The power struggle between sports federations and athletes under scrutiny: the ISU case continues

Posted in Antitrust and competition Dispute resolution, litigation and investigations

The power struggle between sports federations and athletes under scrutiny: the ISU case continues

The International Skating Union’s (ISU) recent appeal to the European Court of Justice (ECJ) provides an opportunity to look at the key facts of this case and consider its significance.

Looking backwards: the past decision-making practice of the competition authorities in Europe

Given the scale of the professional sports industry today, it is somewhat surprising that the sports sector has only fairly recently come under the scrutiny of European competition watchdogs. In contrast to the US, where the relationship between sport and competition law was first tested nearly a century ago,[1] the sports industry in Europe seemed to largely escape the attention of antitrust regulators, lawyers and courts for a long time.

In the 1990s, however, the European Commission (Commission) took a closer look at sport and examined the commercial exploitation of Formula One.[2] One of the first landmark cases on the relationship between sport and EU law also came in 1995 in the Bosman case, where it was decided that EU law had been violated. However, it took until 2006 for the ECJ to provide basic guidance on the application of European competition law in the sports sector. In Meca-Medina, it introduced the so-called Meca-Medina test. According to this test, sporting rules are compatible with EU competition law if they pursue a legitimate objective and if the restrictions that they create are inherent and proportionate to reaching this objective. Since then, the decision-making practice has been thin on the ground. The ISU case, however, brings new impetus.

Background of the ISU case

In 2014, Niels Kerstholt and Mark Tuitert, two Dutch speed skaters and members of the Dutch skating federation (KNSB) (which is a member of the ISU), were interested in participating in the Ice Derby Grand Prix in Dubai which was being planned by Icederby International (Icederby). Participation may have opened up various opportunities for them, including the prospect of significant prize money and lucrative sponsorship deals. However, in view of the eligibility rules of the ISU, Kerstholt and Tuitert decided not to compete at Icederby’s Grand Prix in Dubai. These rules stated, in broad terms, that ISU athletes would be excluded from ISU competitions, the Olympic Winter Games, the Winter Youth Olympic Games and other international exhibitions and tours authorized by the ISU if they participated in events not authorized by the ISU or one of its member federations.

Kerstholt and Tuitert did, however, raise a complaint with the Commission and, in October 2015, the Commission opened a formal antitrust investigation against the ISU. The athletes alleged that the ISU’s eligibility rules were in breach of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) as those rules unjustifiably prevented Kerstholt and Tuitert (and other athletes) from participating in Icederby’s events. Article 101 TFEU prohibits anticompetitive agreements. Article 102 TFEU prohibits abusive conduct by undertakings that have a dominant position on a particular market. The rules that were subject to the Commission’s investigation were Rules 102 and 103 of the ISU’s General Regulations 2014 and, due to amendments implemented by the ISU during the course of the proceedings, Rules 102 and 103 of the ISU’s General Regulations 2016 as well as the ISU’s arbitration rules laid down in the ISU’s Constitution 2014 and the ISU’s Constitution 2016.

About a year after the initial complaint brought by Kerstholt and Tuitert, the Commission came to its preliminary conclusion that the ISU rules unduly restricted the athletes’ commercial freedom. It also found that the ISU rules prevented new entrants to the sector from introducing alternative speed skating competitions, as potential competitors were not able to have access to the ISU’s athletes. It is worth noting, however, that, the Commission only referred to Article 101 TFEU in its preliminary conclusions and it did not pursue any possible infringements of Article 102 TFEU.

The Commission accordingly sent a Statement of Objections to the ISU which was discussed in an oral hearing in early 2017. In April and October 2017, the ISU submitted sets of commitments which the Commission considered but ultimately determined as being insufficient to solve the competition concerns of the Commission.

The Commission’s decision and its consequences

In December 2017, the Commission imposed an infringement decision finding that the ISU’s eligibility rules violated Article 101 TFEU.[3] The Commission found that the eligibility rules restricted competition and enabled the ISU to pursue its own commercial interests to the disadvantage of athletes and potential rival organisers. The Commission further found that the ISU’s rules concerning appeals against the implementation of the ISU’s eligibility rules (which were subject to the exclusive jurisdiction of the Court of Arbitration for Sport) reinforced the restriction of an athlete’s commercial freedom and the exclusion of potential competitors of the ISU.

In February 2018, the ISU appealed against the Commission’s decision to the General Court (GC). Among other things, the ISU stated that the specific nature of the sport had not been adequately taken into account. However, pending the decision of the GC, the ISU did amend its rules to comply with parts of the Commission’s decision, mainly by formalising the approval process for rival events and underpinning the eligibility criteria, such as integrity, health and safety.

In December 2020, the GC issued its judgment.[4] It was the first decision in which the GC ruled on a Commission decision concluding that the rules of a sporting governing body did not comply with EU competition law. The GC stated that the eligibility requirements contained in the ISU’s eligibility rules “cannot all be regarded as clearly defined, transparent, non-discriminatory and reviewable authorisation criteria”[5]. The GC restated that “the protection of the integrity of the sport constitutes a legitimate objective recognised in Article 165 TFEU”[6]. The GC made clear that the ISU’s eligibility rules went “beyond what is necessary to achieve such objectives”[7]. On this point, therefore, the GC confirmed the Commission’s decision as valid. However, in respect of the ISU’s arbitration rules, the GC stated that the Commission was not entitled to consider them as an “aggravating circumstance”. Although the contested decision did not make use of the concept of an aggravating circumstance for the purpose of increasing the antitrust fines, the GC emphasised that only unlawful conduct or circumstances can justify an increase in the fine and that there was no evidence that the arbitration rules amounted to such conduct in the ISU case.

The ISU is now appealing to the ECJ.[8]

Looking forward: European competition authorities may have an increased focus on the sector

Even before the Commission’s decision in the ISU case, the activity of the competition authorities of a number of EU Member States in the sports sector was increasing.

In light of this recent activity, more athletes from around the world may consider arguments founded in competition law as a tool in any dispute against their regulators and organising bodies.

This is clearly a trend, and one which will continue in the years to come. There are a number of high profile pending court cases, recent decisions or investigations by competition authorities in the sports sector, including:

  • the antitrust lawsuits against the International Swimming Federation (FINA) in California;[9]
  • the Bundeskartellamt’s investigation on the 50+1 rule in German football which prevents investors from acquiring a majority stake in a German football club;[10]
  • a recent case in which the Portuguese competition authority put an end to a no-poach agreement between domestic football teams concluded in April 2020;[11] and
  • the acquisition of OGC Nice by Ineos which was the French competition authority’s first merger control case in the football club sector.[12]

We will continue to monitor and analyse these cases in future posts.

 

 

[1] In 1922, the US Supreme Court ruled that the Sherman Antitrust Act did not apply to Major League Baseball, see Federal Baseball Club v. National League, 259 U.S. 200 (1922).

[2] See, e.g., case COMP/35163 – FIA.

[3] Decision of 8 December 2017, AT.40208 – International Skating Union’s Eligibility rules.

[4] Decision of 16 December 2020, T-93/18, ECLI:EU:T:2020:610 – International Skating Union v Commission.

[5] https://curia.europa.eu/jcms/upload/docs/application/pdf/2020-12/cp200159en.pdf.

[6] https://curia.europa.eu/jcms/upload/docs/application/pdf/2020-12/cp200159en.pdf.

[7] https://curia.europa.eu/jcms/upload/docs/application/pdf/2020-12/cp200159en.pdf.

[8] International Skating Union v Commission, C-124/21 P.

[9] Shields et al. v. FINA, 18-cv-07393, and International Swimming League v. FINA, 18-cv-07394. Both lawsuits are pending in the US District Court for the Northern District of California.

[10] https://www.faz.net/aktuell/wirtschaft/unternehmen/kippt-das-uebernahme-verbot-fuer-fussballvereine-15752748.html (in German).

[11] www.concorrencia.pt/vEN/News_Events/Comunicados/Pages/PressRelease_202008.aspx.

[12] https://www.autoritedelaconcurrence.fr/en/press-release/autorite-de-la-concurrence-clears-acquisition-ogc-nice-ineos.

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