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ENIC/UEFA

The Commission’s ENIC/UEFA decision offers an early illustration of the emergence of the model of ‘conditional autonomy’ granted to sport in the Commission’s treatment of practices in the light of EU competition law.[1]

ENIC was an investment company with a stake in six football clubs in four different EU Member States plus Switzerland. They were Glasgow Rangers, Basel, Vicenza, Slavia Prague, AEK Athens, and Tottenham Hotspur. Its difficulties arose as a result of the adoption of a UEFA rule in 1998, which under the title ‘Integrity of the UEFA Club competitions: Independence of clubs’ stipulated that no two (or more) clubs participating in a UEFA club competition may be directly or indirectly controlled by the same entity or managed by the same person. The aim, in short, was to eliminate any whisper of suspicion of a fixed match. ENIC considered that the rule distorted competition by preventing and restricting investment in football clubs. Their point was that the rule restricted the freedom of action of club owners and would-be owners: once they had bought one club they could not buy another, to the detriment of demand-side competition in the market to buy clubs. As mentioned in Chapter 2, a challenge pursued within the lex sportiva did not help ENIC, for the CAS ruled that the ban was necessary to protect the authenticity of sporting competition.[2] So ENIC lodged a complaint with the Commission. Citing the familiar proviso, pioneered by the Court, that pursuit of economic activity brings the practice of sport within the scope of EU law, the Commission agreed in principle that the UEFA rule was capable of amounting to an arrangement that fell within the scope of what was then Article 81(1) of the Treaty Establishing the European Community (EC), now Article 101(1) TFEU, but, referring to the need to guarantee the integrity of the affected competitions, it decided not to pursue the matter further and it rejected ENIC’s complaint. ENIC did not pursue the matter either, although it would have been possible in principle to challenge the Commission’s decision before the Court in Luxembourg pursuant to Article 263 TFEU. That was the end of that particular matter.

Broadly, then, the Commission had adopted a model of ‘conditional autonomy’: the practice fell within the scope of EU law because of its effect on the market for clubs (ie no absolute autonomy), but autonomy was permitted provided it met the conditions set by EU law which here were attuned to the special sensitivity in sport to achieve a rigorous separation of ownership between clubs that are supposed to be rivals on the pitch. However, the precise language employed by the Commission in its rejection decision deserves attention. Its starting point was ‘to assess whether the effect of the rule is restrictive and if so, whether this effect is inherent in the pursuit of the objective of the rule which is to ensure the very existence of credible pan European football competitions’.[3] Plainly this has close association with the reasoning adopted in Deliege, in connection with free movement law.[4] [5] [6] And the Commission had had pressed on it by UEFA the central relevance of that ruling,n but, in examining the matter, the Commission preferred to rely on the Court’s ruling in Wouters, delivered in February 2002P2 This, unlike Deliege, is a competition law case. On the other hand, its factual context has nothing at all to do with sport. Wouters has nonetheless established itself as centrally important in the evolution of EU sports law. ENIC was the start.

In Wouters the Court was asked to consider the compatibility with what is now Article 101 TFEU of a Dutch rule forbidding the creation of multi-disciplinary partnerships involving barristers and accountants. The Court took the view that the national rule ‘has an adverse effect on competition and may affect trade between Member States’.[7] [8] [9] A multi-disciplinary partnership could offer a wider range of services, as well as benefiting from economies of scale generating cost reductions. The prohibition was therefore liable to limit production and technical development.

Having found unambiguously that the ‘rules restrict competition’/4 the Court proceeded in Wouters to state that the application of what is now Article 101 TFEU is conditioned by the overall context in which the bilateral or multilateral decision that restricts commercial freedom has been taken, specifically that account must be taken of its objectives. The core question is then ‘whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives’.^

In Wouters this drew the Court into reflection on the claimed virtues of the Dutch rules prohibiting partnerships between barristers and accountants. The stated aim was to guarantee the independence and loyalty to the client of members of the Bar as part of a broader concern to secure the sound administration of justice. Though there were—the Court repeated—‘effects restrictive of competition’/6 they did not go beyond what was necessary in order to ensure the proper functioning of the legal profession in the Netherlands. There was no breach of EU competition law. In short, the question addressed: Was the practice of the legal profession ‘special’? And the answer: it was. And in ENIC the Commission applied the same model to sport. Asking the same question, it arrived at the same answer.

Adopting the language of Wouters, the Commission in ENIC asked whether the consequential effects of UEFA’s rule were inherent in the pursuit of the very existence of credible pan-European football competitions. And, embedding in its analysis the particular context in which the rule is applied, it took the view that the limitation placed on freedom to act was justified. This was not a restriction of competition, for without such a rule, and the consequent emergence of public scepticism about the fair and honest character of the event, ‘the proper functioning of the market where the clubs develop their economic activities would be under threat’, and damage would be done to ‘interest and marketability’/7

The Commission reached the conclusion that rules forbidding multiple ownership of football clubs suppressed demand, but that they were indispensable to the maintenance of a credible competition marked by uncertainty as to the outcome of all matches. A competition’s basic character would be shattered were consumers to suspect that the clubs were not true rivals. The aim was ‘clean competition’, without which there could be no credible competition at all/8 Moreover the rule went no further than was necessary to achieve its aim: no less restrictive means could be devised. The key insight informing the decision is that sport may be culturally special, but it is economically special too: there is a need to restrain the power of buyers of companies in sports leagues that simply would not arise in a normal market until such time as the threshold of dominant power addressed in EU law by the Merger Regulation is approached.[10] [11] [12] [13] [14] [15] [16] The principal message here is that sporting practices typically have an economic effect and that accordingly they cannot be sealed off from the expectations of the Treaty. However, within the area of overlap between EU law and ‘internal’ sports law (the lex sportiva) there is room for recognition of the features of sport which may differ from ‘normal’ industries.

In its reasoning, ENIC is not presented in exactly the same way as Wouters. In the latter the Court found the rules were restrictive of competition but, having assessed the context and objectives, it concluded that they did not go beyond what was necessary in order to ensure the proper practice of the legal profession, and so they did not fall to be condemned as violations of Article 101(1) TFEU.20 By contrast, in ENIC the Commission, having cited the key part of the Wouters ruling, then declared that there was not a restriction of competition.21 However, the difference is more apparent than real. The Commission reached that conclusion after stating the need to examine the context in which the rule was applied and its objectives. And it agreed with UEFA that the rule protected the proper functioning of the market by ensuring maintenance of the public’s perception that the sporting competition was fair and honest. In applying the Wouters formula the key issue, as the Commission correctly identified^ was whether the consequential effects of the rule were inherent in the pursuit of the very existence of credible pan-European football competitions. They were, and what the Commission intended in introducing its analysis by commenting that there was not a restriction of competition was that there was not a restriction of competition within the meaning of the conduct that is subject to the prohibition contained in Article 101(1)—as indeed later parts of the decision seem to make plain.23

ENIC follows Wouters: the key point is that Article 101(1) TFEU is not violated where the rules, though admittedly restrictive of competition, serve interests that are necessary for or inherent in the organization of the relevant activity. Within the interpretation and application of EU competition law and subject to the controlling requirement that measures must be limited to what is necessary to ensure the implementation of legitimate objectives, any regulated sector is given space to demonstrate what its particular special features and needs entail. Wouters, remote from sport, shows how EU competition law generally is porous to concern for particular sector-specific sensitivities.24 ENIC is simply a sports- specific application.

This is in close alignment with the earlier ruling in Deliege2 There too the Court crafted an interpretation of EU law which concedes conditional autonomy to sport, albeit in the context of free movement law. The inquiry asks just why particular practices with economic effects are pursued—are they inherent in the organization of sport? The Court in Deliege treated the questions about competition law it had been asked by the referring Belgian court as inadmissible for want of adequate detailed information, but Advocate General Cosmas, though advising the Court to treat the questions as inadmissible, added brief comment. Drawing on general EU competition law, beyond its sport-specific application, he cited the Court’s ruling in DLG, on which the Court would also rely three years later in Wouters,[17] [18] [19] and stated that what is now Article 101(1) TFEU ‘does not apply to restrictions on competition which are essential in order to attain the legitimate aims which they pursue’^7 Here the rules prevented judokas from taking part in international competitions for which they were not selected, but they were indispensable to the proper functioning of the sport. He added that were the matter assessed from the perspective of Article 102, the particular organizational demands involved would preclude any finding of abuse.

As Wouters would confirm soon afterwards in the context of competition law, the point is not to deny that there is a restrictive effect felt by individuals, still less to pretend that an economic context is missing, but rather to allow for an interpretation of the Treaty rules that is contextually sensitive—to allow room within EU law for sport’s special characteristics to be weighed and to inquire into what really is ‘inherent’ in the sport’s organizational model. Free movement law and competition law clearly have detailed elements that do not run in common, but, of much greater significance, they share this broader structural openness to contextual appreciation of the reasons for choosing particular organizational patterns. Both Court and Commission are receptive to sector-specific special features in the interpretation and application of EU internal market law. Article 165 TFEU’s embrace of ‘the specific nature of sport’ post-dates these developments, but in fact reflects and is provoked by them.

  • [1] COMP 37.806 ENIC/UEFA, IP/02/942, 27 June 2002. The rejection decision is available at accessed 29November 2016.
  • [2] CAS 98/200 AEK Athens and Slavia Prague v UEFA.
  • [3] ENIC/UEFA (n 7) rejection decision, para 30; see also para 3.
  • [4] Deliege (n 3); see Ch 4.10. n ENIC/UEFA (n 7) rejection decision, para 21.
  • [5] 12 Case C-309/99 JCJ Wouters, JW Savelbergh, Price Waterhouse Belastingadviseurs BV v Algemene
  • [6] Raad van de Nederlandse Orde van Advocaten [2002] ECR I-1577.
  • [7] ibid para 86 of the judgment. 14 ibid para 94. 15 ibid para 97.
  • [8] 16 ibid para 110. 17 ENIC/UEFA (n 7) rejection decision, para 32.
  • [9] 18 ibid paras 29, 38.
  • [10] The current version of the Merger Regulation is Regulation (EC) 139/2004 [2004] OJ L24/1.
  • [11] Wouters (n 12) paras 94, 109. 21 ENIC/UEFA (n 7) para 32. 22 ibid para 32.
  • [12] 23 ibid especially paras 40, 42.
  • [13] 24 The approach reappears in subsequent judgments remote from sport: eg Case C-1/12 OTOC
  • [14] (Ordem dos Tecnicos Oficiais de Contas), judgment of 28 February 2013; Case C-136/12 ConsiglioNazionale dei Geologi, judgment of 18 July 2013; Joined Cases C-184/13 to C-187/13, C-194/13,
  • [15] C-195/13, and C-208/13 API, judgment of 4 September 2014.
  • [16] Deliege (n 3).
  • [17] Case C-250/92 DLG [1994] ECR I-5641, cited at Wouters (n 12) para 109.
  • [18] Deliege (n 3) para 110, Opinion of Cosmas AG.
  • [19] 28 Case C-519/04 P Meca-Medina and Majcen v Commission [2006] ECR I-6991.
 
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