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Negative Law—Free Movement and Competition

The principal negative law provisions are Articles of the Treaty. The application of these provisions is predominantly the preserve of the Court and of national courts, though the Commission too plays a direct role in securing observance of the competition rules. The creation of positive law is predominantly the preserve of the EU’s political institutions and the legislative process, making use of the authorizations to adopt legislation conferred by the Treaty to adopt measures of secondary legislation. For sport, this means most obviously the admittedly meagre power to adopt ‘incentive measures’ which is conferred by Article 165 TFEU.

The Treaty on the Functioning of the EU contains a group of provisions which prohibit practices that obstruct the achievement of the EU’s objectives. Article 18 TFEU is a good starting point since its predecessor was one of the provisions at stake in the 1974 ruling in Walrave and Koch, which was the Court’s first ever exploration of the intersection of EU law and sport.[1] Article 18 TFEU states: ‘Within the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited.’ This is repeated in Article 21 of the Charter of Fundamental Rights of the European Union, which has enjoyed binding effect since 2009. This, then, is a prohibition that is central to the very purpose of the EU, but it also poses evident problems for sports which involve competition between national representative teams where selection is based squarely on the criterion of nationality. In Walrave and Koch the Court, respectful of the distinctive concerns of sporting interest, found a way to permit room for sporting autonomy in the matter. Sport was here ‘special’, as explored more fully in Chapter 4.

Beyond Article 18 TFEU’s prohibition against discrimination on grounds of nationality, the driving force of the Treaty provisions relevant to sport is the project to create an ‘internal market’ for the EU. Article 3(3) TEU commits the Union to the establishment of an internal market. The internal market is defined in Article 26(2) TFEU as an ‘area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty’. The aim, then, is a single trading area stretching across the territory of all twenty-eight Member States, in which national political frontiers shall be of no economic relevance. The key provisions are those which govern free movement and competition. They prohibit practices that obstruct free movement across borders or operate to distort competition in the internal market, although in most instances allowing some limited scope for rule-makers to show justification for their practices.

Articles 34 to 36 TFEU deal with the free movement of goods, by subjecting to control any national practice that obstructs the free movement of goods between Member States. Articles 45 to 48, 49 to 55, and 56 to 62 TFEU perform a similar function by asserting supervision of practices which obstruct the free movement of persons, the self-employed and companies, and providers and recipients of services, respectively. These have been of particular significance in the field of sport: athletes are capable of being classified as ‘workers’ and both clubs and federations which organize competitions are readily treated as suppliers of services. The provisions on the free movement of workers were at stake in the first two major sports-related rulings of the Court, Walrave and Koch v Union Cycliste Internationale and Bosman, both of which will be examined more thoroughly later in this book.15 Rules that treated workers differently on the basis of nationality and rules that required the payment of a fee as a condition of the transfer of a player’s registration were treated as restrictions on the cross-border mobility of workers. The cross-border provision of services by athletes was at stake in Deliege v Ligue de Judo.[2] [3] What is now Article 56 TFEU was deployed to attack selection rules which had the effect of limiting the number of participants in an international (judo) tournament, although the Court, citing Walrave and Koch and Bosman, concluded that such limiting rules were inherent in the conduct of an international event. The exact quality of this formula will be examined further in Chapter 4: it represents an important attempt to carve out a protected area for sporting autonomy even where practices exert an economic effect on the internal market. The Treaty provisions on the free movement of services are important too in the market for broadcasting. This sector is examined more fully in Chapter 11.

All the Treaty provisions on free movement are readily applied to national practices which discriminate on the basis of nationality, but they also apply more broadly to restrictions and impediments to cross-border trade even in the absence of overt discrimination. Measures that restrict free movement are also capable of being treated as limitations from the perspective of Articles 15 to 17 of the Charter of Fundamental Rights, which deal with the freedom to choose an occupation, the freedom to conduct a business, and the right to property, but so far the Court has taken the view that a Charter-based claim adds nothing and changes nothing when compared with the well-established structure and substance of free movement law.[4] [5] The governing concept is to oppose the fragmentation of the EU’s internal market along national lines.

The early cases decided in the growth of EU sports law were concerned with the Treaty provisions concerning free movement, but subsequently the profile of the Treaty rules on competition has become ever more prominent. The competition rules to some extent complement the free movement rules in the sense that they may apply to the same type of practice but they may also control practices that escape the reach of the free movement rules, such as price-fixing or other kinds of anti-competitive arrangements that are not tied to the particular vice at which the free movement rules are targeted, which is the partitioning of the internal market along national lines. Competition law is governed principally by Articles 101 and 102 TFEU. The former controls anti-competitive practices, the latter addresses the abuse of a dominant position. The competition rules are explicitly tied to the internal market. Article 101 targets particular practices which are ‘prohibited as incompatible with the internal market’; Article 102 forbids abuse of a dominant position ‘as incompatible with the internal market in so far as it may affect trade between Member States’. The two provisions share an aim, which is the ‘maintenance of effective competition’ within the internal marketd8

Article 101’s control of bilateral and multilateral practices that may harm the competitive structure of the market is readily applied to the network of agreements between clubs, national associations, and governing bodies at continental and global level that structure professional sport. These are potentially horizontal and vertical restraints, as the orthodox terminology of competition law would have it— that is, agreements struck between parties at the same level of the production process (such as clubs) and agreements between parties at different levels in the chain (such as clubs and governing bodies, or governing bodies and broadcasters). Since the organization of sporting competition is characterized by a much higher degree of interdependence among participants than would be normal elsewhere, one may readily expect to find practices in the organization of a sports league that are in principle capable of falling within the scope of Article 101 TFEU. The question of abiding interest will be whether, and if so how, the fact that the practices do arise in the particular context of sport then conditions the nature of the legal scrutiny.

Article 102 TFEU, which loosely put deals with monopoly power, is capable of application to the rule-maker in sport, which is frequently allocated exclusive power to decide ‘top down’ how the activity shall be organized. In a normal run- of-the-mill industry one is required to investigate carefully whether—to choose one of the most famous examples in the Court’s case law—a supplier of bananas is sufficiently free of competition from suppliers of other kinds of fruit to be correctly regarded as dominant in the market, and whether it is operating in a territory that is geographically distinct and in which it enjoys that position of economic dominance,[6] [7] [8] but in sport the whole point is commonly to centralize regulatory power in the hands of one governing body. It is typical of Article 102 investigations that the undertaking in question seeks to persuade that it is subject to constraint by competition in the market with the consequence that it is not dominant, and so immune from sanction pursuant to Article 102, but that line of reasoning, conducive to achieving autonomy, is not typically open to a sports federation. What is open to the sports federation is to show that its characteristic dominant regulatory power is inherent in the organization of sport. So here too the issue is the extent to which this feature of monopoly power to set rules, which is common in sport, is fed into the legal analysis of whether the dominant position frequently enjoyed by the sports regulator has in fact been abused.

Key decisions of the Commission and Court, examined more fully later in this book, have paved the way. Under an approach which has some functional and structural similarity with that adopted in the development of free movement law, the norm is to refuse to permit the lex sportiva any absolute immunity from the control exercised by EU law where there are economic effects at stake. Instead an intersection between sporting practices and EU law is acknowledged, within which the expression of sport’s special nature is admitted and assessed. So UEFA’s rules prohibiting the ownership of more than one football club were treated as restrictions on competition, because they shut out would-be buyers from the market once they had acquired one club, but were accepted as a necessary measure in ensuring that the sport was not tainted by the suspicion of collusion that would arise where clubs under the same ownership faced each other in a competitive fixture.2° So too in the Court’s pioneering decision in Meca-Medina, which authoritatively analysed the relationship between EU competition law and sporting practices, it was found that the imposition of sanctions for violation of anti-doping rules might in some circumstances damage the athlete’s livelihood in such a way as to offend against EU law, but that provided the sanctions were neither arbitrary nor disproportionate in their restrictive effects, they should be tolerated as a necessary aspect of ‘clean’ sport.21 The lex sportiva enjoys conditional autonomy under EU law. It is where the monopoly power to take decisions about the way the sporting events shall be organized is extended to decisions with direct commercial consequences^ and especially where there is a conflict of interest favouring the rule-maker’s own commercial position/3 that Article 102 TFEU is most likely to be found to have been infringed by a sporting body.

The Treaty provisions on the free movement of workers and services are interpreted as capable of application not only to measures of public authorities but also to the collectively agreed practices of private parties, which clearly embraces governing bodies in sport. This is not true of the rules governing the free movement of goods, which bind only public authorities/4 but the provisions on goods are in any event of little significance to the major issues that arise in sports law. The competition rules are plainly designed primarily for application to private parties, and certainly engage governing bodies in sport. So sporting bodies are within the personal scope of the key Treaty provisions which supply the governing framework of the internal market. Their practices must survive scrutiny in so far as they obstruct cross-border trade or harm the competitive structure of the EU’s market.

The Court has attributed high significance to these Treaty provisions. It describes freedom of movement for goods as ‘one of the foundations’ of the system/5 Article 101 TFEU is ‘a fundamental provision which is essential for the accomplishment of the tasks entrusted to the Community [now Union] and, in particular, for the functioning of the internal market’/6 In FA Premier League and others v QC Leisure and others, Karen Murphy v Media Protection Services Ltd, the Court went so far as to state that completion of the internal market is ‘the fundamental aim of the Treaty’/7 On any literal reading of the Treaty, this is simply not true. But it clearly reveals the strong assumption that the internal market lies at the heart of the EU’s ambitions to reshape the relationships between European states into a model of cooperation from which all benefit/8

The crucial point in understanding the impact of the rules on free movement and competition is that sport is not mentioned at all in any of these Treaty provisions. Sport is affected by and subject to these provisions in so far as it constitutes an economic activity, which is key to bringing sport within the scope of application of the EU Treaties. The point, in fact, is that these foundationally important Treaty provisions do not spell out their application to any particular sector of the economy. They cover all economic activity. They are the means to achieve functional ends—most of all, that of economic integration within the internal market. So sporting practices, as much as practices in the financial services sector or affecting car manufacture [9] [10] [11] [12] [13] [14] [15]

or regulating chemicals, fall to be checked in the light of the demands of EU law in so far as they cause impediments to cross-border trade or distort competition in the internal market. In this vein Walrave and Koch set an enduring tone.29 In that pioneering ruling the Court decided that ‘the practice of sport is subject to Community [Union] law only in so far as it constitutes an economic activity within the meaning of Article 2 of the Treaty’: but, as has become increasingly evident, the word ‘only’ is deceptive, for in fact it is extremely hard to find aspects of sport which are not in at least some way entangled with the jurisdictional trigger of ‘economic activity’. Appreciation of this was in fact not lost on perceptive commentators at the time of the ruling over forty years ago.[16] [17]

In this sense EU law reaches sport principally as a result of its preoccupation with the construction of an internal market, and not as a consequence of its concern for sport as such. And Article 165 TFEU does not change that. But the Court, in choosing to interpret EU law in an expansive manner, is following what it sees as the logic of the Treaty itself. The Treaty does not place particular sectors of economic activity beyond the reach of its basic rules. When one is engaged in economic activity, it is very difficult to construct an argument apt to secure insulation from the application of EU free movement and competition law. In EU trade law the principal arguments tend to surround the question whether a particular practice is justified or not. There is little scope for arguing that EU law does not apply at all.

The question, then, is whether those challenged practices may be justified, a question which is at its most sensitive where their defence is driven by the claim that sport is ‘special’ and so should be treated in a way that grants it more autonomy than would be granted to the financial services sector or car manufacture or production of chemicals. And here the Treaty provisions on free movement and competition offer no help at all, since they do not mention sport. Article 165 TFEU offers some help. But it is thin and vague. Its undeveloped reference to the ‘specific nature’ of sport simply opens space for debate about how special sport truly is, rather than setting out operationally useful rules and boundaries apt to resolve particular disputes at the intersection of EU internal market law and the lex sportiva. It was in any event added to the Treaty as late as 2009, by which time the Court and the Commission had long been forced to grapple with that intersection with no guidance whatsoever provided by the EU’s founding constitutional texts. So the EU’s institutions have been forced to reckon with the claims to sport’s special status in circumstances where they have no choice but to use their own wit to gauge their weight.

It bears repetition that this is endemic to the system of EU law. Negative law, in particular that driven by the functional concern to complete the internal market across the whole sweep of economic activity pursued in the EU, reaches further and wider than positive law underpinned by the EU’s conferred legislative competence. In consequence, policy of sorts must be shaped in the application and interpretation of the Treaty’s free movement and competition rules in circumstances where the Treaty offers little or no guidance as to the EU’s policy-making priorities.

All this is supplemented by the constitutional character of EU law. From the very beginning, in landmark judgments delivered in the early 1960s, the Court has sought, with extraordinary success, to distance EU law from orthodox public international law governing the effects of Treaties within national legal orders, both rhetorically and in substance. It insists that EU law is supreme—it applies in preference to national law in the event of conflict.[18] [19] [20] It also stipulates that EU law is directly effective, which means that rules of sufficient clarity and precision fall to be applied on an everyday basis by the national courts of the Member States.32 None of this is made explicit in the Treaty: it is the product of the Court’s adventurous interpretative approach. Article 19(1) TEU dictates that Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law, but even this is no more than a recent codification of the Court’s longstanding interpretative approach.33 Moreover, the Court of Justice and the national courts are organically tied together in a cooperative relationship by a procedure that is foreseen explicitly in the Treaties, the preliminary reference procedure contained in Article 267 TFEU which permits, and in some circumstances requires, awkward points of EU law raised at national level to be transmitted by national judges to the Court for authoritative resolution. Exploration of the philosophical foundations of this process and the type of legal order that has emerged are fascinating;3[21] so too is investigation of the complex combination of incentives at national and EU level that have nourished and sustained it.[22] But this agenda stretches beyond the ambitions of this book. For present purposes the point is predominantly practical. The combined effect of the constitutional principles nurtured by the Court is that EU law exerts a much more powerful and immediate influence over the shaping of national law and practice than does orthodox public international law. EU law is in many respects not only international law but also national law. The legal order of the EU is much more deeply integrated into national legal practice than is the case for orthodox international treaties and the legal orders of states that are party to them. The Court has long aimed to have EU law treated as something new—as international law but as something more, something that directly controls aspects of the course of domestic legal proceedings. What this means for the practical vindication of rights conferred by EU law to challenge sporting practices is immensely significant. It means that litigation before the ordinary courts of the Member States designed to protect EU law rights is perfectly feasible and normal. This is quite separate from and supplementary to the role of the Commission in prosecuting violations of EU law, if necessary by bringing proceedings before the Court of Justice. The main interest of this book is EU sports law, but in the background is the distinctive constitutional flavour of EU law.

  • [1] Case 36/74 Walrave and Koch v Union Cycliste Internationale [1974] ECR 1405.
  • [2] ibid; Case C-415/93 Union royale belge des societes de football association ASBL v Jean-MarcBosman [1995] ECR I-4921.
  • [3] Cases C-51/96 and C-191/97 Deliege v Ligue de Judo [2000] ECR I-2549.
  • [4] eg Case C-390/12 Pfleger, judgment of 30 April 2014 (TFEU, Art 56); Case C-98/14 Berlington,judgment of11 June 2015 (TFEU, Art 56); Case C-367/12 Sokoll-Seebacher, judgment of13 February2014 (TFEU, Art 49).
  • [5] Case 6/72 Continental Can v Commission [1973] ECR 215.
  • [6] Case 27/76 United Brands v Commission [1978] ECR 207.
  • [7] 2° COMP 37.806 ENIC/ UEFA, IP/02/942, 27 June 2002.
  • [8] Case C-519/04P Meca-Medina andMajcen v Commission [2006] ECR I-6991.
  • [9] eg Decision 2000/12 1998 Football World Cup [2000] OJ L5/55.
  • [10] Case C-49/07 MOTOE [2008] ECR I-4863. See Ch 10.
  • [11] eg Case C-159/00 SapodAudic [2002] ECR I-5031.
  • [12] Case C-194/94 CIA Security International v Signalson and Securitel [1996] ECR I-2201, para 40.
  • [13] 26 Case C-126/97 Eco Swiss China Time Ltd v Benetton International NV [1999] ECR I-3055,para 36.
  • [14] Joined Cases C-403/08 and C-429/08 FA Premier League and others v QC Leisure and others,Karen Murphy v Media Protection Services Ltd [2011] ECR I-9083, para 115.
  • [15] See S Weatherill, The Internal Market as a Legal Concept (OUP 2017).
  • [16] Walrave and Koch (n 14).
  • [17] See G Ubertazzi, ‘Le domaine du droit communautaire. A propos de l’arret Walrave, Unioncycliste international [1976] RTDE 635.
  • [18] Case 6/64 Costa vENEL [1964] ECR 585.
  • [19] 32 Case 26/62 Van Genden Loos [1963] ECR 1. 33 Weatherill (n 3) ch 4.5.
  • [20] 34 eg M Avbelj and J Komarek, Constitutional Pluralism in the European Union and Beyond
  • [21] (Hart 2012).
  • [22] eg K Alter, The European Court's Political Power (OUP 2009); M Everson and J Eisner, TheMaking of a European Constiution: Judges and Law beyond Constitutive Power (Routledge Cavendish2007); G Martinico and O Pollicino, The Interaction between Europe's Legal Systems: Judicial Dialogueand the Creation of Supranational Laws (Edward Elgar 2012).
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