Competition and sports lawyers have had much to write about recently in connection with football and specifically the ill-fated European Super League proposals.
In the latest development, the Government is now proposing to create a legal ring-fence around a decision by the English Premier League ("PL") to renew its existing UK broadcast deal with Sky, BT and Amazon for another three years, guaranteeing revenues of c£5bn in total for the sport. This will avoid the need for an auction process that would normally have been run for the 2022/23 – 2024/25 seasons. It will also allay any competition law concerns that would ordinarily arise out of long term extension of sports media rights deals without following a retendering process.
What is the ring-fence?
Schedule 3 to the Competition Act 1998, allows the Secretary of State to make an “Exclusion Order”, effectively ring-fencing an agreement or agreements from the application of UK competition law where there are ‘exceptional and compelling reasons of public policy’ to do so. This means that the renewal without following a formal re-tendering process, cannot be challenged in the UK on competition law grounds.
Why is it needed?
The argument being made by Government is that renewal of the existing contracts will ensure on-going financial support for the football pyramid up to the end of the 2024/25 season. This includes solidarity payments, parachute payments, youth development funding and funding for grassroots football at existing levels, worth over £1.5 billion over the coming three-year rights term. A further commitment in excess of £100 million has been promised for the National League, women’s football, League One and Two clubs, grassroots football and cross-game initiatives. The PL has promised to increase this funding if its international broadcast rights exceed their current value when re-tendered, thereby providing some much needed commercial certainty in what are uncertain times.
The Government and the PL are presumably keen to avoid a reduction in the value of broadcasting rights that has been seen elsewhere in Europe. In March 2021, Italy's Serie A signed a last minute deal with DAZN for the rights to screen all games for the 2021/22 to 2023/24 seasons which was reportedly worth €400million less than their existing agreement with Sky and DAZN. Similarly, France's Ligue 1 were forced to agree a significant reduction in revenue after it failed to auction off four lots of TV rights following its public fall-out with Mediapro. These developments indicate that perhaps the era of ever-rising broadcasting media rights deals for football in Europe is over.
The effect of Covid-19 on lower league clubs has been particularly tough and the Government is clearly concerned to ensure that financial support is maintained for the sport over the coming three seasons. The PL has argued that in the absence of this financial security, jobs, income and tourism would be lost and that there is a public policy value in preserving football clubs for their fans and local residents and businesses.
The football pyramid receives significant funding from the PL, so a reduction in the value of domestic broadcast rights would negatively affect the ability of the PL and its clubs to continue to directly and indirectly support the football pyramid in England in the current climate. This would compound the impact of the wider financial losses that each level of the pyramid has experienced due to Covid-19, with a real prospect that some clubs and facilities could cease to exist. This is of particular concern for clubs in the lower tiers of English football where, in the past year, we have already seen two clubs suffer insolvency events.
Have they been issued before?
Schedule 3 Exclusion Orders are rare – although this will not be the first time they have been used in the context of Covid-19 – in 2020 an Exclusion Order was issued in relation to supermarkets allowing them to co-ordinate logistics.
Any Exclusion Order will be temporary and the assumption is that the rights would need to be re-tendered prior to the end of the 2024/25 season for the following three-year term.
Likely reaction from the market
The Exclusion Order can be seen as evidence of the Government's increasing involvement in football. The recent European Super League proposals sparked strong reactions from the British Prime Minister and other national leaders across Europe – a fair indication that politicians recognise the importance of football (and sport in general) to voters. The commercial value of the Premier League media rights and their impact on all levels of the sport can be argued to justify the Government's involvement – especially where jobs and investment are at stake as has been argued in relation to this proposed Exclusion Order.
The proposed Order has been welcomed by the PL, the FA, clubs and the rights' licensees. It is also well known that a number of companies had been expressing an interest in the PL media rights and may be unhappy about the Exclusion Order, which will prevent them from taking part in a competitive tender process or challenging the existing arrangements under competition laws.
The fact that the PL and Government see a need for an Exclusion Order reflects the fact that a competition law challenge was a likely possibility had the rights been renewed without such a ring-fence.
Those seeking to express views on the benefits or otherwise of the proposed Exclusion Order may write to plbroadcastingexclusionorder@dcms.gov.uk by 5pm on Friday 28 May 2021.