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Collective Selling of Rights to Broadcast Matches

Rights to broadcast sports events are commonly sold on a collective basis. So it is typical, though not at all inevitable, that a sports league will sell rights to broadcast matches en bloc (perhaps on an exclusive basis, perhaps not), rather than leaving individual clubs to sell rights to broadcast individual matches. This is collective selling. It plainly raises questions about the application of the Treaty competition rules. By preventing buyers from choosing between clubs and instead imposing only a single centralized point of sale, this appears to be a rather plain instance of the suppression of potential competition on the supply-side of the market for rights to broadcast events. The collective arrangements replace the market that would otherwise exist for the purchase of rights from the individual participants in the league, and, on an orthodox understanding, restriction of competition on the supply-side of the market must lead to the extraction of higher prices from buyers on the demand-side.

This seems straightforward, and in fact it is straightforward, yet a pause is appropriate. Sports governing bodies have periodically attempted to make the case that collective selling is not anti-competitive, but rather a necessary element in the organization of sporting competition. Their aim in advancing this argument is thematically familiar. It is to maximize their autonomy and, through that, their ability to extract maximum commercial value from their activities. As so often the Arnaut Report, met and criticized in Chapter 5.5, offers the most shameless example of this strategy:

Both the Nice Declaration and the Terms of Reference for this Review explicitly recognise that collective selling [of television rights] and mutualisation of the resulting revenue is a fundamental aspect of sporting organisation and an essential component in the solidarity structure inherent to European sport ... the concept of individual selling or individual ownership of television rights cannot be accepted from an intellectual point of view.[1] [2]

The simplest rebuke to this claim is that (at least at the time of the publication of the Arnaut Report) in Spain and in some other countries too clubs do precisely what Arnaut alleges is intellectually unacceptable^ One of the reasons why, until very recent statutory reforms, Real Madrid and Barcelona have outstripped other clubs in Spain is precisely that clubs sell rights to televise League matches on an individual basis, with the result that the more popular clubs are able to command much higher fees from broadcasters.[3] [4] [5] [6] So the claim made in the Arnaut Report is at best mischievous and at worst mendacious, but it is fully in line with its strategic concern to maximize sporting autonomy from the application of the law. It must be emphasized that the claim is nevertheless wholly without foundation. True, the phenomenon of ‘interdependence’ in sports leagues requires that some matters are agreed collectively between participants, often via the authority charged with overall responsibility for running the competition, in order to create and administer the competition. Such rules escape the scope of EU law. Examples include fixing the numbers of players per team77 and the scheduling of fixtures and the appointment of referees. A similar approach has been taken to rules forbidding multiple ownership of football clubs/8 Such rules suppress the risk that the outcome may be thought to be fixed in advance. In a sports league the horizontal relationship prevailing between the clubs is not the same as that found in a normal market and the law must take account of that, or else risk mishandling the peculiar economic context in which the sports league operates. As a matter of legal classification the best way to understand this is provided by the Court’s Wouters formula/9 explained in Chapters 5 and 7: the overall context in which sports governance occurs, built around pursuit of a broad objective of fair and balanced competition, produces effects which though apparently restrictive of competition are nonetheless inherent in the pursuit of those objectives, and this is sustained by Article 165 TFEU’s direction to take account of the specific nature of sport. But the logic of action taken collectively pursuant to this relationship of interdependence cannot explain away all restrictions on competition that participants might wish to agree among themselves. Sport is sometimes special, but not always. Some agreements would not reflect a need to coordinate to create a viable competition, but would rather amount to simple horizontal anti-competitive restraints. Clubs would certainly not escape Article 101 TFEU by recourse to the Wouters formula if they agreed the prices they would seek from sponsors or the cost of replica kits. The choice to pursue collective selling of broadcasting rights is of this type too. If rights are available only on a collective basis—so that a purchaser can buy only the output of the whole League—then a market for acquisition of rights belonging to individual clubs has been suppressed. Fixtures cannot be arranged unilaterally—this is the nature of sport—but once clubs agree to play against each other, the subsequent decision to sell rights to broadcast matches on a collective basis is restrictive of competition within the meaning of Article 101(1), in so far as it has an effect on inter-state trade. Such arrangements need to find rescue, if at all, via the exemption foreseen by Article 101(3).

It took some time for the Commission to address this issue. But Champions League confirms both that collective selling of broadcasting rights falls within the scope of Article 101(1) TFEU as a restriction of competition and also that there is room to secure exemption of such arrangements pursuant to Article 101(3).[7]

In July 2001 the Commission sent a statement of objections to UEFA, European football’s governing body, complaining that its arrangements for the sale of broadcasting rights to the ‘Champions League’, the principal European club football competition, infringed what was then Article 81 of the Treaty Establishing the European Community (EC), now Article 101 TFEU.81 Questions of exclusivity— vertical restraints—were considered earlier; the concern here is collective selling— horizontal restraints between parties operating at the same level of the supply chain, which here refers to football clubs. UEFA sells rights to broadcast Champions League matches collectively on behalf of all participating clubs. It is a single package, which explains why there is a single brand identity: broadcasts are familiar to viewers all over Europe and beyond, because of the consistent use, irrespective of jurisdiction or venue, of the UEFA Champions League logo, anthem, and official sponsors and advertisers. The Commission was careful in its preliminary inquiry to observe that it did not object to collective selling of sports rights as such.82 However, it stated that it considered that UEFA’s scheme constituted a substantial restriction on competition, in part because of the foreclosure of the market to potential entrants into a sector capable of dynamic evolution.

UEFA duly responded by proposing an amended system involving, in short, an ‘unbundling’ of the package of rights available for purchase. More operators, including internet content providers as well as more traditional public and private broadcasters, would be able to acquire a degree of involvement in the coverage of the Champions League. This is an important point with obvious thematic connections to the general attitude of the Commission to the importance of ensuring that deals have the minimum effect of foreclosing the possibility of entry into developing markets. So much restriction is tolerated—only so much. The Commission expressed itself favourably disposed to this plan for competitive diversification which, it considered, would benefit football fans while also assisting the growth of new technology in the media sector.83 This, it should be noted, did not set aside the core concept of collective selling—the adjustments related only to what was in fact being sold (collectively).

The Commission concluded its investigation by adopting a formal Decision in the Champions League case in July 20 03.84 The Decision explains in detail the structure of the arrangements for selling and provides close legal examination. It

84 Champions League (n 34).

concludes that the collective selling arrangements restrict competition within the meaning of Article 101(1) TFEU, but it agrees that they fit the conditions for exemption which are set by Article 101(3). The high significance of this Decision, as a formal statement which has set the tone for subsequent deal-making in the field of sports broadcasting and its regulation in the light of competition law, justifies that close attention be paid to it.

UEFA had pressed on the Commission that the analysis should take account of the peculiar context of a sports league, wherein clubs are not truly independent competitors. The purpose was to persuade the Commission that the matter of collective selling is simply the way things are necessarily done in the particular context of a sports league and so not a restriction of competition at all within the meaning of Article 101(1) TFEU. Such an approach would, if accepted, preserve sporting autonomy and, in addition, enhance UEFA’s commercial flexibility. It is the argument advanced by the Arnaut Report, as mentioned previously. But the argument failed to persuade, and, for the reasons provided earlier, deservedly so. The Commission devoted part of the Decision explicitly to rejecting this analysis, under the heading ‘The Special Characteristics of Sport’.85 The Commission agreed that ‘some form of cooperation among the participants is necessary to organise a football league and that there is, in this context, certain interdependence among clubs’.8fi Moreover, the Decision ‘fully endorses the specificity of sport, as expressed for example in the declaration of the European Council in Nice in December 2000’.8? But that was where the acceptance of the special character of sport stopped. The Commission noted that interdependence between clubs did not preclude them competing in the areas of sponsorship, stadium advertising, and merchandising, as well as for players, and it held that it did not preclude the possibility of them competing in the market for selling rights to broadcast matches either. Such arrangements were not necessary to stage a football league: collective selling is not ‘an indispensable prerequisite for the redistribution of revenue’.88

Accordingly the Commission did not at all deny that the relationship between clubs in a sports league is special, but it found it not special enough to warrant a finding that there was in the circumstances no restriction of competition of the type that falls within the Article 101(1) TFEU net. Rather, this was a commercial choice reached by UEFA and the clubs, with significant implications for the competitive process. The Commission did not refer to Wouters8 And this was several years before Meca-Medina had given the Court the chance to analyse more closely and definitively the proper model of application of EU competition law to sport.90 But the Commission could have convincingly framed its examination with reference to Wouters. The overall context in which a sports league is organized may require a degree of collaboration between participants in agreeing rules, and such indispensable arrangements should not be treated as restrictions on competition within the meaning of Article 101(1). But this logic cannot be stretched to cover collective [8] [9]

selling of rights to broadcast matches. So any potential benefits of the scheme, including those alleged to be specific to sport, such as the possible need to protect weaker clubs through a cross-subsidization of funds from the richer to the poorer clubs, could not defuse the application of Article 101(1) and were pushed instead to the stage of the analysis encompassed by exemption pursuant to Article 101(3).

At the stage of exemption UEFA was successful. The Commission agreed that collective selling, though a restriction within the meaning of Article 101(1) TFEU, could be exempted pursuant to Article 101(3), and that the deal under scrutiny was worthy of exemption.

The system created a single point of sale for defined ‘packages’ of matches, which the Commission considered generated efficiencies that were of a particularly significant magnitude as a result of the elimination of the need for broadcasters to deal with many different clubs subject to different ownership structures in different jurisdictions across Europe. Transaction costs were kept relatively low. In fact, the identification of advantages of this nature was a key factor in the Commission’s earlier favourable treatment of Eurovision, which involved collective selling of rights.[10] [11] [12] Moreover, collective selling of the ‘Champions League’ permitted UEFA a tight grip on the pattern of the competition’s organization and allowed the commercially advantageous ‘branding’ of the competition as an unfragmented single product. The Decision notes the ‘dressing-up’ of the stadium facilities, the recording of the match and the on-screen presentation, on-screen signage, and the music as common elements which increased the attraction of the Champions League brand.92 So, in one of the many comments contained in the Decision which will chill the soul of the football traditionalist but which captures the commercial aims at stake, the Commission accepted that ‘definitions of UEFA Champions League branded products will optimise the global interaction between UEFA Champions League branded and club branded Products’^3 Media operators would share in the advantages. The efficiencies realized would permit them to invest more in improving the quality of production and transmission technologies.

There was, in short, a sufficient level of economic benefit created by the deal that it deserved a green light notwithstanding the restrictions on competition that had dragged it within the scope of Article 101 TFEU in the first place.

This, the Commission added, would be likely to lead to a more intensive and innovative exploitation of the rights to the benefit of the ultimate consumer, the viewer. It is noticeable that the emphasis on the gains made by providers, rather than consumers, is stronger. The treatment of the ultimate consumer is relatively brief, and makes the type of hasty assumptions about the inevitable transmissions of benefits to the consumer in consequence on an improved product that is admittedly typical of the Commission’s decisional practice under Article 101(3) TFEU generally, but open to criticism for its complacency and infidelity to the textual demands of Article 101(3).[13] [14] In this particular case, however, the Commission’s assumption of an adequate consumer benefit from collective selling of rights seems to be justified.

To complete the conclusion that the elements necessary for exemption pursuant to Article 101(3) TFEU were present, the Commission found that the restrictions on competition were indispensable to provide these economic gains and that, moreover, competition would not be eliminated in respect of a substantial part of the media rights in question.

Champions League serves as an illuminating case study into how the detailed application of Article 101 TFEU promotes the broader regulatory concerns of the Commission in its handling of the dynamically evolving broadcasting sector. Collective selling has clear economic advantages, but it has costs too, specifically in the elimination of competition on the supply-side. At stake is a balance. The length of the contract is carefully scrutinized: the shape of exclusive rights is carefully examined. The importance of keeping open opportunities for new players to enter the market to acquire rights forms part of the assessment, especially where, as in markets of this type, technological progress holds out the possibility of significant and rapid innovation that is capable of yielding benefits to the consumer.95 This is not even fifteen years ago: but the impact of the third generation of mobile telephony was yet to take clear shape. In this sense, the combined effects of deregulation, technological innovation, and commodification need to be managed in order to ensure that their overall impact remains beneficial, and juridification, in particular through the scrupulous application of the EU’s competition rules, is the essential supplementary theme that is designed to secure that enduringly felicitous outcome.

  • [1] The Arnaut Report, paras 3.76, 3.77 accessed 29 November 2016.
  • [2] As noted in Champions League (n 34) para 131, examined later.
  • [3] Statutory reform is achieved by Real Decreto-ley 5/2015 accessed 29 November 2016. In summary, P Callol, ‘Spain: Legislation—Sports Broadcasting’ [2015] ECLR N-128; on persisting legal disputes, see B Keane, ‘The Applicationof EU Competition Law in the Sports and Entertainment Sectors 2014/2015’ (2015) 6 Journal ofEuropean Comparative Law and Practice 735, 739.
  • [4] cf Deliege (n 19). See Ch 4.10.
  • [5] COMP 37.806 ENIC/UEFA, IP/02/942, 27 June 2002. See Ch 5.2.
  • [6] Case C-309/99 JCJ Wouters, JW Savelbergh, Price Waterhouse Belastingadviseurs BV v AlgemeneRaad van de Nederlandse Orde van Advocaten [2002] ECR I-1577.
  • [7] Champions League (n 34). 81 IP/01/1043, 20 July 2001 82 ‘Background Note’, Memo 01/271, 20 July 2001. 83 IP/02/806, 3 June 2002 [2002] OJ C196/3.
  • [8] ibid paras 125—31. 86 ibid para 129. 87 ibid para 131.
  • [9] 88 ibid para 131. 89 Wouters (n 79). 90 Meca-Medina (n 3). See Ch 5.
  • [10] See n 56. The CFI annulled the Commission’s Decisions in Eurovision (Case T-185/00, see n 57),
  • [11] but it did not take issue with the identification of these economic benefits flowing from the arrangements.
  • [12] 92 Champions League (n 34) paras 154—57. 93 ibid para 163.
  • [13] With particular reference to the audiovisual sector, see eg B Van Rompuy, Economic Efficiency: TheSole Concern of Modern Antitrust Policy? (Wolters Kluwer 2012) ch 6; and more generally E Buttigieg,Competition Law: Safeguarding the Consumer Interest. A Comparative Analysis of US Antitrust Law andEC Competition Law (Kluwer Law International 2009). See also R Parrish and S Miettinen, ‘SportsBroadcasting and Community Law’ in I Blackshaw, S Cornelius, and R Siekmann (eds), TV Rights andSport: Legal Aspects (TMC Asser 2009).
  • [14] On this aspect of the impact of Champions League as seen at the time, see N Petit, ‘TheCommission’s Contribution to the Emergence of 3G Mobile Communications: an Analysis of SomeDecisions in the Field of Competition Law’ [2004] ECLR 429, 436—37.
 
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