EU court finds sports body infringed competition law

Out-Law News | 21 Dec 2020 | 8:32 pm | 3 min. read

An EU court has upheld a 2017 European Commission decision which found that the International Skating Union (ISU) infringed competition law rules by imposing restrictions on skaters from taking part in non-ISU events.

The General Court agreed with the Commission that the ISU’s eligibility rules breached competition law. The rules provided for severe penalties and potentially a lifetime ban for speed skaters who competed in non-ISU events – specifically a new event to be run by Korean company Icederby.

The Commission said these rules restricted competition and enabled the ISU to pursue its own commercial interests, to the detriment of the athletes and to competing event organisers. The rules prevented independent organisers from putting together their own speed skating competitions.

Diaz-Rainey Julian

Julian Diaz-Rainey

Partner

This judgment confirms that sports bodies need to ensure that their eligibility and entry rules can be justified on the basis that any restrictions are necessary to the proper functioning of the sport

Sports law and regulatory expert Julian-Diaz Rainey of Pinsent Masons, the law firm behind Out-law, said: "For many sports such as football, rugby and tennis, there are well-established and long standing regulators and competitions in which all the main teams or individuals compete. For other sports, such as boxing, there are a range of different regulatory bodies, but athletes are largely free to compete under the rules of some or all of those bodies. By upholding the Commission’s findings, this judgment confirms that sports bodies need to ensure that their eligibility and entry rules can be justified on the basis that any restrictions are necessary to the proper functioning of the sport."

According to the General Court, the ISU was in a position which was capable of giving rise to a conflict of interest, as it both organised its own events and had the power to authorise events run by third parties. The court said the ISU “must ensure, when examining applications for authorisation, that those third parties are not unduly deprived of market access to the point that competition on that market is distorted”.

The court also found that the penalties imposed by the ISU are disproportionate, even after the body relaxed these penalties in 2016. It said the categories of infringements were ill-defined and remained severe given the average length of a skater’s career.

Although the court acknowledged it was legitimate for the ISU to establish rules seeking to protect the integrity of skating from betting, it said the rules adopted went beyond what was necessary to achieve these objectives.

Bret Angelique

Angelique Bret

Partner

Although sporting bodies generally have a degree of discretion when it comes to their rulebooks in terms of what is necessary and proportionate for the interests of the sport, the competition authorities may take a stricter approach

The court did partially uphold the ISU’s application relating to the legality of the corrective measures imposed by the Commission. It said the use of arbitration rules giving the Court of Arbitration in Sport exclusive jurisdiction to hear appeals against ineligibility decisions did not make the infringement of competition rules more harmful. The Commission “was not entitled” to conclude that the arbitration rules reinforced the restrictions of competition created by the eligibility rules.

Diaz-Rainey said: “It is also of interest that the General Court commented on the ISU’s arbitration system to the Court of Arbitration in Sport. This is a common method of dispute resolution used by sporting bodies. It is therefore important that the General Court found that this is not an aggravating factor when it came to EU competition law penalties.”

Competition law expert Angelique Bret of Pinsent Masons pointed out that this is the first case where the European Commission has taken a formal decision against a governing body for imposing restrictions which infringe the competition law rules.

"Any restrictions on athletes participating in other events may need to be objectively justified," Bret said. "Although sporting bodies generally have a degree of discretion when it comes to their rulebooks in terms of what is necessary and proportionate for the interests of the sport, the competition authorities may take a stricter approach, particularly where the rules might have a potential impact on the market for sports events and create barriers to entry to new events."

Watkins Trevor

Trevor Watkins

Partner, Head of Sports

It is likely that third parties will look to create more events and investors, media, sponsors and participants will want to be associated with them because they can attract top talent, officials and sponsors without fear of sanction from governing bodies

Trevor Watkins, head of the Pinsent Masons' sports team, said there are likely to be further practical implications arising from the judgment.

"This decision is likely to lead to more new events built around established sports," Watkins said. "Historically the rules and regulations of sport have served to dissuade third parties from creating or funding new events. These would often prohibit individuals from competing in governing body authorised competitions if they had chosen to participate in unauthorised events and effectively prevent competing 'unauthorised' events gaining momentum."

"The finding weakens the ability of a governing body to place conditions on participants that prevents them becoming part of a new event. In turn, it is likely that third parties will look to create more events and investors, media, sponsors and participants will want to be associated with them because they can attract top talent, officials and sponsors without fear of sanction from governing bodies. With governing bodies still very much at the forefront of organised competition, to preserve that position they will have to be alive to this and look to continue to innovate and adapt their events to ensure they keep ahead of the game,” Watkins said.

It is not yet clear whether the General Court’s findings will be appealed to the EU's highest court within the Court of Justice of the EU.