A hattrick for EU competition law

The world of modern professional sports is a high-stakes business arena. Here, the playing field is not just grass and goals, but also the complex legal pitches where sports rules meet EU competition law. This intersection has sparked intriguing debates about the extent to which sports associations’ regulations can coexist with antitrust principles without stifling the essence of sports competition. The CJEU’s judgments of 21 December 2023, in the cases of International Skating Union (ISU), European Super League (ESL), and Royal Antwerp FC collectively illustrate that sports, while unique, cannot escape the grasp of competition law. In essence, the CJEU makes one thing clear above all: Thoroughly commercialized professional sport is, on the part of all stakeholders, entrepreneurial activity. There will still be room to take the special features of sport and its organization into account. However, as this “organization” in the current European Sport Model regularly amounts to the monopolization of competition organization and marketing by the (global) associations at the top of the international organizational pyramid, the corresponding set of rules must satisfy a specific list of criteria to be compatible with EU competition law.

Three’s a charm – the rulings in a nutshell

A new playbook – the ESL case (C-333/21)

In 2021, a rebel team of 12 top European football clubs formed the ESL, intending it to run as a parallel event to existing FIFA and UEFA tournaments. However, the company behind ESL did not seek prior approval from FIFA and UEFA, a requirement stipulated in the associations’ rule books, leading to a conflict. The associations responded by threatening sanctions against teams and players participating in the ESL, prompting the ESL organizers to challenge this in the Madrid Commercial Court, citing anti-competitive behavior. Advocate General Rantos, in December 2022, advised that the rules were in line with EU law, necessary to maintain the sport’s integrity and competition structure. He emphasized the European Sport Model and its pyramid structure, open competitions, and financial solidarity. Akin to a last minute goal, however, the CJEU now blew the whistle on FIFA and UEFA, ruling that they had indeed abused their dominance by arbitrarily banning football clubs from forming a new league, violating EU competition law. In opposition to the Advocate General, the court found that the associations’ rules lacked a transparent, objective, non-discriminatory, and proportionate framework. In that regard, the CJEU’s emphasis was less on Article 165 TFEU, the anchor provision of the European Sport Model, and more on the need for a fair regulatory framework which associations need to apply – a requirement rooted in EU competition law.

Teetering on the (b)rink – the ISU case (C-124/21 P)

In an appeal procedure, the CJEU confirmed the European Commission in its critical view of the rules of the ISU. The ISU on the one hand regulates figure and speed skating but on the other hand also organizes international ice-skating tournaments. The ISU’s regulations curtailed figure skaters’ opportunities to participate in competing events (i.e., those not organized by the ISU) under threat of lifelong bans. Again, as in the ESL case, contrasting with the view of Advocate General Rantos, the CJEU ruled that the ISU’s sanctioning rules for athletes participating in unauthorized events indeed violate EU competition law. It also in part disagreed with the General Court’s 2020 ruling, finding the ISU’s arbitration rules to reinforce the infringement of competition law constituted by the ISU’s “eligibility rules” and their threat of bans.

Care for some “home-grown”? The Royal Antwerp FC case (C-680/21)

In the Royal Antwerp FC case, the referring Belgian court asked the CJEU whether Article 101 TFEU precludes a UEFA rule which obliges football clubs to include in their team a minimum number of so-called home-grown players who have been trained by a club or by the national football association to which the club belongs. However, Advocate General Szpunar did not comment on this issue when he delivered his opinion in March 2023. Instead, he focused on the permissibility of the UEFA regulation under Article 45 TFEU (the free movement of workers). And again, the CJEU takes a different route, highlighting that the rules in question may indeed fall foul of EU competition law and Article 45 TFEU. While acknowledging possible justifications for these rules if they are aimed at achieving a non-economic objective and the restrictions imposed are necessary and inherent to attain that objective, the referring Belgian court will have to assess whether that is actually the case. According to the CJEU, the rules will only stand the test of EU competition law, if it is established that they systematically and consistently ensure the objective of encouraging the recruitment and training of young professional football players at the local level (a goal acknowledged by the court in recognition of Article 165 TFEU) and do not exceed what is necessary for achieving that objective.

What do you say, ref? The common thread in the court’s reasoning

Business or pleasure? Usually presented to foreign travelers at border control, this question is decisive for the application of antitrust laws to today’s sports landscape: Are the agreements made between stakeholders in the sports sector about fair play and the love of the game, or do they boil down to cold, hard business transactions, i.e., an “economic activity” in EU competition law jargon?

The position of the CJEU is, in all three decisions, very clear. The court clarifies once again that, despite Article 165 TFEU, according to which the EU “shall contribute to the promotion of the European dimension of sport, taking account of its specific characteristics”, there is no general exemption from competition law for the sports sector. Only regulations that were adopted exclusively for non-economic reasons and relate to issues that are of interest exclusively to sport as such are to be regarded as being outside any economic activity, and thus irrelevant for antitrust. While the CJEU acknowledges that sport has legitimate special features, including the existence of associations with their own regulatory, control and sanctioning powers, the judges also underscore that these statutes, too, must be assessed under competition law if they concern economic matters. And things like the existence and organization of sports competitions or the eligibility of professional athletes to participate in such competitions can indeed be economic matters which are then not only to be measured against the applicable fundamental freedoms of EU law (in particular Article 45 TFEU) but must also comply with EU competition law. This is made particularly clear in the Royal Antwerp FC case, where the CJEU assesses the application of competition law in parallel to a possible violation of fundamental freedoms; the Advocate General had been silent on the latter.

What’s more, the ESL case illustrates that substantively, the applicability of “antitrust” extends to the whole range of competition rules of the Treaty. With regards to the association regulations concerned here, this means that both Article 101 TFEU and Article 102 TFEU have a role to play. That is due to the fact that the associations are not only an “association of undertakings” within the meaning of Article 101 TFEU but can also be regarded as a dominant undertaking due to the special features of the organization of sports in the European Sport Model (ESL, paras. 115 et seq.; ISU, para. 93). As the structural embodiment of the European sports organization, a pyramid of which they are the tip, sports associations are on the one hand granted fundamental statutory autonomy – they are allowed to shape the interests of their sport with their own rules – but on the other hand they are, in economic terms, de facto monopolists. And in an increasingly commercialized world of sports, it is inevitable that many of the associations’ rules also affect the commercial interests of the association members and/or third parties.

This puts sports associations in a tight spot. According to the CJEU’s pre-Christmas hattrick, the solution to this dilemma is to grant the associations a kind of “controlled autonomy”: While it remains possible for them to draw up rules that are binding for their members, including rules that concern the organization and implementation of alternative (competing) sport competitions or events, the drafting, interpretation, and application of such rules by the associations must be firmly guided by the boundaries of competition law. Specifically, this meant that in the ESL case it is legal from an antitrust point of view that an association subjects the organization and conduct of (alternative) international competitions to common rules that ensure the homogeneity and coordination of these competitions within the framework of an overall game calendar, and generally promote the conduct of sports competitions on the basis of equality of opportunity and sporting merit in an appropriate and effective manner (ESL, para. 144). According to the CJEU, these “common rules” may also include provisions on eligibility to participate in such competitions and on pre-authorization of participation in competing events.

However, there is a major caveat to this. The CJEU states very clearly – a new thing in its specificity and clarity – that it is precisely such rules that have the potential to monopolize the business of sport. That is why they must stand up to a strict test: They must be based on specific substantive criteria applied on the basis of detailed procedural rules. Both these criteria and the procedural rules must then be (1) transparent, (2) objective, (3) non-discriminatory and – above all – (4) proportionate in both their design and application. If the actions of an association do not meet either one of these cumulative criteria, there is, in the eyes of the court, the manifest risk of several negative consequences that go against the grain of EU competition law: The associations could (1) flat out exclude any competing company from the market and restrict the organization of new competitions, (2) prevent the athletes – who are themselves engaging in commercial activities – from participating in these competitions, and (3) harm consumers by depriving live viewers and television audiences of any opportunity to follow these alternative competitions.

Consequently, the CJEU also takes a critical view of the controversial regulation of marketing rights in the ESL case, which are of decisive importance both for the accessibility of the competitions for a larger audience and for the commercial exploitation of the sporting performances. An unconditional exclusive marketing right granted or retained by an association is therefore fundamentally contrary to competition law; it can at best be objectively justified (Article 102 TFEU) or exempted (Article 101(3) TFEU) in the individual case and for specific reasons.

Despite the above, the “end of the UEFA monopoly” that was loudly proclaimed by some after the ruling in the ESL case was certainly premature. The associations were primarily felled by the fact that there was simply no set of rules for the issues in dispute and they were therefore able to use their governing power arbitrarily. In view of the subject matter of the dispute and the questions referred to it, the CJEU did not have to answer the question under which circumstances the rules of associations are “right”, let alone “good”. The court merely drew a line calling for certain minimum standards. And while this might result, and in the now decided cases actually has resulted, in a slap across the wrist if associations fall foul of these standards, it is quite clear looking at the judgments that the CJEU has left the associations’ fundamental ability to regulate their sports, including their economic affairs, very much unscathed.

Whether the specifics of such regulations can withstand antitrust scrutiny is a question of the individual case – meaning that the more-than-proverbial referee will retain a pivotal role going forward. What’s more – and, again, this is a new insight for “sports competition law” – the job of the referee must not lie solely with an arbitrator. EU competition law is primary EU law – calling for a primacy of the EU courts. The CJEU is not criticizing (sports) arbitration as such. However, in order to rule on EU law, arbitration proceedings must ensure effective compliance with public policy enshrined in EU law and be compatible with the principles of the judicial architecture of the EU to the extent they affect not just sport as such, but economic matters within the territory of the EU. From the CJEU’s point of view, this is not guaranteed if the court of last instance is in fact not an EU court, but a court of a third country, which is neither obliged nor entitled to refer questions integral to EU law to the CJEU (in ISU that was the case for the Swiss Federal Supreme Court in Lausanne as the highest instance above the Court of Arbitration for Sport (CAS)). The CJEU does not accept the counterargument that event organizers or athletes who consider themselves adversely affected by the association’s rules can call on EU antitrust authorities or at least prevent the enforcement of arbitration awards or sue for damages before the courts of the EU.

This development, aiming to protect the EU’s ordre public with regards to antitrust, shakes up an established practice both in football as well as in other sports such as speed skating – and is noteworthy not least since the CAS recently sided with an association in another prominent case, the international dispute over new FIFA regulations for player agents (case 2023/O/9370). Incidentally, this is a subject that lies at the core of two further CJEU proceedings (C-428/23 – Rogon and Others and C-209/23 – RRC Sports), with the EU’s highest court now more certain than ever to rule entirely unimpressed by the Swiss arbiters.

Post-match analysis – the rulings’ implications

What do these landmark decisions mean for the future of sports governance? The rulings certainly represent a pivotal moment at the intersection of sports and antitrust. While the court in particular did not greenlight the widely reported ESL project and upheld the associations’ general ability to extensively govern their respective sports in terms of sporting merit and commercial affairs, it is now very clear that associations are also required to handle this power with care, in particular by setting up clear, non-discriminatory, and proportionate rules and avoiding arbitrariness.

More broadly, the implications of the rulings are as follows:

• Openness to alternative competitions: The CJEU has signaled that sports associations cannot flat out prevent the establishment of alternative sports competitions or the participation of athletes and clubs in such competitions. This opens the door a bit further for new market entrants and competitions, promoting innovation and competition within the sports industry. However, there is no obligation for associations to allow that kind of competition under all circumstances.
• Reevaluation of sports associations’ powers: The key lies in avoiding arbitrariness, be it in relation to establishment of alternative competitions or other regulations imposed by sports associations. In the wake of the rulings, sports associations must reassess their approval and sanctions regimes to ensure they are transparent, objective, non-discriminatory, and proportionate. The CJEU has challenged the associations’ discretionary monopoly power and demanded compliance with EU competition law. The rulings essentially advocate a “controlled autonomy” approach for sports associations. While associations keep the right to draft rules governing the organization of competitions, these must be framed within competition law boundaries. This “controlled autonomy” for sports associations looks to strike a delicate balance aiming to preserve the integrity of sports while ensuring fair play in the market.
• Strengthened role of EU courts in sports arbitration: Effective judicial review mandates that EU courts review rulings and awards by sports arbitration bodies, particularly those rendered by the CAS, insofar as they concern the application of EU competition law in relation to the territory of the EU. This shift emphasizes the importance of EU public policy in sports. The CJEU’s stance indicates also that no domestic court has to respect arbitration clauses mandating CAS arbitration in matters involving EU competition law, thus challenging the traditional role of CAS and the Federal Supreme Court of Switzerland in sports-related disputes. This might well become an actual game changer in sports governance going forward.