European Court of Justice plays hardball in Sports rulings
The rulings by the European Court of Justice (ECJ) on the discretionary powers of international sports associations to authorise alternative competitions show that the specifics of sports are no reason to tread lightly when applying EU competition rules.
Regulatory powers of international sports associations resulting in conflicts of interests or ‘favouritism’ are not inherent to the game. In fact, they may amount to a ‘by object’ infringement and an abuse of dominance if insufficient safeguards are in place to guarantee their fair application and associated sanctioning. Regulatory powers should be used in a transparent, objective, precise, non-discriminatory and reviewable manner and sanctions should be proportionate.
FIFA, UEFA and ISU may have to go back to the drawing board to set up a ‘competition law proof’ framework for their respective eligibility rules for third-party organised competitions. Time will tell whether the rulings are also a potential red card for non-sports organisations and dominant companies with similar regulatory ‘market access’ powers.
Sport is no excuse for infringing the competition rules
The ECJ rulings relate to sporting rules set up by sports federations FIFA, UEFA and International Skating Union (ISU), which give them a dual role: the federations organise sport matches but they also regulate third-party organised competitions through a prior authorisation system with accompanying sanctioning mechanism.
In its ruling of 21 December 2023 , the ECJ upheld the Commission’s decision and General Court’s subsequent ruling that the ISU’s prior authorisation and eligibility rules amount to a ‘by object’ infringement under the cartel prohibition laid down in Article 101(1) TFEU. According to the ECJ, the ISU’s rules provide ISU with an advantage over its competitors by empowering it to arbitrarily authorise, control and set the conditions of access to the market or to favour its own activity. In the same vein, the ECJ states in its preliminary ruling in European SuperLeague that the arbitrary application of FIFA’s and UEFA’s prior approval rules constitutes an abuse of a dominant position.
The ECJ reiterates that EU competition rules apply to the practice of sport, in so far as it constitutes an economic activity. However, if measures are taken in pursuit of legitimate objectives in the public interest and their potential anti-competitive effects are limited to what is necessary to ensure the pursuit of these objectives, they may nevertheless fall outside the scope of the competition rules. But this does not apply to conduct that has as its very ‘object’ the restriction of competition. A ‘by object’ infringement can only escape the application of Article 101(1) TFEU by satisfying all four conditions listed in Article 101(3) TFEU. Similarly, conduct by a dominant company that ‘by its very nature’ infringes Article 102 TFEU can only be justified if objectively necessary or if counterbalanced or outweighed by efficiency gains.
Market access conditions
The ECJ’s rulings further underline the risk of infringing EU competition rules in case of arbitrary applications of the sport federations’ rules. Such risk will be significantly reduced if regulatory powers are not used in an arbitrary, discriminatory or disproportionate manner.
To avoid such arbitrary use, the ECJ states that powers need to be regulated by a framework outlining the conditions on when, how and why market access will be granted or denied. For this purpose, the ECJ provides the following rules of thumb:
- The substantive criteria to determine market access should be objective, transparent, clear and precise and ensure that any regulatory powers are exercised without discrimination.
- The criteria to determine sanctions that may be imposed for non-compliance should be transparent, objective, precise and non-discriminatory. In addition, these criteria should ensure that the sanctions are determined, in each specific case, in accordance with the principle of proportionality taking into account, in particular, the nature, duration and severity of the infringement found.
- There should be transparent and non-discriminatory procedural rules in place relating to, for instance, the applicable time limits for submitting a prior authorisation request and the adoption of a decision on that request.
- The criteria and procedural rules should be clearly set out in an accessible form, prior to any implementation of the power they are intended to circumscribe.
- The application of the criteria should be subject to effective review.
Conclusion
With the power to block market entry of potential competitors comes the responsibility to use that power responsibly or, if you will, sportsmanlike. The ECJ’s rulings in ISU and European SuperLeague read as a cautionary tale for self-regulatory associations and dominant companies with dual roles to keep their ‘market access’ rules and conduct from falling under the cartel prohibition laid down in Article 101(1) TFEU and the prohibition on abuse of a dominant position under Article 102 TFEU. For those companies, it may be prudent to double-check whether their substantive and procedural access conditions meet the ECJ’s standards.
This article was published in the Competition Newsletter of January 2024. Other articles in this newsletter:
