[Arnab Chakraborty and Amiya Krishna Upadhyay are third-year students at National Law University, Odisha]
Super League – Typical example of a business cartel or defence of single entity?
In the previous part, the anti-competitive behaviour associated with the closed door model of the European Super League has been discussed. However, it is imperative to determine whether the Super League model resembles a cartel or whether they are protected by the single entity doctrine, and how broadcasting rights have served as the money-minting machine for these clubs.
An informal partnership or arrangement between two or more competing parties is referred to as a cartel. Parties of a cartel communicate information about their businesses, or create agreements about their future, with the goal of reducing competition and raising their own pricing or profits. The expected increase in TV rights income for the 15 clubs who will qualify regardless of how well they actually play football, clearly indicates that the ESL model could easily be characterised as a cartel. There’s no sporting risk here, coupled with the incentive to earn hundreds and millions every year. The clubs are primarily attempting to grow and safeguard their earnings by using collective market power gained as a result of their success in the very sporting rivalry that they are now attempting to deprive other teams of.
Since, the clubs of the Super league form part of the same group, they can take the defence of the single economic entity. Article 101 only applies to agreements between undertakings that are independent. It is evident that the super league teams are sporting rivals and due to the fact that sport rivals cannot conduct a competition without each other's cooperation, they should be viewed as a single entity for the purposes of antitrust scrutiny. However, this defence may not apply to Europe since there exist multiple leagues, and clubs become less dependent on their competitors to produce their product.[1] Further, in American Needle v. NFL, the SCOTUS had made it clear that the teams in a league were separate economic entities and hence they could be held liable if involved in anti-competitive practices.
Article 101(3) of the TFEU is aimed at eliminating anti-competitive effects in the market and ensures consumer welfare at the same time. Even though it would not sound right to equate fans with consumers, the resemblance is a consequence of the ever-increasing commercial involvement with the sport which cannot be ignored in the current scenario. The exemptions provided to anti-competitive transactions under Article 101(3) derive their power from the advantages they are claimed to accrue, which should outweigh the detriments produced.[2] The fact that the Super League does not bother about consumer satisfaction is evident from the concerted disapproval of the league format by the fans. 57% of the fans portrayed negative sentiment while 63% disapproved of the closed league model that the Super League planned to adopt. Further, the massive protests outside the home stadiums of Manchester United and Chelsea have reaffirmed the fans’ commitment to the existing open league model. It can be stated that the European Super League goes against the very fundamental principles of the game. Thus, the glaring abuse of power by the ones behind the wheel of the competition should attract consequences for the Board and the clubs.
Broadcasting Market: Looking to strike gold?
A healthy portion of the revenue generated by clubs in different leagues depends on the sale of broadcasting rights. Collective selling has become increasingly prevalent in the top leagues of the world.[3]In UK and France, the mode of distributing broadcasting rights through collective selling has been upheld, while Italy and the Netherlands have prohibited such a model citing less restrictive means that could be used for achieving the same purpose.[4] It was believed that collective selling would only result in restriction of output, that is, only games of top teams being broadcasted in order to satisfy selfish commercial motives of the right holder.
The European Commission has backed the idea of collective selling under the credence of equitable distribution of income among all the teams and encouraging development in European football. The acquisition cost of sports broadcasting in Europe has skyrocketed over the last few years and it has obtained the status of premium content. The Commission’s approach to exclusivity, combined with collective selling, has evolved as it has started to indulge in the intricacies on a case-to-case basis instead of conveniently agreeing to the dominant broadcaster’s version of exclusivity being necessary for producing quality content.
The European Super League would undoubtedly attract the most popular broadcasters due to the brand of teams that signed up for the competition. Broadcasters like Sky Sports and Amazon were already in the scheme of things to acquire the contract, thereby implying that the domestic leagues and the lower positioned teams would automatically lose substantial revenue due to the absence of the big teams. Further, broadcasting channels and media outlets would have to forego their contract with the domestic leagues in order to ensure live broadcasting of the Super League games, consequently discouraging innovation and adversely affecting competition in the market.
Evidence suggests that in England, one-third of the football fans conveyed that Premier League was the reason for their subscription to Sky Sports while 75% of the people ascertained that availability of Premier League football was extremely important for them.[5] Among other competitions, Champions League, FA Cup and international competitions closely followed the league in terms of consumer interest. The rising numbers can be attributed to the fact that football leagues thrive on the theory of ‘competitive balance’ which implies that fans prefer a more competitively balanced contest than one based on unrestricted competition among the clubs. However, the approach of fans has changed over time.
Competitive imbalance has started to attract a massive audience due to the uncertainty of outcome associated with such a contest. A historic fixture in English football like Manchester United facing Liverpool will undoubtedly attract fans but at the same time, a match between Manchester United and a bottom table club like Sheffield United will also attract an audience because of certain other factors such as the threat of relegation involved or the fans’ demand for their favourite club to finish in the top four of the table. The rivalry among fans is another factor which contributes to this theory of ‘competitive imbalance’, thereby generating greater revenue for the broadcasters and the clubs.
Conclusion
Courts across the world have meted out harsh penalties for abuse of dominance. UEFA’s role as a sporting body cannot be said to be fair and legitimate either. Criticisms for failing to curb racism, ignoring players’ physical capabilities, favouritism for bigger clubs etc. can be levelled at the organisation. However, the breakaway league has significantly outshone UEFA’s frailties. It is important not only for the clubs and the competing leagues to take a stand against it but also for the biggest stakeholders, the fans to amplify their demands.
The European Super League is all set to take away the sense of adventure and excitement associated with domestic football leagues that flourish on competitive imbalance and outcome uncertainty. The fact that unrestrained competition would eventually lead to excessive dominance by teams with heavy resources cannot be downplayed.[6] The Super League is aimed to profit on this by making the rich richer, without recognising the impact that the smaller clubs have had on football since the inception of the game.
History suggests that the Commission[7] has not objected to the idea of collective selling. However, it has considered the model only within the scope of open leagues till date. Moreover, the Commission has scrutinized competitions that comprised of both small and big teams, with regard to resources. In the present scenario, even if the collective selling of broadcasting rights of the European Super League was allowed, it would eventually go into the pockets of the teams which already have in excess as compared to other domestic teams.
Foreclosure of competitors or creating entry barriers to the market cannot be said to be a minor incidental impact of the European Super League. The European Super League will have massive consequences, if given the green light, despite nine-teams backing out. Without giving due regard to the welfare of fans and football at large, the multi-billion dollar competition fails to account for its anti-competitive effects on the game.
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[1]OECD Policy Roundtables, ‘Competition and Sports’ (2010) <https://www.oecd.org/daf/competition/competition-and-sports-2010.pdf> accessed 22 April 2021.
[2]Case 58/64, Consten and Grundig v. Commission [1966] ECR 299, p. 348.
[3]Sonia Falconieri, Frédéric Palomino and József Sákovics, ‘Collective versus Individual Sale of Television Rights in League Sports’ (2004) 2 Journal of the European Economic Association 833.
[4] Competition and Sports (n 1) 41.
[5] Competition and Sports (n 1) 36.
[6] Competition and Sports (n 1) 23.
[7] Regulation 17/1962, article 9(1).