Source: https://harvardjsel.com/2016/03/influence-of-the-private-enforcement-of-competition-law-on-sport-in-the-european-union-against-the-united-states-law-background/
Timestamp: 2019-04-25 20:16:26+00:00

Document:
This commentary piece was written by Dr hab. Marek Krzysztof Kolasiński, professor at Nicolaus Copernicus University in Toruń, and was submitted in conjunction with Professor Kolasiński’s recent interview with JSEL which can be found here.
Private enforcement of competition law is a relatively new phenomenon in European Union law. However, there is a clear tendency towards its enhancement. Adopting the Directive 2014/104/EU of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union is of particular importance.
Strengthening the role of individuals in competition law enforcement in the EU could significantly change the landscape of European sport. It would particularly decrease the role of cooperation between the European Commission and international sport associations, which is currently of vital importance.
There is a risk that enhancing private enforcement of competition law will especially disturb the European sport system until the case law is settled. To diminish it, one can look at the rich experiences in the United States, where almost all antitrust sport cases are private, and consider the possibility of applying them to the European Union legal system.
European Union (European Community) competition law has been effectively applied to sport since the mid-seventies. The best-known outcome of it was remodeling the basis of the athletes’ transfer system. The European Commission has proved to be very efficient in this area.
However, broadly speaking, in recent years the European Commission has been careful in order to avoid the over-enforcement of competition law in sport. For example, as C. Davies noted, the European Commission “accepted that football was a special case and should not be subject to a month’s termination clause”. The European Commission seems to be particularly reluctant to enforce competition law standards in cases which are less related to the European Union internal market freedoms. Its attitude in the Meca-Medina case is characteristic. Contrary to a subsequent Court of Justice judgment, the European Commission took a position that the issue of anti-doping rules did not fall within the scope of European Union competition law.
The European Commission’s hospitality towards the FFP reached its highest level in the decision of 14 October 2014 adopting the Arrangement for Cooperation between the European Commission and the Union of European Football Associations (UEFA) . According to point 2.6 thereof “financial solidarity between elite sports and grassroots, but also among clubs of all sports at the professional level, is important in maintaining long-term financial viability and competitive balance, thus also protecting the integrity of sporting competitions. In this respect, redistribution mechanisms concerning, for example, audiovisual media revenues and training compensation fees should be recommended, in accordance with the EU acquis.” The European Commission also expressed an opinion that “financial stability, transparency and better governance within sport can be pursued through responsible self-regulation. In this respect, and subject to compliance with competition law, measures to encourage greater rationality and discipline in club finances with focus on the long-term as opposed to the short-term, such as the Financial Fair Play initiative, contribute to the sustainable development and healthy growth of sport in Europe” (point 2.7).
Thanks to the European Commission’s balanced approach, the activity of sport associations, leagues, teams and other organizers of professional sport has not been significantly disturbed over the last few years by competition law scrutiny. Things are changing now because private enforcement of European Union competition law is being enhanced. The risk of over-enforcement of competition law in sport seems to be much clearer now than it was a few years ago. Some opinions which are currently expressed go in the direction of a very far-reaching competition law scrutiny of sport.
It is particularly apparent that the role of non-binding agreements between the European Commission and international sport associations will be diminished. The same can be said about decisions making the commitments offered by undertakings to meet the concerns expressed to them by the Commission, binding (Article 9 of Regulation 1/2003). This is due to the fact that neither of them can deprive private parties of the possibility of enforcing competition law to practices which are the subject of such agreements or decisions in a private procedure. Motion 13 of Regulation 1/2003 states that “commitment decisions should find that there are no longer grounds for action by the Commission without concluding whether or not there has been or still is an infringement. Commitment decisions are without prejudice to the powers of competition authorities and courts of the Member States to make such a finding and decide upon the case.
It is justified to say that the fact that the European Commission has approved UEFA Financial Fair Play Regulations is of limited importance today. Moreover, its importance will be further reduced along with progresses in strengthening private enforcement of competition law. This conclusion is reinforced by the fact that the problem of the relationship between competition law and FFP has been examined by Belgian courts in a private case.
National courts may show less understanding to the necessity of protecting financial long-term rationality and discipline in football at the cost of limiting competition to the detriment of the current football teams’ business partners. It seems that the natural consequence of adopting FFP will be to limit clubs’ spending. This must result in cutting their business partners’ income. Further doubts arise from the fact that FFP has reduced the possibility of strengthening the position of clubs with borrowed money. This solution has important advantages, but at the same time it makes challenging the leading position of the currently strongest teams more difficult too. It is very difficult to draw a clear line between clubs’ legal efforts towards “financial stability” by “responsible self-regulation” of football associations, and anticompetitive collusion.
It looks as if the rules of competition law scrutiny of sport activity in the European Union are becoming similar to the United States standards. In this country, most of conflicts related to sport are resolved under privately enforced antitrust law. Note that the United States Federal Trade Commission and the Department of Justice have hardly ever enforced antitrust law in sport.
In the United States, non-statutory antitrust exemption is the crucial legal construction thanks to which leagues are able to follow a policy of competitive balance. To give a very general picture of it, one may point out that in the first years after the basis of the US antitrust had been passed ,courts, contrary to the intention of Congress, used antitrust law to proscribe union activity. That line of case law did not change even after passing “sections 6 and 20 of the Clayton Act (in 1914), which Congress intended to be a statutory exemption from the Sherman Act for the unions.” Statutory legal exemption for unions was recognized only after Congress had passed the Norris-LaGuardia Act and the judgment in the Apex Hosiery Co. v. Leader case had been rendered.
“an agreement struck by the union with an employer is exempt from antitrust liability regardless of whether the agreement was with a single employer or with multiple employers, as long as the bargaining was at arm`s length”.
According to Peter Carfagna’s observations, “after the double blow of Smith and Mackey, the NFL realized that it needed the protection of non-statutory labor exemption and would have to collectively bargain for its desired set-up with the NFLPA in order for the current NFL practices to survive antitrust scrutiny”.
The scope of non-statutory labor exemption is ambiguous. However, one may seriously doubt if it would be possible to effectively apply the draft system or other solutions ensuring competitive balance without it.
In Drijvende Bokken BV , the Court of Justice confirmed the correctness of legal findings presented in the Albany judgment. It was particularly emphasized that the agreement was derived from social dialogue between employers and workers and had a form of collective agreement. The Court stressed also the fact that the agreement was to improve the working conditions.
In the EU Member States, the legal status of athletes often does not entitle them to be a part of the formally understood collective bargaining agreements. Nevertheless, the mere fact that in particular situations athletes are not allowed to bargain collectively for reasons arising from labor law should not automatically deprive them, clubs and leagues of all advantages of relaxing competition law scrutiny for social reasons. To support this point of view, one may mention the fact that the EU attitude to relationships between competition law and collectively bargained agreements is based on functional interpretation. There are no statutory obstacles to the possibility of equalizing deals concluded by athletes associations which do not have the status of collectively bargained agreements with narrowly understood collectively bargained agreements, if they fulfill the same functions. Emphasis should be put rather on functions fulfilled by such agreements than on their legal status.
For the purposes of comparison, note the Australian experiences. Prior to 2006 “collective bargaining was not available to non-employed workers who were economically dependent on the sale of their labor (for example, independent contractors and self-employed persons) as a tool to improve their working conditions.” That situation was disapproved of by the Dowson Report – the Review of the Competition Provisions of The Trade Practice Act. The main conclusion of that paper is a thesis that non-labor collective agreements “could generate public benefits”.
It can be inferred from the Australian experiences that the attitude to relationships between competition law and collective labor agreements should not be too formalistic. The fact that a contract has a form of a collective agreement recognized by labor law should be taken into account when determining the scope of competition law scrutiny, but at the same time it should not be overestimated.
The major obstacle to using collectively bargained agreements in European Union sport in a manner similar to the American one is of a functional nature. One may doubt if the real purpose of the United States collectively bargained agreements in sport is always or usually “improving employment conditions”. It seems that they rather decrease athletes’ wages and deprive them of the advantages which they could expect from the effectively functioning competition mechanism.
The above problem can be illustrated by examining the history of the NFL players’ struggle for contractual freedom. It should be stressed that they used arguments taken from antitrust law and questioned the restrictions on changing clubs. On the other hand, the core strategy of the employers – i.e. of the NFL clubs – was to invoke collective bargaining labor agreements which they entered into with the players’ union (NFLPA). In those cases, the employees had to abandon the bargaining role of their labor organization and “restructure the Union as a voluntary professional association to act on behalf of former and active NFL players using methods other than collective bargaining” in order to avoid the employers’ argument that restrictions on the employees’ contractual freedom were protected from the antitrust scrutiny as a non-statutory labor exemption. Finally, mainly thanks to antitrust law, players succeeded in improving their working conditions.
When analyzing those cases, it should also be kept in mind that the European system of collective labor agreements is different from the American one, and in most European countries such far-reaching restrictions on workers’ contractual freedom as those imposed on NFL players would probably be considered invalid under labor law.
It is justified to say that different standards of antitrust scrutiny are applied to collective bargain agreements in the United States and in the European Union. American non-statutory labor exemption provides a much more efficient protection for teams’ owners against antitrust attack than similar legal construction could offer them in the European Union.
However, the fact that restrictions on competition were accepted in the process of fair negotiations between social partners should be taken into account in the European Union competition law scrutiny. This can be particularly meaningful in cases of limiting competition within relatively small and weak leagues. Athletes who represent teams belonging to them are often in danger of suffering harm as a result of clubs’ bankruptcy. Polish speedway “Ekstraliga” is a good example of it. Despite the fact that speedway is very popular in Poland, after the 2014 season, two out of eight clubs belonging to “Ekstraliga” were deprived of licenses because of financial problems, and some riders weren’t paid their remuneration. That was mainly due to an uncontrolled race for top athletes. To make things worse, serious injuries are not rare in the speedway industry and sportsmen are provided hardly any support if they have been affected. An agreement between the riders’ association and clubs in which the former would accept some “competitive balance” solutions in exchange for financial stability and reliable insurance would be reasonable and should be treated leniently in competition law scrutiny.
As it was previously mentioned, private enforcement of competition law can lead to disturbances in sport activity. Arbitration is an interesting way of reducing them .
One may expect that specialized arbitrary tribunals will show more understanding to the socio-economical specificity of sport and will apply competition law to sport in a relatively predictable way. However, it should be emphasized that arbitrary clauses are binding only on its parties. As a consequence, they have no effects on public enforcement of competition law.
It should be further stressed that potential abuses of the arbitrary dispute resolution system can be a subject of competition law scrutiny. The creation, by a league, of a biased system of arbitration to make the possibility of private enforcement of competition law by athletes illusory could be considered a violation of Article 102 TFEU. The German Higher Regional Court (Oberlandesgericht) has established high standards of neutrality for sport arbitration in the Pechstein case.
Please note that in the United States very broad, mandatory arbitrary clauses are part of standard contracts concluded with players in all big leagues.
The unpredictability of the effects of private enforcement of European Union competition law in sport, especially until the case law is settled, could be very problematic to sport leagues and their business partners. For example, doubts about the risk of violating competition law could decrease the value of TV rights packages sold by leagues.
Sometimes one may avoid or limit the negative effects of the uncertainty about the results of competition (antitrust) law scrutiny by filing a request for a declaratory judgment. As emphasized in point 3.4 of this paper, it was an issue examined in the United States v. NFL (NFL II) case.
In the European Union, declaratory actions can be particularly convenient. The differences in the effectiveness of private enforcement of competition law between the European Union member states are significant. This encourages forum shopping on a wide scale. It can sometimes be the best solution for a sport league to file a request for a declaratory judgment in the court of a member state whose legal system is not particularly enthusiastic about the idea of private enforcement of competition law. The possibility of applying this tactic was confirmed by the Court of Justice in Folien Fischer AG, Fofitec AG v. Ritrama SpA.
It should also be kept in mind that there are some legal constructions specifically tailored to ensure the homogeneity in interpreting EU law. It is necessary to take advantage of them in sport cases which are privately enforced under competition law. The preliminary reference procedure is of particular importance.
Thanks to the single entity defense, leagues tried to avoid antitrust liability under section 1 of the Sherman Act, which was regarded to be stricter than liability under Section 2. Basically, now the defense is not effective for sport leagues any more. However, it should be stressed that in Chicago Professional Sport Ltd.v. National Basketball League,the Seven Circuit stated that a sport league can be treated as a single firm in the broadcasting market. It was emphasized that a sport league produces a single product and that cooperation between teams is essential. The court considered that “in order to determine whether a unity of interest exists, courts should analyze a sport league on case-by-case basis, one facet at a time”.
The majority of the United States courts have been taking a different position and continued to rule “that sport leagues are not single entities”. Judgments in cases McNeil v. National Football League and Sullivan v. National Football League are good examples of it. Currently, the possibility of using antitrust single entity defense even by a very centralized Major League Soccer is doubtful. It also seems that nowadays antitrust liability under section 1 of the Sherman Act is not much stricter than liability under section 2.
Currently, the single entity defense is of a very limited value in sport cases in the United States and is of no use in the European Union. It should be stressed that in the European Union, the concept of undertaker, which is crucial for Articles 101 and 102 TFEU, is purely functional and the legal status of clubs is of a little meaning.
Moreover, excluding Article 102 TFUE from legal bases of clubs’ and leagues’ liability under competition law would not have significant influence on competition law scrutiny standards. In the European Union, it would be pointless to make any attempts to persuade courts that clubs are single entities. Even if teams were successful, it would not give them any competitive law advantage.
In the United States the most important antitrust statutory exemption was introduced by the Sport Broadcasting Act (SBA) of 1961. To outline the current role of this regulation, it is useful to present its legal history.
The marketing strategy of the NLF was further undermined in the NFL II. The league “petitioned the United States District Court for the Eastern District of Pennsylvania to construe NFL I to allow its contract with CBS. Because the CBS-NFL contract prohibited teams from selling broadcasting rights for their own games to any other television network, the court found that the NFL violated NFL I decision. The NFL`s restriction on its member teams, which eliminated all competition for the sale of broadcasting rights, was an unreasonable restriction of trade”.
Peter Carafagna underlines that the Act “applies only to television broadcasts, not cable, satellite or internet, or other new media broadcasts”. Moreover, the exemption covers only four sports and section 2 of the Sherman Act is entirely beyond its scope.
There are doubts about how the SBA should be interpreted. However, the general idea that the exemption should be read narrowly is accepted. The legal situation could have been clarified in the Shaw v. Dallas Cowboys Football Club, Ltd.  case, but the NFL decided not to use that opportunity and reached a settlement. It should also be mentioned that an argument for revoking the statutory antitrust exemption was used to put sports leagues under pressure not to limit the availability of watching sport events.
Competition (antitrust) law is mainly about efficiency and consumer welfare. If it is intended to limit the scope of pursuing these goals to promote other values in sport, passing statutory legal exemptions in the European Union is necessary. The necessity of developing some antitrust exemptions for sport in the European Union seems to be more urgent than in the United States. This is due to the fact that the legal system of the latter has a more established case law.
The US experiences in applying antitrust law to sport are valuable from the European Union point of view. However, it would not be proper to simply copy solutions accepted in the United States into the EU legal system. Private enforcement of competition (antitrust) law in sport should be analyzed against a broad socio-economical background, which is significantly different on both sides of the Atlantic. Nevertheless, the structure of the tension existing between competition (antitrust) purposes and indispensable cooperation between teams forming a league is similar in the European Union and in the United States.
 See Anneli Howard, The Draft Directive on Competition Law Damages – What does it mean for infringers and victims?, 35 (2) European Competition Law Review 52 (2014); Commission staff working document. Impact assessment report. Damages actions for breach of the EU antitrust rules Accompanying the proposal for a Directive of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, Strasburg 11.6.2013, SWD (2013) 203, p. 15.
 Chris Davies, Football`s Transfer System Post-Bosman: Freedom of movement for players versus football`s financial future?, 35 (1) European Competition Law Review 9 (2014). See also Chris Davies, Labour Market Controls and Sport in Light of EUFA`s Financial Fair Play Regulation, 33 (10) European Competition Law Review 438 (2012).
 See Romano Subiotto, The Adoption and Enforcement of Anti-Doping Rules Should Not Be Subject To European Competition Law, 31 (8) European Competition Law Review 323 (2010).
 Joint Statement by Vice-President Joaquín Almunia and President Michel Platini, 21 March 2012, http://ec.europa.eu/competition/sectors/sports/joint_statement_en.pdf.
 See Leanne O`Leary, “If it moves out there, we sell it”: Super League and the intellectual property of rugby league players, 32 (4) European Competition Law Review 185 (2011).
 See Chris Kerse & Nicholas Khan, EU Antitrust Procedure, 323, 379 (sixth ed. 2012).
 See Commission Notice on the handling of complaints by the Commission under Articles 81 and 82 of the EC Treaty, OJ 2004 C 101/65; Ignace Maselis & Hans Gilliams, Rights of Complainants in Community Law, 22 (2) European Law Review 111 (1997); Bemim v. Commission  ECR I-2181.
 The Sherman Act was passed in 1890.
 Jeffrey Hoffmeyer, Fourth Down and an Appeal: The Nonstatutory Exemption to Antitrust Law in Clarett v. National Football League, 13 Sports Lawyers Journal 195 (2006).
 Hoffmeyer, supra note 20, at 196.
 Smith v. Pro Football, Inc, 593 F.2d 1173 (D.C. Cir. 1978).
 Mackey v. NFL, 543 F.2d 606 (8th Cir. 1976).
 Peter Carfagna, Sports and the Law. Examining the Legal Evolution of America`s Three “Major Leagues”, 82-83 (2nd ed. 2011).
 Shae McCrystal, Collective Bargaining and the Trade Practice Act: The Trade Practice Legislation Amendment Act (No 1) 2006 (Cth), available at http://ssrn.com/abstract=1079872.
 Scott Backman, NFL Players Fight for Their Freedom: The History of Free Agency in the NFL, 9 Sports Lawyer Journal 30 (2002).
 See Jan Piątkowski, Uprawnienia zakładowej organizacji związkowej, 47-52 (1999).
 OLG München, Teil-Urteil vom 15. Januar 2015, Az. U 1110/14 Kart.
 See Carfagna, supra note 32, at 46-47.
 See Katrin Lefever and Robin Kerremans, Football on (Must-) Offer, 32 (12) European Competition Law Review 621 (2011); Bill Bathelor and Tom Jenkins, FA Premier League: The Broader Implications for Copyright Licensing, 33(4) European Competition Law Review 157 (2012); O`Leary, supra note 12, at 185.
 196 F. Supp. 445 (E.D. Pa. 1961).
 See. Stephen Wisking, Kim Dietzel and Mally Herron, European Commission finally publishes measures to facilitate competition law private actions in the European Union, 35 (4) European Competition Law Review 193 (2014); Howard, supra note 1, at 52.
 See Fiona Shevill, Ixora Trading Inc., Chequepoint SARL and Chequepoint International Ltd v. Presse Alliance SA.,  ECR I-415; Handelskwekerij G. J. Bier BV v. Mines de potasse d’Alsace SA.,  ECR 1735; Jürgen Basedow, Jurisdiction and Choice of Law in the Private Enforcement of EC Competition Law, (in: ) Private Enforcement of EC Competition Law, ed. Jürgen Basedow, 250 (2007).
 See Nathaniel Grow, There`s No “I” in “League”: Professional Sports Leagues and the Single Entity Defense, 105 Michigan Law Review 185 (2006); Keith N. Hylton, Antitrust Law, Economic Theory & Common Law Evolution, 163 (2003).
 See Robert M. Bernhard, MLS` Designated Player Rule: Has David Beckham Single-Handedly Destroyed Major League Soccer`s Single Entity Defense?, 18 Marquette Sports Law Review 419 (2008).
 95 F.3d 593 (7th Cir. 1996).
 See Bernhard, supra note 52, at 420.
 See Grow, supra note 51, at 187. Masteralexis, supra note 27, at 632.
 See Grow, supra note 51, at 187.
 790 F.Supp. 871 (D.Minn 1992).
 34 F.3d 1091 (1st Cir. 1994).
 See Mark W. Lenihan, Major League Soccer Scores an Own Goal: A Successful Joint Venture Attains Market Power in an Internal Sport, 62 Depaul Law Review 889 and next (2013); Bernhard, supra note 52, at 431; Fraser v. Major League Soccer, 97 F. Supp. 2d 130 (D. Mass 2000).
 See Andrew I. Gavil, Copperweld 2000: The Vanishing Gape Between Section 1 and 2 of the Sherman Act, 68 Antitrust Law Journal 88 (2000); Phillip E. Areeda & Herbert Hovenkamp, Fundamentals of Antitrust Law, § 22.05d, 67-68 (third ed. 2004).
 15 U.S. Code § 1291.
 United States c. National Football League,116 F. Supp. 319 (E.D. Pa.1953).
 Ariel Y. Bublick, Are You Ready for Some Football?: How Antitrust Laws Can Be Used to Break Up DirectTV`s Exclusive Right to Telecast NFL`s Sunday Ticket Package, 64 Federal Communications Law Journal 231 (2011).
 Lacie L. Kaiser, Revisiting the Sports Broadcasting Act of 1961: A Call for Equitable Antitrust Immunity from Section One of the Sherman Act for all Professional Sport Leagues, 54 Depaul Law Review 1245 (2005).
 Carfagna, supra note 32, at 76.
 See Kaiser, supra note 65, at 1246, 1249, 1252.
 172 F.3d 299 (3d Cir. 1999).
 See Kaiser, supra note 65, at 1249, 1250.
 See Bublick, supra note 63, at 239.

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