Professional Sport in the Internal MarketResearch Study commissioned by the Committee on the Internal Market and Consumer Protection of the European Parliament (on the initiative of Mr Toine Manders MEP), T.M.C. Asser Instituut in cooperation with Edge Hill College (Lancaster University), United Kingdom and Sport 2B, The Netherlands, The Hague, September 2005
Sport is unlike any other business. At one level it performs educational, public health, social, cultural and recreational functions. At another level, sport is big business capable of generating considerable revenues. Sport also operates under different market conditions to other industries with competitors (clubs) having a vested interest in the strength and survival of their rivals. This uniqueness has contributed to the construction of an organisational model described as the ‘European model of sport’ endowed with a rule book designed to protect the ‘specificity’ of sport. Many of these rules would not be considered appropriate in ‘normal’ industries and would be subject to legal challenge because they inhibit the development of a level playing field either through restricting the free movement of workers or by placing undue market restrictions on the commercial freedom of undertakings. These concerns have now emerged in sport, particularly as players, clubs and governing bodies increasingly carry out significant economic activities. This has contributed to a growing number of sporting complaints being brought before the EU.
A review of the settled case law of the European Court of Justice and the Competition Policy Directorate General reveals an emerging approach to sport. This is based on the location of disputed sporting rules within one of three categories:
- In the first category are sporting rules or practices which fall outside the scope of the EC Treaty’s free movement and competition law provisions. These rules or practices are either of sporting interest only (an increasingly impossible judgement to make) or they are deemed to be rules which are essential for the proper functioning and organisation of sport. Such rules include; nationality restrictions in the composition of national team sports, rules relating to selection criteria, sanctions for doping offences in sport, rules preventing club relocation, rules preventing multiple club ownership and the granting of educational state aid to sports clubs.
- In the second category are sporting rules or practices which are economic in nature and which do constitute restrictions and are thus subject to the EC Treaty’s free movement and competition law provisions. However, such rules or practices will not be prohibited by the Treaty should the rules in question be necessary for the proper functioning and organisation of sport. The EU has thus far considered the maintenance of competitive balance in sport, the preservation of the integrity of sport, encouraging the education and training of young players and the protection of national team sports as being legitimate objectives. Consequently, a range of sporting rules have been deemed to be compatible with the Treaty including; the use of transfer windows, the collective sale of broadcasting rights, collective purchasing agreements for broadcasting rights, restrictions on the cross border transmission of sport, ticketing arrangements, in-contract transfer payments and rules regulating players’ agents.
- In the third category are sporting rules or practices which do constitute restrictions and are prohibited by the EC Treaty’s free movement and competition law provisions. Such rules include; nationality restrictions in the composition of club sport, out-of-contract transfer payments, nationality rules in breach of non-discrimination provisions contained in Association Agreements, periods of long exclusivity for sports rights, export bans for sports goods and regulatory rules designed to maintain commercial dominance.
The above settled case law has considerably clarified the legal environment in which sport operates. There are however a number of unresolved issues that may require further adjudication by the EU. Many of these issues relate to UEFA’s regulation of football. Rules on home-grown players, player release clauses and rules which seek to tie clubs to national territorial locations are questionable. Whilst it must be accepted that UEFA has a legitimate right to seek to maintain competitive balance in sport, the preserve the integrity of sport, encourage the education and training of young players and protect national team sports, it is submitted that more appropriate and less restrictive means of achieving these objectives are available to UEFA.
At the root of many such disputes is the issue of allowing appropriate levels of participation by those affected by the rules. To avoid litigation sports governing bodies should ensure their constitutions and procedures are transparent and allow for the democratic involvement of all stakeholders. This can help resolve disputes such as the one witnessed over player release clauses. On a wider theme, it is clear that a properly structured social dialogue between representatives of labour and management (players and clubs), supported by UEFA could create a wider consensus amongst the stakeholders, particularly in relation to employment matters.
Therefore the issue at stake is not so much the creation of a perfectly level playing field for sport as this may not be appropriate in all cases. Rather the rules of sporting bodies which contradict the basic principles of EC law should be carefully scrutinised to see whether they are transparently and democratically agreed and truly necessary and proportionate for the achievement of the legitimate objectives they seek to pursue. Given the complexities of these arguments, these judgements can only be made on a case by case basis.
The recommendation to the European Parliament would be to urge UEFA and FIFA to anyhow change their policy in this respect and bring their Statutes, Rules and Regulations in conformity with the basic principles of European competition law.
As a further step, we would even suggest to involve the European Commission in this basic issue of the structure of European professional sports (football) in a more active role. Of course, individual clubs or groupings of clubs could finally go to the European Court of Justice to liberate the market and, in particular, for example to change “the football law” (cf., the current actions by G-14 before the Competition Commission of Switzerland and joining FC Sporting Charleroi v. FIFA, arguing that the mandatory player release system is unlawful), but this approach will not structurally change circumstances in European professional football. To really open the market more is necessary. So, it should be considered whether using the instrument of a Commission Directive for the liberalization of the professional football sector in particular, is not a useful instrument to pave the way for changes in case individual clubs or groupings of clubs wish them to happen on the basis of the principles of fair competition under European Law. In such a Directive special attention should be also paid to the crucial competition issue of state aid. It is not yet clear what is legally allowed or not under the EC Treaty. Neither the European Commission nor the European Court of Justice has so far decided on any concrete case in professional sport (football). In the perspective of guaranteeing a level playing field amongst clubs on the European level, it is of utmost importance that the Commission presents its policy on this issue explicitly, also thereby creating legal certainty for all parties involved. In this context, it is to be welcomed that UEFA will adopt in the near future a European licensing system for clubs. The licensing system will help to promote a level playing field between clubs on a European level. It is not only contrary to fair competition that some clubs get financial and other support from public authorities (state aid) and others not, but is also very detrimental to fairness that some clubs are allowed to have economic budgetary deficits in their home country, whereas others abroad are not allowed to. Another issue that is open for debate in the context of the market perspective of the European professional football sector, for example, is the UEFA “coefficients table” for the determination of the participation of the actual number of clubs per country in the Champions League and UEFA Cup each season under European competition law. It implies that clubs are dependent on the performance of other clubs of the same country which they cannot influence. And there is also the UEFA rule that winners and runners-up in the Champions League from larger countries receive more premium money than those from smaller countries, because they represent a much bigger football TV market and consequently generate much more income.