44
Vienna, June 26, 2002
mm/mo
DW: 11
Re: LIDC 2001/2002/ Question 1
REPORT of the International Reporter
Michael Meyenburg,
"Should any special considerations be taken into account in the application of competition law to sport and, if so, which and to what extent?"
Following National Reports received by the date mentioned above together with information received by other sources[1] form the basis of this International Report:
Spain, by Raul Bercovits,
Sweden, by Elisabeth Legnerfält,
Switzerland, by Christian Stambach,
France, by Pascal Wilhelm,
UK, by Richard Shaw,
USA, by John Richardson,
Germany, by Peter Heermann,
some remarks from me for Austria;
Hungarian Report by Zoltan Barakony and team,
Brazil Report by Antonio Figueiredo Murta
Belgian Report by Alex Tallon
1. Organisation of Professional Sport:
1.1.1. In Europe[2] sport is traditionally organised in a system of national federations. Only the top federations are linked together in European and International Federations. Basically the structure resembles a pyramid with a hierarchy[3].
The clubs form the basis of amateur and professional sport. Regional Federations then can form the next level.
The National Federations, one for each discipline, represent the next level. As there is only one "national federation" for each discipline, they have a monopolistic position.
The European and International Federations form the top of the pyramid, which are organised along the same lines as the national federations.
A System of "Promotion and Relegation" is implied by the pyramid structure between the levels, not only in the organisation but also on the competitive side, because competitions are organised on all levels. "Relegation" and "Promotion" are standard features of every national championship[4]. Accordingly, the federations, which make up "the sport movement", enjoy considerable autonomy.
1.1.2. The US system versus the European has developed the model of closed championships and multiple sport federations. The problems faced by Europe in integrating different sports regimes and sports systems do not exist as integration took place generations ago.
The state of professional sport in the United States is a combination of (i) entrepreneurial owners and organized player's associations, who meet periodically to negotiate a collective bargaining agreement, and (ii) the individual player's agents who negotiate with the owners for the signing or renewal of a player's contract in accordance with the rules of the collective bargaining agreement currently in force. Collective bargaining shields the professional leagues from the antitrust laws so that various restrictions such as player drafts, salary caps and revenue sharing can be adopted.
Whereas sport in Europe is on a large part - based on a grassroots approach run mainly by non-professionals and unpaid volunteers, in the US sport is based on a more professional approach and is operated mainly by professionals.
In Europe national teams are seen as representing a nation and the tradition has been for the different countries to compete against each other and to hold international competitions, whereas in the US there is no need for inter-State competitions.
1.2. The most important fields of professional collective sport are:
throughout Europe especially in Spain, France, Belgium, Italy, Germany, the Netherlands but also in the Central European countries: football, in Sweden, ice-hockey, football, basketball and handball; in the U.S., the four major sports are baseball, basketball, football and ice hockey[5]. In the UK also football is the most popular sport, the main team sports, both from a participation and spectator perspective, are football, rugby and cricket[6].
1.3. The most important fields of professional individual sports are:
in the UK: golf, tennis and athletics; in Sweden: golf, trotting races, athletics, tennis, skiing, Formula 1, in Switzerland and Austria skiing, mainly throughout the world presumably except from motor racing tennis and golf.
One has in recent years also found an increasing interest of the public in new forms of sporting events[7].
1.4. Different sporting organisations exist in the different countries for each kind of sport: e.g. in Sweden: in total 67 national sporting and 12 different "recognized" sports federations exist, in Switzerland the two national sports federations with more than 350.000 members are the "Schweizerischer Fussballverband (SFV)" (football) and the "Schweizerischer Turnverband (STV)" (athletics and gymnastics).
In France due to the respective sports laws a full set of an approval system for sport federations is given[8].
In Belgium le "Comité olympique et interfédéral belge" (COIR) has obtained a double role as national Olympic Committee but also acts as "l'association des fédérations sportives belges"[9].
Also in the U.K there generally is a single national governing body responsible for regulating each sport.[10]
Competition organisers are either the governing bodies or specific organisations set up to run a competition and are responsible for, amongst other things, obtaining sponsorship and selling the broadcasting rights for that competition.
Players unions have been set up to represent the interests of professional players. The Football Association (FA), formed in 1863, is the governing body of football in England[11].
In Hungary the Sport Act provides that only one national federation can be registered in one particular field of sports[12].
1.5. The league system as the basis system of professional sports in the U.S. seems in different modified ways to be introduced in Europe also for sports on professional level.
In the U.S. the major professional sports organizations are the Major League Baseball ("MLB"), the National Basketball Association ("NBA"), the National Football League ("NFL"), the National Hockey League ("NHL"), Major League Soccer ("MLS")[13], and Women's National Basketball Association ("WNBA").
In France the existence of professional leagues is an innovation of the Act 2000-627 of 6 July, 2000. "Commissioned federations" may create a professional league for the representation, management and coordination of professional sport activities organized by their affiliated associations and by companies which they have formed".
In Belgium l'Union royale belge de football (U.R.B.S.F.A.), founded in 1895 is the only national federation responsible for the administrative and sportive organisation as well as the promotion of football[14].
Leagues having a distinct legal existence must establish "Articles of Association" in compliance with a decree issued by the Conseil d'Etat subsequent to an opinion issued by the CNOSF ("National Olympic and French Sport Committee").
Lawfully formed professional leagues have the exclusive right to organise professional competitions in their respective sports and to award titles at the conclusion of such competitions.
In England the chief professional leagues are the National Football League[15], the National Basketball League, the Promotional Volleyball League and the National Rugby League. The most successful soccer clubs in England are members of the Premier League.
1.6. Specific statutes on sports or sporting organisations exist in Spain[16], in France[17], Belgium[18], Brazil[19] and Hungary[20], whereas in Sweden[21], in the UK, Germany, Austria and in Switzerland no specific statutory rules applicable to sports organisations[22] exist. This seems to be also the case in other European countries and for the time being no new definite movements to create such statutory law[23] seems to be in progress.
1.7. In the eighties of the (last) century the IOC decided to abolish the distinction between amateur and professional sport, thus opening the Olympic games to everyone. It also allowed the games to be commercially sponsored. Sponsorship has now become one of the major sources of funding for sport. Also in Europe the state television monopoly was broken. As in the US, fierce competition ensued to win the broadcasting rights for major events.[24] The "East bloc" disappeared and with it the restrictions for those engaging in sport.
In 1995 the European Court of Justice (ECJ) recognized in the Bosman case that there is no reason why professional sports people should not enjoy the benefits of the single market and in particular the free movement of workers.
Since 1997 e.g. English football clubs have been listed on the stock exchange. On the other hand, some investment companies acquired majority shareholdings in several sporting clubs, gained influence on competitions and even directly or indirectly on sporting organisations, which naturally had also consequences on the national level.
In Sweden e.g. until recently sports associations were only allowed to exist as non-profit organisations. Since 1999 "sports limited companies" can be created under certain conditions.
In Switzerland many sports clubs have changed their organisational form from an association to a share corporation. This allows these sports clubs to attract additional capital, to limit liability, eventually to list their shares on the stock market and to attract foreign investors.[25]
In France the place, which sport holds in individual lifestyles has persistently increased, with nearly 30 million people practicing sports including 13 million holders of sport qualification certificates. Further, major sporting events such as the World Football Championships or the Olympic Games have an even-greater audience and impact on the public.
In the U.K. primarily due to increased revenues earned through the sale of TV rights, sponsorship and merchandising sport also has benefited as a result of income received through the National Lottery.
One major development in English sport was the conversion of the Rugby Union from an amateur to a professional sport in August 1995, which caused problems because the club competitions do not generate sufficient income to support the professional game. The clubs and the players are dependent on wealthy individuals for a great part of their funding, who want more influence in running the professional game, but the Rugby Football Union and the junior clubs want to retain control[26].
With regard to the corporate structure of clubs, the revenues of clubs, the income of athletes/players, broadcasting and TV license fees, sponsor contracts etc. the national reports mention significant increases of „money“ involved in sports: the total revenue for the whole Swedish sports movement in 1996 amounted to SEK 7,8 billion; SEK 150 million originated from the sale of broadcasting rights, SEK 910 million from sponsoring, SEK 1819,4 million from gambling and lotteries; profits from ticket sales were in 1996 SEK 576,3 million of which 103 million originated from the national ice-hockey league and 76,5 million from the national football league. State aid accounted for 6,5 percent of the total revenue[27].
In Spain sports clubs or their professional teams participating in official competitions at a professional and national level, must incorporate as a "Sports Company by shares" (art. 19.1), which is a special type of a company, subject to regulations of its own[28].
In Brazil sport clubs regulated by statutes have to be commercial enterprises to generate profits and reduce the debts accrued in the past[29].
To give some ideas how important professional sporting events have become one has to note that in the U.S. e.g. "Sports Business Daily", an internet newsletter, estimates 422 million spectators in the U.S. and Canada attended sporting events in 2000[30] of which 116.4 million went to baseball games and the average salary of a player in baseball in 1975 was US $ 44,676 but by 2000 it had risen to US $ 1,895,630!
There is no shared national television contract for the NHL but the richer teams have to split gate receipts with the poorer ones so there is some revenue sharing.
In the U.K. the Premier League is a private limited company. It has an authorized share capital of £ 100 divided into 99 Ordinary Shares of £ 1 each (of which 20 are issued) and one Special Rights Preference Share of £ 1. Each of the 20 Premier League Cubs holds one Ordinary Share. Relegated clubs are obliged to relinquish their shares and promoted clubs have to take one[31].
By being a member of the Premier League, each club agrees to be bound by and comply with the Premier League Rules as well as the Articles of Association of the Premier League[32].
Since 1994, £ 1.2 billion of lottery funds have been spent by Sport England on 3,276 capital projects. Football including the merchandising industry is now an extremely attractive commodity. The clubs themselves are limited companies, often owned or controlled by individuals. Over recent years, many clubs - some of them from media organisations - have sought funding by becoming public companies listed on the London Stock Exchange.[33]
In 1992, The Premier League entered into an agreement with BSkyB for the exclusive broadcast in the UK of 60 live matches in the five seasons from 1992/93 through to 1996/97.[34] BSkyB has recently entered into a new broadcasting agreement with the Premier League which is valued at £ 1.2 billion and gives BSkyB the rights to broadcast 66 live Premier League matches each season.[35] The difference between TV income for Premier League and Nationwide League clubs is immense.
In Germany a similar tendency can be seen.[36] In football at the first step the "Ligaverband e.V." was founded, whose members are the clubs and corporate entities of the first and second "Bundesliga". The business operations are conducted through the 100 % subsidiary, the "Liga-GmbH". The Ligaverband ("DFL") is responsible for the competitions of the DFB for the German Championship and for the participants for the European championships as it uses the properties of the DFB against a rent. Furthermore the Ligaverband receives income from the marketing rights and the logo of the league including income from the entrance fees[37]. In such a way the members of the league themselves and not the organization "DFB" "control and centralize" the marketing rights for the competitions at home ("Heimspiele") and try to avoid an infringement of the German and EU competition law provisions[38].
2. The Player and the Club/not only a question of "sports" and "employment" law:
2.1. Before and After Bosman
The Bosman case[39] has had huge financial consequences for the professional sport in Europe. Before the Bosman ruling transfer fees provided much of its financial resources. When transfer fees were (partially) abolished, players salaries soared and clubs had to make huge investments. The financing of sport in Europe since then has changed dramatically. It now depends increasingly on revenues derived from sponsorship and commercial communications. The same applies for several types of individual sports.
The characteristics of sport (uncertainty of results, equality of competitors) make the sport market different from any other commercial undertaking.
In the cases before the ECJ after Bosman the questions referred by the national courts for a preliminarily ruling, whether rules of sports federations are contrary to Art 81 and 82 (former Art 85 and 86) of the Treaty of Rome were not answered - mainly on procedural grounds. For competition purposes it could be necessary to examine "if and how sports income needs to be distributed among the clubs and associations"[40].