Nothing is more interesting than the intersection of international business law and sports. Add Charlize Theron into the mix and things get, well, even more interesting. Over the weekend, Ms. Theron, representing the host country South Africa, announced the draw for World Cup 2010, the biggest sporting event on the planet.
If you haven’t already, you can read all about the draw in the Wall Street Journal article The Envelopes, Please and in the Financial Times article English hopes rise after World Cup draw. Also be sure to check out the Fédération Internationale de Football Association (FIFA) website, the go-to site for World Cup information.
EU Sports Are Big Business
Because of the massive revenue the World Cup generates for each participating nation, soccer has become big business to which the rules on competitive and anti-competitive behavior apply. How these rules are applied often determine which teams ultimately qualify for the world’s greatest sporting event.
No region has more at stake than the EU, which is sending many of its members to South Africa. With so much on the table, it is unsurprising that the business decisions of EU football clubs are often contested under anti-trust laws. This is particularly true in the areas of M&A, salary caps and media rights.
EU Anti-Competition Law Increasingly Applied to Sports
England, Spain, Germany, France and Portugal are considered the European Union’s top contenders to win the World Cup in 2010. And all of them are subject to the same EU Anti-Trust laws, which are contained in Articles 81 and 82 of the EEC, which state:
Agreements, decisions and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition are prohibited by art. 81 (1) of the Treaty of Rome if and in so far as they may affect trade between EC member states.”
The following is an overview of the areas and issues where EU Anti-trust laws are frequently invoked to contest the business decisions made by EU football clubs.
- M&A Activity: At present, no two or more clubs participating in a UEFA club competition may be directly or indirectly controlled by the same entity or managed by the same person. However, one might question how legitimate this rule is given the broad definition of ‘control’ that is typically adopted in the context of mergers. Should an investment fund be prevented from buying more than one club, if it is just a financial holding company with no right to influence the club’s management?
- Salary Caps: Salary caps have an inherent potential to breach EC competition rules. They may constitute an anti-competitive agreement or concerted practice between national or international sporting associations and either clubs or players’ unions under article 81(1) EC. Equally, there is a potential for violation of article 82 EC, given that sporting associations can be dominant in the market for the competitions they control. Need I mention the Yankees?
- Media Rights: The restricted structure of the broadcasting market has frequently raised issues under articles 81(1) and 82 EC. Team owners in the industry show a clear willingness to seek redress under EC law when their commercial interests are threatened, and may be even more likely to do so as bottom lines are squeezed in the current recession. As the largest revenue stream in sport, media rights will continue to be the focus of disputes across the EC and beyond. The next major battlegrounds are likely to include access to content on the internet and territorial broadcasting restrictions
As these issues illustrate, competition law remains at the heart of EU sports law disputes and often impact how each national team fills its roster. Ultimately, this plays a central role in which teams qualify for the World Cup.
Trend to Watch: Look for EU Anti-Competition Law to Be Increasingly Applied to Sports …And Look for Spain to Take the World Cup in 2010.