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

Sport and EU Competition Law: uncharted territories - (I) The Swedish Bodybuilding case. By Ben Van Rompuy

The European Commission’s competition decisions in the area of sport, which set out broad principles regarding the interface between sports-related activities and EU competition law, are widely publicized. As a result of the decentralization of EU competition law enforcement, however, enforcement activity has largely shifted to the national level. Since 2004, national competition authorities (NCAs) and national courts are empowered to fully apply the EU competition rules on anti-competitive agreements (Article 101 TFEU) and abuse of a dominant position (Article 102 TFEU).

Even though NCAs have addressed a series of interesting competition cases (notably dealing with the regulatory aspects of sport) during the last ten years, the academic literature has largely overlooked these developments. This is unfortunate since all stakeholders (sports organisations, clubs, practitioners, etc.) increasingly need to learn from pressing issues arising in national cases and enforcement decisions. In a series of blog posts we will explore these unknown territories of the application of EU competition law to sport.

We kick-start the series with a recent investigation of the Swedish National Competition Authority (NCA) into a so-called duty of loyalty clause applied by the Swedish Bodybuilding and Fitness Federation (Svenska Kroppskulturförbundet, SKKF).[1]

Source: http://www.scmp.com/photos/recent/all/1046780


The facts

The SKKF is the only national member of the International Bodybuilding Federation (IFBB) and organises various championships in the sport of bodybuilding and fitness in Sweden. It is essential for Swedish clubs, individual athletes, and officials to be a member of the SKKF as this is prerequisite for participation in IFBB international competitions.

The IFBB’s rules and regulations form an integral part of the SKKF’s Statutes. According to the SKKF’s rules, members who compete or otherwise participate in contests that are not approved or authorised by the SKFF or IFBB can be fined or suspended (i.e. the duty of loyalty clause). Athletes who have taken part in an unsanctioned event must also test for doping, at their own expenses, before they are allowed to compete at SKKF or IFBB events again.

In October 2013, BMR Sport Nutrition AB, a manufacturer of nutritional and bodybuilding supplements that also occasionally organises unsanctioned bodybuilding and fitness events in Sweden, filed a complaint before the NCA alleging that this rule violates Article 101 TFEU and Chapter 2, Article 1 of the Swedish Competition Act as it prevents event organisers from effectively competing with the SKKF (i.e. they are deprived from the chance to gather the human resources necessary for a successful event). The complainant submitted evidence that the threat of a fine and/or the withdrawal of their license by the SKKF effectively deterred athletes from participating in non-sanctioned events.


The context

The Swedish bodybuilding case follows a 2011 decision of the NCA, which ordered the Swedish Automobile Sports Federation (Svenska Bilsportförbundet, SBF) to abolish its rules preventing members from participating in motorsport events not authorized by the KKF.[2] On appeal by SBF, the Swedish Market Court upheld the decision in its entirety.[3]

This “precedent” case dealt with two duty of loyalty clauses in the SBF’s Common Rules prohibiting officials and contestants, licensed by the SBF, to officiate or participate in motor sport events other than those organised by the SBF or its member clubs. A violation of these provisions could result in a fine and/or withdrawal of the licence to officiate or compete in SBF events.

The NCA and the Market Court established that the contested rules constituted a decision by an association of undertakings. While the NCA had only applied national competition law, the Market Court, having defined the organisation of motorsport competitions in Sweden as the relevant product market, found that trade between the Member States was affected and therefore also applied Article 101 TFEU. According to the Court, the mere existence of the rules considerably distorted competition because they led to an absolute ban for SBF members to participate in non-sanctioned events. It concluded that, even if the rules would be regarded as serving a legitimate objective, the total ban could not be considered proportional to achieving such an objective. Moreover, the Court concluded that the restriction of competition could not benefit from an exemption under Article 101(3) TFEU or Chapter 2, Article 1 of the Swedish Competition Act.

While the Market Court’s judgment is far from innovative and carefully followed the proportionality test adopted by the Court of Justice in Meca-Medina, the case drew much media attention and raised concerns and criticism from the Swedish sports movement. Having demonstrated the remedial potential of EU competition law to challenge organisational sporting rules, it was only a matter of time before further national enforcement action would result from this case. 


The outcome

In a statement responding to the filing of the complaint by BMR Sport Nutrition AB, the chairman of the SKKF contested the apparent analogy with the SBF (motorsport) case. He essentially put forward three reasons. First, the SKKF is a non-profit organisation that pursues an aim in the general interest (i.e. the promotion of sport) and reinvests all its income, which is insufficient to cover its costs, in its sports activities, e.g. to fund education and training activities, doping tests, and travel expenses of the national team. This precludes the assumption that it pursues an economic activity. It follows that the SKKF cannot be regarded as an undertaking for the purposes of competition law (contrary to commercially successful sports associations). Second, the SKKF does not act independently of the will of its members. Similar to trade unions, member athletes voluntarily submit themselves to the applicable regulations when they join a member club. They can move to change certain rules if they find, in a true democratic spirit, a majority for such change. Alternatively, member athletes can choose to leave their club and join another association. Third, the right of freedom of association excludes the rule-making powers of the SKKF from the ambit of the competition rules.

Nevertheless, following several meetings between the NCA and the SKKF, the latter committed no longer to suspend or fine athletes, coaches, officials or judges that participate in non-sanctioned events.[4] The requirement that they must test for doping, at their own expense, was not abolished. According to the SKFF, this requirement was necessary to comply with the IFBB anti-doping rules, which conform to the provisions of the World Anti-Doping Code.

Given the commitment of the SKKF to no longer apply the duty of loyalty clause, the NCA decided to close the investigation without concluding whether competition law had been infringed.


Commentary

Those familiar with sports-related competition law cases will surely recognize the arguments of the chairman of the SKKF to assert immunity from the application of the competition rules. While they have been tried and tested many times, also before the Union courts, these arguments keep popping up. So let’s take a closer at why they are not accepted.

Regarding the claim that the SKKF is a non-profit organisation that exclusively aims to promote the development of the sport, it must be recalled that – if there still was any doubt - in Meca-Medina the Court of Justice made clear that the qualification of a rule as “purely sporting” was insufficient to remove the body adopting that rule (or the person engaging in the activity covered by it) from the scope of the Treaty. It thus must be examined, irrespective of the nature of the rule, whether the specific requirements of the various provisions of the Treaty are met. For the purpose of the competition rules, the notion of “undertaking” is a core jurisdictional element. According to established case law, this concept covers “any entity engaged in an economic activity regardless of the legal status of the entity or the way in which it is financed”.[5]

In an attempt to escape the bite of the competition rules, various other sports associations have time and again asserted that they cannot be regarded as “undertakings” because their objective is not the pursuit of economic interests. Even when only considering their regulatory functions, this reasoning finds no support in the case law. The Court of Justice has consistently held that the concept of undertaking does not presuppose a profit-making intention. The fact that entities are non-profit making has no effect on their classification as undertakings.[6] Similarly, the fact that entities pursue cultural or social activities does not in itself prevent these activities from being regarded as economic.[7]

In the case at hand, it is clear that in addition to the SKKF, even assuming that it organises bodybuilding and fitness events without seeking to make profit, other entities like BMR Sport Nutrition AB are also engaged in that activity (and do seek to make a profit). The SKKF offers goods or services on a market in competition with others. The success or economic survival of the SKKF ultimately depends on it being able to impose its services to the detriment of those offered by other event organisers. Consequently, the SKKF must be considered as an undertaking engaged in the markets for the organisation and marketing of bodybuilding and fitness events.

Regarding the somewhat chucklesome claim that the SKKF should be qualified as a trade union (or other professional association) that cannot act independently of the will of its members, it is sufficient to stress that Article 101 TFEU also applies to “associations of undertakings”. A federation like the SKKF, the beacon of democracy it may be, is not an association of employees but (also) of member clubs that engage in economic activities. Hence, the result of the delimitation between the federation acting “in its own right” or “merely as an executive organ of an agreement between its members” is irrelevant: Article 101 TFEU still applies to its regulations.

Regarding the claim based on the principle of freedom of association, indeed protected in the Swedish constitution as well as in the EU legal order, it is difficult to see how the duty of loyalty clause could be considered an inevitable result thereof. In any event, the Court of Justice has made clear that this right cannot be so absolute as to afford sports federations’ complete immunity from EU law.[8] In other words, the need to guarantee sports’ right of self-regulation cannot be a blank check to avoid scrutiny of measures that may conceal the pursuit of economic interest. Provided that its rules are proportional to a legitimate objective, SKKF should have nothing to fear from the competition rules.

So contrary to what the chairman of the SKKF contented, the analogy between its rule and the contested rule in the SBF (motorsport) case was accurate. A confrontation with this inconvenient truth was sufficient to convince the SKKF to commit itself to no longer suspend or fine athletes, coaches, officials or judges for participating in non-sanctioned competitions. That the requirement of a doping test (for those having participated in competing events) could remain clearly illustrates that competition law will leave unscratched restrictive sporting rules that are deemed inherent and proportionate to the organisation and proper conduct of sport. It almost makes you wonder what all the fuss is about when competition law confronts the world of sport.

One final note: the contested “SKKF” rule is the national equivalent of the clause contained in the IFBB Constitution (which forms an integral part of the SKKF’s statutes). Article 19.4.7 stipulates that:

“Any athlete or official who participates in a competition or event not approved or sanctioned by the IFBB, may be fined, suspended or expelled. The amount of the fine as well as the suspension period will be decided by the IFBB Disciplinary Commission … Once the suspension has been completed and before participating in an IFBB competition or event, the athlete must be drug tested at his or her own expenses”

Participation in an event or competition includes (but is not limited to!) competing, guest posing, giving a seminar, lecture or similar presentation, judging, officiating, allowing the use of one’s name and/or likeness for promotional purposes, and/or taking part in a non-IFBB sanctioned competition or event in any other way, shape or form.

To the IFBB and all other European member federations, who have to the author’s knowledge not decided to no longer enforce or abolish this rule: beware!


[1] Swedish Competition Authority (Konkurrensverket), 28 May 2014, Bodybuilding and Fitness Competitions, Decision dnr. 590/2013, http://www.kkv.se/upload/Filer/Konkurrens/2014/13-0590.pdf

[2] Swedish Competition Authority (Konkurrensverket) 13 May 2011, Swedish Automobile Sports Federation, Decision dnr. 709/2009, available at http://www.kkv.se/upload/Filer/Konkurrens/2011/Beslut/09-0709.pdf

[3] Swedish Market Court's ruling 2012:16 in Case A 5/11, Svenska Bilsportförbundet v Konkurrensverket (December 20, 2012), http://www.kkv.se/t/NewsArchive.aspx?id=529

[4] The SKKF notified its member athletes and clubs of the changes via its newsletter and website.

[5] Case C-41/90 Höfner and Elser [1991] ECR I-1979, para. 21.

[6] See e.g. Case C-222/04 Ministero dell'Economia e delle Finanze v Cassa di Risparmio di Firenze SpA and others [2006] ECR I-289; Case C-475/99 Firma Ambulanz Glöckner v Landkreis Südwestpfalz [2001] ECR I-8089; Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck v Commission [1980] ECR 3125; C-244/94 Fédération Française des Sociétés d’Assurances and others v Ministère de l'Agriculture [1995] ECR I-4013; Joined Cases C-115/97 to C-117/07 Brentjens’ Handelsonderneming BV v Stichting Bedrijfspensioenfonds voor de Handel in Bouwmaterialen [1999] ECR I-6025.

[7] See e.g. Joined case C-180/98 to C-184/98 Pavel Pavlov and Others v Stichting Pensioenfonds Medische Specialisten [2000] ECR I-6451; Case C‑218/00 Cisal [2002] ECR I‑691.

[8] Case C-415/93 Union Royale Belge des Sociétés de Football Association and others v Bosman and others [1995] ECR I-4921, paras. 79-80

Comments (2) -

  • penerjemah tersumpah

    12/5/2014 2:34:42 AM |

    or more specific project names that would be searchable? Sounds like it would be worth writing up.

  • Garret Radle

    6/24/2015 9:31:34 PM |

    but you sound like you know what you�re talking about! Thanks

Comments are closed
Asser International Sports Law Blog | UEFA’s Financial Fair Play Regulations and the Rise of Football’s 1%

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

UEFA’s Financial Fair Play Regulations and the Rise of Football’s 1%

On 12 January 2017 UEFA published its eighth club licensing benchmarking report on European football, concerning the financial year of 2015. In the press release that accompanied the report, UEFA proudly announced that Financial Fair Play (FFP) has had a huge positive impact on European football, creating a more stable financial environment. Important findings included a rise of aggregate operating profits of €1.5bn in the last two years, compared to losses of €700m in the two years immediately prior to the introduction of Financial Fair Play.



Source: UEFA’s eighth club licensing benchmarking report on European football, slide 107.


 Meanwhile the aggregate losses dropped by 81% from €1.7bn in 2011 to just over €300m in 2015.



Source: UEFA’s eighth club licensing benchmarking report on European football, slide 108.


 Furthermore, net debt as a percentage of revenue has fallen from 65% in 2009 to 40% in 2015.[1]



Source: UEFA’s eighth club licensing benchmarking report on European football, slide 125.


UEFA’s Financial Fair Play vindicated?

As was clear from the UEFA Club Licensing Benchmarking Report Financial Year ending 2011, the deficit of clubs with a UEFA License increased from €0.6 billion in 2007 to a peak of €1.7 billion in 2011, with some historic European football clubs, like FC Parma, going bankrupt. Though the increasing indebtedness might have been to a large extent related to the global economic crisis[2], UEFA considered that it was mainly the result of irresponsible spending by the clubs.[3] Consequently, UEFA introduced the FFP Regulations, whose objectives are, inter alia, improving the economic and financial capabilities of clubs; introducing more discipline and rationality in club football finances; encouraging clubs to operate on the basis of their own revenues; and protecting the long-term viability and sustainability of European club football. UEFA’s primary tool to achieve those is the break-even requirement imposed on clubs having qualified for a UEFA club competition.[4] Accordingly, clubs must demonstrate that their expenditure does not exceed their revenue  should they wish to avoid sanctions by the UEFA Club Financial Control Body.[5] With these objectives in mind, it does not come as a surprise that UEFA is celebrating in this report the success of the FFP regulations.


The negative side effect of FFP: The rise of the 1%

The FFP regulations are still facing controversy and legal challenges in spite of (or, maybe, because of) the results highlighted in this report. As early as 2012, critics pointed out that FFP could nurture the competitive imbalance between European football clubs. Basically, a successful club will yield more revenue, leading to the club being able to afford better players, in turn leading to the club being more successful, and so on and so forth. Since small clubs are no longer allowed to overinvest their way to a greater market size in the future, people predicted that FFP would trigger an era of competitive imbalance.[6] Indeed, this competitive imbalance was one of the primary arguments used by player agent Striani and his lawyer Dupont in their complaint to the European Commission.[7]

UEFA has so far successfully managed to withstand the legal challenges launched against the FFP rules, such as a Commission complaint, a preliminary reference to the Court of Justice of the EU, challenges in front of Belgian courts, a challenge in front of a French court, and a challenge in front of the Court of Arbitration for Sport. However, it is now forced to acknowledge that “the top 15 European clubs have added €1.51bn in sponsorship and commercial revenues in the last six years (148% increase), compared to the €453m added by the rest of the approximately 700 top-division clubs in Europe (17% increase)”.[8] UEFA is clearly concerned about the increasing gap between the “global super clubs” and the rest, though it is adamant that “overspending and unsustainable business models cannot be the answer to financial inequality”.[9]

Nonetheless, it is not completely fair to argue that by attempting to solve one problem (i.e. reducing the increasing debts of football clubs) UEFA single-handedly created another problem (i.e. the growing inequality between the global super clubs and the rest).[10] There are of course other factors that contributed to this increasing financial gap, most notably the discrepancies in incomes derived from the selling of media rights at national level. As can be seen in UEFA’s latest Benchmarking report, English Premier League clubs received an average of €108m for their media rights in 2015. This figure is considerably higher than other clubs from the “top five leagues”, namely the Italian (€47.7m), Spanish (€36.7m), German (€36.1m) and French clubs (€24.9m).[11] In fact, 17 out of the top 20 clubs by broadcast revenues in 2015 are English, the other three being Real Madrid, FC Barcelona and Juventus.[12] Nonetheless, even though UEFA is not responsible for the differences in media rights revenue, the FFP Regulations remain a clear obstacle for clubs from other leagues to get investment from alternative sources.  


What has UEFA done to counter this growing inequality?

The pressing question on many people’s mind is whether UEFA will, or even can, do something about the ever-growing financial inequality between football clubs. The FFP Regulations can be changed, as was demonstrated in 2015. An important innovation in this regard was the introduction of Annex XII on voluntary agreements with UEFA for the break-even requirement. Under this Annex, UEFA allows, inter alia, a club to apply for such an agreement if the club has been subject to a significant change in ownership and/or control within the 12 months preceding the application deadline.[13] When applying for a voluntary agreement the club will (among other obligations) need to:

- submit a long-term business plan, including future break-even information;
- demonstrate its ability to continue as a going concern until at least the end of the period covered by the voluntary agreement;
- and submit an irrevocable commitment by an equity participant (i.e. shareholder) to make contributions for an amount at least equal to the aggregate future break-even deficits for all the reporting periods covered by the voluntary agreement.[14]

The relaxation of the FFP Regulations to leave more room for investment has probably led to an increase of foreign acquisitions of European football clubs. As the graph below shows, only four clubs were bought by non-Europeans in the years 2012 and 2013, a period in which a stricter version of the FFP Regulations was in force, whole nine clubs were bought in 2016 alone, seven of which were bought by Chinese investors.



Source: UEFA’s eighth club licensing benchmarking report on European football, slide 56.


Nonetheless, upcoming media rights deals will ensure financial inequality for years to come, regardless of any particular FFP relaxation. It is estimated that Premier League clubs will receive an average of €141m per season for the 2016/17 – 2018/19, while e.g. Spanish clubs are predicted to make an average of ‘only’ €64m for the 2016/17 season.[15] Meanwhile, the highest earning Dutch club (Ajax) is expected to make a meagre €9.3m from the selling of its media rights for the 2016/17 season.  


Conclusion: Can UEFA equalize?

With the financial gap between clubs increasing instead of decreasing, should UEFA’s regulatory focus shift from good corporate governance (limited debt, small deficit) to redistribution and the fight against inequalities in football? The recently installed UEFA President Aleksander Čeverin held that “UEFA, together with its stakeholders, will need to continuously review and adapt its regulations”[16], but it is unclear what concrete adaptations he has in mind.

Possible options to tackle inequality would include: limiting media rights income; sharing media rights income at a European level; introducing salary caps; or even introducing a solidarity mechanism that would oblige clubs to redistribute some of their income to poorer clubs.[17] However, such proposals will always be strongly resisted by rich clubs, which are in a position to threaten to put in place a breakaway league at any time.[18] UEFA is hardly equipped to resist them. Unless UEFA’s regulatory monopoly is fully recognized and endorsed by the European Commission, it will not be able to face down a breakaway rebellion. Instead, it risks facing a FIBA-like bitter and costly secession. Hence, for UEFA the status quo remains the safest option, and facing criticisms from small clubs way less harmful economically and politically.

A final option, favoured by the many opponents of FFP, would be to abandon FFP all together. This way, there would be no more restrictions to (private) investors willing to pour their (often borrowed) money in (European) football clubs. However, it would also imply renouncing the key achievement of FFP, European football clubs are financially way healthier than in 2009 and their governance better scrutinized. Furthermore, taking into account the Premier League’s latest media rights deal, it is questionable whether abandoning FFP could in any way lead to a narrower gap between the rich clubs and the rest. 




[1] The definition of net debt according to UEFA includes net borrowings (i.e. bank overdrafts and loans, other loans and accounts payable to related parties less cash and cash equivalents) and the net player transfer balance (i.e. the net of accounts receivable and payable from player transfers) – see UEFA’s eighth club licensing benchmarking report on European football, slide 125

[2] Oskar van Maren, “The Real Madrid case: A State aid case (un)like any other?” (2015) Competition Law Review, Volume 11 Issue 1, pages 86-87.

[3] See for example, UEFA Club Licensing Benchmarking Report Financial Year ending 2008, slide 4.

[4] Article 2 (2) of both the 2012 and 2015 FFP Regulations.

[5] 58-63 of the FFP Regulations. Article 61 allows for an acceptable deviation of €5 million, i.e. the maximum aggregate break-even deficit possible for a club to be deemed in compliance with the break-even requirement.

[6] Markus Sass, “Long-term Competitive Balance under UEFA Financial Fair Play Regulations” (2012), Working Paper No. 5/2012.

[7] For an analysis of FFP under EU competition law, see for example Stefan Szymanski, “Financial Fair Play and the law Part III: Guest post by Professor Stephen Weatherill”, 14 May 2013, Soccernomics.

[8] UEFA Press release of 12 January 2017, “European club football’s financial turnaround”.

[9] Ibid.

[10] In fact, the discussion on financial balance between football clubs has been a constant theme for decades. Particularly the elaborated opinion of A.G. Lenz in the Bosman case is worth reading in that regard (paras. 218-234).

[11] UEFA’s eighth club licensing benchmarking report on European football, slide 74.

[12] Ibid, slide 75.

[13] Annex XII under A (2)iii) of the 2015 FFP Regulations. The application deadline is the 31 December preceding the licence season in which the voluntary agreement would come into force.

[14] Annex XII under B of the 2015 FFP Regulations.

[15] FC Barcelona and Real Madrid are expected to make €150m and €143m respectively, meaning that the other clubs would receive an average of €55m.

[16] UEFA Press release of 12 January 2017, “European club football’s financial turnaround”.

[17] Once again, see the opinion of A.G. Lenz in the Bosman case (paras. 218-234).

[18] Threatening to put in place a breakaway (European) league is a favoured method by some of the top clubs. For example, during last week’s row it had with La Liga following the postponement of the Celta – Real Madrid game, Real Madrid held that the Spanish league is not very well organised and that they are better off playing in a European Super League.

Comments (2) -

  • Stephan

    2/21/2017 3:16:36 PM |

    Interesting article.
    I've one remark on your claim that UEFA is not responsible for the differences in media rights revenue.
    I believe they do since UEFA prize money, specifically the market pool component,  is a protectionist measure to grow big leagues, disrupting uefa's own principals (even their mission) on fair competition.

    Why?
    Because uefa market pool is based on national TV deals, which is a false assumption causing to grow big leagues instead of big clubs. "Big club" already reflect domestic market pool only more direct to it's fanbase actually in stadiums instead of those watching tv around the world. Since CL needs to be the biggest platform, current reasoning is flawed: TV market should and could never be a driver for performance based incentives. Currently, this prize money is given directly to big countries.

    And yes, UEFA prize money is a big part is in club finances.

  • Stephan

    2/21/2017 3:24:02 PM |

    Also, in conclusion prize money is the easiest way to equalize between big leagues and smaller leagues. Leaving out this marketpool component, thus only reward prestation based prize money would potentially shift lot's of money from subtop clubs in big leagues to top clubs in smaller leagues.

Comments are closed