Sport Legal Environment & Broadcasting

Coursework

NOVEMBER 25, 2015Alexandros efthymiou

efthymia@uni.coventry.ac.uk

Introduction

This report provides a general overview of the competition rules (101, 102 TFEU) applicable to companies cases. The European Union (EU) is more than a common market and an economic union. Nevertheless, implementing the internal market is still one of the most important goals of the EU. It aims to accomplish a highly competitive social market economy, protected against distortion of the interference with competition. The TFEU was previously called the EC Treaty, and renamed by the Treaty of Lisbon (ToL) on 1st December 2009.

“The Treaty on the Functioning of the European Union (TFEU) (which incorporates the relevant provisions of the 1957 Treaty of Rome) provides for a single internal market with free movement of goods and services throughout the European Union (the EU). To achieve this, it includes rules to ensure that competition within the EU is not restricted or distorted inter alia by cartels or anti-competitive agreements, abuses of market power, certain merges and acquisitions or unfair State aid. These European competition rules have the force of law throughout the European Economic Area (EAA). They are enforced by the European Commission and, in certain circumstances, by the Member States’ national competition authorities (NCAs). The countries in the EEA each also have their own domestic competition rules which trend to be modelled on the EU rules” (Slaughter and May, 2011).

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Table of Contents

Introduction 1

Statement discussion 3

European Competition Rules 5

Cartels 6

Abuse of dominance 7

Merger policy 8

Decisions of the Court of Justice of the EU 8

Walrave and Koch v Association Union Cycliste Internationale Case 36-74 8

Bosman Case C-415/93 8

Meca-Medina Case C-519/04 P 9

Piau Case T-193/02 10

Karen Murphy v Media Protection Services Ltd Case C-429/08 10

FIA Case COMP/39732/BRV /FIA 10

MOTOE Case C-49/0711

NewsCorp/Telepiu Case Comp/m.5121 11

Hoffmann-La Roche v Commission Case 85/7612

Conclusion 12

References 13

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Statement discussion

The increasing commercialization has turned professional sports more and more into a business. Competition rules define the strategic behaviour of clubs and associations when it comes to economic activities and make them decide what behaviour is allowed and what is not.

This statement shows how important the competition policy is to the consumers. Consumers are the latest beneficiaries from the enforcement of competition rules. Consumers derive several key benefits from business competition, including better quality of the products, wide variety of similar products and lower prices. On the other hand, they will be big losers from any lack of competition, which will mean increased costs, less choices, low service quality. At this time, consumers are “passive beneficiaries” of competition or market abuse. As Neelie Kroes mentions that, informed, educated and active consumers are the real drivers behind a competitive marketplace. This consumers help also the businesses to decide where to focus and how to be innovative and successful. It is important that the behind European competition policy is based by an understanding of the needs and welfare of the consumers.

It is decisive for sports organizations to understand the principles and policy practices of European competition authorities, in order to shape their in compliance with competition rules. The sports sector differs significantly from other, more ‘ordinary’ industries (Smith & Stewart 2010) and this is recognized by the relevant competition authorities in Europe.

Sport has a huge economic impact in the EU: €407 billion in 2004, representing 3.7% of EU GDP and employing 15 million persons (5.4% of the labour force). That impact

has continued to grow, and in many cases sport has become "big business" (primarily because broadcasting rights – particularly for TV – have become very profitable)

(European Commission, 2012)

The EU Commission has handed down a growing number of important judgments in the field of sport. While some of these judgments are based on the EU internal market rules, the others are based on EU competition rules. EU competition law covers antitrust, mergers and state aid. Most sport cases have been handled under EU antitrust policy, which prohibit unhealthy competition agreements and practices as well as abuse of a dominant position.

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While the application of EU competition law to economic activities in the sport sector is of great importance, the European Commission recognized how important sports are for social and cultural roles when considering cases related to sport.

In 2007 European Commission outline the context of the principles of EU competition in sport markets as the “White Paper on Sport 2007”. This paper provides guidance to the sport organizations but it does not constitute official competition guidelines and also it does not possess a binding character for Commission decisions. Competition law, also drove a thinking behind the white paper and the damages actions. That allows consumer bodies to bring actions for damages that a group of consumers has undergone. In cases like abuses of dominant position or agreements which restrict competition the Commission can identify the effect and fine the organisation. The main purpose of the White paper is to help the “healthy competition” and ensure that the market operates in the consumer interest. In order to hold the consumer welfare, it is vital for the Commission to think as a consumer, and work with consumers and their representative associations.

Commission’s continued engagement focus on consumer in order to ensure the competition policy. They also building on a feedback module for a further development of the competition policy, regarding competition issues.

Consumers and their representatives are able to bring helpful information about potential market failure to the Commission’s attention (John Madill & Adrien Mexis,

2009).

When the “white paper on sport” was prepared the European Union had no jurisdiction for sport under European Treaties. Until now, EU has engage with sport through principals which adopted in 1997 and 2007 (Amsterdam 1997, Lisbon 2007) and include the following provision:

“The Union shall 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”(Article 165 of the Treaty on the

Functioning of the European Union)(UEFA, 2009).

and that the action shall be aimed at

“developing the European dimension in sport, by promoting fairness and openness in sporting competitions and co-operation between bodies responsible for sports, and

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by protecting the physical and moral integrity of sportsmen and sportswomen, especially the youngest sportsmen and sportswomen”( Article 165 of the Treaty on

the Functioning of the European Union)(UEFA, 2009).

European Competition Rules

European Union competition law is concerned with ensuring that firms (undertakings) operating in the free market economy do no restrict or distort

competition in a way that prevents the market from functioning optimally (Jones A, and Sufrin B, 2014).

The link between domestic and national sports law is replicated at the transnational level by the relationships between global, European and international sports law. The European Commission’s involvement with sport, protect the EU sport policy and the operation of the internal market and competition.

The European policy level provides rules for enterprise cooperation, for abuse strategies, for merger control and for public subsidies for enterprises. Four main regulation

Cartel policy (Article 101 TFEU) prohibits behaviour between competitors. Cartel includes price-fixing, market sharing, limiting the supply or production of goods or services.

Abuse control (Article 102 TFEU) prohibit businesses with huge power market position to exploit their strong position unfairly.

Merger control policy prohibits merges, acquisitions and joint ventures involving companies and lead them to an impediment of effective competition.

State aid policy (ARTICLE 107 TFEU) prohibits aids by Member States of the European Union to companies.

Many times, competition rules differ from Community or Member States.

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Cartels

"The concept of an “undertaking” under Article 101 includes individuals, partnerships, corporations, limited partnerships, trusts, charities, co-operatives, nationalised firms, state owned commercial organisations and non-profit making organisations. The European Court of Justice has stated that in the context of competition law, the concept of an undertaking contains every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed”(Field Fisher Waterhouse, 2010).

Agreements between enterprises in the same corporate group will not prohibited (by the competition rule) because they will be treated as they belong in the same economic entity.

In order to apply the TFEU Article 101 the agreement has to prevent, restrict or distort the competition. The article 101 sets out which agreements are anti-competitive and includes fixing purchase or selling prices, controlling the production, the markets, the technical developments and finally sharing markets or supply sources. This includes both horizontal (retailers) and vertical (retailers and suppliers) agreements.

The Commission recognises that

“Many agreements between companies with small market shares or which are small in size (agreements of minor importance and agreements between SMES) are unlikely to have any adverse appreciable affect on competition. Unless they contain certain hardcore restrictions,

such agreements will not infringe Article 101” (Field Fisher Waterhouse, 2010).

Fines

In 2008 the Commission imposed fines to three companies, a total of €1.3 billion for participating in illegal market sharing, and exchanging of commercially sensitive information in the Car Glass case (the largest individual fine imposed was €896 million on Saint-Gobain).

Leniency

In December 2006, the Commission adopted the Leniency notice which has two principles:

The earlier undertakings contact the Commission, the higher reward The value of the reward it depends on the usefulness of the materials supplied

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Exemptions (Tobler Christa, 2010) : practices beneficial to consumers Agreements of minor importance (applies to small companies, holding no more than

10% of the relevant market). a collection of block exemptions for different contract types

Abuse of dominance

Article 102 applies in cases where an undertaking has a “dominant position”. First of all the relevant market has to be defined in terms of product, geographic, or temporal market. When the market is defined it is indispensable under 102 article to define if the undertaking holds a “dominant position”.

Examples of abuse behaviour by dominant companies include:

Exclusiveness Excessive pricing, Predatory pricing, Rebates, Margin squeeze, Price Discrimination Refusing to allow access to an essential facility Tying (i.e. stipulating that a buyer wishing to purchase one product must also

purchase all or some of his requirements for a second product) (Pinsent Masons, 2014).

Relevance to non-dominant undertakings and other considerations

Relatively, few companies enjoy such position of market power that they are at real risk of being investigated under article 102. That said, it should be borne in mind that markets can be defined narrowly for these purposes.

Unilateral behaviour by firms with market power may also raise some matters under national competition legislation. A few member states do currently have national laws which can be applied to forbid or treat unilateral conduct in circumstances where there may not be violation of Article 102. “For example, in Germany the provisions on discriminatory and

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other restrictive conduct in the GWB in particular sector 20, can be applied with respect to unilateral conduct of companies which do not enjoy Article 102 dominance. In the UK, the enterprise Act 2002 gives the Competition Commission powers to take actions or make recommendations if it decides that features of a market adversely affect competition; these provisions could conceivably be used in respect of unilateral conduct which would not be prohibited by 102. ” (Slaughter and May, 2011).

Merger policy

The EU provides rules in order to control the mergers and acquisitions at the European level.

In accordance with EUMR (EU Merger Regulation), the merger has to be notified to the European Commission if it attains certain turnover thresholds in the EU and globally (ICAO, 2013). The Commission also allow merges of organisations only if the way that doesn’t impede healthy competition. Commission can block merges of companies where there are not in the interests of competition, but in many cases the competition can improved by allowing the merger with some limitations.

Decisions of the Court of Justice of the EU

In 1970, the CJEU declared in Walrave and Koch v Association Union Cycliste Internationale that sport relationships, those who involve well-known sportspersons, were subject to EU law where the behavior in question compose an economic activity. After that, it made became clear that sports didn’t had the immunity from EU.

The next major landmark was the case between Union Royal Belge des Societe de Football Association ASBL and Jean-Marc Bosman. Bosman case concerned UEFA’s rule, which didn’t allow each national football association to limit the number of foreign players whom a club may field in any first division match in their national championships to three, plus two players who have played in the country of the relevant national association for an uninterrupted period of five years, including three years as a junior (Mark James, 2013). The CJEU decide that the rule of limitation of foreign players in a football club were illegal as it distinguishes players from countries within the European Union.

Although the CJEU ruled only on the basis of the free movement for workers, the Commission and Advocate General Lenz considered that rules limiting the employment of

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foreign players also infringed Article 101 TFEU because they restricted the possibilities for the individual clubs to compete with each other by engaging players. There is no doubt that history will remember Bosman case as a big step forward for football in Europe.

It is clear that, whatever the advantages of any player market restrictions, whatever the interests of any particular industry like sports, their rules cannot violate basic human rights or labour laws (Wladimir Andreff, Stefan Szymanski, 2006).

The applicants became more creative in presenting their cases before national courts, there was a complexion over the questions of EU law. In Meca-Medina case, the compatibility of IOC’s anti-doping regime and EU law was challenged. The Meca-Medina and Majcen v Commission of the European Communities was a huge importance decision in EU Court of Justice which helped to establish the EU law in sports federations. The Meca-Medina ruling had a big impact in sport industry and today provides guidance in sports rules under articles 101 and 102 TFEU.

Meca-Medina and Majcen filed a case against the executive body of the European Union, the European Commission, that the regulations adopted by the International Olympic Committee concerning doping control were incompatible with the Community rules on competition and freedom to provide services. Until that time the rules of European law applied only to economic activities. In 2001, the appellants complaint that anti-doping rules comes into rupture with the articles 49, 81 and 82 of the EC Treaty.

Article 82 states:

Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States (European Commission, Article 82).

The judges of the Court reject the complaint against the IOC (International Olympic Committee) and state that certain rules adopted by the IOC and implemented by the Federation Internationale de natation (International Swimming Federation; ‘FINA’) and also certain practices relating to doping control were opposite with the Community rules on competition and freedom to provide services (Judgment of the court, 18 July 2006, Case: C-519/04 P)The CJEU held that the rules had as their main objective to ensure the healthy rivalry between the competitors.

Another case that tested the dominant position of a sport governing body was the Piau case which judged FIFA’s regulations and criteria of licensing the profession of agents (bank deposit, interview). After further investigation by the Commission, FIFA decided to review its

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rules and change the most restrictive limitations in order to make the market more accessible to agents. Considering this the Commission dismissed the appeal from Mr. Piau. When the case was brought to the CFI by Mr. Piau, unlikely the Meca-Medina case, it stated straightforward that the activity of an agent undoubtedly does not follow a purely sporting interest hence Articles 101 and 102 TFEU should apply (Laurent Piau v Commission 2005). Similarly though, after FIFA’s alterations to the rules, the CFI found that there was no infringement of both articles.

After that, the Murphy v Media Protection Services Ltd was examined and found that breaches by the complex framework of contracts that resulted a British pub owner being preventing from using a subscription television services from another country, and in that case from Greece. First, held the CJEU, national legislation prohibiting the import, sale and use of foreign decoder cards contravenes Article 56 of the Treaty on the Functioning of the European Union (“TFEU”), which protects the free movement of services between Member States. Second, the Premier league made contracts in order to prevent their broadcasters from offering their services to other Member States that they didn’t had a licence. It was clear that was against with Article 101 TFEU.

Fifteen years ago, the Commission concluded that the sport’s regulatory body, FIA, had abused its dominant position in the sport and limited free competition (Serby Tom, 2015). The EU Commission investigate the way the international motor sports is organised and commercialized. The Commission alleged that FIA abuse their dominant position in the motor racing market by for ways.

• FIA used its authority in order to block the events that where competing theirs

• FIA used their power to constrain competing series out of the market

• FIA used their power to gain all the television rights of motor sports events

• FIA protect the F1 from competition by tying everything up in order not to let a competitive rival championship to take place

The most significant conclusion was about the commercial exploitation of their events. Particularly, the broadcasters contracts where on an unlawful situation under the European completion law. The Commission decide that they found serious evidence that violate the EU competition rules which resulted substantial fines.

Sport is, of course, subject to EU Competition Law and sports governing bodies must be able to demonstrate (under the Meca-Medina principle) that their ‘sporting rules’ are proportionate and justified, if they can be shown to be having an effect on competition (Serby Tom, 2015).

The key differences between the FIA case and the MOTOE is the role the state plays in legitimising and establishing the special powers of the dominant undertaking. In the MOTOE

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case, the respondent ELPA was granted a regulatory power of consent by the state rather than economic power. However, ELPA could effectively prevent rival competitions with that state power and it was alleged to have been abused when ELPA offered no reasons for refusing to consent to a competition organised by MOTOE, a rival to its own competitions. It is important the fact that the MOTOE judgment provides some reasons why sports services will not often constitute services of general interest that are shielded from the full force of the Treaty’s internal market rules.(Trainor Niall , 2009)

So, the MOTOE judgment raises the question of whether the risk of abuse itself requires regulation and supervision of an undertaking that is placed, by virtue of special powers, in a dominant position (Miettinen Samuli, 2008)

The European Commission classify the abusive behaviour as either exclusionary or exploitative. Exploitative means the abuse which includes unfair buying or selling prices. Because of the weakness of the Commission to decide what is an excessive price they unwilling to act as a price adjuster.

Under what occasions should a competition authority allow a merger that creates a monopoly? The NewsCorp made exctacly this argument in the NewsCorp/Telepiu case in order to demonstrate that the suggest merger would not lead (Helberger Natali, 2005).

Competition policy set the need to protect the market and the consumers from market power, the presumption might be that such a merger (that tent the market into a monopoly) should never be allowed. However, there are some occasions in which a merger to monopoly can be the best option. The European Commission’s recent clearance (subject to undertakings) of the merger of the two competitors companies of satellite operators in the Italian pay-tv market (Stream, jointly owned by NewsCorp and Telecom Italia, and Telepiù, owned by Vivendi) provides a relevant example. First the merge of Telepiù and NewsCorp will create one integrate unified satellite platform (to be branded Sky Italia), which will be controlled by NewsCorp and with Telecom Italia as a minority shareholder with a share of just under 20%. Second this was the third time that Vivendi and NewsCorp wanted to combine their pay-tv assets in Italy in two years.

“Vivendi had originally been the acquirer and Stream the target, and jurisdiction had fallen to the Italian antitrust authority: after two Phase II investigations, approval had been granted subject to extensive remedies. However Vivendi had been unable to proceed with the acquisition and in the summer of 2002 the roles were reversed: NewsCorp agreed to acquire Telepiù, which required a different notification in Brussels.”(Lexecon Ltd, 2003).

In 1979 the ECJ explained the significance of market shares in Hoffmann-La Roche v Commission case, stating that although the importance of the market shares may vary from one market to another, the view may legitimately be taken that very large shares are in

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themselves, and save in exceptional circumstances, evidence of the existence of a dominant position (Case85/76 [1979] ECR 461, [1979] 3 CMLR 211). The ECJ issued two statements: first that recognises that in some cases the high market share held by a firm concerned may not in itself be sufficient, and second that recognises that market share needs to be held for some time. Whilst helpful, the judgement in Hoffmann-La Roche raised an obvious question: what amounts to a high market share? The question was answered by the ECJ in the case of AKZO v Commission (Maher M. Daddah, 2004)

“Generally, a company in order to be in a dominant position, must have the ability to act independently of its customers, competitors and consumers. If a company has 50% market share there is presumption of being dominant. Also, dominance sometimes exists where the market share is 40%. Although dominance is not by itself breach to competition law, it’s the

abuse of the position that is prohibited” (Pinsent Masons, 2014).

Conclusion

Competence is one of the most important topics in EU law because it is the core of the constitutional identity of the EU. ECJ use to creatively define treaty provisions in order to enhance the European competition. This remains until today, despite the attempt by the ToL to categorise the European competances.

Competition law policy in the EU seeks to maintain and encourage competition in the EU for the benefit of the whole Union and its citizens (Nigel Foster, 2015). The cases mentioned above included nationality clauses, transfer fees, anti-doping rules, multi-ownership and agent licensing among others. It is obvious that Commission in the above cases apply the rules with unique approach in every case. The European Commission uses the general law pattern but because of the cases variety they have to look each case separately from the old ones. The cases mentioned above are is just one very small sample. Commission every year examine many cases of companies that abuse the competition. Some of the cases were decided by national courts, in others the parts reached an agreement before the ECJ’s ruling and others were dismissed in the lack of evidence.

“Obviously, the CJEU did not rule on every type of sporting rule yet, as it can only rule on the cases it gets and then only insofar as the question of their conformity with EU law is part of the constituent elements of the reference for a preliminary ruling made to it. That leaves

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many questions on conformity with EU law with regard to sporting rules unresolved and consequently leads to legal uncertainty” (Arnout Geeraert, 2013).

REFERENCES

Aaron C.T. Smith, Bob Stewart (2010) The special features of sport: A critical revisit [online] available from http://www.aaronctsmith.com/Article%20PDFs/Smith%20SMR%202010.pdf [20 November 2015]

Arnout Geeraert (2013) Limits to the autonomy of sport: EU law, HIVA- Research institute for work and society, KU Leuven

Commission of the European Communities (2007) White paper on sport [online] available from http://www.msmt.cz/uploads/Areas_of_work/sport_and_youth/Bila_kniha_sport_eng.pdf

[20 November 2015]

European Commission (2012) Sports Overview [online] available from http://ec.europa.eu/competition/sectors/sports/overview_en.html [20 November 2015]

Field Fisher Waterhouse (2010) EU Competition Law: Article 101 and Article 102 [online] available from http://www.fieldfisher.com/pdf/EU-competition-law-articles-101-102.pdf [10 November 2015]

Helberger Natali (2005) Controlling Access to Content: Regulating Conditional Access in Digital Broadcasting, Netherlands: Kluwer Law International

ICAO (2013) [online] available from http://www.icao.int/Meetings/atconf6/Documents/WorkingPapers/ATConf6-ip004_en.pdf [20 November2015]

John Madill and Adrien Mexis (2009) Consumers at the heart of EU competition policy [online] available from http://ec.europa.eu/competition/publications/cpn/2009_1_7.pdf [18 November 2015]

Jones, A. and Sufrin, B. (2014) EU Competition Law (fifth Edition). Oxford University: Oxford

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Maher M. Daddah (2004) EC and UK Competition Law , United Kingdom ,Cambridge University

Mark James (2013) Sports Law (Palgrave Macmillan Law Masters) (2nd edition), UK, England: PALGRAVE MACMILLAN

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Miettinen, Samuli (2008) The International Sports Law Journal [online] available from https://www.questia.com/library/journal/1G1-212546219/policing-the-boundaries-between-regulation-and-commercial [20 November 2015]

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Trainor Niall (2009) The 2009 WADA Code: A More Proportionate Deal for Athletes? Entertainment and Sports Law Journal, ISSN 1748-944X, June 2010, [online] available from http://go.warwick.ac.uk/eslj/issues/volume8/number1/trainor/ [23 November 2015]

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Wladimir Andreff, Stefan Szymanski (2006) Handbook on the Economics of Sport, UK, England: Edward Elgar

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