Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Balancing Athletes’ Interests and The Olympic Partner Programme: the Bundeskartellamt’s Rule 40 Decision - By Thomas Terraz

Editor’s note: Thomas Terraz is a fourth year LL.B. candidate at the International and European Law programme at The Hague University of Applied Sciences with a specialisation in European Law. Currently he is pursuing an internship at the T.M.C. Asser Institute with a focus on International and European Sports Law.

 

1        Introduction

The International Olympic Committee (IOC), after many years of ineffective pushback (see here, here and here) over bye law 3 of rule 40[1] of the Olympic Charter (OC), which restricts the ability of athletes and their entourage to advertise themselves during the ‘blackout’ period’[2] (also known as the ‘frozen period’) of the Olympic Games, may have been gifted a silver bullet to address a major criticism of its rules. This (potentially) magic formula was handed down in a relatively recent decision of the Bundeskartellamt, the German competition law authority, which elucidated how restrictions to athletes’ advertisements during the frozen period may be scrutinized under EU competition law. The following blog begins by explaining the historical and economic context of rule 40 followed by the facts that led to the decision of the Bundeskartellamt. With this background, the decision of the Bundeskartellamt is analyzed to show to what extent it may serve as a model for EU competition law authorities.

 

2        Rule 40 in Context

Before dissecting the decision, the considerable impact of the IOC’s rule 40 and its implementation by national Olympic committees (NOCs) must be emphasized. Many athletes look to the Olympic Games as a unique opportunity to gain exposure and benefit financially from their accomplishments, especially considering that many athletes who qualify for the Olympic Games struggle to make a living from their sport. Athletes are greatly reliant on external funding, particularly from sponsors, to fund their career.[3] To further complicate matters, many sports only enjoy a meaningful spotlight during the Olympic Games. Hence, athletes in those sports view the Games as an unparalleled occasion to become known to a wider public and gain new sponsors. So, why does the IOC restrict these opportunities?

Rule 40’s existence is principally due to The Olympic Partner Programme (TOP), a closed group of thirteen sponsors, which was created in 1985 with the aim of diversifying and securing greater means of funding for the Olympic Games.  It was the brainchild of Michael Payne who has defended the importance of preserving the ‘value of the Olympic sponsorship program’ to prevent a return to the days where the funding of the Games was highly dependent on ticket sales.[4] For the IOC, preserving the value of TOP has meant taking aggressive actions against ambush marketing, which according to Payne is ‘any communication or activity that implies, or from which one could reasonably infer, that an organisation is associated with an event, when in fact it is not’. Payne describes the ways in which the IOC has attempted to tackle ambush marketing, which includes educating the public about ambush marketing, preventing ambush marketing through prohibiting non-sponsor association and controlling Olympic imagery among other methods, and finally legal action, which according to Payne, ‘the mere threat of this is often enough to bring the offending party into line’. In this view, rule 40 can mainly be categorized as a preventative measure.

Rule 40 has also experienced an evolution ever since it was first introduced in 1991 into the OC, which has also meant that ‘defining the scope of rule 40 and understanding its nuances is a process that evolves with each iteration of the games’.[5] Although rule 40 has recently moved from a general ban on advertising with limited exceptions into allowing it under severe restrictions, it remains to be seen whether the IOC will fundamentally rethink the conditions applied to athlete advertising. Meanwhile, athletes, who were partly the initiators of the complaint to the Bundeskartellamt, have perhaps realized that public awareness campaigns have not brought about the drastic change they had hoped for. In the present case, the Bundeskartellamt’s attention was drawn to rule 40 OC after a complaint from Athleten Deutschland (German Athlete Commission) and Bundesverband der Deutschen Sportartikelindustrie (Federal Association of the German Sports Goods Industry).

 

3        Background to the Decision

Before examining the substance of the Bundeskartellamt’s decision, it is important to understand that rule 40, as it was analyzed in the decision, was the one that was in place in the lead up to the Rio 2016 Games.[6] It states:

 “Except as permitted by the IOC Executive Board, no competitor, team official or other team personnel who participates in the Olympic Games may allow his person, name, picture, or sports performances to be used for advertising purposes during the Olympic Games.”

In other words, a general ban on advertisement with limited exceptions. The applicable conditions meant that only athletes with TOP sponsors could launch an advertising campaign during the Rio 2016 Olympic Games and ongoing campaigns from non-TOP sponsors were subject to authorization. Further complicating the matter, NOCs could introduce additional restrictions or opt-out completely from allowing their athletes to advertise during the frozen period.[7] The German Olympic Sports Federation (DOSB), in its 2016 guidelines[AD1]  (page 78), distinguished between DOSB sponsors, Olympic sponsors and non-Olympic sponsors.[8] In the case of non-Olympic sponsors, ‘only advertising activities which had started at least three months prior to the Olympic Games had a chance of being approved’, which means potential sponsors needed to have early concepts ready before that date (early April). It should also be noted that at that time, the DOSB had not yet nominated any athletes for the Olympic Games. In addition to the deadlines, references to the Olympic Movement were strictly forbidden, which included an incredibly broad list of words and phrases.[9] If they wanted to participate in the Games, athletes were forced to subscribe to these rules via the athlete agreement (page 83) [AD2] and any breach could imply sanctions, which included removal from the Olympic Team.[10]

The conditions that these rules impose is succinctly summarized by Grady who explains that though the IOC claimed it had relaxed its rules, it ‘did not create the kinds of opportunities that the IOC may have envisioned’, which in effect ‘precluded almost all but the most powerful global brands from taking full advantage of the ability to feature Olympic athletes during the Games’, a view that was acknowledged by the Bundeskartellamt.[11]

 

4        The Bundeskartellamt’s Decision

Although the present case was resolved through the commitments made by the IOC, the Bundeskartellamt still provided a preliminary assessment concerning the relevant market, the abuse of a dominant position, possible justifications, and proportionality, which are analyzed below.

4.1       Relevant Market

Having decided to resolve the case on the basis of Article 102 TFEU,[12] the Bundeskartellamt identified the relevant market on the basis of a ‘modified concept of demand-side substitutability’ and defined the market as the ‘market for the organisation and marketing of the Olympic Games’.[13] It considered that the Olympic Games was an event that differed from other major sport events from the consumers’ point of view because of the wide variety of sports that are covered and because certain sports which perhaps are not normally broadcasted in a particular country receive extensive media coverage during the Games.[14] The Bundeskartellamt supported its analysis of the relevant market by referring to MOTOE in which the CJEU also defined the ‘relevant product market for the organisation (and marketing) of sports events according to the type of sport’.[15] Lastly, it found that the athletes participating in the Games to be ‘customers of the organisation and marketing of sport events’.[16] ‘Other well-known competitions’ could be considered as an alternative for certain athletes, however, many athletes practice sports that receive very little media attention outside the Games, meaning that overall the substitutability between the Olympic Games and other major sports events is limited.[17]

4.2       An Abuse of a Dominant Position

Next, the Bundeskartellamt considered the members of the Olympic Movement to be in a collectively dominant position in the aforementioned market and deemed them to be undertakings regardless of the fact that they do not make a profit.[18] It also asserted that the members of the Olympic Movement were abusing their dominant position, hindering effective competition, for several reasons. First, the registration deadlines to request authorization were set too early since athletes did not know whether they were even going to the Olympics in the first place. Moreover, the Bundeskartellamt ruled that the very use of registration and authorization criteria could have a prohibitive effect for certain kinds of advertisements. Even though ‘ongoing’ advertisement could be approved, it was still subject to restrictions since it could not use any ‘designations and symbols as well as images and videos’ connected to the Olympic Games.[19] As stated earlier, these are very extensive and make it ‘difficult to market an athlete’s participation in the Olympic Games’.[20] In the end, the sanctions that athletes could face exacerbated the restriction on competition, especially since the sanctions had no proportionality requirements and an appeal could only be made to the CAS.[21]

4.3       Justifications

At this point the Bundeskartellamt moved to make a preliminary assessment as to whether the abuse of the dominant position inherently pursued legitimate objectives and whether the restriction is proportionate to its claimed objective (the Wouters test[22]).  It is interesting to note that the Bundeskartellamt decided to apply the Wouters test to an Article 102 TFEU case and expressly stated that ‘it is to be assumed that the criteria are also meant to apply with regard to the applicability of Art. 82 EC’ (now Article 102 TFEU) in referring to the CJEU’s Meca-Medina case.[23]  Only one of the pursued objectives of the IOC was considered legitimate, while all the others, including ‘preserving the financial stability and sustainability of the Olympic Movement and the Olympic Games’, ‘preserving the value of the Olympic brand to finance the Olympic solidarity model’, and ‘preventing the excessive commercialisation of the Olympic Games’, were not found to be legitimate.[24] The three rejected objectives reflects the decisional practice of the Commission and the CJEU that ‘economic aims cannot justify restrictions’, which the Bundeskartellamt directly acknowledges.[25] This is why it is interesting that the Bundeskartellamt then found that the ‘prevention of ambush marketing during the frozen period in order to safeguard the funding of the Olympic Games, facilitated in part by Olympic sponsorship programmes, and thus to ensure that the Games can be held on a regular basis’ as the only legitimate objective.[26]

A literal reading of this aim seemingly exposes an economic dimension since the IOC wishes to protect TOP and as a consequence, its own budget. However, the Bundeskartellamt was convinced by the IOC’s contention that this was no economic objective,[27] since the ultimate aim of the objective is to ensure the Olympic Games’ consistent occurrence. It could be argued that there are in fact two objectives mangled into one: (1) the prevention of ambush marketing to protect TOP (an economically motivated objective) and (2) ensuring the regular occurrence of the Games (a non-economically motivated objective). The Bundeskartellamt decided to not disentangle the two and accepted that they were in fact one inseparable objective, whereby the latter sub-objective ultimately sidelines the economic dimension of the first. On the other hand, the CJEU’s case law on economic justifications has not been entirely consistent and there has been occasions where it has accepted economic justifications.[28] Furthermore, an efficiency defense could also allow for economic justifications in which the IOC could argue that preventing ambush marketing in order to protect TOP benefits consumers, outweighing any negative effects to competition.[29] In the end, it might be desirable that any future analysis of this dual objective at least acknowledge that there is an underlying economic interest. [TT3] 

4.4       Proportionality

Before analyzing the proportionality of the measure in terms of the prevention of ambush marketing, the Bundeskartellamt defined ambush marketing as ‘the planned endeavour of a company, which is not an official sponsor of a major (sports) event, to attract public attention to its own business by means of marketing activities related to the event, and thus to profit from the communication performance of the event (e.g. high profile, image) without making a financial contribution’.[30] In the corresponding footnote, the Bundeskartellamt makes reference to the definitions of ambush marketing on Wikipedia, which upon closer inspection is taken from Manuela Sachse’s book Negative Kommunikationseffekte von Sponsoring und Ambush-Marketing bei Sportgroßveranstaltungen. It is rather unfortunate that the Bundeskartellamt did not elaborate on why it chose this particular definition of ambush marketing.

Nonetheless, on the formal aspects, the Bundeskartellamt held that the DOSB’s pre-authorization scheme for individual advertisements was disproportionate, especially due to the deadlines. Moving to substantive aspects, it maintained that individual advertisement could only be prohibited if it violated specific legal provisions such as intellectual property rights or specific contractual obligations.[31] Violations of property rights ‘only exist in cases where the public perception is that there are economic and organisation relations between the owner of the property rights and the company which uses Olympic designations’, referring to the jurisprudence of the German Federal Court of Justice.[32] The Bundeskartellamt makes reference to the reasonably well-informed consumer standard, which is also recognized in EU law,[33] to explain that consumers are able to differentiate between ‘a sponsor’s advertising and a reference to the Olympic Games in a promotional context’ and that simply a positive association or temporal connection with the Olympic Games and Olympic Movement is not a violation of intellectual property rights.[34] In this regard, the Bundeskartellamt only found prohibiting the use of ‘Team Deutschland’ during the Olympic Games and the use of ‘a combination of the respective location and the year’, e.g. Rio 2016, during the frozen period to be proportionate, while finding the other restrictions to be disproportionate.[35] In terms of the restrictions on photos and social media posts, the Bundeskartellamt held that the general prohibition of taking photos at Olympic venues for individual advertising measures and posts on social media accounts that do not have any protected ‘designations or symbols’ to be disproportionate.[36]

Ultimately, the sanctions, in particular sporting sanctions, were judged to be disproportionate because of their potential impact on athletes’ careers, since they could affect the athletes existing and future sponsorship opportunities and a competition ban could also, depending on the athlete’s age and the ban’s length, end an athlete’s career. The very existence of sporting sanctions could have a ‘deterrent effect’.[37] Additionally, the CAS’ exclusive jurisdiction over disputes could jeopardize the effectiveness of competition law since ‘there is no guarantee that the parties’ action against an athlete will also be subject to judicial review under European antitrust law’, especially when considering that neither the Swiss or German courts would conduct such a review in an action against the enforcement of the award.[38]  Sports sanctions are also typically carried out by the sport bodies themselves, without intervention of public bodies. Interestingly, the Bundeskartellamt acknowledged the German athletes’ position that the CAS proceedings were longer and more costly than proceedings in front of German courts, which directly contradicts the IOC’s claimed benefits of sports arbitration.[39]

 

5        The Commitments and Potential for Further Intervention Under EU law

After two rounds of negotiations, the DOSB was able to put an end to its infringements by making several commitments that brought its policy on athlete advertisement into line with the Bundeskartellamt’s findings. The commitments submitted after the first round did not go far enough to quell the competition concerns and most sponsors and athletes found ‘little or no improvement in the modified guidelines’. The original commitments were deemed to be too restrictive on the protected Olympic related terms, not provide sufficient opportunities for advertising on social media, not sufficiently delineate the responsibilities of the different parties, and the exclusive jurisdiction of the CAS coupled with sporting sanctions continued to have ‘a strong deterrent effect’.[40] After the second round of negotiations, the most important  commitments included: (1) no more authorization required for advertisements during the frozen period and instead athletes can request that the DOSB review planned advertisements beforehand to confirm if it meets the admissibility criteria; (2) advertisement campaigns may now be launched during the frozen period; (3) pictures of athletes during Olympic competitions may be used for advertisement so long as it does not include protected Olympic logos, symbols or designations; (4) videos[41] are restricted only to the German House, the Olympic village or the back of house areas and (5) sports related sanctions are no longer available (only economic sanctions are possible) and athletes may have recourse to German courts. All in all, the new Guidelines will allow athletes to advertise during the Games provided that they observe certain restrictions that mainly relate to intellectual property rights.[42] This compromise fosters a far better balance between the IOC’s interests to protect the value of the Games and TOP and the athletes’ wish to expand their financial opportunities during perhaps the most important time of their careers.

The analysis undertaken by the Bundeskartelamt is likely to influence any future intervention of the European Commission on this issue. After all, it is quite possible that the Commission may have to take action since the Bundeskartellamt’s decision ‘is enforceable only as regards individual advertising and marketing activities of German Olympic athletes on the German market’. In doing so, the Commission may have to elaborate whether a pre-authorization scheme for advertisements with reasonable deadlines could be compatible with EU law and perhaps further scrutinize the definition of ambush marketing and potential objective justifications that are completely void of an economic motive. The Commission would likely evaluate any advertisement pre-authorization regime in light of the ISU criteria.[43] From a pure competition law perspective, it could also be an opportunity for the Commission and ultimately the CJEU to expressly confirm whether the Wouters test extends to Article 102 TFEU.

Regardless, Commissioner Verstager explained that this is ‘an example of the way the network operates, with the Commission and the German competition authority working closely together’. She also underlined that the Bundeskartellamt’s decision could ‘create incentives for a change of the relevant rules at national and international level, with the Commission following closely any developments in this direction’. Thus, the possibility that the Commission will at some point intervene seems dependent on how seriously the IOC takes this decision. In the meantime, British athletes have also threatened legal action on the basis of EU competition law against the British Olympic Association over its implementation of rule 40, which demonstrates the ongoing nature of this saga.

 

6        Conclusion

The Bundeskartellamt’s narrow interpretation of ambush marketing and emphasis on the protection of intellectual property rights will most likely influence the IOC’s strategy to protect the value of TOP. For example, it could prompt the IOC to place greater efforts into expanding its protected properties. Nevertheless, the IOC’s war against ambush marketing has widened from its original concept and even Michael Payne has been one to express his concern about the extent to which the IOC has gone in order to protect TOP and has expressed the need to apply the rules with ‘balance and common sense’. Albeit these comments were made concerning the rules for ‘clean’ venues at the London 2012 Summer Olympics, there is a certain resonance to the present situation and begs the question whether drastically restricting athletes in their often one-time chance to earn decent money through sponsoring is absolutely necessary to protect the economic viability of the Olympics as a whole.


[1] When the blog refers to rule 40, it refers specifically to bye law 3 of rule 40 OC.

[2] The ‘blackout’ period starts 9 days before the Olympic Game’s opening ceremony to 3 days after the closing ceremony.

[3] Nicholas Gary Schlereth and Evan Frederick, ‘Going for Gold: Social Media and the USOC’ [2017] 27 Journal of Legal Aspects of Sport 19.

[4] Michael Payne, ‘Ambush Marketing: The Undeserved Advantage’ [1998] 15 Psychology and Marketing 323.

[5] John Grady, ‘Analyzing Rule 40’s Restrictions on Using Atheletes in Olympic Sponsorship at Rio 2016’ [2017] 15 Entertainment and Sports Law Journal 1.

[6] Bundeskartellamt, Decision pursuant to Section 32b GWB Public version, B-226/17 (February 25, 2019) para 3.

[7] ibid para 5.

[8] ibid para 7.

[9] See ibid para 8 for examples.

[10] ibid para 11 and 65.

[11] Grady (n 7) and ibid para 69.

[12] Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) para 41.

[13] ibid para 44 and 56.

[14] ibid para 46-47.

[15] ibid para 46.

[16] ibid para 53.

[17] ibid para 54.

[18] ibid para 58-63.

[19] ibid para 71.

[20] ibid.

[21] ibid para 75-76.

[22] Case C-309/99 Wouters and Others [2002] ECLI:EU:C:2002:98, para 97.

[23] See Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) footnote 52.

[24] ibid para 102-105.

[25] See International Skating Union’s Eligibility rules (CASE AT. 40208) [2017] C(2017) 8240, footnote 350 and ibid para 95.

[26] Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) para 96.

[27] ibid para 27.

[28] For an exploration of accepted economic objectives see Sue Arrowsmith, ‘Rethinking the Approach to Economic Justifications under the EU's Free Movement Rules’ [2015] 69 Current Legal Problems 307.

[29] See for example, Case C-209/10 Post Danmark A/S v Konkurrencerådet [2012] ECLI:EU:C:2012:172, para 41-42.

[30] ibid para 97.

[31] ibid para 108-109.

[32] ibid para 110, referring to Federal Court of Justice, judgment of 15 May 2014 – I ZR 131/13, Olympia-Rabatt.

[33] Case C-210/96 Gut Springenheide and Tusky v Oberkreisdirektor des Kreises Steinfurt [1998] ECLI:EU:C:1998:369, para 31.

[34] Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) para 110-111.

[35] ibid para 115-118.

[36] ibid 119-120.

[37] ibid para 122.

[38] ibid para 124.

[39] ibid para 124.

[40] ibid para 128.

[41] Protected Olympic logos, symbols or designations are also not allowed in videos.

[42] Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) para 136-148.

[43] A pre-authorization scheme must (a) ‘provide for sanctions and authorization criteria that are inherent in the pursuit of legitimate objectives’, (b) ‘provide for objective, transparent and non-discriminatory sanctions and authorization criteria’ that are proportionate to its objectives, and (c) ‘provide for an objective, transparent and non-discriminatory procedure for the adoption and effective review of decisions’.


Comments are closed
Asser International Sports Law Blog | Blog Symposium: Why FIFA's TPO ban is justified. By Prof. Dr. Christian Duve

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Blog Symposium: Why FIFA's TPO ban is justified. By Prof. Dr. Christian Duve

Introduction: FIFA’s TPO ban and its compatibility with EU competition law.
Day 1: FIFA must regulate TPO, not ban it.
Day 2: Third-party entitlement to shares of transfer fees: problems and solutions
Day 3: The Impact of the TPO Ban on South American Football.
Day 4: Third Party Investment from a UK Perspective. 

Editor’s note: Finally, the last blog of our TPO ban Symposium has arrived! Due to unforeseen circumstances, FIFA had to reconsider presenting its own views on the matter. However, FIFA advised us to contact Prof. Dr. Christian Duve to author the eagerly awaited blog on their behalf. Prof. Dr. Christian Duve is a lawyer and partner with Freshfields Bruckhaus Deringer LLP and an honorary professor at the University of Heidelberg. He has been a CAS arbitrator until 2014. Thus, as planned, we will conclude this symposium with a post defending the compatibility of the TPO ban with EU law. Many thanks to Prof. Dr. Duve for having accepted this last-minute challenge!


This blog article outlines FIFA’s reasons to introduce Art. 18ter FIFA Regulations on the Status and Transfer of Players (RSTP) which bans third-party ownership of players’ economic rights (TPO). In recent years, TPO was perceived as a threat to the integrity of football competitions within the international football community[i] and has become an area of concern for FIFA. Nevertheless Art. 18ter RSTP has been heavily criticized mainly by the proponents of TPO and a complaint has been filed with the European Commission by the Spanish and the Portuguese Leagues for an alleged violation of EU competition law. In the following it will be shown that such criticism does not sufficiently take into consideration the specific characteristics of the practice of TPO as well as football in general. It explains the rationale behind Art. 18ter RSTP which

-      fosters the integrity of competition which is a priority topic for FIFA,

-      promotes the independence of clubs by preventing third parties’ influence in sporting decisions,

-      leads to stable squads,

-      provides an opportunity for investors to invest in the clubs rather than in single players,

-      leads to financially healthier clubs.

Hence, with the introduction of Art. 18ter RSTP, FIFA pursues legitimate aims which justify the ban of the TPO practice.


1.              FIFA’s Way to Art. 18ter RSTP

TPO covers various situations in which a third party invests in the economic rights of a player in order to receive a compensation with regard to a future transfer. Whilst it is widely used in South America and in Southern Europe as an alternative funding possibility, especially to finance investments in sporting talent,[ii] TPO is explicitly prohibited in England, France and Colombia.[iii] The English ban on TPO was introduced in 2008 after the commotion caused by the Tévez case in 2006 where the contract between Tévez and West Ham United contained a provision giving a third party owner the right to decide on the transfer and the transfer fee of the player without any right to veto by the club.

FIFA has introduced a new rule Art. 18bis RSTP which prohibits clubs to enter into contracts that are liable to jeopardise the club’s independence, its policies or the performance of its teams and freedom of decision-making in employment and transfer-related matters and came into force on 1 January 2008.[iv] However, after having mandated two studies providing data and information on TPO in several countries in 2013 and 2014, it was felt that Art. 18bis RSTP was not sufficient and did not address this subject in an appropriate manner. Therefore FIFA decided to introduce a new Art. 18ter RSTP as from 1 May 2015.

The main provision of Art. 18ter RSTP reads:

1.      No club or player shall enter into an agreement with a third party whereby a third party is being entitled to participate, either in full or in part, in compensation payable in relation to the future transfer of a player from one club to another, or is being assigned any rights in relation to a future transfer or transfer compensation. […]

It has been criticized that Art. 18ter RSTP prevents and restricts competition in the market for capital investment in football in a way that is not proportionate for attaining its legitimate objective and that Art. 18ter RSTP is therefore incompatible with EU Competition law. However, such criticism does not sufficiently take into consideration the specific characteristics of football as will be shown in this blog.


2.              The Rationale of Art. 18ter RSTP

First and foremost, Art. 18ter RSTP protects the integrity of the game itself by allowing for the necessary freedom in the contractual relationship between a club and a player, to determine whether and when the player is fielded as well as to decide independently and for sporting reasons only whether and when they are transferred.

Second, with regard to financial aspects of the clubs, critics undervalue that Art. 18ter RSTP is limited to a prohibition of an investment in a club’s players and does not in any way limit an investment in the clubs themselves leading to financially healthier clubs.

2.1           Art. 18ter RSTP Fosters the Integrity of Football

Art. 18ter RSTP pursues several legitimate aims, inter alia, the integrity of competition (2.1.1.), the independence of clubs (2.1.2.) and the stability of squads (2.1.3.).

2.1.1      Integrity of Competition

The protection of the integrity of the game is not only one of FIFA’s main objectives according to Art. 2 e) of the FIFA Statutes, it was also recognized by the European Commission as a legitimate aim justifying limitations on competition.

With regard to the UEFA rule on the “Integrity of the UEFA Club competitions: Independence of clubs” establishing a ban on the ownership of several clubs participating in the same competition by the same person or company, the European Commission held that the ban was in any case a necessary rule to ensure its legitimate aim of protecting the integrity of sporting competitions by “protecting the uncertainty of the results and giving the public the right perception as to the integrity of the […] competitions with a view to ensure their proper functioning“.[v] Previously, a Court of Arbitration for Sport (CAS) decision has also confirmed the validity of this limitation and found that “when commonly controlled clubs participate in the same competition, the «public’s perception will be that there is a conflict of interest potentially affecting the authenticity of results»” and that “that ownership of multiple clubs competing in the same competition represents a justified concern for a sports regulator and organizer”.[vi]

The danger of such conflicts of interests is, however, not limited to club owners, it extends to investors, agents and coaches. Similar to the situations in which a third party has interests in several clubs participating in the same competition, conflicts of interests can also arise in cases where third parties own shares in economic rights of several players of different teams which are competing against each other.[vii] Especially if a player in which a third party has an economic interest competes against a club that is owned by the same investor, there is a significant potential for such conflicts. Even within the same team, the risk of having the same owner of a number of players presents a competitive integrity risk.[viii]

In any case and irrespective of an actual conflict, a conflict may at least be perceived by the public in connection with TPO. Such perception leads to a loss of confidence in the integrity of the competition and damages the image of the sport. In the light of the increasing threat of match manipulation, the involvement of third-party owners creates a danger to the reputation of the competition that could weaken the football world. The integrity of the game is therefore only guaranteed if players and clubs are not influenced by third parties owning the players’ economic rights with the aim to maximize their investment.[ix]

2.1.2      Independence of Clubs

To ensure the independence of its Members’ affiliated clubs is one of FIFA’s objectives pursuant to Art. 18 para. 2 of the FIFA Statutes. The second TPO study found that “the spread of TPO in the majority of the cases may be closely related to a partial takeover of the clubs’ control by actors seeking primarily short-term profit and speculating on the purchase and sale of economic rights, regardless of sporting concerns”[x]. TPO potentially has an impact on player selection on the field of play and creates complications for transfer negotiations as the clubs’ sporting interests (e.g. of holding a player despite a lucrative offer or of letting a player go without being offered a lucrative transfer fee) may conflict with investors seeking a profitable return on their investment.

Even though interests may coincide if the investor speculates for a rise in the player’s market value (e.g. Santos FC refusing Chelsea FC’s offer for Neymar), one prominent example of conflicting interests is the Tévez case in which West Ham United was deprived of any rights with regard to a future transfer of the player. More recently, contract renewal negotiations with Zambrano, a key player of Eintracht Frankfurt, are jeopardized by a third party whose entitlement to future transfer compensation for Zambrano is to be bought by Eintracht.[xi] 

Overall, the more clubs are depending on TPO financing, the more negotiating power third party investors have. The second TPO study mentions the purchase of economic rights at preferential prices, pre-emptive rights on new players or even greater influence on transfer policy.[xii] Moreover, with players’ economic rights in the hands of various investors the fragmentation of interests within a club increases. The independence of clubs can only be guaranteed by preventing a partial takeover of the clubs’ control by third parties especially with regard to transfers.

2.1.3      Stability of Squads

The aforementioned clash of interests between investors speculating on the purchase and sale of players’ economic rights and clubs reoccurs when it comes to the frequency of transfers. Whereas an investor makes money out of transfers, a club may be more interested in building a stable team and team cohesion for sporting reasons. The Demographic Study of CIES in 2014 found that “in general, the number of transfers carried out by teams during the current season is at an all-time high” and stated that “the increasing speculation surrounding players’ transfers is also visible through the progressive drop in the number of club-trained players, which has attained its lowest level since 2009”.[xiii] Pursuant to the same study, players recruited from January 2013 onwards represented 41.3% of squads on average (10.2 signings per club). At the same time, the best performing clubs generally have the most stable squads. For instance, FC Barcelona has the most stable squad among European top division teams. Its Players have been for 5.5 years in the first team squad on average pursuant to the Demographic Study of CIES in 2014.[xiv]

Leagues and club representatives stressed in the Second TPO study that the increasing gaps between clubs in terms of stability contribute to the general decline in the competitive balance both at national and international level.[xv] FIFA’s overall objective to promote football, laid down in Art. 2 a) of the FIFA Statutes, is endangered by such contractual instability caused by TPO.

2.2           Art. 18ter RSTP Provides an Incentive for Investment in Clubs

Football clubs play the central role with regard to the aforementioned legitimate aims. In order to achieve those objectives, appropriate financing mechanisms are fundamental for football clubs. It is undisputed that clubs need external sources. A solution that takes sufficiently into account the role of the clubs and their needs can only be to finance clubs directly. By prohibiting the TPO of single players’ economic rights, Art. 18ter RSTP creates an incentive for investors to invest in the clubs themselves.

Admittedly, some football clubs have been affected by financial difficulties and thus do not seem to be attractive for investors at first sight. In this context, however, it must be taken into account that clubs that seek regular access to talent by means of TPO are becoming even more and more dependent on the regular injection of funds from external investors which may lead to a “vicious circle of debt and dependence”.[xvi] With a club selling its players’ economic rights to third parties, the value of the respective club’s assets decreases. As a result, it is even harder to find potential investors interested in financing the club.[xvii] Therefore TPO cannot be a sustainable financing option. Improving the overall financial health of club football is a major concern for football associations. Therefore the UEFA Financial Fair Play Regulations (FFP) were established to prevent professional football clubs from excessive spending. Although the regulations only contain disclosure requirements with regard to TPO, they were released in view of a TPO ban.[xviii]

Overall, critics therefore have to take into account that Art. 18ter RSTP prohibits only one single form of investment whilst it promotes at the same time investment in the clubs specifically tailored to the overarching aim of fostering the integrity of the game.


3.              Conclusion

Art. 18bis RSTP has already targeted the aforementioned legitimate aims. However, this provision may be easily circumvented by inserting a clause into the TPO agreement stating that it does not permit any exercise of influence by the third party within the club’s employment and transfer-related matters, policies or performance of its team. In practice, the engaged third parties will interfere with a club’s sporting decisions in many cases despite such a contractual clause. Interviewees in the second TPO study reported that in practical terms, many third­party investors do influence the transfer of players.[xix] Therefore, there is a consensus among football stakeholders that TPO should be restricted. The legitimate aims underlying Art. 18ter RSTP can be achieved most effectively by a total ban of the TPO practice. Whereas critics point to the lack of financing options caused by the prohibition of TPO, this blog has argued that in the specific context of football competitions the integrity of the game benefits from direct investments in the clubs.


[i] Cp. FIFA Circular no. 1420 of 12 May 2014.

[ii] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 3.

[iii] Moreover, Poland has a rule which is interpreted by its football association as prohibiting third parties to hold a player’s economic rights with an exception for former clubs, cp. TPO study I, p. 3, 17 et. seq.

[iv] Art. 18bis RSTP, as introduced in 2008, reads:

1.   No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams.

2.   The FIFA Disciplinary Committee may impose disciplinary measures on clubs that do not observe the obligations set out in this article.

[v] European Commission, Rejection Decision of 25 June 2002, Case COMP/37 806: ENIC/ UEFA, para. 47.

[vi] Arbitration CAS 98/200 AEK Athens and SK Slavia Prague / Union of European Football

Associations (UEFA), award of 20 August 1999, para. 48 (available at http://jurisprudence.tas-cas.org/sites/CaseLaw/Shared%20Documents/200.pdf).

[vii] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p.  9, 81.

[viii] Cp. Third-party ownership of players’ economic rights, Part I., Centre international d’étude du sport, p. 33.

[ix] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 81 et. seq.

[x] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 8.

[xi] Available at: http://www.fr-online.de/eintracht-frankfurt/carlos-zambrano-eintracht-frankfurt-zambrano-deal-gefaehrdet,1473446,29843342.html.

[xii] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 88.

[xiii] Available at http://www.football-observatory.com/demographic-study-2014-now.

[xiv] Available at http://www.football-observatory.com/demographic-study-2014-now.

[xv] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 78.

[xvi] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 9.

[xvii] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 88.

[xviii] Available at http://www.uefa.com/community/news/newsid=2064391.html.

[xix] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 88.

Comments are closed