Fair Play or Foul: The Impact of Competition Law in the Sports Industry

As national sporting bodies expand their roles beyond oversight into areas from membership systems to digital platforms/other software, the distinction between regulator and commercial operations becomes rather blurred. And where lines are blurred, legal certainty also becomes obscured, which can bring challenges.

Claims of abuse of dominance sit among the more intricate issues in competition law. For lawyers and advisors supporting organisations facing such litigation, these matters require a nuanced approach that not only requires great legal interpretation but also factors in business context and evidentiary precision.

Competition law doesn’t prohibit holding market power; instead, what it does target is the misuse of that power in ways that distort fair competition, hinder market access, or disadvantage rivals unjustifiably. Much like the most of us wouldn’t be too keen on a form of dictatorship, I suppose…

The Competition Act 1998

In the UK, the legal foundation for abuse of dominance lies in Section 18 of the Competition Act 1998 (hereafter ‘the Act’). This provision draws heavily from the case law developed under Article 102 of the Treaty on the Functioning of the European Union (TFEU), even post-Brexit.

Under this Act, a business - or ‘undertaking’ - is prohibited from engaging in conduct that constitutes an abuse of a dominant position, providing that behaviour has a considerable effect on trade within the UK.

 To establish such a claim, a complainant must generally show:

• A clearly defined market in which competition occurs;

• That the alleged offender holds a dominant position in that market;

• Such conduct amounts to abuse; and

• That the abuse has resulted in harm - for example, through exclusion, reduced choice, or financial loss.

It is worth noting that one does not need to be a ‘monopolist’ to be considered dominant. Market shares above 40% can be sufficient, particularly where other factors such as barriers to entry or consumer dependence are present.

What Conduct Can Be Deemed Abusive?

Competition law focuses on behaviour that distorts market dynamics without proper justification. However, not all forceful commercial conduct is automatically unlawful.

Common types of potentially abusive behaviour include:

Exclusionary Tactics – are strategies designed to shut out or marginalise competitors whether that be through predatory pricing, tying products together or imposing exclusivity agreements that prevent or hinder rivals from gaining establishment.

Refusal to Deal - when a company controls an essential service, platform or infrastructure, refusing access to it can raise concerns especially if it is done so without good reason.

Discriminatory Treatment – simply charging different prices or imposing different terms on similar transactions without any comprehensive economic or technical reasoning can amount to unlawful discrimination, especially if it disadvantages certain competitors.

Excessive or Unfair Pricing - although rarely pursued due to their difficulty to establish, claims may also arise where dominant players set prices that appear vastly out of proportion to cost or value.

Whilst the above facts are all prevalent in this topic, being dominant doesn’t mean a business can’t compete aggressively; what matters is whether actions actually serve a genuine commercial purpose and are proportionate.

How can Market Abuse affect the Sporting Sector?

Given that in many sports categories there are often instances whereby singular governing bodies or major rights-holders control access to means such infrastructure, events, software/tech platforms or things such as broadcasting opportunities, there are associated risks involved in regard to breaches of the Act if such control is exercised unfairly.  For instance, as aforementioned, if the ‘control’ is restrictive in a way that shuts out rival organisations or prospective entrants without valid justification, such could be seen as anti-competitive behaviour under Section 18.

A notable example of this was UEFA and FIFA’s handling of breakaway football initiatives like the proposed ‘European Super League.’ In this instance, UEFA and FIFA’s threats of sanctions against clubs and/or players prompted legal scrutiny over whether such actions were a genuine defence of the sport’s structure, or simply an unlawful attempt to preserve its position as an observable ‘dominant force’ within Europe.

If in any instance like the above, even beyond the realms of football, if those excluded or disadvantaged by such behaviours can evidence unlawful conduct, there may be grounds for claims. Given it is evident that boundaries between governance and control are growing ambiguous, sports bodies should always remain wary of the risks that could adversely impact them both legally and reputationally.

Dealing with Claims

Courts and regulators generally recognise that even dominant players are entitled to compete, innovate, and defend commercial interests; again, it goes back to that key point - so long as they don’t unfairly shut others out.

A significant factor in a case can often rest on how the relevant market is drawn. Often, narrow definitions may exaggerate dominance, whilst those broader may reveal effective competition.

When defending such claims, looking to internal communications can be a good place to start in corroborating that decisions were made for legitimate reasons and were not made with the intent of excluding rivals.

There is also great importance in highlighting how conduct benefited consumers or improved services alongside exhibiting that competitors still had a viable path to entering the market in question. Ultimately, competition law is about protecting the competitive process, not preserving competitors.

If a claim succeeds, remedies can be substantial and may include compensation for losses and injunctions to halt or reverse the conduct in question. Damages claims often involve economic modelling to compare actual events to hypothetical scenarios whether that be ‘entry’ versus ‘non-entry’ scenarios. Defendants ought to closely consider both the logic and the assumptions behind such models, particularly where markets are evolving quickly or there are other influencing factors.

A good defence and robust expert evidence is crucial and can do more than avoid liability; it may also reinforce an organisation’s right to compete on merit and innovate in the interests of those and the sector it serves.

Forbes Solicitors’ specialist sports team deal with litigation relating to Competition Law in the Sports Sector.

Article by Darcey Black.