11 Jan 24
When the Court of Justice of the EU (the “CJEU”) delivered its judgment in the European Super League (“ESL”) case on 21 December 2023, the headlines proclaimed a victory for the ESL and a defeat for FIFA and UEFA. However, as is often the way, the position is more nuanced than it may first appear.
In this article, we note what we consider to be the key takeaways from both the ESL case and the International Skating Union (“ISU”) judgment that the CJEU delivered on the same day, and consider what they mean for sports governing bodies (“SGBs”). Although the two cases centred on three sports associations in particular – FIFA, UEFA and the ISU – the judgments are of importance to SGBs more generally.
- SGBs can adopt and implement rules and sanctions regarding the prior approval of, and participation by clubs and players in, alternative competitions within the sport that they govern.
- However, such rules must be circumscribed by a suitable framework to prevent those rules from being implemented arbitrarily. We set out in section C below some pointers as to what that framework should look like, based on guidance provided by the CJEU.
- In the absence of such a framework, the adoption and implementation of such rules would amount to an abuse of a dominant position and a serious restriction or prevention of competition (referred to as a “by object” infringement, meaning that the conduct reveals a sufficient degree of harm that it is not necessary to examine if the rules actually have anti-competitive effects in practice).
- The CJEU has opened the door to the prospect of SGBs being required to approve third-party competitions if those competitions respect certain criteria, such as equal opportunities and sporting merit (among others).
- Disputes or appeals involving the economic aspects of sport (which include ineligibility and authorisation decisions made by an SGB) and which have an effect within the EU must be subject to effective judicial review by a court within the EU. The CJEU took issue with the limited review of awards of the Court of Arbitration for Sport (“CAS”) by the Swiss Federal Tribunal, as it considered this does not guarantee that EU competition law will be respected. This will have a significant impact on arbitration provisions in most SGB’s rules which generally require all appeals to be brought exclusively before the CAS.
- Rules relating to the exclusive exploitation by an SGB of commercial and media rights can constitute, in principle, a prevention or restriction of competition “by object” and an abuse of a dominant position, unless those rules can be justified (in respect of which the CJEU recognised that there are convincing arguments).
- The CJEU has narrowed the scope of application of the Meca-Medina caselaw, which it has clarified does not apply to “by object” infringements of competition law.
- For UK-based SGBs, it is worth bearing in mind that neither the ESL nor ISU judgment has binding effect in respect of UK competitions. They may, however, be taken into account by UK courts and by UK-based arbitral panels facing similar challenges, not least given the overlaps and similarities between EU and UK competition law[i].
Accordingly, now is an opportune time for SGBs to review their rules and procedures, to ensure that they are in line with best-practice standards.
A. Brief background
At the heart of both cases was whether a sporting association – in particular one that organises its own sporting competitions – can hold a role of authorising or preventing access to potentially competing leagues or organisations. In both cases, the CJEU had to consider whether the association’s statutes and rules (as they stood at that time) in relation to approving third-party competitions, and the sanctions which could be imposed against clubs and athletes that participated in an unauthorised competition, infringed EU competition law.
The proposed establishment of the ESL requires no further explanation. Following the announcement of the ESL in April 2021, the European Super League Company petitioned the Commercial Court in Madrid for protective measures against any disciplinary steps and sanctions that FIFA or UEFA may have taken and launched legal action against the two associations alleging anti-competitive conduct. The court in Madrid referred several questions, largely relating to the interpretation of EU competition law, to the CJEU. The judgment of the CJEU in December 2023 is its response to those questions, and the Madrid court will now continue its assessment in light of those responses. The CJEU’s judgment has binding effect within the EU.
Whilst referred to as the “European Super League” case, the CJEU was not asked to rule on the compatibility of the proposed ESL with EU law, but rather on aspects of the rules of FIFA and UEFA as they stood at the time.
The European Commission adopted a decision against the ISU in 2017, emanating from a complaint submitted by two professional speed skaters who belong to the Dutch federation, which is a member of the ISU. The athletes complained that the ISU’s rules prevented them from competing in a speed skating event which was not authorised by the ISU, but which offered significant prize money. The Commission’s decision found that the ISU’s rules on eligibility, and their sanctions of a lifetime ban for breach of those rules, infringed EU competition law.
The ISU appealed the decision before the EU’s General Court, which largely dismissed the appeal in 2020, although the General Court did annul part of the Commission’s decision insofar as it related to the ISU’s rules on the CAS, which we’ll examine further in this article. There was then a further appeal to the CJEU, whose judgment in December 2023 we consider further below.
B. SGBs as “gate-keepers”
As an initial observation, the CJEU did not suggest that the dual function of SGBs – the adoption of sports governance and regulatory rules on the one hand, and organising sporting competitions and exploiting the various commercial rights relating to them on the other hand – was, itself, an issue or something which was contrary to EU competition law per se.
Accordingly, there is recognition and acceptance that SGBs may organise their own competitions whilst at the same time holding a regulatory and governance function, a point which some SGBs feared could be threatened by the CJEU’s judgments.
The CJEU found in the ESL case that it is legitimate, taking into account the specific characteristics of the sport in question (namely football), for the organisation and conduct of international professional competitions to be made subject to common rules intended:
- to guarantee the homogeneity and coordination of those competitions within an overall match calendar; and
- to promote, in a suitable and effective manner, the holding of sporting competitions based on equal opportunities and merit.[ii]
This final point appears to make it permissible for an SGB to refuse authorisation to a proposed closed league, where relegation and promotion are not guaranteed, provided the authorisation procedure satisfies the framework criteria as described further below.
In order to give effect to those common rules, it is also legitimate for an SGB to adopt, implement and ensure compliance with rules relating to prior approval of alternative (and potentially competing) competitions and relating to participation by clubs and players in those competitions.[iii] However, such rules must be subject to, and implemented in accordance with, a suitable framework to prevent the arbitrary use of the powers given by them. We explore what that framework must entail in section C below.
The adoption and implementation of prior approval and participation rules without a suitable framework would allow the SGB to refuse access, arbitrarily, to a third-party organisation that wishes to set up an alternative or new competition, thereby depriving athletes of the opportunity to participate in it and, ultimately, depriving spectators and viewers of being able to watch what could be an innovative, new format.[iv] Accordingly, the CJEU found that, in the absence of a suitable framework, such rules constitute an abuse of a dominant position and a restriction or prevention of competition “by object”.
It would still, in theory, be possible for an SGB to evidence that the rules are justified, if they are able to satisfy the various conditions that give rise to an exemption under EU competition law. Although the rules may appear to be legitimate, at least in terms of their principle – for example, by contributing to the open, meritocratic nature of the competitions concerned, or by ensuring a form of ‘solidarity redistribution’ of revenues – the CJEU reminds SGBs that they must (among other things) produce evidence that those objectives translate into genuine, quantifiable efficiency gains, and that such gains counteract the harmful effects on competition that are caused by the rules.[v] This would require an SGB to produce a detailed economic analysis and, in the ESL case, could lead to the redistribution of revenues by FIFA and UEFA coming under scrutiny.
C. Fixing the goalposts – the necessary framework
The CJEU held that rules relating to prior approval and participation must be subject to restrictions, obligations and effective review. More specifically, there must be a framework of substantive criteria and detailed procedural rules (such as time limits for decisions), which are transparent, objective, precise and non-discriminatory.[vi]
Any sanctions which are imposed by an SGB for any breach of its rules must be similarly subject to such substantive criteria and detailed procedural rules. Moreover, it must be possible to verify, in a transparent and objective manner, that the imposition of sanctions is, on a case-by-case basis, justified and proportionate.[vii]
The CJEU provided some additional (non-exhaustive) guidance[viii]:
- The rules must be set out in an accessible form before their implementation.
- So that the criteria and procedural rules can be considered as non-discriminatory, especially where the SGB has its own competition and/or exploits commercial rights, those criteria and rules should not make the organisation and marketing of third-party competitions (and the participation of clubs and players therein) subject to requirements which are either different from those that apply to the SGB’s own competition, or are identical or similar to them but are impossible or excessively difficult to fulfil in practice (e.g. because the third party does not have the same status or the same powers at its disposal as the SGB and, accordingly, is in a different situation to the SGB).
- So that sanctions are not discretionary, they must be governed by criteria that are not only transparent, objective, precise and non-discriminatory, but that also guarantee that they are determined, in each specific case, in accordance with the principle of proportionality, in light of the nature, duration and seriousness of the infringement found (among other considerations).
- The criteria must be capable of being subject to effective review.
The second bullet point above opens the door to alternative, third-party competitions, which respect the requirements of equal opportunities and sporting merit (among other things), being approved to avoid an SGB abusing any dominant position it may hold, or from being found to have prevented or restricted competition illegally. In the context of football, this could, in theory, lead to a new, open competition that competes with the UEFA Champions League.
D. CAS arbitration rules
In the ISU case, the CJEU examined the arbitration rules that appeared in the ISU’s constitution, which provided for the possibility for athletes who wished to challenge a decision on ineligibility to lodge an appeal against that decision exclusively before the CAS. Any appeal of the CAS’ decision had to be made before the Swiss Federal Tribunal in accordance with Swiss law.
The European Commission had previously found, in its decision of 2017 against the ISU, that the arbitration rules reinforced the ISU’s infringement of competition laws (relating to its eligibility rules and sanctions, as referred to above). It did not take issue with the existence, organisation or operation of the CAS as an arbitration body, but rather that the ISU enjoyed legal immunity, insofar as EU competition law was concerned, because judicial review of CAS arbitral awards was heard by a court in a third country.[ix]
The CJEU agreed with the Commission. Where rules of an SGB concern the exercise of a sport as an economic activity, and they are implemented within the territory of the EU, EU laws (including EU competition law rules) apply and must be subject to effective judicial review by an EU court. Whilst the rules of an SGB may require disputes to be heard by an arbitral body, any subsequent judicial review must ensure respect for EU competition law (among other things) and must provide an ability for the judicial authority to refer questions to the CJEU for a preliminary ruling, where applicable. Because Switzerland is not within the EU, the Swiss Federal Tribunal does not guarantee that fundamental provisions of EU public policy will be respected and it is not competent to refer questions of EU law to the CJEU.[x]
Accordingly, SGBs, and in particular international federations, whose rules and decisions are implemented within the European Economic Area (“EEA”) should consider whether any mandatory arbitration rules within their constitution allow for effective judicial review of their rules and decisions by a domestic court within the EEA. If their rules provide for the CAS to have exclusive jurisdiction, appeals against CAS awards can only be made to the Swiss Federal Tribunal, and only on limited grounds of appeal.
E. Exclusive right for SGBs to exploit commercial rights related to their sporting competitions
The CJEU was asked to review FIFA’s and UEFA’s rules on the exploitation and marketing of all commercial and media rights relating to their competitions, a matter which has been the subject of competition law investigations on several occasions. Unsurprisingly, the CJEU found that the rules confer a monopoly on the associations, and enable them to have total control over the supply of those rights. The CJEU went on to state that the rules could enable FIFA and UEFA to charge excessive, and therefore abusive, prices. The rules not only prevent all competition between professional football clubs in this area, but also affect the functioning of competition in the down-stream media markets (i.e. among broadcasters and other media service providers), to the ultimate detriment of consumers and television viewers. Accordingly, the rules constitute an inherent “by object” prevention or restriction of competition and an abuse of a dominant position, unless it can be evidenced that the rules are justified in accordance with the applicable conditions of EU competition law.[xi]
In that regard, persuasive arguments were made to the CJEU (including by several governments and the European Commission) that the rules on rights’ exploitation allow efficiency gains by helping to improve production and distribution of those rights. Moreover, a large share of the resulting profits allow a ‘solidarity redistribution’ of funds within football. Although there is an effect on down-stream markets, competition is not eliminated altogether and indeed the rules allow potential buyers of the rights to access a more attractive product in terms of content and image, for which there is fierce competition. Although the rights can only be acquired from a limited number of vendors (i.e. FIFA and UEFA in this case), competition can still be ensured through the use of an auction (or similar selection) process that is open, transparent and non-discriminatory and that leads to impartial decision-making.[xii]
Whilst noting these potential justifications, the CJEU ultimately left it for the referring court in Madrid to decide whether FIFA’s and UEFA’s rules are justified.
F. Meca-Medina – a narrower scope of application
In the CJEU’s ruling in Meca-Medina (2006), it determined that anti-doping rules adopted by the IOC did not come within the scope of EU competition rules, even though the rules restricted athletes’ freedom and had an effect of restricting competition. This followed a line of case-law which provides that conduct will not constitute an illegal restriction of competition if it is justified by the pursuit of legitimate objectives, it is genuinely necessary to achieve those objectives and any inherent restrictive effects that result from such conduct do not go beyond what is necessary.
The application of this caselaw in the context of sports associations was viewed as a landmark decision. However, in the ESL and ISU cases, the CJEU has clarified that the Meca-Medina (and associated) caselaw does not apply to conduct that reveals such a degree of harm that it must be classified as an inherent, “by object” prevention, restriction or distortion of competition.
This interpretation narrows the scope of the Meca-Medina caselaw for SGBs. In the future (and contrary to what had previously been thought), if a decision or rule of a SGB is challenged as being anti-competitive, it must first be determined if it constitutes a “by object” infringement, as opposed to a “by effect” infringement. It is only if it is the latter, that the Meca-Medina framework may apply.
The recent Rule K arbitration in the UK concerning the FA’s National Football Agent Regulations adopted the here-to established approach of first considering if the rules in question fall outside the scope of the relevant competition law framework on the basis of the principles set out in Meca-Medina. It was only when the tribunal determined that they did not, that it considered whether those rules constituted a restriction of competition “by object” or “by effect”.
Whilst the CJEU’s ESL ruling will not automatically change the position in the UK, it will no doubt provide scope for argument in future cases.
G. Other observations
- Whilst not new, the cases are a reminder that SGBs should, as a general rule, act as though they hold a dominant position in relation to the organisation of the particular sport which they govern. Whilst there may be exceptions to this rule in some instances, it is likely to be the case for many SGBs and good practice to act in that way in any event to avoid inadvertently engaging in conduct which infringes competition law.
- The CJEU disagreed in several respects with the opinions of the Advocate General in these two cases (which were delivered in December 2022), including in relation to the AG’s view that the “special characteristics of sport” may be relevant for assessing any justifications for restrictions on competition. The CJEU stated that the relevant article of the EU treaty – Article 165 TFEU – does not have general application and does not cut across other provisions of the treaty, including those relating to competition law.[xiii]
H. Impact for UK SGBs
Judgments of the CJEU that are delivered after Brexit no longer have binding effect in the UK, so these findings will not automatically apply to UK courts or arbitral bodies, or in respect of conduct that has effect in the UK. However, the applicable competition law rules in both the EU and UK remain closely aligned, so the CJEU’s findings are likely to be at least persuasive before UK courts and arbitral bodies and to the Competition and Markets Authority (the UK’s competition regulator), and will almost certainly be deployed by claimants in UK proceedings.
It is also clear that the matters ruled on by the CJEU in the ESL and ISU cases regularly arise in UK proceedings, including in the recent arbitral decisions concerning: (i) the DP World Tour sanctions against certain golfers who signed for LIV Golf; and (ii) various football agencies’ challenge against the implementation in the UK of the FIFA Football Agents Regulations (referenced above).
I. Final thoughts
These are significant judgments, whose importance extends beyond football and skating. They are also somewhat surprising given that they go against the findings of the Advocate General a year earlier.
There is much for SGBs to be aware of and consider within them, in particular in relation to the framework that applies to any prior approval, eligibility or participation rules that they adopt and implement, and in relation to any mandatory arbitration rules that apply to disputes concerning the SGB’s rules and decisions.
The cases also give rise to the prospect of the establishment of, and the participation by clubs and athletes in, alternative or competing competitions not organised or marketed by the SGB itself, albeit ones that respect equal opportunities and sporting merit. Far from being the end, this is likely only the beginning of significant challenges to the established order so it makes sense for SGBs to ensure their own rules and regulations are as defensible as they would wish them to be.
[i] The Chapter I and Chapter II prohibitions under the UK Competition Act 1998 (concerning anti-competitive decisions of associations and abuses of a dominant position respectively) have a large degree of overlap with the equivalent EU prohibitions codified in Articles 101 and 102 TFEU.
[ii] Para. 144 of the ESL judgment
[iii] Para. 142 of the ESL judgment
[iv] Para. 176 of the ESL judgment
[v] Para. 196 of the ESL judgment
[vi] Para. 147 of the ESL judgment
[vii] Para. 148 of the ESL judgment
[viii] Para. 151 of the ESL judgment and paras. 133 – 134 of the ISU judgment
[ix] Para. 184 of the ISU judgment
[x] Paras. 190 – 198 of the ISU judgment
[xi] Paras. 129 – 130 of the ESL judgment
[xii] Paras. 232, 234 and 240 of the ESL judgment
[xiii] Para. 100 of the ESL judgment