Competition law and sport - update

Posted on 11 November 2021

The application of competition law to the world of sport has continued to hit the headlines in the second half of 2021. In this update, we take a closer look at a number of ongoing cases and disputes worth keeping an eye on.

European Super League

While any immediate plans for a European Super League were scrapped following the public outcry that led to nine of the founding clubs announcing their intention to withdraw, Real Madrid, Barcelona and Juventus refuse to back down.

The three clubs are taking UEFA and FIFA to court, arguing that the governing bodies infringe EU competition law due to their dual roles as regulators and organisers of football competitions. The argument runs that this conflict of interest has led to an abuse of their position to prevent the creation of rival competitions.

According to the Financial Times, a spokesperson for UEFA commented in response to the claim that European institutions have previously recognised and endorsed the dual role of sports governing bodies, adding that this combined role helps to ensure fair and coherent competition.

While it is true that in last year's ruling in relation to the International Skating Union, the General Court recognised that such a role is not per se illegal, this came with heavy caveats. The Court set out the need for transparent rules to govern the authorisation of competitions organised by third parties and made it clear that any punishments for participating in unauthorised competitions must be proportionate. You can read our summary of the General Court's judgment here.

It's important to note however that the ISU decision has since been appealed, meaning that the European Court of Justice will be required to provide some more clarity on the application of competition law to governing bodies. This will certainly be one to keep an eye on given its potential impact on the future of the European Super League.

Standoff between rugby agents and clubs

Last month a dispute between Premiership rugby clubs and their players' agents regarding the payment of agent fees reportedly went to mediation following the agents downing tools in protest at the clubs' conduct.

Historically, Premiership clubs would pay player agents a commission directly each time one of their players signed a new contract. However, this season the clubs have refused to pay the commission, arguing that the players should pay their agents directly (thereby removing any perceived conflict of interest where an agent effectively acts for both parties). The clubs have also pointed towards HMRC's treatment of dual representation by football agents, stating that this move will help to avoid any potential tax issues.

From the agents' perspective, the refusal of clubs to pay their fees has the potential to squeeze them out of the market – a concern often at the heart of competition law investigations and disputes. It is expected that the agents will focus their arguments on the existence of a potential 'cartel' between the clubs, whereby they have collectively agreed to withhold agency fees in order to distort the market for their services and potentially cut them out of transactions altogether (in other words, foreclose them from the market).

The dispute is yet another example of potential cost cutting by sports bodies in the wake of the pandemic that have come under scrutiny as a result of competition law.

Messi State Aid challenge

Earlier this year the European Court of Justice ruled that Barcelona, Real Madrid and two other top division Spanish sides had benefited from illegal State Aid. The case revolved around a change to Spanish law that required all professional sports clubs to convert into another form of limited company, with the exception of those that could demonstrate a positive financial balance. In short, only four teams met this exemption and the change in law meant that only those four were able to benefit from preferential corporate tax rates.

Perhaps inspired by the ruling, a group of Barcelona fans have filed a complaint with the European Commission claiming that the transfer of Lionel Messi to Paris Saint Germain also breaches State Aid rules.

The complaint argues that the French financial fair play rules are more lenient than those applied in Spain and that this constitutes an attempt by the French to artificially support the activities of Paris Saint Germain.

However, given the need for State Aid to flow from the resources of an EU member state, it is difficult to see this one succeeding. The financing of PSG is not obviously linked to the French state and EU State Aid rules do not capture funding by e.g. Qatar. Nonetheless, it provides another example of the increasing willingness of claimants to deploy competition law in a sports context.


 

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