Editor's note: Marine Montejo is a graduate from the College of Europe in Bruges and is currently an intern at the ASSER International Sports Law Centre.
On 3 June 2016, the Landgericht München (“Munich
Regional Court”) ordered temporary injunctions against the International Basketball Federation (“FIBA”)
and FIBA Europe, prohibiting them from sanctioning clubs who want to
participate in competitions organized by Euroleague Commercial Assets (“ECA”).
The reasoning of the Court is based on breaches of German and EU competition
law provisions. FIBA and FIBA Europe are, according to the judge, abusing their
dominant position by excluding or threatening to exclude national teams from
their international competitions because of the participation of their clubs in
the Euroleague. This decision is the first judicial step taken in the ongoing
legal battle between FIBA and ECA over the organization of European basketball competitions.
This judgment raises several interesting points with
regard to how the national judge deals with the alleged abuse of a dominant
position by European and international federations. A few questions arise
regarding the competence of the Munich Regional Court that may be interesting
to first look at in the wake of an appeal before examining the substance of the
case.
1. FIBA Europe/FIBA vs Euroleague: the dispute’s
background
FIBA and FIBA Europe are involved in a
bitter struggle with ECA for the control of the European basketball
competitions. The dispute commenced with FIBA Europe (fully supported by FIBA)
announcing the creation of a Basketball Champions League starting from the
2016-2017 season at the end of last year. Through the new “official”
competition, FIBA intends to reinstate its hold over the organization of
European championships. Back in 2001, ECA took over the organization of the
European professional clubs’ competition after a harsh row with FIBA. FIBA did
not trademark the name “Euroleague”, leaving the organisation without any legal
avenues to prevent its use elsewhere. It battled for a year with ECA but finally
left the organisation of those competitions to ECA in order to promote
uniformity at that level of competition. Since then, Euroleague and Eurocup,
the continent’s top two clubs’ competitions, are overseen by ECA, a commercial
private body owned by the clubs participating in those tournaments. The status quo has now been challenged by the
creation of a FIBA rival competition and the newly created fracture in European
professional basketball is showing no signs of letting up, risking the
possibility of having two continental leagues in competition with each other as
of next season. In response to the creation of the FIBA Champions League, ECA
announced its intention not only to maintain its competitions but to evolve
toward a closed, franchise-based league. In retaliation, FIBA Europe (publicly
backed by FIBA) put pressure on national federations by threatening to withdraw
their rights to participate in its international competitions, including EuroBasket
2017, if they would continue allowing their clubs to participate in the ECA
competitions (Euroleague and Eurocup). FIBA’s position, in that FIBA Executive
Committee decided to fully support FIBA Europe’s decision, has also raised
concerns surrounding possible sanctions on national teams for the 2016 Rio
Olympic Games.
At this point the dispute moved away from the
basketball court to the legal field. The first shoot out occurred in relation
to the Euroleague which, in February, filed a complaint before the European
Competition against FIBA for alleged abuses of their dominant position (art.
102 TFEU) by threatening national federations to force their professional clubs
and leagues to rescind their participation in the Euroleague competitions. From
its back court, FIBA caught the ball and, in April, filed a complaint against FIBA
Executive Committee decided to fully support FIBA Europe’s decision. FIBA Executive Committee decided to fully support FIBA Europe’s
decision. FIBA Executive Committee decided to fully support FIBA Europe’s
decision. ECA before the same EU Commission for the same breaches of EU
competition law provisions. Possibly for the first time in EU competition law,
we have two undertakings filing two different complaints against the same
parties for the same alleged breaches of article 102 TFEU. DG COMP, now in the
place of a referee, has to decide whether it will open an investigation into
the matter and if it so decides, it probably will have to open two procedures
(or at least join both of them).
2. The procedure and the jurisdiction of the Munich
Regional Court
One could think that it was a tight game in
the hands of the Commission, but Euroleague, along with 12 professional
basketball clubs, decided to spin dribble and scored a buzzer-beater by asking
for preliminary injunctions before the Landgericht München. Preliminary
injunctions (einstweilige Verfüngung) are interim remedies, provided by
the German Code of Civil Procedure, for exceptional cases in civil and
commercial matters. They are granted to secure the enforcement of a final
judgement that may be endangered before the rights of the parties have been
finally determined. Where the case is urgent, the Court is allowed to make a
decision ex parte, namely without giving
the respondent an opportunity to be heard and without an oral hearing. In the
decision, the judge referred to the provision on urgency (section 937(2) of the
Code of Civil Procedure) which implies that he felt the pressure of the run-up
to the 2016 Rio Olympic Games and the 2016 Basketball Qualifying Tournament
scheduled to take place at the beginning of July. Moreover, in its press
release following the judgement, FIBA regretted that it was not invited, along
with FIBA Europe, to present their views which tends to confirm that, in this
case, the conditions for urgency were met and that both the international and
European federations were ex parte in
the dispute.
The territorial jurisdiction of the Munich
Regional Court is not of concern for FIBA Europe as it is seated in the same
city. However, for FIBA, situated in Mies, Switzerland, the question should be
addressed. The Court retained its competence from the Lugano Convention of 2007
on jurisdiction and the recognition and enforcement of judgements in civil and
commercial matters to which Germany and Switzerland have signed. It then states
that “pursuant to article 6(1) (of the) Lugano Convention, in proceedings
against a number of defendants that involve the same matter and that it is
expedient to hear together in order to avoid irreconcilable judgments, the
proceedings may be heard in the place where one of the defendants is domiciled.
In this case, this is Munich”. The Court may be too straightforward in
establishing its competence.
The clause on competence enshrined in
Article 6(1) provides that “a person (…) may be sued (…) where he is one of a
number of defendants, in the courts for the place where any one of them is
domiciled, provided the claims are so closely connected that it is expedient to
hear and determine them together to avoid the risk of irreconcilable judgments
resulting from separate proceedings”. The key legal concept for a national
court to derive its competence from the Lugano Convention is whether the claims
are so closely connected that a person/entity based in another State (in this
case FIBA, Switzerland) may be subject to its scrutiny along with the others
defendants (in this case FIBA Europe, Germany). In its decision, the Court
enclosed three documents transmitted by the appellants through which the
Slovenian, Italian and Hellenic national basketball federations were warned
about potential sanctions they were facing due to the actions of their clubs
entering into an agreement with ECA. These documents were signed by Kamil
Novak, FIBA Europe Executive Director, and referred to FIBA Europe’s Board
decision to ban national federations from participating in Senior men’s national
team competitions organised by FIBA Europe because their clubs appear to be
taking part in ECA competitions. These assumptions were based on press
statements about their intention to take part in ECA competitions. The letters
are only of relevance to FIBA insofar as a copy of the so-called letter was
sent to the international federation. It takes a stretch of the imagination to
consider, from these documents only, that the claim against FIBA is closely
connected to the one against FIBA Europe.
Moreover, article 2(1) of the Convention
provides that “persons domiciled in a State bound by this Convention shall,
whatever their nationality, be sued in the Court of that States”. FIBA could
argue that this is the case of Swiss Courts. A number of exceptions exist to
this general provision. Under article 5(3) “a person domiciled in a State bound
by this Convention may, in another State bound by this Convention, be sued (…)
in matters relating to tort, delict or quasi-delict, in the
courts for the place where the harmful event occurred or may occur”. In that
case, FIBA could be sued in Germany because its decisions may have an effect on
German basketball clubs. Unluckily, none of the applicants are German
basketball clubs which, again, put the competence of the Munich Regional Court
into perspective as, in the case of FIBA, there is no harmful effect yet.
In order to justify the competence of the
Munich Court, it may be easier to rely on article 6(1) of the Convention,
referred to above. In case C-352/13, Cartel Damage Claims (CDC) Hydrogen Peroxide
SA, on the interpretation of article 6(1) of Regulation 44/2001, the wording of which is identical to that of Article 6(1) of the
Lugano Convention, the Court states that “it is necessary to ascertain whether,
between various claims brought by the same applicant against various
defendants, there is a connection of such a kind that it is expedient to
determine those actions together in order to avoid the risk of irreconcilable
judgments resulting from separate proceedings (…) In that regard, in order for
judgments to be regarded as irreconcilable, it is not sufficient that there be
a divergence in the outcome of the dispute, but that divergence must also arise
in the context of the same situation of fact and law” (p. 20). It is true that
FIBA publicly backed FIBA Europe when it threatened to extend the ban to its
competitions and participation in the Olympic Games) and that the claim before
the European Commission was filed by both international and European federations.
It seems that the requirement that the same situation of fact and law must
arise is satisfied in those circumstances. Moreover, and the judge refers to
it, under FIBA’s General Statutes, national federations have the obligation to ensure
that their clubs, leagues and players participate only in official
international activities and competitions (art. 9.1) upon the risk of sanctions
in the event of non-compliance (art. 12). In that case, and as is often the
case for sports governing bodies, national basketball federations must
implement the rules and decisions from FIBA and FIBA Europe which confirms that
there is a connection between the two entities on this particular case and that
the Munich Regional Court is presumably competent; even if, in this case, a
more in-depth analysis on the rule of jurisdiction would have been welcome.
3. Is FIBA Europe abusing its dominant position?
Given that the Munich Regional Court held
that it was competent, it granted preliminary injunctions to FIBA on the ground
of an abuse of a dominant position under EU law (art 102 TFEU) and under the
corresponding provisions in German law.
The Court defined two markets where FIBA
and FIBA Europe each hold a dominant position. FIBA is dominant on the market
for “competitions of the national team”. That dominant position relies,
according to the judge, on article 1(2) of FIBA’s Statutes providing that “FIBA is the sole competent authority for basketball
throughout the world and is recognised as such by the International Olympic
Committee”. A broader market definition for FIBA, as a worldwide basketball
regulator, would be the market for basketball competitions. It is not contested
that international federations hold a dominant position at the top of a sports
organisation nor that they regulate all matters related to their sports with
other (continental and national) federations and bodies at lower levels. This
position is then secure by the principle of solidarity which, in the case of
basketball, can be found in article 1(4), which provides that “all bodies and
officials of FIBA must observe the General Statutes, Internal Regulations,
other rules and regulations, and decisions of FIBA”, and article 9, which lists
the obligations of members. That principle is reinforced with a mechanism of
sanctions (articles 10, 11 and 12). However, the market may appear too broad. A
narrower market may be the market for international basketball competitions of
the national teams excluding continental competitions. This market would
specifically target the mission of FIBA as an international competitions
organizer for basketball. In particular, FIBA is responsible for the
organisation of the FIBA Basketball World Cup and the FIBA Olympic Qualifying
Tournament, with both competitions determining which teams will participate in
the Olympic Games. While defining a market for “competitions of the national
teams”, the judge targeted both of the markets where FIBA holds a dominant
position. For FIBA Europe, the judge defined a market for “European competitions
of the national teams”. This market covers FIBA Europe’s mission to organise
the EuroBasket. The alleged excluding practices are related to the
participation in European and international competitions of the national teams,
so it seems that both narrower markets are relevant in the case where FIBA and
FIBA Europe hold dominant positions.
While defining the relevant markets, the judge only
targets competitions for national teams. Does the same still apply for club
competitions? The core problem of the dispute is about the organisation of basketball
professional club’s European competitions. If one would define a market for the
professional basketball clubs’ European competitions that market may exists and
ECA, as the sole organiser of Euroleague and Eurocup, is in a dominant
position. The creation of the Basketball Champions League is an attempt from
FIBA and FIBA Europe to enter that market and challenge that dominant position.
Holding a dominant position on a market is not
contrary to EU competition law provisions, but rather it is the abuse of that
dominant position that needs to be examined. In the case of FIBA, the judge considers
article 9(1) of FIBA Statutes regarding the obligations of the members, i.e.,
national federations. Under provision (d), “national member federations must
(…) ensure at all times that their leagues, clubs, players and officials
participate only in international activities and competitions officially
recognised by the respective national member federations and by FIBA”. FIBA
Europe sent a letter to three national federations advising them that their
right to participate in Eurobasket 2017 had been withdrawn because some of
their professional clubs chose to compete in the Euroleague 2016/2017. A copy
of this letter was transmitted to FIBA, “which is competent to take any
decisions it deems necessary regarding worldwide events”. From these letters, it
is clear that FIBA and FIBA Europe used or will use their regulatory power to
sanction national federations for a breach of their solidarity obligations. By
doing so, national federations are excluded from all European and international
competitions. Moreover, the pressure on national federations will probably lead
to the exclusion of ECA from the market for professional basketball clubs’
European competitions as none of the clubs will be able to participate in the Euroleague.
In that case, article 9(1) can rightly be qualified as an exclusivity clause
that leads to an exclusionary abuse by dominant undertakings, and the judge is
rightly assessing the situation, FIBA is abusing its dominant position by
threatening to exclude national basketball teams from the 2016 Olympic
qualifying tournament and, by extension, the 2016 Olympic Games. FIBA Europe is
also abusing its dominant position by, in its case, excluding national
basketball teams from the Eurobasket 2017. The fact that FIBA/FIBA Europe are
creating a new European competition for clubs has nothing to do with their
dominance; rather, a competition problem occurs when they use their power to
sanction national federations by pressuring them to force their clubs to
participate in the “official” competition. Similar situations are arising where
international federations are fighting the emergence of “unsanctioned” private
leagues by using their sanction powers. The Belgian competition authority already granted
interim measures to the Longines Champions League in a
dispute where the FEI tried to suspend riders and horses that were
participating in the competition. A similar case involving ISU and suspended
ice speed skaters is pending before the European Commission.
Nonetheless, the German Court goes on to mention
possible justifications to FIBA/FIBA Europe’s behaviour pertaining to article
101 TFEU. This is rather surprising, even though such a stance is permissible, after
it just concluded there had been a breach of article 102 TFEU. If article 101
was to be applied, it could be argued that the fact that FIBA Europe and FIBA
are excluding national federations constitutes concerted practices leading to
restrictions upon competition on the market for professional basketball clubs’
European competitions. In that case, the analysis could move to article 101§3
and examine proportionate justifications. The judge seems sensible that the
outcome of FIBA and FIBA Europe’s practices cannot lead to anything other than
undermining the viability of Euroleague competitions by preventing clubs to
participate. It does not appear, as such, as a proportionate justification.
However, the judge may, again, be too
straightforward in his application of articles 101 and 102 TFEU. FIBA and FIBA
Europe may argue that there are justifications for using their sanctions power.
The Court of Justice already held that not every sporting rule that is capable
of restricting competition infringes articles 101 and 102 TFEU (C-519/04, Meca Medina). In that case, in assessing the compatibility of the
obligation for national basketball federations to force their professional
clubs to take part in the Basketball Champions League upon sanction by the
international and European federations, the judge must take into account the Wouters criteria (C-309/99): (i) the objectives of FIBA and FIBA Europe measure; (ii) whether the
consequential effects that restrict competition are inherent in the pursuit of
those objectives; and (iii) whether they are proportionate to them. As seen before,
the pressure on national federations will probably have an adverse effect on
competition, making it impossible for ECA to organise a viable competition as
no professional clubs will take part (this doesn’t take into account the third
factor – that professional clubs do not have any interest in European and
international competitions, and that they are probably better off keeping their
players). Nonetheless, FIBA may bring previous case law and article 165 TFEU to
the dispute and argue that there is no breach of EU competition law in the
sense that restrictive effects on competition are, in this case, inherent and
necessary to the organisation of basketball. The specificity of sports
organisations, the solidarity mechanisms between different levels of
competition and the pyramidal structures have already been recognised. FIBA
Europe and FIBA are, here, making sure that national federations comply with
article 9(1) of the FIBA Statutes and that professional clubs will participate
in its European competitions. FIBA is then meant, as the sole legitimate
basketball authority, to apply sanctions if its members do not comply with
their obligations. All the reasoning will focus on proving that these effects
are proportionate to the legitimate genuine sporting interest pursued. The
impact of FIBA Europe’s decision (and FIBA potential decision) is really
important, and, it is readily apparent that FIBA should not focus on its
commercial exploitation of the Basketball Champions League competition as it
has already been decided that rules prohibiting clubs or athletes from
participating in competitions other than those organised by sports federations
under the threat of penalties do not comply with EU competition law provisions
(see for example the FIA Commission decision, IP/01/1523). On the other hand, the Lethonen case on
transfer periods (C-176/96) may be useful as a rule whose objective is to ensure the regularity of
competitions (competitive balance, functioning of the championships and
effective calendar) is more likely to comply with articles 101 and 102 TFEU.
Those are just possible justifications and there is sufficient flexibility in
articles 101 and 102 TFEU for FIBA and FIBA Europe to justify more proactive
behaviours under EU competition law.
The German judge also disregarded possible
objective justifications under article 102 TFEU. In that case, again, the
monopolistic pyramid structure of sport may be taken into account.
The judge goes on to say that FIBA must
await the outcome of antitrust proceedings before the Europe Commission regarding
whether ECA is also abusing its dominant position. This is, again, really
surprising for two reasons. On one hand, the judge does not tackle the
behaviour of ECA in his decision. As discussed, ECA enjoyed a monopoly over the
organisation of European competitions that FIBA and FIBA Europe wanted to
challenge by creating the Basketball Champions League. In that dispute, ECA is
also using its monopoly position toward professional clubs and national leagues
to consolidate its organisation. On the other hand, filing a complaint before
the European Commission does not presume that DG Competition will open an
investigation on the matter. DG COMP enjoys a broad discretion with regard to
opening an investigation based on the complaint. What will happen to FIBA if
the Commission decides to reject the complaint without analysing its substance?
Moreover, an in-depth investigation is a (very) long procedure that can take
years before the Commission issues a decision. The German judge is putting FIBA
and FIBA Europe under a lot of legal uncertainty and, while protecting the
rights of Euroleague, threatened the viability of the European Basketball
League if, in the end, ECA is also abusing its dominant position. This is
probably the most questionable point in this judgement.
Finally, the judge finds that “the
entitlement to take part in Olympic Games should be decided for sports reasons.
The decision of certain clubs to take part in a certain club competition has,
in terms of sport, nothing whatsoever to do with a national team’s
participation in international competitions”. Putting aside the fact that
national teams are composed of athletes coming from those clubs and the
controversies that already exist about the release of players, it is difficult
to understand what the judge meant by this. FIBA is recognised by the IOC as
the sole worldwide competent authority for basketball. As such, national
federations must respect the rules FIBA sets in order to qualify for the
Olympics. Regardless of the contested practices at stakes, FIBA has the power
to sanction a federation if the latter does not comply with its regulations and
the participation in its competition may be one of the sanctions it can impose.
As a conclusion, it may be recalled that
this judgement is provisional and probably the first of a long series. FIBA has
already announced its intention to appeal the judgement, highlighting the fact that
the contested sanctions were already withdrawn by FIBA Europe’s Board a few
days before the Munich Regional Court released its decision and ECA’s position
hasn’t properly been assessed. However, these circumstances and facts should
not obfuscate the key legal question here – namely, the assessment under EU competition
law of the use by international federation of its regulatory powers to stop the
emergence of unsanctioned competitions.