Wednesday, June 19, 2024

DG COMP’s foresight enables EU Commission to come out on winning side in both sports antitrust cases heard by ECJ next week: European Superleague Company v. UEFA and International Skating Union v. European Commission

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This blog’s focus will remain on tech antitrust and IP cases. With only a few days to go until the European Court of Justice hearing that will presumably draw more media attention than any other in the ECJ’s 70-year history, and in light of the interesting role the European Commission plays in that context, an exception is warranted. Normally, however, I write about sports antitrust matters on LinkedIn:

On Monday and Tuesday, the ECJ will host a sports-related antitrust double-header (click on the image to enlarge):

  • Monday, July 11, 9:30 AM CEST: case no. C-124/21 P, International Skating Union v. Commission

    This is a further appeal from the EU General Court, which in December 2020 affirmed the most important part of a DG COMP decision: AT.40208, holding the International Skating Union’s (ISU) in violation of Art. 101 TFEU because it threatened athletes (who would otherwise have contemplated participating in a non-authorized speed skating contest in Dubai) with long-term sanctions, such as being excluded from the Olympic Games.

  • 2:30 PM CEST and continuing the following day: case no. C-333/21, European Superleague Company [v. UEFA & FIFA]

    This is the high-profile case I meant. The “European Super League” was announced in April last year as an attempt to form a breakaway football (soccer) competition, hoping to displace the UEFA Champions League. But resistance from fans and politicians was so overwhelming that it all fell apart within a couple of days. Three teams (Real Madrid (this year’s winner of the Champions League), FC Barcelona, and Turin’s Juventus FC) are still pursuing their “project” through litigation, hoping to be able to get other clubs interested in the event of an outcome favoring their plan. Shortly after the rebel clubs brought–through a company they control–an antitrust case with the Madrid Commercial Court No. 17, a trade judge asked the top EU court for a preliminary ruling on six questions relating to the interpretation of EU law in this context.

Both cases will be heard by the Grand Chamber (the President plus 14 other judges). This back-to-back scheduling is no coincidence: there is a certain overlap–either case is about the antitrust implications of sanctions against those participating in a sports contest not authorized by a traditional sports body–but the differences are far greater than the similarities. The Court is obviously aware of the potential for conflicting rulings, yet that risk is easily manageable.

At first sight one might think that the Commission is taking contradictory positions or applying dual standards as it

The Commission defends the rights of athletes participating in a non-authorized sports tournaments in ISU, and at the same time opposes the breakaway “Super League”. Odd as it may seem, there are perfectly valid reasons. The Commission may indeed get its way in both cases.

Those two cases do overlap to a limited extent, but above all, they are “false friends.”

With respect to my doubts about the merits and prospects of the “Super League” case, may I refer you to one of my LinkedIn articles. The focus here is just on the Commission’s role and DG COMP’s foresightful course of action.

When the Commission was investigating and then writing its decision in the ISU matter, it already knew that the shoe might seemingly be on the other foot next time around. The threat of a soccer breakway league had been lingering since at least the late 1990s. In 1998, 14 major teams founded the G-14 organization to present a united front vis-à-vis UEFA, which was a thinly veiled threat of taking matters into their own hands and setting up their own European soccer competition–unless certain demands would be met. For the next 20+ years, the threat resurfaced in different forms and on different occasions, but until last year, it was idle and never carried out: solutions were found through negotiations.

In 2007, I worked on a soccer antitrust matter a the EU. My client was Real Madrid, and FC Barcelona and AC Milan were our informal allies with respect to broadcasting rights. I won that battle for them all. The EU policy makers I was talking to at that time–EU Commission officials as well as Members of the European Parliament–were profoundly concerned about the possibility of a breakaway. 14 years later, those fears would be validated–and there was a sigh of relief after the “Super League” had gone down the tubes.

DG COMP believed that the International Skating Union had gone too far, but carefully sought to avoid unintended consequences. They wanted to go after the ISU but not act as a trailblazer for a breakaway soccer league, not knowing if or when–but full well aware that–it might happen at some point.

It doesn’t really take much to distinguish the two cases for factual, legal, and policy reasons.

What the ISU didn’t allow–a third-party off-season event–is actually done by soccer teams every year, particularly every summer. Real Madrid announced a 2022 summer tour with matches against FC Barcelona in Las Vegas, Mexico’s Club América at Oracle Park in San Francisco, and Juventus FC at the Rose Bowl (L.A.). UEFA and world soccer body FIFA won’t sanction them for playing those games–but the ISU potentially destroyed the careers of certain athletes for participating in a Dubai contest for a few days during a long break between seasons.

Art. 165 TFEU emphasizes the “specific nature of sport.” It must be taken into consideration when applying EU competition law, too (as the ECJ recognized more than a decade ago). It doesn’t make sense to treat (non-profit) sports bodies with their pyramidal structure like, for instance, digital gatekeepers. Sports bodies are not above the law, but the law must be applied reasonably–which sometimes means deferentially–to the professional sports sector.

Also, there’s a lot less money involved in other European sports than in football, but the outcome of the “Super League” case would impact the entire sector.

It’s about proportionality. Sports bodies do have a mandate to protect the integrity of their sports and their competitions–that’s also the Commission’s position. Now, on a case-by-case basis the question is whether a particular rule or other measure pursues a legitimate objective (which, again, the integrity of a sport is, as is the balance of competitions) and whether the rule or measure is inherent to the pursuit of that objective and proportionate to it. It’s the FRAND (fair, reasonable, and non-discriminatory) formula in that field.

DG COMP determined that the International Skating Union made disproportionate threats, considering that the Dubai race didn’t have the potential to undermine the integrity of the sport or of the ISU’s own competitions that take place at a different time of the year. That’s a completely different set of facts from the “Super League” case.

Footnote 376 of DG COMP’s ISU decision distinguished speed skating from soccer:

“The ISU notes that the Commission has in principle in UEFA Champions League accepted that at least for certain sports and in certain cases some form of cooperation amongst the participants is essential to ensure the good organisation of sport (ISU’s response to the SO of 16.01.2017, paragraph 86). However, that decision concerned the organisation of a competition in (professional) football, in which the requirements are different compared to speed skating, namely insofar as football players participate, throughout the year, in a great number of national and international club competitions as well as national team competitions. Such considerations do not apply in the same manner to speed skating, which is a winter sport with a long off-season going approximately from March to October every year. Moreover, in that decision the Commission considered that certain arrangements between competing undertakings (in this case, cooperation amongst football clubs to organise and commercially exploit a
football league) are restrictions of competition that can be individually exempted pursuant to Article 101(3) of the Treaty. The Commission therefore did not generally exempt all sports organisational rules from the scope of application of Union competition law.” (emphasis added)

It would be a highly plausible outcome if the Court of Justice explained in European Superleague Company certain circumstances in which a sports body lawfully levies sanctions on those participating in a non-authorized competition (safe harbor) while, in International Skating Union, drawing the line where restrictions are disproportionate and, therefore, contravene EU competition law.

Apart from those factual differences, we’re also talking about fundamental differences from a procedural and legal perspective:

  • In European Superleague it’s about guidance on the interpretation of EU law, at a stage where the Spanish court from which the preliminary reference originated has only held a pretrial conference. The ISU case, however, is at a stage where the appellant can only raise questions of law as all factual disputes were previously resolved by the EUGC based on a Commission decision. Given the limited scope of review at this final stage, it’s even possible that the ECJ could feel forced to affirm the EUGC despite potentially having a divergent opinion on some relevant facts.

    That is, by the way, the reason why it will be difficult for the Commission to appeal the EUGC’s recent Qualcomm judgment.

  • The questions raised by the Spanish trade judge (who by the way is not presiding over the case anymore) in the Super League case last year are abstract, and the answer to each of them will most likely be: “It depends.” In the ISU case, however, there is a specific finding of a violation of competition rules to be adjudicated.

  • The ISU’s second plea relates to gambling, which is not at issue in the “Super League” case.

  • The Commission based its ISU decision entirely on Art. 101 because of a lower hurdle for proving a restraint of competition (in that case, by object, i.e., without having to prove particular effects). The preliminary reference in European Superleague involves Art. 101 as well as Art. 102.

The Commission is more likely than not to be in good shape on Monday in the ISU case. In the “Super League” case, both sides will likely face some tough questioning from the judges, but I believe the ECJ will not allow itself to be weaponized against the European Sports Model. The Commission can win both cases, the first one (ISU) as a party, the second one (“Super League”) as a political ally of UEFA. And it has the right of initiative: it could propose legislation to reconcile conventional EU competition law (particularly Art. 101 & 102) with Art. 165, which recognizes the specific nature of sport.

I’m going to be watching the webcast on the Court’s website, and I look forward to tweets from those attending the hearing in person, such as Lewis Crofts of MLex.

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