From a competition law standpoint, the regulation of sport presents a difficult conundrum. On one hand, sports regulations may limit the ability of economic actors (including sportspeople) to win business through unrestricted competition. On the other hand, without such regulations, the essential core of the sport (and the business interests built around it) may be undermined.
Competition authorities in the UK and EU have sought to develop policies that manage this difficulty by focusing on two key issues: the management of conflicts of interest and the application of proportionality to rulemaking.
Conflict of interest for sports governing bodies
Given that many sports governing bodies have a dual role in both regulating and carrying out commercial activities related to sport, there is scope for conflicts of interest to arise.
As such, a governing body will typically establish rules for the organisation of and participation in sporting events, but may also be organising such events themselves. In that scenario, there is a risk that the governing body may use its rulemaking authority in order to confer an advantage on its own events business, over those of other events organisers.
Competition authorities will typically take action (including through the imposition of sanctions) against governing bodies that fail to manage such conflict-of-interest risks.
In December 2023, the Court of Justice of the European Union (CJEU) spelled out the minimum requirements for managing such conflicts in relation to the approval of (potentially competing) events in the European Superleague and International Skating Union cases. According to the Court, an approval power must be placed within a framework of:
- substantive criteria which are transparent, clear, precise, published in advance, and suitable for ensuring that the power is exercised in a non‑discriminatory manner enabling effective review; and
- transparent, non-discriminatory detailed procedural rules relating, inter alia, to time limits (which cannot be such as to deny effective access to the (events) market).
Failure to adhere to these minimum requirements is likely to result in individual cases of an approval power being found anti-competitive and/or abusive without there being any need to examine their market effects.
Proportionality (i) – impacts on core activity
Competition authorities recognise that sports governing bodies must have the ability to lay down rules on certain topics, for instance anti-doping or equipment standards, which inherently restrict the freedom of sport participants to compete as they wish. They acknowledge that the core values of the sport (such as the need for uncertainty of outcomes or the development of sportspeople) are likely to depend upon some degree of restriction.
However, the competition authorities will expect such restrictions to be proportionate, that is to say clearly motivated by a legitimate sporting interest and carefully tailored to achieving that objective without unduly restricting opportunities for competitors to innovate. This expectation calls for an approach to rulemaking which is transparent, objectively motivated, and non-discriminatory.
In its European Superleague ruling, the CJEU emphasised the legitimacy of common rules (e.g. dealing with approval of sporting competitions) intended to guarantee the homogeneity and coordination of those competitions within an overall match calendar as well as, more broadly, to promote the holding of sporting competitions based on equal opportunities and merit.
Similar questions of proportionality have been raised in the context of ongoing litigation in the UK and other European countries regarding the regulation by FIFA of agent fees, in particular the imposition of a cap on fees.
Proportionality (ii) – wider market impacts
The rulemaking and standard-setting activities of sports governing bodies may not simply constrain the competitive freedom of those engaged directly in those sports; they may also have impacts in related markets. Thus, a rule which imposes minimum equipment standards may restrict competition not only among the sportspeople using such equipment, but also among the manufacturers of the equipment.
The competition authorities will expect governing bodies to tailor their rule-making activities so as to mitigate wider market distortions, such as taking steps to avoid discriminating unfairly in favour of certain firms or creating a situation in which certain firms may acquire undue market power.
There is an ongoing discussion in the sailing arena, regarding the Commission’s 2018 antitrust investigation into World Sailing, aiming to ensure there will be fair and open competition for sailing equipment used at Olympic events. The investigation follows an initial complaint brought by Devoti, a European boat manufacturer, concerned by the actions of World Sailing’s move toward a system of single-manufacturer one-design for boats.
This move meant that, following a tender process, World Sailing would choose a unique boat design for each competition. The one-design rule would dramatically restrict the accessibility of manufacturers which were unable to produce certain types of boats and could be forced to request licences from competitor manufacturers in order to be able to compete in the tender.
Usually, anti-competitive conduct is avoided where an open tendering process is followed. However, as some boat models have open intellectual property (IP) rights and others do not, Devoti argued that the tender process, which led to a choice of boat design rather than choice of manufacturer, gave advantage to manufacturers with effective monopolies on exclusively licensed designs.
In an attempt to address the complaint, World Sailing adopted a new licensing approach aimed at managing these tensions between competition law and IP rights: the fair, reasonable and non-discriminatory licensing terms (Frand Terms). This move suggests that members will have to vote for a boat design that is available on Frand Terms for all manufacturers and seems aimed at encouraging monopolising manufacturers to make their boat designs available on fair and reasonable licensing terms.
However, the practicalities of the policy and the results of the Commission’s investigation are still awaited. It is hoped that this will shed more light on the Commission’s approach to the anti-competitive effects of restrictive sporting equipment standards and IP rights.
In 2020, the Belgian Competition Authority (the BCA) imposed measures on the Belgian Bumper Pool Association (the BGB) for anti-competitive conduct. The BGB imposed rules on the specification of balls that could be used in official competitions and matches, meaning that only balls produced by manufacturer Saluc could be used. Another ball manufacturer, HCSD BVBA, brought a challenge before the BCA over the exclusivity deals between Saluc and the BGB.
As an interim measure, the BCA permitted the BGB to stipulate the balls’ objectively determinable characteristics but to suspend the obligation to exclusively use Saluc’s bumper balls and to have the authorised balls determined for a maximum of two seasons on the basis of a non-discriminatory tender.
The interim measures imposed act as a suspension of the anti-competitive practices and ensure that any damage to the market is overcome urgently. This provides some insight into how restrictive equipment standards may be imposed whilst still ensuring competition rules are met.
For more information please contact Gordon Downie, a Partner in our regulation and markets team, at gordon.downie@shepwedd.com, or Scott Rodger, an Associate in our regulation and markets team, at scott.rodger@shepwedd.com.
This article was co-authored by Ella McIntosh-Farrelly.