[Arnab Chakraborty and Amiya Krishna Upadhyay are third-year students at National Law University, Odisha]
It wouldn’t be surprising to see 18th of April, 2021 make its way into the history books of European football for the havoc it caused by shaking the entire football fraternity. Football has often been viewed as an important ‘part of life’. Modern football’s greatest players in Lionel Messi and Cristiano Ronaldo continue to script new chapters in the book that has previously contained the fairy tales of Pele, Diego Maradona and Gerd Muller. In 2021, the latest addition to the book - the European Super League (ESL), would probably haunt football fans across the world for several years to come.
Through a press conference, six elite English Premier League Clubs joined hands with three clubs from Italy and Spain each to constitute the founding clubs of the Super League. In a world economy that has already suffered massive damage on account of the pandemic, the football clubs’ financials have also taken a hit. Therefore, the masterminds of the breakaway league identified the current crisis to be the perfect opportunity to get the top clubs on board. The clubs could not ignore the $3.5 billion that was laced with ribbon and placed in front of them against their assurance to join the Super League.
With the steady but heavy influx of money in European sports over the last couple of decades, sport regulatory bodies have often been called upon to burden the responsibility of greater intervention and increased accountability in order to ensure that sporting ethics remain intact. In the United States of America, the materialistic approach to sports has never been brought under the scanner but in Europe, where sports have had a significantly greater impact in bringing people together, there have been several questions regarding the cost at which commercialism is ingrained into the setup.
Applicability of EU Competition law in sports
The goal of EU competition law, particularly in this context, is to build an economic model that prohibits enterprises from entering into agreements that substantially hinders competition in the market and prevent abuse of dominance at the same time. The degree to which sport is susceptible to EU law had been a point of contention since it is on very rare occasions that EU Courts are asked to adjudicate on the compatibility of rules set by a sports entity with EU competition law. The European Courts have often emphasised that EU law applies to sports that involve commercial activity and not a purely sporting activity.
Yet, it is not the first time that UEFA and other football associations have become a part of an antitrust scrutiny. Restrictive sport regulations are compliant with EC legislation if they achieve a legitimate objective and the restrictions that they impose are reasonable to achieve this purpose, according to the EU Commission. It is hesitant to intervene in sporting activities unless the behaviour in issue clearly goes beyond just a legitimate objective. However, numerous instances have been discussed in the later sections which suggest that the whole scenario of European Super League is actually headed in a direction which calls for scrutiny by the EC.
It is implicit that the study of a potential competition violation must be preceded by the definition of the relevant market, i.e., determining whether the ESL and other leagues operate in the same market and as a result, whether their interactions have the potential to influence competitiveness in that market. The relevant market has to constitute of products or services that are interchangeable in the eyes of the customers, in this case, football fans. In other words, demand substitutability across various competitions as well as the money generated by them, is critical. The fact that consumers of football, i.e, the fans can easily migrate to viewing a different European competition reaffirms that the Super League, Europa League, Champions League and the recently introduced Conference League are all competing in the same relevant market for ‘football competitions in Europe’.
Super league: Violating Articles 101 and 102 TFEU?
Under EU competition law, actions taken by an association of undertakings that have the purpose or effect of distorting competition are anti-competitive in nature. However, it has not been defined explicitly as to what constitutes an association of undertakings. Through its decisions, the Commission has reiterated that UEFA was found to be an association of undertakings, and thus could be held accountable for antitrust violations.
The intriguing aspect of the Super League is that competition law in this case has the ability to harm all the stakeholders involved. On one hand, the UEFA and other national federations stated that they will continue to work together to combat the Super League: “The clubs in question will be barred from competing in any future domestic, European, or international competition, and its players may be denied the chance to represent their countries.” This statement prompted concerns about these federations’ compliance with EU competition laws. Any actions taken by the respective sporting bodies against the Super League or its member clubs and players are likely to have been scrutinised under competition law. In that context however, it is pertinent to note that the EU courts have held that “sporting bodies do have the power to authorise alternative sporting events if such power is subject to restrictions, obligations, and review”.
Recent jurisprudence has looked into whether these types of actions might be considered as an agreement between an association of undertakings with the purpose of preventing, restricting, or distorting competition in violation of Article 101 of the Treaty on the Functioning of the European Union (TFEU) or an abuse of a dominant position in violation of Article 102 of the TFEU. The most recent authority on this topic is the EU General Court ruling in the International Skating Union (ISU) dispute. The General Court ruled that the ISU's eligibility criteria, which prohibited competitors from competing in competitions that were not sanctioned by the ISU, were in violation of Art. 101 of the TFEU. In assessing the compatibility of a sport body’s rules, no infringement of competition law will be found only if that sport association’s restrictive practices and/or conduct are inherent and have a legitimate objective.
In this case, the above mentioned regulations by the UEFA are neither inherent nor proportionate to achieve a legitimate objective. Thus, if UEFA decides to ban clubs or players from their respective leagues, it will be held accountable for anti-competitive practises. On the other side of the argument, the formation of ESL means that big teams would simply increase their financial edge over smaller clubs that would not have the same option. As a result, economic competition within the market will be reduced, which is incompatible with Article 101(1) TFEU. Secondly, by reducing economic competition within the national market and so injuring smaller clubs, the ESL teams may be accused of collectively abusing their dominating market position and therefore violating Article 102.
Closed league: model orchestrating glaring abuse of dominance
The format of the league resembles the major sports leagues in North America such as the Major League Baseball (MLB), National Football League (NFL), Major Soccer League (MSL) among others. In brief, the Super League assures yearly participation to the founding clubs, while the remaining five clubs would be decided on their success in the previous editions of the competition thereby assuming the status of a closed league for the founding clubs. From 1950 to 2008, the closed-league format of Major League Baseball generated a twenty-six fold increase in revenue while the highly coveted open-door English Premier League witnessed a sixteen-fold jump within a span of twenty eight years from 1980-2008. This proves that both open and closed league models have witnessed tremendous growth in terms of revenue.
European football competitions have thrived on the open model that was introduced in 1892. In the English Football League, the system of promotion and relegation of clubs was embraced as the most viable approach to this system. This implied that sporting merit was the determining factor in this model. However, the economic implications of the two models on any game were found to be vastly different. In an open league model, the pressure to perform on a regular basis is a lot higher than in a closed league. Therefore, for a club in the English Premier League which seeks to play regularly at the highest level and secure talented players in their ranks, is compelled to focus on short term goals rather than looking at long-term investments.
The European Commission has observed that reasonable steps undertaken by dominant enterprises to protect its commercial interests would not constitute abuse. However, when such steps have the capability of foreclosing competitors as efficient as the enterprise itself, it comes under the ambit of anti-trust scrutiny. The European Super League is built on a closed model which implies that there is a substantial barrier to entry for other clubs. Sporting merit goes out of the window and everything comes down to the ability of clubs to acquire top talent and the potential to generate revenue. Considering the current season, teams like West Ham United, Leicester City, Atalanta have demonstrated that football should be a game that rewards merit over wealth. If the Super League proposal goes through, it would result in an exclusionary effect by unfairly excluding deserving teams from competing at the very top level. The Super League was built around a strategy aimed at eliminating competitors as efficient as the dominant teams backed with a very fallible ‘objective justification’.
‘Objective justification’ can be considered by the Court in waiving off claims of abuse by the dominant enterprise or allegations of anti-competitive agreements. It is however, incumbent upon the enterprise to substantiate that the practice in question should be permitted as it entails a fair share of benefits to consumers and the restriction is essential. The multi-billion dollar investment fails to account for any benefit that the competition would yield in favour of the consumers, i.e, the fans in this context. Restricting entry of deserving clubs into the competition runs contrary to the interest of fans and therefore, there is no objective justification that prevails on the part of the ESL.
John Jasina and Kurt Rotthoff, ‘A model of promotion and relegation in league sports’ (2010) Journal of Economics and Finance 36(2) 303-318. Stefan Szymanski, Winners and Losers (Penguin 2000). Case 27/76, United Brands v. Commission ¶189. Case T-191/98, Atlantic Container Line and Others v. Commission ¶86. Article 101(3) of TFEU, Guidelines ¶72.