Member Participation in Unauthorised Competitions: Protecting Official Competitions in light of the EC Decision in the ISU Case

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THE ISU COMPLAINT

In 2015, Dutch Skaters Mark Tuitert and Niels Kerstholt, filed a complaint against the International Skating Union (ISU) in relation to lifetime bans imposed for participation in unauthorised skating competitions (out with the ISU schedule). The skaters argued that such severe sanctions were unreasonable and prevented them from pursuing their careers as well as placing unreasonable obstacles for other organisations looking to promote events and invite participants.

The skaters argued that ISU eligibility rules, in particular Rule 102 of the ISU General Regulations, were in direct violation of Article 101 of the Treaty of the Functioning of the European Union (TFEU) which prohibits restrictive business practices:

“The following shall be prohibited as incompatible with the internal market: All agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade by Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market.”

Generally speaking, sporting rules are subject to EU competition law when the organisation imposing the rules, or the companies and persons affected by the rules, are engaged in an economic activity. Sporting rules are generally found to be compatible with EU law if they pursue a legitimate objective and if restrictions imposed are inherent and proportionate to the aim of the objective.

THE ISU RESPONSE

The ISU is the sole organisation recognised by the International Olympic Committee to administer the sports of figure skating and speed skating. Its members are national ice skating associations. The ISU and its members organise and generate revenues from speed skating competitions, including from major international competitions such as the Olympic Games.

The ISU unsurprisingly defended the complaint arguing that their rules pursued a legitimate aim and any sanctions were necessary and proportionate in pursuing and meeting that aim. They argued that their rules protected sport organisers, athletes and spectators and were drafted with the aim of protecting the integrity, safety and health of the sport of skating. The ISU stressed that, in their opinion, to adopt a neo-liberal and de-regulated approach would be to destroy the Olympic values.

EC DECISION

The EC first opened proceedings in relation to the ISU’s eligibility rules on 05 October 2015 and issued its final decision on 08 December 2017.

The EC considered that although International Sporting Federations play an important role in an athlete’s career, the penalties imposed by the ISU served to protect its own commercial interests and prevent others from organising their own events.

The key findings from the EC investigation were as follows:-

• Under the ISU eligibility rules, in place since 1998, speed skaters participating in competitions that are not approved by the ISU face severe penalties up to a lifetime ban from all major international speed skating events. The ISU can impose these penalties at its own discretion, even if the independent competitions pose no risk to legitimate sports objectives, such as the protection of the integrity and proper conduct of sport, or the health and safety of athletes.

• By imposing such restrictions, the ISU eligibility rules restrict competition and enable the ISU to pursue its own commercial interests to the detriment of athletes and organisers of competing events. In particular, the Commission considers that the ISU eligibility rules restrict the commercial freedom of athletes who are prevented from participating in independent skating events. As a result of the ISU eligibility rules, athletes are not allowed to offer their services to organisers of competing skating events and may be deprived of additional sources of income during their relatively short speed skating careers.

• The ISU eligibility rules prevent independent organisers from putting together their own speed skating competitions because they are unable to attract top athletes. This has limited the development of alternative and innovative speed skating competitions, and deprived ice-skating fans from following other events.

The EC, thus, found that the ISU’s eligibility rules were disproportionately punitive and prevented the emergence of independent international speed skating competitions. The rules were thus anti-competitive and in direct violation of Article 101 TFEU.

OTHER CASES

The ISU is not the first governing body to fall foul of competition laws and there have been a number of judicial decisions, across the globe, similar to the ISU case.

FIA Formula One Championship [2001] OJ C169/5

The EC may have had a feeling of deja-vu when determining the ISU case as in 2001, it heard a complaint concerning the International Sporting Code of the Federation International de Automobile (FIA) which stated that no license holder could participate in a motor-racing event not sanctioned by the FIA. Any licensee who breached that rule would have their license revoked and be excluded from FIA events.

The EC held that the FIA had abused its position in order to block the organisation of competing events. Again, the rule was seen to be serving the FIA's own commercial interests.

Hendry v World Professional Billiards and Snooker Association [2001] All ER (D) 71

Hendry brought an action against the WPBSA (the ISF for snooker) in relation to a number of rules. Hendry was associated with a rival company that sought to promote tournaments in competition with the WPBSA. Hendry lodged an action when the WPBSA amended its rules so that its members (which included Hendry and other leading players) were prevented from joining the unauthorised tournament and asked its members to notify their acceptance of the new rules within a ten day period. Hendry argued that the WPBSA enjoyed a dominant market position for the promotion of snooker tournaments, their sponsorship and broadcasting, and for players to compete and earn money from snooker. Hendry contended that the WPBSA had abused that position by restricting members from participating in other competitions. Hendry argued that this was in direct violation of competition law.

The case was heard by a UK Court and the Judge held that a rule which restricted the tournaments in which players could participate infringed UK competition law and probably Articles 101 and 102 TFEU, under EU law – The Judge agreed that the rule was indeed an abuse of the WPBSA's dominant position.

Greig v Insole [1978] 1 WLR 302

The International Cricket Conference (ICC) and the Test and County Cricket Board (TCCB) fell foul of competition laws back in the 1970s when they imposed restrictions on cricketers playing in “private” matches.

The ICC arranges test matches and controls what players are eligible to play in those. In 1977, a number of leading players (including three of the cricketers who brought this case) entered into a contract with an Australian promoter to participate in matches (unconnected to the ICC or TCCB) known as the “Packer Circus”. When the ICC got knowledge of this, they announced that any cricketers who remained contracted to participate in private matches would not be eligible to compete in test matches. The TCCB extended this ban to include county matches, a sanction which would run for a two year period, starting from the last “private” match.

The Judge held that the imposition of such a rule was not only a restraint of trade but also acted to induce breach of contract with the Australian promoter. The Judge held that neither the ICC or the TCCB had showed that there was a reasonable and legitimate aim for restricting such participation.

Pilkadaris v Asian Tour (Tournaments Players Division) Pte Ltd [2012] SGHC 236

Asian Tour Limited (ATL) is a sports association who organizes golf competitions across the Asian region. The members of the association were professional golfers. The association had a rule that if members wished to participate in “competing” or “conflicting” events, they had to first seek the permission of the association, otherwise they would find themselves sanctioned with a fine or a suspension.

The Pursuers had applied to participate in “competing” events but were repeatedly rejected by the association. When the pursuers competed in the events, they found themselves faced with a fine and threatened with suspension, if they were to ignore the rules again. As such, they lodged proceedings against the association on the basis that the rule was an unjustified restraint of trade.

The Singapore High Court agreed with the Pursuers and ruled that the ATL was a trade organisation and although they may have an objective to govern the actions of its members in relation to their professional lives and earnings, it was operating in an area in which the doctrine of restraint of trade applied. As the rule prevented members from playing in any golf tournament considered to be “competing” or “conflicting”, this was a restraint of trade. The Pursuer were professional golfers who needed to be able to take part in as many tournaments as possible to improve their chances of making a living. The restriction and sanctions were considered too wide in scope and punitive in nature.

PROTECTING OFFICIAL COMPETITIONS IN LIGHT OF THE ISU DECISION

Various types of sport run a “pyramid structure” not only in relation to key stakeholders (ISF, NGB, Clubs, Athletes etc) but also with regards to competitions. The pyramid governs what competitions fall under the responsibility of the various governing bodies. For example, in a football context, at the top of the pyramid is FIFA who has responsibility for the World Cup, next are the Confederations who have responsibility for continental competitions such as UEFA’s Champions League and then you have the domestic associations who are responsible for their own domestic competitions – The FA for example has responsibility for the Premier League and the FA Cup.

The pyramid structure of competitions can be seen from grassroots to elite level and encourages solidarity amongst the various levels of the pyramid. It also serves to discourage rival competitions unauthorised by the governing bodies which may cause consumer confusion. A significant number of governing bodies therefore have a rule, in one form or another, which prohibits athletes/clubs from participating in unauthorised competitions without the prior consent of the relevant governing body. The sanctions for such a breach often result in exclusion from official competitions, as well as the Olympics.

It is clear from recent decisions that unless governing bodies are able to show that the restriction is reasonable, validly justified and proportionate, it is likely they will fall foul of competition law. National Courts and the European Commission have made the position clear - the overriding interest, behind such restrictive rules cannot be the governing body’s own commercial interests. Thus, it is inevitable that governing bodies will require to amend their rules to permit participation in alternative competitions, subject to proportionate conditions – this may, for example, be in relation to health and safety policies such as the event having to pass a particular standard of safety inspection or the organiser carrying adequate insurance.

The key reasons that breakaway competitions occur in sport usually have a common theme centering on commercial interests. It may be the disproportionate distribution of commercial opportunities to athletes or clubs, or the need for participants to generate increased revenue. The pyramid structure of sport carries with it a number of benefits such as certainty, a guaranteed consumer following, increased potential to exploit commercial opportunities and a governance structure set-up to protect sporting values. Breakaway competitions, on the other hand, can dilute fan engagement, raise integrity concerns and in a bid to secure commercial investment sacrifice sporting values and solidarity amongst stakeholders. Stepping away from the restriction rule, another possible solution to avoid breakaway competitions (or deter participation) is to build and improve upon the very pillars that make the pyramid structure attractive and beneficial. Further, governing bodies could explore new innovative strategies to increase fan engagement and commercial opportunities for athletes and clubs whilst taking steps to implement increased distribution of revenues, as well as promoting equality across sport.

The implementation of meaningful measures that attempt to negate and solve the issues that lead to breakaway leagues, rather than imposing disproportionate punitive restrictions/sanctions that lead to rebellion, may be the key to the future protection of official competitions and the commercial interests of governing bodies.