For Sports Law buffs: The European rugby "breakaway" and EU competition law

Does the proposed English and French breakaway contravene EU competition law?

I suspect it does, full argument as follows:

• Article 165 of the Lisbon Treaty (the TFEU) has established that sport is a matter that the EU can concern itself with from a policymaking perspective, because sport has social and economic benefits to the EU. Sport is by no means exempt from EU laws on freedom of movement (of labour) and competition law (Article 101 TFEU, Article 81 of the previous EU treaty), but TFEU Article 165 recognises that sport has some unique properties which allow sports bodies some flexibility in adhering to the relevant laws.

• The historic context is that a body of case law as it relates to sport has only been built up over the years on a piecemeal basis rather than as a result of sport-specific constitutional measures.

• Also, much debate about sport as an economic activity has been conducted at EU level.

• It is well established that the EU favours a pyramidal model of sport, especially in team sport. The EU favours national leagues with promotion and relegation as they foster social mobility. The EU appreciates international competition between sports clubs and between representative national teams. The EU favours single governing bodies having control over their sport, ideally with an international federation delegating downwards to national and regional bodies etc. This is all documented in EU policy papers.

• That is not to say that the EU does not accept private closed leagues, but their clear preference for a joined-up pyramidal model is based on the belief it can promote and safeguard the interests of the sport as a whole, and ensure that elite and grassroots levels are connected. This has social and economic benefits for the EU.

• The EU has stated its appreciation of solidarity mechanisms that redistribute income from the top of the pyramid downwards. The European Council commissioned an Expert Group to investigate sports funding in Europe and among its findings was that collective selling of rights to broadcast elite competition can be an important source of income for lower levels of the game, including grassroots, if effective redistribution mechanisms are in place.

• In ordinary circumstances, collective selling of media rights would be a breach of competition law, an abuse of dominant market position. However, there are several legal precedents where the European Court of Justice has approved such monopoly or cartel-like behaviour by sports bodies.

Continued:

• Even in those precedent cases, however, the EU has been very strict in making sure that no single broadcaster can dominate the coverage.

• A perfect case study is the UEFA Champions League and the collective selling of its broadcasting rights by a single body, UEFA.

• UEFA successfully argued to the European Court of Justice that (a) collective selling maximises revenue (b) this creates a better quality product for consumers, (c ) the maximised income is redistributed effectively by UEFA (c.60% of Champions League revenues go to national associations, including to smaller countries which spend on infrastructure development) and (d) the redistribution of income among competing clubs ensures some balance in the competition.

• This model is the very essence of a joined-up pyramid with genuine solidarity benefits down to all levels, and across borders.

• The ECJ insisted that CL rights be limited to a maximum tenor of 3 years to ensure fresh competition among broadcasters, and must be bundled into packages (among other conditions).

• The ECJ agreed that this monopolistic selling of rights was legitimately jusified for sporting reasons, and that the breach of competition law went no further than was required to achieve the sporting objectives. This is important - precedent has shown that any breach of EU law must be both legitimately justifiable and proportionate to be accepted by the ECJ.

Continued:

• Would any PRL breakaway not overseen or approved by the IRB be legitimately justifiable on sporting grounds? Possibly, on the basis that the Celtalian teams have privileged access to a lucrative tournament. This isn't certain, but let's assume this argument holds.

• Would a breakaway competition with no IRB endorsement be a proportionate means of achieving this legitimate objective? Does it go no further than is required? Is there no other less drastic measure that the PRL clubs could take? You'd have to say it is NOT proportionate. Given what we know of the EU preferring a joined-up pyramid overseen by a single federation with the best interests of the whole sport at heart, with the TV income being partly available to fund all levels of the game, the resulting competition with PRL acting to sell its clubs' rights - especially with no RFU endorsement - would be seen as a private monopoly, no more and no less.

• The owner of Bath RFC has predicted "financial oblivion" for the Celtalians. This does not sit well with the concept of solidarity! International rugby, a vital source of grassroots funding, could suffer and the development of a growing sport in Europe would probably be reversed. If the UEFA CL is seen as a good precedent, the PRL initiative looks doomed as it is nothing like the UEFA model.

• Similarly, a bilateral 4-year arrangement between PRL and BT is unlikely to be seen favourably by the ECJ. It's too long and not the result of a competitive process.

• Of course, all this questions the legality of the current TV arrangements with SKY and ERC, but that's another issue.

• In my layman's opinion, the PRL could not argue a "restraint of trade" restriction either, as Bruce Craig of Bath has threatened. The RFU, IRB and other unions could argue that not allowing the English clubs to go solo on this matter is a restriction that is legitimately justifiable on sporting and solidarity grounds, and is also a proportionate restriction.

References:
* European White Paper on Sport: http://ec.europa.eu/sport/white-pape...n-sport_en.htm

Sections 3.4 (anti-trust) and 4.8 (media) are of particular interest.

* Expert Group on Financing Sport, 2012: http://ec.europa.eu/sport/library/do...eliverable.pdf

* Article on Sport's Specificity: http://www.pravst.hr/dokumenti/zborn...201204_697.pdf
Pp718-719 being of particular interest

(Thanks to Danny for the last article)

OK, so it was a convoluted post but the idea was to show that if the breakaway would not withstand a challenge on EU Competition Law grounds, the breakaway is dead in the water, tilting the negotiating balance firmly back towards IRB, and the national unions.

I'm fascinated by this whole saga. Obviously not many others are!

Quote:

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Originally Posted by Stuttgart88

OK, so it was a convoluted post but the idea was to show that if the breakaway would not withstand a challenge on EU Competition Law grounds, the breakaway is dead in the water, tilting the negotiating balance firmly back towards IRB, and the national unions.

I'm fascinated by this whole saga. Obviously not many others are!

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Many of us are Stutts. Some of us don't possess The time to read such posts and post appropriately on them.

Excellent posts BTW.

Before geting into the nitty gritty of the whole thing it's plain to see from the beginning of the PRL argument that once the IRB aren't on board with it it will fall like a House of Cards. And so it should.

What's naive abour this whole thing is that as the Top14 gets increasingly stronger and more attractive it will sound the death knell for the PRL's ambitions also.

Once that happens they'll come crawling back to the cosy arms of the ERC.

Munster and Leinster are very very attractive teams revenue wise from the point of view of English and French teams and any tournament in Europe would require them otherwise the monotony would kill the Anglo-French Cup straight off.

I like these sorts of upheavals in sport (for entertainment and pundit value) but I like to see my side win out and in this case I hope it all comes good and we have a H-Cup in 2014-2015.

I found it pretty interesting too.

Especially as football in Ireland does not really have the following:

Quote:

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It is well established that the EU favours a pyramidal model of sport, especially in team sport.

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(Somewhere in Kerry, spidey senses are tingling at the mention of a pyramid and Irish Football.)

rumour around limerick last weekend was that BT Sport have a condition in the new TV agreement that any new european cup must have at least 4 top tier nations competing. If true the attempted breakaway will fail i suspect

Gerry Thornley introducing the EU competition law angle, though not quite getting it right!

http://www.irishtimes.com/sport/rugb...rift-1.1583615

Nor should the Unions and the IREB be cowed by Bruce Craig’s threat to take them to the European courts for restraint of trade, any less than his forecast/threat of “financial oblivion” for the Celts and Italians.
Notwithstanding the existing Sky contract which had been renewed by the ERC board, at which the PRL were represented, the EU permits Uefa to collectively sell Champions League rights because it maximised income that was subsequently distributed across all of European football (just as ERC does).

The EU insisted on various provisions to maximise competition among broadcasters but agreed that this breach of competition law was both legitimately justified and proportionate. (This is the bit I think he gets a bit muddled - the first half of this sentence is right, but the second doesn't follow. The breach of EU law is the actual collective selling. Maybe it's just not elegantly worded).

Indeed, with PRL’s BT deal in mind, the various European Unions and the IRB might have a very strong case if they were to accuse the breakaway clubs of anti-competitive behaviour.

The most feasible outcome remains an IRB-sanctioned competition, perhaps with some concession to the English and French clubs. A breakaway competition without collective selling of the media rights appears far less feasible.

Rumours of the ERC’s imminent demise, like that of the Heineken Cup, may yet prove premature, but English media reports presenting the Rugby Champions Cup appear even more premature, much like any impending sight of a resolution to this crisis. This one is still set to run, and run, and run.