Sport Meets Antitrust: Should monopolistic structures in European sports be questioned?

The ESL case

In the ESL case, European football's governing body UEFA is facing accusations from the organisers of the failed ESL alleging that UEFA blocked rival football competitions in Europe in an anti-competitive manner. Most readers will recall the uproar that arose in April 2021 when it was announced that twelve of Europe's top clubs were planning to establish their own breakaway league, the ESL. The ESL was intended to compete with the UEFA Champions League, which has long been established as the pinnacle of European football. However, readers will also recall that the clubs' ESL ambitions were quite short-lived. After strong reactions from fans and announcements from FIFA and UEFA (based on their statutes) to exclude clubs and players who would have participated in ESL from their competitions, clubs began to withdraw until the project was put on hold just days after it was announced.

But not all clubs were dissuaded. Those that stayed took legal action in a Spanish court, claiming that UEFA's measures violated EU competition law. The Spanish court referred the case to Europe's top Judges, who must now rule on the case. The question to be answered is whether UEFA's measures could potentially constitute an abuse of market dominance, thus violating EU competition law, or whether they may be justified. For answering this, it is important to know that European sport is traditionally structured according to the single-association principle, i.e. there is one governing body per sport and region, resulting in a pyramidal structure of sports associations ranging from regional to global. Sports associations are primarily responsible for enforcing sporting rules and conduct. Conflicts arise, however, when these associations are also involved in the organisation of sporting events and leagues such as the UEFA Champions League.

The parties' positions

According to ESL's arguments before the CJEU, UEFA's dual role as governing body and league organiser leaves it with a conflict of interest that results in the association blocking any attempts to establish competing sporting events. Therefore, it has been suggested that UEFA's management function and its role as organiser of sporting events should be separated. A similar solution was mandated by the European Commission ("Commission") in the early 2000s with the separation of the organisation and exploitation of the Formula One World Championship from the governing functions of the FIA, the international motorsport governing body.

UEFA, on the other hand, argued that the association structure protected the sport and ensured, among other things, grassroots funding, which was essential to maintain the benefits of sport for society. Its lawyers stated that there was no need to divide the regulatory functions and economic activities. They explained that UEFA's functions were "subject to restrictions, obligations and review" that enabled the dual role.

Further, UEFA's lawyers claimed that the ESL constituted a cartel itself due to its setup of a partially closed league. Under the plan proposed in April 2021, 15 founding clubs would have been given a permanent place in the league, with five additional spots open to other qualifiers. Such a league would not be compatible with the European Sport Model – that fans also want to see protected – and sporting value, according to UEFA, which advocates open competition. Concerns are that a closed competition, with the continent's top teams sharing all the revenue among themselves, would harm less successful clubs, national competitions and the sport's grassroots.

This will probably be the decisive factor in the proceedings. ESL argues that the interests of the sport could also be looked after by private companies, with ESL planning a revenue redistribution system that goes beyond UEFA's current efforts. UEFA, by contrast, believes that its special position is justified by its role in the pyramidal structure of the associations.

The EU Member States' and the Commission's positions 

During the two-day hearing, many Member States expressed their support for UEFA – as they had done previously –, stressing that the association's work was essential in supporting the grassroots structure of football. Member State representatives stressed that the values of solidarity and inclusion were particularly important for smaller countries. They also voiced concerns that allowing a closed competition would impair opportunities for minor clubs and exclude them from playing at the European level. 

Some Member States considered that ESL's closed league model could itself constitute a cartel and opposed the separation of UEFA's regulatory and economic activities, arguments also put forward by UEFA (see above).

The Commission acknowledged that associations should have a right to sanction rival events to the extent "necessary and proportionate" to protect the values of European sport.

The Judges' questions

In the final phase of the ESL hearing, the Judges' questions focused on the financial support that the ESL intends to provide to grassroots footballers in the Member States in order to level up with UEFA's current system, the closed nature of the planned league and the possibility of separating UEFA's functions. ESL representatives reiterated the ESL's "voluntary commitment" to support football under independent supervision and stressed that ESL was not planning a closed league but a "platform". 

Also, questions were raised as to whether the UEFA and FIFA statutes fell within the scope of EU competition law and what exactly the "sporting exemption" implied by the Commission was.

The ISU case

The ISU case, which was heard by the CJEU Judges immediately before the ESL case, concerns the compatibility of the ISU's eligibility rules with EU competition law. The eligibility rules allowed the ISU to exclude athletes participating in speed skating competitions not approved by the association from taking part in ISU events. In 2014, two professional speed skaters planned to participate in a new type of speed skating event hosted by a private company that was not approved by the ISU. Faced with exclusion from major ISU competitions, the athletes filed a complaint with the Commission claiming that the eligibility rules restricted competition by limiting athletes' ability to freely participate in speed skating events and depriving third-party organisers of athletes' services. Both the Commission and the General Court ("GC") decided in favour of the athletes and ordered the ISU to discontinue its pre-authorisation system. They had considered the lifetime bans provided for in the eligibility rules to be disproportionate and criticized the lack of objective, transparent selection criteria for rival events.

Similar to the ESL case, ISU lawyers argued that the eligibility rules and the corresponding pre-approval of competing events were justified to preserve the integrity of the sport. The rival event in question was based on betting models that, in the ISU's view, were not compatible with the principle of integrity.

The skaters’ side advocated for a separation of ISU's regulatory and organising functions and the Commission argued that the ISU's eligibility rules went beyond what was necessary to protect the integrity of the sport.

Outlook

Both cases centre on a potential conflict of interest between a sports association's monopolistic role as a governing body and as an organiser of sporting events. This particular conflict as well as disputes between sports associations and private organisers in general seem to be gaining more and more importance. This can be seen, for example, in the fact that new disputes are emerging in the same haze.

Shortly after the hearings discussed here, for instance, it became known that UEFA has been confronted with another competition complaint related to its rules for authorizing new competitions. A Luxembourg football club has initiated proceedings before a national court. It claims that UEFA's refusal to authorise cross-border leagues is affecting its growth prospects and violates EU competition law.

A similar scenario is currently unfolding in golf, where the incumbent professional tournament organiser, the PGA, is being challenged by a new operator. The newcomer, backed by considerable financial resources, offered professional golfers generous rewards for joining its rival league. The PGA in response reportedly tried to discourage "its" golfers from participating in the competition with suspensions and threats, showing clear parallels to the UEFA and ISU approaches described above.

In all these cases, the challenge is to reconcile legitimate sporting needs with the basic rules of competition law, and to find a balance between sport as a societal institution and as an economic driver. Therefore, the Advocate General's non-binding opinion in December 2022 and the CJEU's decisions next year in the above CJEU cases are eagerly awaited, as they could do no less than steer the future of European sport in a new direction.

Authored by Christian Ritz, Dennis Cukurov and Frederik Junker.