General Court on 'Thin Ice'​ with its ISU Ruling, says Advocate General

The Advocate General has this morning proposed overturning the 2020 ruling of the EU General Court that the International Skating Union's rules on third party organised events amounted to a restriction of competition ‘by object’, but has left open the possibility that the rules might ultimately be found to constitute a restriction of competition ‘by effect’.

15th December 2022
Short track speed skater in ice arena

In an opinion issued this morning, Advocate General Rantos has proposed that the European Court of Justice should set aside the 2020 judgment of the General Court (which rejected in large part the International Skating Union’s appeal against the EU Commission’s 2017 infringement decision on its treatment of third-party organised speed skating events) and refer the case back the General Court for reconsideration.

The Advocate General rejected the General Court’s characterisation of the ISU’s rules as a restriction of competition ‘by object’, but left open the possibility that the rules might ultimately be found by the General Court to constitute a restriction of competition ‘by effect’.

Context

The ISU is the sole international sports federation recognised by the International Olympic Committee (IOC) as responsible at worldwide level for regulating and administering figure skating and speed skating on ice.

The ISU is composed of national associations (the members) that administer figure skating and speed skating on ice at national level. The members comprise local skating clubs and associations, in which athletes who practise speed skating or figure skating as an economic activity are individual members.

The ISU also organises and owns the rights in the most important international speed skating events, including the European and World long-track and short-track speed skating championships, the Long Track Speed Skating World Cup and the Short Track Speed Skating World Cup.

The ISU has power to determine various rules of affiliation which its members and individual skaters are required to observe. These include rules (the eligibility rules) determining the conditions in which skaters may participate in ISU events and requiring skaters to participate only in events authorised by the ISU and/or by its members. 

The ISU eligibility rules were originally described as having been made, “for the adequate protection of the economic and other interests of the ISU, which uses its financial revenues for the administration and development of the ISU sport disciplines and for the support and benefit of the members and their skaters”. However, following commencement of the Commission proceedings in this case the opening words of this statement were amended in 2016 to refer to the, “adequate protection of the ethical values, jurisdiction objectives and other legitimate respective interests”, of the ISU.

Breaches of the eligibility rules were originally sanctioned by a lifetime ban, but following commencement of the Commission proceedings in this case the ISU changed the sanctions so that they are determined in accordance with the seriousness of the infringement (beginning with a warning, leading to bans of increasing length and ending a penalty consisting of a lifetime ban for very serious infringements, in particular, “participation in non-authorised events which jeopardise the integrity and jurisdiction of the ISU”. 

In 2015 the ISU established rules (the authorisation rules) by which third party organisers could have their international events authorised by the ISU. This required six months advance notice (as opposed to three months for members seeking authorisation). Organisers are required to meet a series of general, financial, technical, sporting and ethical requirements (including compliance with the ISU prohibition on betting) and supply information, e.g., relating to the venue and the value of the prizes to be awarded, business plans, the budget and planned television coverage. Organisers are also required to pay a solidarity contribution to the ISU, determined on a case-by-case basis, for the promotion and development of sports falling within the ISU’s competence at local level. The authorisation rules permit the ISU to accept or reject an application on the basis of those general requirements and the ISU’s fundamental objectives as regards regulating, governing and promoting ice skating. 

Appeals from ISU decisions on ineligibility and on applications for event authorisation are heard by the Court of Arbitration for Sport (the CAS).

The Commission proceedings

In 2014 two speed skaters complained to the European Commission that the eligibility rules were incompatible with Articles 101 and 102 TFEU and that they prevented them from taking part in a speed skating event (which the ISU had refused authorisation) which a third party planned to organise that year in Dubai involving a new format of races that would take place on a special ice track on which long-track and short-track speed skaters would compete together. The Commission initiated proceedings against the ISU in October 2015, issuing an infringement decision in December 2017. 

In its infringement decision, the Commission concluded that the relevant market was the worldwide market for the organisation and commercial exploitation of speed skating. However, given the applicant’s role as the organiser of the most important speed skating events and the regulator of the discipline, the Commission considered that the eligibility rules would restrict competition even if the market were to be defined more narrowly.

The Commission observed that the applicant was able to influence competition on the relevant market because it was the governing body and the only regulator of speed skating and that it had the power to authorise international competitions for that discipline.  In addition, the applicant was responsible for organising the most important speed skating events.  Its substantial market power was demonstrated by the fact that apart from the applicant and its members, no undertaking had been able to enter the relevant market successfully.

The Commission concluded that the applicant was an association of undertakings and that the eligibility rules constituted a decision by an association of undertakings within the meaning of Article 101(1) TFEU.

The Commission found that the eligibility rules had the object of restricting competition within the meaning of Article 101(1) TFEU, i.e., restricting the possibilities for professional speed skaters to take part freely in international events organised by third parties and depriving them of the services of the athletes needed to organise those events. It reached that conclusion after examining the content of those rules, their objectives, the economic and legal context of which they form part and the ISU’s subjective intention to exclude third-party organisers. Whilst the Commission considered that there was no need to analyse the effects of the eligibility rules on competition, it set out the reasons why it was able to conclude that they rules also had the effect of restricting competition.

The Commission also considered that the eligibility rules did not fall outside the scope of Article 101 TFEU, finding that (a) they did not serve only purely legitimate interests, but also corresponded to other interests of the applicant, including its economic interests and (b) the consequential effects of the eligibility rules are in part not inherent in the pursuit of legitimate objectives and, in any event, not proportionate to them.

It also found that the requirement to submit appeals to the CAS arbitration system reinforced the restrictions of competition caused by the eligibility rules.

Key findings and reasoning of the General Court

The ISU appealed against the Commission decision to the General Court on various grounds, notably that the Commission was wrong in finding that the ISU’s eligibility rules fell within the scope of Article 101 TFEU and that, even if they did, the rules infringed Article 101 TFEU by object.

Did the eligibility rules fall within the scope of Article 101 TFEU?

As regards the Commission’s findings that the eligibility rules fell within the scope of Article 101 TFEU, the General Court noted in its judgment that, in light of established case law, it was necessary to take account of their objectives and then to examine whether the restrictions arising therefrom were inherent in the pursuit of legitimate objectives and were proportionate to those objectives. As to the question of ‘legitimate objectives’, the Court recalled that Article 165(1) TFEU provides that the European Union is to contribute to the promotion of European sporting issues, while taking account of the specific nature of sport, its structures based on voluntary activity and its social and educational function.  It also noted that under Article 165(2) EU action in the field is aimed at developing the European dimension in sport, by promoting fairness and openness in sporting competitions and cooperation between bodies responsible for sports, and by protecting the physical and ethical integrity of sportsmen and sportswomen, especially the youngest sportsmen and sportswomen.

The General Court noted that the ISU’s argument was essentially that the eligibility rules pursue the legitimate objective of protecting the integrity of speed skating from the risks associated with betting. It observed that the European Court of Justice has recognised that the protection of the integrity of the sport (which in this case would include preventing sports betting from creating risks of manipulation of events and skaters) constitutes a legitimate objective. However, it pointed out that the pursuit of legitimate objectives cannot in itself suffice to preclude a finding of restriction of competition by object if the means used to attain them are contrary to the provisions of Article 101 TFEU.

It was necessary, according to the General Court, to examine whether the restrictions in question are inherent in the pursuit of those legitimate objectives and proportionate to them.

The Court accepted that, as the ISU submitted, a pre-authorisation system for third party organised events was a suitable mechanism to ensure that sporting competitions comply with common standards, seeking in particular to ensure that competitions take place fairly and the physical and ethical integrity of sportspeople is protected.

However, it agreed with the Commission that the pre-authorisation system established by the authorisation rules went beyond what is necessary to pursue that objective for four reasons. First, the rules imposed obligations on third-party organisers to disclose information of a financial nature (notably the disclosure of the organiser’s business plan rather than event budget) which went beyond what was necessary to achieve the stated objective. Second, there was no justification for requiring a longer notice period for third-party organisers than for ISU members. Third, the authorisation rules were not exhaustive and left the ISU broad discretion to accept or reject an application for authorisation.  Four, the rules did not provide for specific time limits for dealing with requests for authorisation, which could also give rise to arbitrary treatment of such requests.

The General Court also found that the Commission had been entitled to find that the requirement for third-party organisers to make a solidarity contribution which the ISU could use to finance its own events went beyond what was required in order to pursue its legitimate objectives.

Did the eligibility rules amount to a ‘by object’ infringement of Article 101 TFEU?

As regards the Commission’s findings that the eligibility rules infringed Article 101 TFEU by object, the General Court noted that, on the basis of established ECJ case law, the concept of restriction of competition by object can be applied only to certain types of coordination between undertakings that reveal, by their very nature, a sufficient degree of harm (having regard to the content of its provisions, its objectives and the economic and legal context of which it forms part) to the proper functioning of normal competition that it may be found that there is no need to examine their effects. This meant, in the view of the General Court, that it was necessary to examine the eligibility rules, in the light of their alleged objectives and their specific context including, in particular, the authorisation rules.

In that regard, the General Court noted that, according to ECJ case law, when a rule (whether created by a public authority or, as in this case, de facto recognition) entrusts an entity, which itself organises and commercially operates competitions, with the task of authorising third parties to organise those competitions, it grants that entity an obvious advantage over its competitors. Given that conflict of interest, the exercise of that regulatory function should therefore be made subject to restrictions, obligations and review, so that the entity may not distort competition by favouring its own events.

The General Court considered that the Commission was correct in its criticism of the ISU’s regulatory functions in two important respects.

First, the Court agreed that the eligibility rules did not explicitly or clearly state the legitimate objectives that they pursue.  It also found that, before the authorisation rules were created in 2015, the ISU’s regulatory framework lacked content concerning the criteria for authorising events, so that it had full discretion to refuse to authorise third party events. Further, the Court noted that the requirements of the authorisation rules were non-exhaustive, entitling the ISU to accept or refuse an application for authorisation on grounds other than those expressly set out. As such, the authorisation rules did not establish criteria that were clearly defined, transparent, non-discriminatory, reviewable and capable of ensuring third party organisers effective access to the relevant market.

Second, the General Court agreed with the Commission that, until their amendment in 2016, the eligibility rules provided for a single and extremely severe penalty consisting of a lifetime ban which rendered the restrictions arising from the rules manifestly disproportionate with regard to the objective of the protection of the integrity of skating.  It also found that the amended sanctions regime (which included 5 and 10 year bans) were disproportionate having regard to the average length (8 years) of a skater’s career and given the absence of any precise criteria for the imposition of different levels of sanction.

The Commission’s finding on the impact of CAS dispute resolution

The General Court did however rule against the Commission on its finding that the requirement for submission of disputes under the eligibility and authorisation rules to arbitration under the CAS system reinforced the anti-competitive restrictions involved.

The Court noted that arbitration is a generally accepted method of binding dispute resolution and that agreeing on an arbitration clause as such does not restrict competition. It also noted that the use of arbitration in the context of international professional sport meant disputes could be submitted to a specialised court which is capable of adjudicating quickly and economically and in a way that facilitates a certain procedural uniformity and strengthens legal certainty.

It also noted that the ISU rules did not prevent the making of claims by skaters or third-party organisers for damages for breach of EU competition law or the filing of complaints with the Commission or national competition authorities. 

The Advocate General’s opinion

The key question confronted by the Advocate General in his opinion is whether the General Court correctly interpreted Article 101(1) TFEU in upholding the Commission decision in so far as it found that there was a restriction of competition by object.

In particular, he considered whether the General Court was able to carry out a ‘combined’ or ‘parallel’ analysis both of the existence of a restriction of competition by object and of the absence of objective justification for and proportionality of that restriction.  In that respect he was critical of the analytical approach of the General Court in combining a traditional approach of identifying a restriction of competition by object (with reference to the content of the eligibility rules) with an examination of the objective justification or proportionality of those restrictions.

In the Advocate General’s view, the General Court’s ‘combined’ approach improperly extended the concept of a ‘restriction of competition by object’ which would be contrary to the settled case-law of the Court of Justice which required a restrictive interpretation of that concept.   Nonetheless, he considered that it remained appropriate to ascertain whether the relevant ISU rules have as their ‘effect’ the restriction of competition within the meaning of Article 101(1) TFEU.  That aspect of the case required, in his view, a re-examination of questions of fact by the General Court.

In his opinion, the Advocate General also recommended upholding the finding of the General Court that the Commission had wrongly concluded that the exclusive and binding arbitration mechanism imposed by the ISU rules could not be classified as a ‘reinforcing’ element of the restriction of competition found.

The judgment of the European Court of Justice is now awaited.