its member boards, such as the Board of Control for Cricket in India (“BCCI”), act as the sole governing bodies for the game of cricket in their respective national jurisdictions.
Such tendency towards monopolisation and the growing concern over the commercial aspects of professional sports has led to the extension of anti-trust law to the operations of professional sports bodies. This article will examine the manner and instances in which anti-trust law has intervened in the operations of professional sports bodies and the larger impact that such interventions have had on the professional sports industry generally.
Instances of Interventions
Anti-trust adjudicatory authorities have accorded recognition for the need of a balanced anti-trust policy with respect to the sports industry, whereby the need for monopolistic gains to aid the development of the game and encourage participants to devote their full-time to the sporting activity must be balanced with the requirement of limiting exploitative commercial terms in relation to competitive sporting engagements. Thus, in furtherance of this balance, anti-trust interventions in professional sports leave the monopolistic governing structure of the game alone and typically target the downstream commercial effects of the monopolistic structure, such as the grant of media and broadcasting rights or the right to use stadiums and venues.
Joint Selling of Media Rights
Joint selling of media or merchandising rights are typically undertaken by the organiser of a sports competition to maximise the revenue generation from the sporting event, by ensuring that clubs are unable to compete with, and under-cut each other in the process of granting media and broadcasting rights to each of their matches. Such joint selling permits the organiser to control and direct the grant of broadcasting rights for all matches in the competition, distribute the broadcasting revenue equitably among participants and fund the prize pool for the competition. However, such intent to monopolise and maximise gains from the grant of broadcasting rights may violate anti-trust law in case such price or manner of grant is abusive or is otherwise to the detriment of viewers.
In 2001, the European Commission (“EC”) had commenced proceedings against the Union des Associations Européennes de Football (“UEFA”), the governing body for football in Europe, in relation to the joint selling of media rights by UEFA, whereby UEFA would undertake to sell the broadcasting rights of matches on behalf of all participating clubs. In this regard, UEFA’s policy of bundling and selling all broadcasting rights for the final stages of the UEFA Champions League competition on an exclusive basis to a single broadcaster in each territory was found objectionable under anti-trust law.
The EC’s objection rested on the deleterious effect that such selling of rights would have on the ability of smaller broadcaster groups to compete with large media groups in the purchase of broadcasting rights. It opined that the resulting exclusion of smaller broadcasters from the process of grant of broadcast rights would leave few able media houses in each territory and would enable such media houses that purchase the rights to charge exorbitant or near-monopoly rates to permit viewers to access UEFA Champions League content.
In the course of proceedings, the EC noted that the sale of broadcasting rights contributed a significant portion to UEFA’s revenue, which in turn enabled it to effectively develop the sport of football at many levels, and recognised the principle of solidarity between multiple levels of the sport that encouraged such use and filtering down of revenue to the lower levels and leagues. However it stressed a need to balance this principle of solidarity with the need of ensuring that viewers and football fans have affordable access to UEFA Champions League content.
Thus, pursuant to the discussions undertaken between the EC and UEFA, UEFA agreed to modify its policy on the joint selling of broadcasting rights, to the effect that the rights would be split into fourteen (14) smaller packages, some of which would be sold by UEFA exclusively (consisting of matches that are likely to generate a significant amount of interest, like a match between the football clubs AS Roma and Real Madrid) and some of which would be sold by UEFA and the participating clubs, in case UEFA is unable to sell the same (such as in case the broadcasting slot has been taken by simultaneous matches) and that no grant of rights would exceed three (3) years. Further, UEFA agreed to sell all broadcasting rights, including rights for broadcasting over internet or mobile telecommunications resources, and permit clubs to resell deferred broadcasts of their matches. These terms sought to enable smaller broadcasters and clubs to participate in the process of grant of broadcast rights, and thereby ensure a degree of competition in the pricing of match broadcasts, for the benefit of viewers of the sporting event.
Similar proceedings have also been issued against the organisers of the English Premier League and the German Bundesliga to ensure that separate packages of broadcast and media rights, such as live-broadcast rights, deferred broadcast rights, radio rights and mobile rights would be issued to ensure competition between broadcasters and the provision of match content to viewers at an affordable price.
Private and Rebel Leagues
In many cases, the organiser of a league and the sports body engaged in the regulation of the sport are the same body, and the conduct of the body in such cases raises concerns of abusive or anti-competitive practices. For example, in Surinder Singh Barmi v. the Board for Control of Cricket in India (Case No.61/2010), the Competition Commission of India (“CCI”) ruled, by an order dated February 8, 2013, that the BCCI is functionally the regulator for the game of cricket in India. In this capacity, the BCCI is authorised to sanction private leagues and other private cricket events. However, in the course of organising and commercialising the Indian Premier League (organised by the BCCI), it had inserted a clause within the media rights agreement executed with broadcasters whereby it represented that it would not organise or sanction any other professional domestic Indian T20 competition. The CCI took strong exception to the incorporation of this clause and the underlying intent of the BCCI, as it indicated that the BCCI sought to restrict the emergence of events and private leagues that would compete with the Indian Premier League and thereby sought to distort competition in favour of the BCCI. Thus, it directed the removal of such clauses in the media rights agreements, directed the BCCI to cease the denying of sanction to competitive cricket leagues and applied a penalty equal to 6% of its average revenue in the preceding three (3) years.
Similarly, the use of exclusionary provisions in player agreements to disentitle their participation in competitive leagues has also been subject to intervention through anti-trust law. In News Ltd. v. Australian Rugby League Ltd ((1996) 64 FCR 410), the issue concerned the operation of a Rugby league by News Ltd. in competition with the Australian Rugby League. In this case, the organiser of the Australian Rugby League executed loyalty agreements with players and coaches participating in the league to preclude them from participating in any other competition that was not sanctioned by the organisers. The loyalty agreements were challenged by News Ltd. for seeking to limit the emergence of competition to the Australian Rugby League. The federal court agreed with News Ltd. and ruled that the execution of the loyalty agreements with the intent of excluding participation in non-sanctioned competitions violated anti-trust principles as it sought to maintain the monopoly enjoyed by the Australian Rugby League in the organisation of Rugby league competitions in Australia, and left the participating clubs, players and coaches with no alternative option. Similar exclusionary provisions that suspended players for participation in non-sanctioned leagues were also found to be a violation of anti-trust law by the Australian Competition and Consumer Commission (See Australian Ice Hockey Federation Notification No.N94049 dated March 2, 2010).
However, there are instances where the sanctioning policy of leagues is considered reasonable. In this regard, the CCI had instituted an investigation into the operation of Hockey India as well (Dhanraj Pillay & Ors v. M/S Hockey India (Case No. 73/2011).) in relation to its suspension policy for unsanctioned events. In this matter, it noted that the intent behind the event sanctioning policy is to ensure the primacy of the national competition organised by the national representative organisation, to protect its investment in the development of the sport and secure its revenue sources and to ensure that the roster of events does not adversely affect its international calendar. Pursuant to considering the facts of the matter, the CCI could not find any violation or abusive conduct on the part of Hockey India, but cautioned it to avoid acting, in the future, in such manner as to abuse its regulatory function to unfairly favour or further its commercial interests in the organisation of hockey events and leagues in India.
Control over sports venues and other facilities
One means of stopping the emergence of competition or competitive leagues is to deny access to facilities and venues that are essential and necessary for the organisation of the event. Sports stadiums and venues are examples of such essential facilities. Sports stadiums (particularly stadiums that are specifically built for a single sport) are often built and/or exclusively operated by the national sporting body or the national league operator in each country. Due to urban planning restrictions and the capital costs involved, it would be unviable for a competitive league or event organiser to build another stadium for its use, while the national sporting body or league operator would have recovered the building cost of the stadium over its years of operation. Thus, the national sporting body or league operator can ensure that no other competitive league or event may emerge in any territory by denying access to the sports venue to any other person in such territory.
Such conduct was at issue, and invited interventions on the basis of anti-trust law, in the case of Norman Hecht v. Pro-Football Inc.(570 F.2d 982 (D.C. Cir. 1977)). In this case, the Pro-Football Inc. organised and operated the National Football League in the United States of America, and their franchisee (Washington Redskins) was the lessee of the RFK Stadium in Washington. This lease for the RFK Stadium stipulated that the lessor would not be permitted to lease the use of the RFK Stadium to any other professional football team. Mr. Norman Hecht and his group of investors sought to participate in the American Football League (a professional football league that competes with the National Football League) with a team from Washington and thus sought to use the RFK Stadium, without prejudice to its use by the Washington Redskins. However, this permission was denied due to the restrictive covenant in the Washington Redskin’s lease for the stadium. In response, Mr. Norman Hecht challenged the restrictive covenant on the basis of competition law, as it created a monopoly in favour of the Washington Redskins in the market for professional football in Washington.
The court in this case opined that the denial of access to a stadium to a competitor would violate anti-trust principles as it would safeguard the monopoly of the principal lessor/owner. However it added that for a stadium to be an essential facility it must be shown that it is the only stadium in the metropolitan area which is capable of hosting that professional sport and that the construction of an alternative venue is not commercially viable. The court also added that usage rights are not absolute, and that the competitor seeking access must show that the stadium can be contemporaneously used without interfering or prejudicing with the use of the principal lessor (the Washington Redskins in this case).
Interventions on the basis of anti-trust law and policy typically target the commercial aspects of professional sports bodies and enterprises, such as the organisation of private leagues or the sale of broadcasting and media rights. They seek to balance the needs of access of the parties with limited negotiating rights, that is, the viewers, players and teams, to sporting enterprise with the needs of the sports regulatory authority to generate sufficient revenue to support the development of the sport and the maintenance of professional participants and the infrastructure of the sport.
This balance is particularly evident in the frequent references made by competition authorities to the principle of solidarity, whereby the benefits of the monopoly over sporting engagement enjoyed by a sports regulatory authority is used to further the development of the sport at lower levels. Furthermore, the role of sporting authorities in the development and organisation of the sport is also recognised by competition authorities, and thus, their interventions avoid interfering in the unified monolithic structure of professional sports governance or the charge of reasonably large profits from sporting events by such bodies.
These considerations of balance and reasonability of commercial terms thereby makes the process of adjudication in relation to complaints concerned with anti-competitive practices in professional sports undertakings less reliant on precedents and more on the determinable effect of the sporting body’s decision on the various stakeholders’ interests in the case.
© The Sports Law & Policy Centre