20 Apr 2021
(by Andreas Stephan) The world of European football was thrown into controversy this week by the announcement that 12 leading clubs have agreed to join a new European Super League (ESL). Unlike the Champions League, the ESL will consist of a permanent membership, with only 5 of its 20 slots open to qualification from other teams. The move has widely been condemned by sports fans and political leaders, and UEFA have said, ‘We will consider all measures available to us, at all levels, both judicial and sporting in order to prevent this happening. Football is based on open competitions and sporting merit it cannot be any other way.’ This blog takes a brief look at the possible competition law implications of the Super League.
EU Competition Law and Sport
The level of organisation and regulation required for sport make it quite different to conventional markets. Apart from the importance of everyone being subject to the same set of sporting rules, there is also a need for careful coordination between competitions to ensure that, for example, players can honour their commitments to commercial and national teams. How football clubs behave in their commercial transactions is generally the same as any other business subject to competition law. For example, if they agree with other clubs on the price of replica football kits, they will be fined for being in a cartel.
Yet, contrary to what has been suggested elsewhere, it is difficult to describe football teams as competitors in the conventional sense. A Norwich City football fan would never view Ipswich Town as a competitor they might one day take their business to (except for a ticket to an away game, of course). The commercial success of football clubs depends primarily on their performance in the sport itself and this is a key aspect of the industry and appeal for fans. For example, it is what made it possible for Leicester City to win the English Premier League in 2015/6, despite being clear outsiders. Sports federations like UEFA are required to regulate the game and to deal with the crucial business of selling TV rights and distributing the proceeds among football clubs. Competition rules do apply to sports but the role of sports federations ‘is recognised in pursuing the legitimate objective of safeguarding the integrity, health, safety and the proper functioning of sport’. If TV rights were allocated at club level, for example, it would result in a chaotic and inefficient system of allocation and constant negotiation, with the possibility of the rights to the same game being sold twice.
The European Commission’s general approach is that, ‘…restrictive sporting rules are compatible with EC law if they pursue a legitimate objective and if the restrictions that they create are inherent and proportionate to reaching this objective.’ However, the European Commission is reluctant to interfere in sporting matters unless the conduct in question clearly goes beyond a legitimate objective. It instead views arbitration as the preferable forum for settling sporting related disputes. For example, in its 2017 case relating to the International Skating Union’s Eligibility Rules, the Commission found that the ISU’ prevented competing organisers from setting up alternative sporting events and were therefore incompatible with competition rules. Skaters participating in events that were not authorised by the ISU faced being suspended or a lifetime ban from any ISU organised competition, including two Dutch skaters whose complaint gave rise to the case. The decision centred on the arbitration process for challenging eligibility decisions by the ISU, as they essentially prevented athletes from relying on competition law considerations. The General Court upheld the decision and made clear that, while sporting federations can implement a system for authorising competing events, the rules must not unduly impede those events.
Could UEFA’s retaliatory action breach competition law?
There are certainly parallels between the action threatened by UEFA and the rules found to be incompatible with competition law in the ISU case. The ESL could argue that such action unduly impedes a competing event. They could cite the benefits of having a rival event to the UEFA Champions League, in terms of choice for fans and competition for tv rights, and point to the fact UEFA have outright rejected their proposal without giving any consideration to any benefits. There is an interesting tension here, between creating a pyramid of competitions at national and European level to make the sport as exciting as possible (which requires a federation monopoly), and the possible benefits of having rival football competitions. It is notable the ESL statement spoke of improving quality and intensity of the European game. A lot may centre on whether it is feasible for both Leagues to operate in parallel to each other. UEFA could argue that the ESL would essentially kill off the Champions League and therefore undermine its key role as an international football federation. The extent to which any retaliatory measures by UEFA are proportionate, will also be of great importance. The lifetime bans in the ISU case were quite extreme and made it impossible for skaters to continue with their livelihood because they were prevented from competing in the lucrative Winter Olympic Games.
Could the European Super League amount to a cartel?
Remembering that competition law does apply to sport and that restrictive practices must be inherent and proportionate to reaching a legitimate objective, it could be argued that the central design of the ESL puts it firmly beyond reasonable legitimate objectives that are permissible in competition law. In particular, the integrity of the game depends crucially on fairness and on the ability of clubs to climb the league tables and be successful at the very top of the game. The question is whether only allowing 5 of the 20 qualifying teams to be based on achievements in the prior season, does enough to protect the integrity of the game and whether the resulting restriction of competition is proportionate. The very significant anticipated increase in TV rights income for the 15 clubs who will qualify regardless of their performance, suggests that the ESL model could easily be characterised as a cartel. The clubs are essentially seeking to increase and protect revenues through the exertion of collective market power acquired as a consequence of their success in the very sporting rivalry they are now seeking to deny other clubs. What arguably distinguishes it from the inherent and proportionate need to have restrictive practices in sports, is the extent to which it guarantees commercial success for those clubs regardless of how well they actually play football.
The European Commission has already indicated it has no intention of getting involved in the current dispute. The most likely outcomes are that either the twelve clubs behind the ESL will reach a compromise with UEFA at arbitration and fall back into the Champions League, or they will be forced to do so by any retaliatory measures. However, there is scope for competition law arguments to emerge at arbitration or through actions taken by either UEFA or the ESL in national courts. This blog has discussed two possible issues. The first is in relation to any retaliatory measures taken by UEFA in an attempt to frustrate the creation of a rival to the Champions League. The second centres on the question of whether the restrictions created by the design of the ESL can be said to be inherent and proportionate to achieving a legitimate objective in sport. This is perhaps the more compelling question, unless the ESL significantly loosens the rules around qualification for the League.