The European Super League, Super Anti- Competitive? Whether European Competition law should prohibit the new closed football league

Jay Meliëzer [email protected] 10835202 International and European Law: European Competition Law and Regulation Date of submission: 26 July 2019 Supervisor: dr. L.J. Ankersmit

TABLE OF CONTENTS CHAPTER 1. INTRODUCTION ...... 5 1.1. GENERAL ...... 5 1.2. COMPETITION LAW ...... 6 1.3. LEGAL PROBLEM ...... 7 1.4. METHODOLOGY & STRUCTURE ...... 7 CHAPTER 2. EU COMPETITION LAW IN THE CONTEXT OF SPORTS LEAGUES ...... 9 2.1. INTRODUCTION ...... 9 2.2. SPORT GOVERNING BODIES OF FOOTBALL IN EUROPE ...... 9 2.2.1. Regulatory structure ...... 9 2.2.2. League structure ...... 10 2.2.3. New situation ...... 11 2.3. CASELAW ...... 12 2.3.1. Walrave and Koch ...... 12 2.3.2. Bosman ...... 12 2.3.3. Wouters ...... 12 2.3.4. Meca Medina ...... 13 2.4. EU LEGISLATION AND SOFT LAW ...... 14 2.4.1. Helsinki Report ...... 14 2.4.2. The 2007 White Paper on Sport ...... 15 2.5. CONCLUSION ...... 16 CHAPTER 3. THE SUPER LEAGUE: A RESTRICTION TO COMPETITION OR ABUSE OF A DOMINANT POSITION? ...... 17 3.1. INTRODUCTION ...... 17 3.2. SPORT LEAGUES AND THEIR PRODUCTS ARE PECULIAR ...... 17 3.2.1. The product ...... 17 3.2.2. The relevant market ...... 18 3.3. THE CLASSIFICATION OF THE EUROPEAN SUPER LEAGUE ...... 24 3.4. RESTRICTION OF COMPETITION UNDER 101(1) TFEU? ...... 25 3.5. THE MECA MEDINA TEST ...... 35 3.6. 101(3) TFEU ...... 35 3.7. CONCLUSION ...... 36 CHAPTER 4. THE DESIRABILITY OF THE SUPER LEAGUE ...... 38 4.1. EUROPEAN MODEL OF SPORT VS AMERICAN FRANCHISE LEAGUES ...... 38 4.2. TWO COMPETING LEAGUES ...... 39 4.3. A CLOSED LEAGUE OR AN OPEN LEAGUE ...... 39 4.4. CONCLUSION ...... 41 CONCLUSION ...... 42 BIBLIOGRAPHY ...... 43 APPENDIX ...... 48

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Abstract In 2018, a term sheet was disclosed which shows that eleven European football clubs explore the possibility to create the European Super League (ESL). This thesis explores and answers the question to what extent the ESL is a breach of European Union competition law. To answer this question the structure of sports Europe is explored and caselaw and EU competition law in the context of sport is examined. Then it is determined whether the ESL restricts competition within the meaning of 101 TFEU and constitutes an abuse of dominant position within 102 TFEU. Sports in Europe are organized in leagues. These leagues are monopolies as there is just one league in each country and continent. The leagues are open as clubs can be promoted and relegated; any club can become the champion of a league. As all activities with economic significance, sports need to comply to EU competition law: 101 TFEU and 102 TFEU. EU competition law should regulate sport governing bodies in Europe. Still, EU acknowledges the specificity of sports which should be taken into account when applying and interpreting EU law. Specific characteristics of sports are the open “grassroot structure”, the interdependence of teams, and the need for agreements to ensure fair competitions. For 101 TFEU to apply, coordination of market behaviour by undertakings in the form of an agreement or concerted practice or a decision of an association of undertakings is needed. This means that the commercial contracts between ESL, clubs and third parties concerning broadcasting rights, sponsors or advertisements fall under the scope of EU competition law. As do the sporting rules, applied by the ESL. Furthermore, the way the Super League is organized is a restriction of competition under 101 TFEU. The Meca Medina test and Article 101(3) TFEU do not provide an exemption. Moreover, the organization of the Super League does affect trade between MS. An analysis of the relevant geographic market and the relevant product markets shows the ESL restricts competition within the meaning of 101 TFEU and constitutes an abuse of dominant position within 102 TFEU. This is an effect of the closed nature of the ESL; the fact that the eleven Founders of the ESL are never relegated to a lower division, the fact that Founders manage which club participates in the ESL and which clubs are excluded. This is a restriction of competition under 101 TFEU. It will be the first time in football in Europe that two leagues compete for consumers and the first time that there is a closed league in European football. Closed leagues are a known concept in the US. Scholars agree that this is a detriment to competition and that an open league with promotion and relegation is far more beneficial for the consumer.

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List of abbreviations

CFI Court of First Instance CL UEFA Champions League Commission European Commission ECJ European Court of Justice EL UEFA European league ESL European Super League EU European Union EUMR European Union Merger Regulation FA The Football Association FIA Fédération Internationale de l'Automobile FIFA Fédération Internationale de Football Association GC General Court MS Member States of the European Union NCA National Competition Authority P&R Promotion and relegation TEU Treaty of the European Union TFEU Treaty on the Functioning of the European Union TS Term Sheet The Court European Court of Justice UEFA Union of European Football Associations USA United States of America

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Chapter 1. Introduction 1.1. General Football Leaks, the website which is the football version of WikiLeaks, revealed on the 2nd of November 2018 that the eleven of the biggest football clubs of the world are exploring the possibility to create a new league, the European Super League (ESL)1. In a leaked term sheet2, it became clear that this so-called Super League may be established in 2022. These eleven clubs, named the ‘Founders’, will all become shareholders of a new company: ESLCo. The main purpose of the newly established undertaking is the management, sale and distribution of the broadcast rights of the matches of the Super League3. The profits will be distributed in a pre-arranged system4. ESLco will also ensure a fair competitive league5.

The founders will invite five clubs to take part in the ESL, the ‘Initial guests’6. In addition, the Founders will consider establishing a lower division league by inviting 16 clubs to participate7. The format of the league consists of a group stage and a knockout phase. In the knockout phase, teams will play for the championship and determine who will relegate to the lower division. Remarkably, the Founders cannot be relegated8.

Founders will not undergo the hassle of qualifying each year in a national competition, as is the case in the Super League’s main competitor; the Champions League. By establishing the Super League, the Founders will ensure massive revenues as they have a guaranteed spot in the ESL every year. Financial projections show revenues up to €500 million per year for each founder9. In comparison, the 2018 Champions League winner from Spain, Real Madrid,

1 Der Spiegel Staff, ‘Documents Show Secret Plans for Elite League of Top Clubs’ Der Spiegel (Hamburg, 2 Novermber 2018) < https://www.spiegel.de/international/world/football-documents-show-secret-plans-for-elite- league-of-top-clubs-a-1236447.html > accessed on 15 July 2019 2 The Term Sheet is included in the appendix of this thesis, from here on reference will be made to the ‘TS’ accompanied by the relevant clauses of the Term Sheet. 3 TS Section ‘Whereas’ under B 4 TS 4.2: 72% will be distributed to the 16 participating clubs, 10% will go to the shareholders, 8% on the basis of solidarity in which also players could receive bonusses, and 10% will be going to the development of the ESL. 5 TS 2.1.2.b.i 6 TS Section ‘Whereas’ under C 7 TS 2.1.2.a.iii 8 TS 2.1.2.a.iii.3 9 Mark O’Neill ‘The European Super League: Moving the Goalposts too Far?’ (Keep calm talk law, 21 December 2018) accessed on 17 May 2019

5 earned around €90 million and the winner of the Spanish League grossed around €175 million10.

1.2. Competition law The TEU and TFEU do not discuss specific objectives of competition law. Since the Lisbon Treaty, undistorted competition is no longer listed as an objective of the internal market. Nevertheless, the Protocol on the Internal Market affirmed that undistorted competition is part of the internal market11. Thus, through the reference of the internal market in Art. 3(3) TFEU competition policy is mentioned in the Treaty.

European competition policy is about applying rules to make sure companies compete fairly with each other. The main objective of EU competition law is to prevent distortion of competition12. The goal of a unified market and market integration is a key objective of EU competition law, the rules of competition law complement the four freedoms of the Treaty to ensure a well-functioning internal market13. Competition requires companies to act independently of each other and be subject to the competitive pressure exercised by others14. In recent years the Commission placed consumer welfare as a pivotal point when applying competition law15.

The two central rules of EU competition law are Articles 101 TFEU and 102 TFEU: Article 101 TFEU prohibits anti-competitive agreements between independent market operators, which will restrict competition by object or effect. The third paragraph of the Article gives a general exception to the prohibition. 102 TFEU prohibits companies that have a dominant

10 UEFA Financial report 2017/17 annex A; Bobby McMahon ‘La Liga Distributes 1.5B of TV Money; Barcelona, Real Madrid and 16 Other Teams Receive Record Payouts’ Forbes (6 January 2019) < https://www.forbes.com/sites/bobbymcmahon/2019/01/06/1-5b-in-tv-rights-fees-barcelona-real-madrid-and-16- other-teams-bank-record-payouts-from-la-liga/#f44a8f65eb9e > accessed on 20 May 2019 11 Consolidated Version of the Treaty on the Functioning of the European Union Protocol (27) on the internal market and competition [2008] OJ C 115/309 12 Richard Whish and David Bailey, Competition Law (Oxford University Press 2018) 2 13 Paulet L ‘The Multiple Personalities of Eu Competition Law: Time for a Comprehensive Debate on its objectives’ in Daniel Zimmer (ed) The Goals of Competition law (Edwar Elgis 2012) 65 14 Whish (n 12) 15 European Commissioner Neelie Kroes in 2005: ‘Aim is simple: to protect competition in the market as a means of enhancing consumer welfare and ensuring an efficient allocation of resources.’ SPEECH/05/512 available at www.ec.europa.eu/competition/speeches

6 position on a given market to abuse that position. A company has a dominant position when it can behave independently on the market without regard to its competitors16.

1.3. Legal problem The eleven founders cannot relegate, and they will decide who participate17. In Europe, historically, clubs promote and relegate to rise in the ranks of club competitions18. When the ESL is introduced, there will be a new league format in Europe, a closed league. The founders introduce a closed league in transnational European professional club football. A closed league seems like the new Super League will violate European antitrust rules. The aim of this thesis is to answer the question: to what extent should EU competition law prohibit the creation of a European Super League? In this thesis, I will argue that the establishment of the Super League will infringe 101 TFEU.

In this thesis the focus is on Article 101 TFEU. Although revenue prognoses were made, it is complex to predict whether the ESL becomes a dominant undertaking in de sense of 102; if ESL becomes a reality, the market will transform enormously because of the new league. The legal assessment is whether an agreement setting up a league such as the ESL can be considered anti-competitive in the sense of 101 TFEU. Articles 101 and 102 TFEU seek to attain the same aim of maintaining effective competition within the common market19. Although it should be noted that the objectives differ, 101 TFEU applies to agreements, decisions and concerted practice regardless of market position of the undertakings, 102 TFEU deals with abuse of a position of economic strength20.

1.4. Methodology & structure In chapter 2 the rationale and content of EU competition law in the context of sport leagues in Europe will be discussed. An internal descriptive research will examine the case law and legislation in the field of sport law in the EU. Chapter 3 entails an individual assessment of the Super League to see whether there is an infringement of the EU competition provisions. Chapter 4 will be a comparative assessment of the open European structure of sport leagues

16 Communication from the Commission – Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C 45/02 para 10 17 TS Section ‘Whereas’ under B; TS 2.1.2.a.iii.3 18 This is even recognised by Council of Europe and UEFA in Memorandum of Understanding 19 Case C-6/72 Europemballage Corporation and Continental Can Company Inc. v. Commission [1973] ECLI:EU:C:1973:22 para 110 20 Whish (n 12) 28

7 and the American closed model to conclude whether, and to what extent, EU competition law should prohibit the concept of the Super League.

8 Chapter 2. EU competition law in the context of sports leagues 2.1. Introduction First, the structure of sport governing bodies in football in Europe will be explained since these bodies regulate football leagues in Europe. Second, caselaw and legislative content will be analysed to explore to what extent EU competition law affects the sport governing bodies in football. This way, the content and rationale of EU competition law in the context of sport leagues will be determined.

2.2. Sport governing bodies of football in Europe

2.2.1. Regulatory structure Sport governing bodies have regulatory power in the organization of sport leagues in Europe. Football in Europe is organized by a pyramid system, in which each level takes on different responsibilities in a different geographical scope21. It is a hierarchical structure from the grassroots level up to the elite level22.

On the global level, FIFA is the governing body. FIFA oversees global regulations that concern national leagues, like transfer systems or the international match-calendar. Its main profit is made by organizing the World Cup. Technically, the continental bodies are not members, but the national associations are. Still, the continental bodies have a significant influence. In return FIFA obliges national associations to be a member of a continental federation, FIFA obliges continental bodies to comply with the FIFA Statutes, regulations and decisions, FIFA prohibits national associations and their clubs to play matches in associations which are not a member of FIFA or without consent, and FIFA ensures that leagues shall not be formed without consent of FIFA23. With these rules FIFA guarantees that the layers in the pyramid in the organization of football are respected and creates a monopoly in every layer of the pyramid24.

In Europe, UEFA is the continental body; it is formed by 52 national associations25. UEFA is the European part of the governing pyramid in football. Organizations that partake in the

21 Ducrey, Ferreira, Huerta, Marston, ‘UEFA and Football Governance: A New Model’ (2002) Centre International D’etude du Sport 11 22 Matthew Holt, ‘UEFA, Governance, and the Control of Club Competition in European Football’ [2009] 10 23 FIFA Statutes (2018 ed) art 4(1), art 9(9), art 57(11) art 71 (1) 24 Ducrey (n 21) 14 25 UEFA APPENDIX A in EUFA Statutes (2018 ed); Ducrey (n 21) 14

9 pyramid have a monopoly in each of their geographic markets26. UEFA oversees the national leagues in Europe and regulates the European Cup competitions. UEFA maintains the current football pyramid with rules that forbid breakaway leagues. UEFA statues say that UEFA shall have sole jurisdiction to organize or abolish international competitions in Europe. And leagues played on UEFA territory (Europe) shall require prior approval of UEFA27.

On the national level, national football associations are the governing bodies. In England, for example, this is the English Football Association (FA). National associations organize club competitions and coordinate the national teams who represent a nation in the World Cup or in the continental Cup, like the European Cup. They are the regulatory and sanctioning bodies within the national geographic area. Yet, they have to follow rules from the UEFA and FIFA. As long as they abide by the rules, they are granted a monopolistic position in the national organization of the game, for FIFA, as the ultimate body, will only acknowledge one association per state28.

FIFA

UEFA

National leagues/national association

Clubs

2.2.2. League structure The structure of leagues in Europe is open, so clubs do not have a guaranteed spot in a league each season. Each country has multiple layers of leagues, the number of clubs that is promoted or relegated differs per league per state but usually at the end of the season the best placed club of a league is promoted to a higher league and the lowest ranking club is relegated to a lower league. This open structure allows clubs to rise to higher leagues if they perform well. The club that ranks first in the highest league is the best of the country and is seen as the national champion. In addition, the best teams per league qualify for the UEFA continental competitions, the CL and EL. Even teams who cannot win the national league try to qualify

26 Ducrey, Ferreira, Huerta, Marston, ‘UEFA and Football Governance: A New Model’ (2002) Centre International D’etude du Sport 11 27 UEFA statutes article 49(1) & (3) 28 FIFA statues 2018 ed art 24

10 for these European competitions, as the price money is a huge bonus which provides them with a competitive advantage the following year29.

2.2.3. New situation The formation of a new alternative league is also called a breakaway league. This is not a new phenomenon; the top clubs in Europe have threatened UEFA multiple times in the past to start their own league30. However, when in November 2018 the Term Sheet of the ESL was leaked, it seemed to be more than just a tool to increase pressure.

In recent years some NCAs and the Commission have opened cases against sport organisations in the pyramid that allegedly used rules to make it harder for athletes to participate in events organised by bodies outside the pyramid model31.The ESL falls outside the jurisdiction of UEFA. After establishment of the Super League, the participating clubs are obliged to step out of the pyramid model by UEFA statues32. Therefore, founders and Initial Guests will not compete in their respective national league, leave their national football associations and do not compete in their national leagues and the UEFA CL and EL. The

29 UEFA Financial report 2017/17 annex A 30 Katarina Pijetlovic EU Sports Law and Breakaway Leagues (Asser Springer, 2015) 53 et seq. 31 International Skating Unions Eligibility Rules (Case AT.40208) Commission Decision 2018/C148/06 [2018] OJ L148/9 32 UEFA Statues art. 49

11 Founders gain control over regulatory rules and revenue generating activities. The new ESL will compete with the existing transnational football leagues; the CL and EL.

2.3. Caselaw 2.3.1. Walrave and Koch In 1974, CJEU had to decide in a landmark case whether rules of a sport governing body would fall within the system of EU Treaty law33. The Court ruled that the practice of sport is subject to EU law in so far it constitutes an economic activity. In addition, the Court suggested by stating that the rule was purely a sporting interest34. Therefore, suggesting that sporting rules could be subject to a general sport exemption35. Since Walrave, the ECJ did not apply the doctrine from Walrave to establish a sporting exemption.

2.3.2. Bosman The Bosman ruling in 1995 was the judgement that shook EU sports law36. Bosman ended an age of innocence in which sport was assumed immune from the intervention of law37. The ruling confirmed that sport is subject to all relevant EU Treaty provisions with regard to the economic activities it generates38. Although the special characteristics of sport should be considered, the provisions could be applied on the basis of general principles39.

2.3.3. Wouters In 2002, the Court ruled in Wouters that a restrictive measure by the Dutch state was allowed because the body could not reasonably consider that a regulation, despite having restricting effects on competition that are inherent, was necessary for the proper practice of the legal profession, as organised in the MS concerned40. This judgement was based on the DLG judgement in which a restrictive rule by a cooperative purchasing organization was necessary to ensure the cooperative functions properly. The Court considered the restriction objectively

33 Case C-36/74 Walrave and Koch v Union Cycliste Internationale [1974] ECLI:EU:C:1974 34 Walrave and Koch (n33) para 4 35 An Vermeersch, 'All's Fair in Sport and Competition? The Application of EC Competition Rules to Sport' [2007] 3(3) JCER 238, 240 36 Stephen Weatherill ‘European Sports Law’ in Weatherill S (ed) European Sports Law (2nd edn. Asser Press) 76 37 Ken Foster, ‘European Law and Football, who is in charge?’ (2007) 1 Soccer & Society 39, 40 38Case C-415/93 Bosman [1995] ECLI:1995:463, para 73 39 ibid para 142 40 Case C-309/99 Wouters [2002] ECLI:EU:C:2002:98, para 110

12 necessary to protect certain rights recognized as legitimate41. The proportionate measure escaped the application of 101 TFEU42.

2.3.4. Meca Medina The Meca Medina case was the first time the EU Courts applied competition law to a sporting rule adopted by a sports association in relation to a sporting activity43.

First, the ECJ reiterated that sport is subject to EU law insofar as it constitutes an economic activity44. Then, the ECJ stated that the qualification of a rule as ‘purely sporting’ was not sufficient to remove the sports association adopting the rule in question from the scope of the competition provisions. Sporting purity is irrelevant, and in no way excludes rules immediately from the scope of EU law45. Whenever the sporting activity in question constitutes an economic activity and thus falls within the scope of the EU treaty, the conditions for engaging in it are subject to obligations resulting from the various Treaty provisions including the competition rules46.

Specific requirements of Articles 101 and 102 TFEU must be examined irrespective of the nature of the rule. This means that first the rules must be assessed in the regular way, as one would normally do in competition law cases. Meaning; whether the activity is from an undertaking, whether the latter restricts competition or abuses its dominant position, and whether the restriction or abuse restricts trade between MS47.

The reasoning from Wouters was used to assess whether the rule at hand which was a rule concerning the organisation of competitive sport may fall outside the scope of 101 TFEU in certain circumstances; (i) Account must be taken of the overall context in which the rules were taken or produce their effects and of their effect and of their objectives, (ii) whether the restrictive effects cause by the rule are inherent in the pursuit of the objectives and (iii) if the

41 Case C-250/92 Gøttrup-Klim e.a. Grovvareforeninger v Dansk Landbrugs Grovvareselskab AmbA.(DLG) ECLI:EU:C:1994:413, para 34 42 Ibid para 45 43 Robert Siekmann, Introduction to the international and European sports law, (TMC Asser Press) 9 44 Case C-519/04 P Meca Medina [2006] ECLI:EU:C:2006:492, para. 32 45 ibid para 31 46 Siekmann (n43) 87 47 Meca Medina (n 44) para 30

13 rule is proportionate in the light of the objectives pursued48. This led to the conclusion that the rules at hand about doping were justified, reasonable and well-balanced49.

There are organisational sporting rules that are likely not to breach competition provisions of the TFEU, provided that the principles from Wouters are fulfilled. This means anti- competitive effects are allowed as long as they are inherent and proportionate to the objectives pursued50. As a consequence, the assessment whether a certain sporting rule is compatible with EC competition law, can only be made, under a rule of reason analysis, on a case-by-case basis51.

Meca Medina clarified the matter in two ways: it was the refusal of purely sporting rules as automatically falling outside the scope of the Treaty and the establishment of a methodological framework for the examination of the compatibility of organisational sporting rules under Articles 101 and 102 TFEU52. By adopting the Wouters test in relation to sport cases, the Commission acknowledges that non-efficiency considerations can outbalance competition concerns under Article 101(1) TFEU53.

2.4. EU Legislation and soft law 2.4.1. Helsinki Report In 1999 the European Council published the Helsinki Report54. Notably, the report recognized the European Model of Sport as a principle, which is the system of promotion and relegation, and a single federation per state. The report notes that these federations perform tasks such as the promotion of sport which should translate in financial mechanisms of internal solidarity between competitive and amateur sport55. This means that the sport governing bodies have to distribute some of their earnings to the amateur side of sport.

48 Wouters (n 40) para 97; Meca Medina (n 44) para 42 49 Meca Medina (n 44) para 43 50 European Commission White Paper on Sport, COM (2007) 391, 11 July 2007 51 Lenita Lindstrom-Rossi, Sandra de Waele and Dovile Vaigauskaite, DG Comp, ‘Application of EC antitrust rules in the sport sector: an update’ (Competition Policy Newsletter n3) 52 Siekmann (n 43) 87 53 Ben Van Rompuy Economic Efficiency: The Sole Concern of Modern Antitrust Policy? Non-efficiency Considerations under Article 101 TFEU (2012, Wolters Kluwer) 356 54 COM (1999) 644 and 644/2 55 COM (1999) 644 and 644/2 para. 4.2.3

14 2.4.2. The 2007 White Paper on Sport In July 2007 the Commission released the White Paper on Sport as a product of a comprehensive consultation56. The document states that ‘governance is mainly the responsibility of sport governing bodies and, to some extent, the MS and Social Partners’ but also states that the ‘Commission can play a role in encouraging the sharing of best practice in sports governance’57. It hands the EU a facilitating role instead of a role as a top-down rule- maker58.

In the section on the Organisation of Sport in the White Paper, the first part is titled ‘the specificity of sport’. It recognizes the specific characteristics of sports, in particular the interdependence between teams to compete59. The document describes the specificity of European sports in two ways: specificity of the sporting activities and of sporting rules and the specificity of sport structures60. The specificity of the sport structure includes: ”notably the autonomy and diversity of sport organizations, a pyramid structure of competitions from grassroots to elite level and organized solidarity mechanisms between the different levels and operators, the organization of sport on a national basis, and the principle of a single federation per sport”. Following the European Council61, the Commission the European sports model which is a single association per sport per geographic area and an open competition structure with promotion and relegation. In May 2018, the UEFA and the Council of Europe renewed their Memorandum of Understanding and once again recognizing the European Sports Model62.

The White Paper provides a helpful framework for analysis but is not innovative if compared to Meca Medina. In line with established case law that the specificity of sport should be considered in the interpretation and application of EU law, it rejects any possibility of allowing a general exemption from the application of EU law63.

56 White Paper (n 50) 57 White Paper (n 50) 12 58 Weatherill (n36) 137 59 White Paper (n 50) 12 60 White Paper (n 50) 13 61 Declaration of sport Nice (2001) annexed to the Presidency Conclusions of the Nice European Council Meeting 62 Memorandum of Understanding between Council of Europe and the UEFA, para 1.2 63 White Paper (n 50) 13

15 In the annex staff working document in ‘Sport and Competition Rules’ it is stated that Meca Medina means that the qualification of a rule as a purely sporting is not sufficient to move the athlete or the sports association adopting the rule form the scope of the Treaty competition rules and that a case-by-case analysis is therefore required. A general exemption for certain rules regarding sport activities is neither necessary nor warranted64.

The White Paper has set a direction for subsequent EU practice in the field of sports, it is a stable framework. By affirming Meca Medina as a focal point for the analysis, the Commission confirms that EU competition law is willing to regulate and manage sport governing bodies in Europe. The White Paper shows that activities with economic significance cannot escape the scrutiny of EU law and also that when interpreting and applying EU law, the special features and the specificity of the sport has to be taken into account.

Following the Working Staff Document that was accompanying the White Paper on Sport, the test for organizational sporting rules under 101 and 102 TFEU asks for 4 steps: (i) Is the sport association an undertaking or an association of undertakings? (ii) Does the rule in question restrict competition within the meaning of 101 TFEU or does it constitute an abuse of a dominant position under 102 TFEU? In this step the test from the Wouters judgement will be used to see if there is a legitimate objective. (iii) Is trade between MS affected? (iv) does the rule fulfil the conditions of 101(3) TFEU and thus exempted from a prohibition65.

2.5. Conclusion In Meca Medina a framework is established for the test of rules of sports governing bodies. In the White Paper this approach is confirmed. The recognition of the specificity of sport and the European Sport Model by EU legislation is the main takeaway, it acknowledges the special characteristics of sport that make sport different from other industries. In particular, the interdependence of teams needed to play against each other and the need for agreements to have fair competitions. It recognizes the specific organizational aspect of the sports with the pyramid structure from grassroots to elite level with a single federation per sport.

64 White Paper (n 50) 29 65 Commission Staff Working Document Accompanying document to the White Paper on Sport {COM (2007) 391

16 Chapter 3. The Super League: A restriction to competition or abuse of a dominant position? 3.1. Introduction This chapter investigates whether the Super League restricts competition within the meaning of 101 TFEU. The individual assessment is made on the way the league is organized. The assessment at hand helps to determine to which extent closed leagues are incompatible with EU competition law66.

For EU competition law to apply, the conduct in question has which may affect trade between MS. This requirement ensures that the boundary between what is covered by EU competition law and the law of the MS is clearly defined67. In the case of the Super League there is a clear effect on trade between MS. Football clubs from several MS are participating in the league, several national exploitation markets are affected, and the agreement is appreciable because the agreement exceeds 40 million euro68. Thus, the rule in question affects trade and is subject to EU competition law.

In this chapter the regular way of assessing individual cases under EU competition law is followed with the addition of the test of Meca Medina to test an organizational sporting rule.

3.2. Sport leagues and their products are peculiar 3.2.1. The product The product of sports leagues is the sport itself: the match between two teams. The revenues are generated by people watching the match, in a stadium or on television. For any sporting match, it is essential to have two competing teams. Therefore, competing teams are interdependent, which is a specific trait of sport69. This is different from regular industries; normally a monopoly would be desirable for any undertaking. In a sport competition, this is not the case, as teams need competitors to be successful in making attractive matches70.

66 In the Term Sheet of the ESL there is one footnote: ‘as per precedent in Euroleague’. This refers to the Basketball league called the Euroleague, the Euroleague uses a similar format with eleven licensed clubs and 5 other teams plus a lower division. The Commission received a complaint from FIBA about this format. The Commission has yet to decide whether it wants to open a formal investigation or reject the complaint. If it opens the investigation, it will rule about the accessibility of the Euroleague. Then, it will be easy to predict how EU competition law will assess the ESL. 67 Case C-22/78 Hugin Kassaregister AB v Commission [1979] EU:C:1979:138 68 Commission Notice on the definition of relevant market for the purposes of Community competition law [1997] OJ C372/03, para 52 69 Siekmann (n 43) 83 70 Walter Neale, ‘The Peculiar Economics of Professional Sports: A contribution to the Theory of the Firm in Sporting Competition and in Market Competition’ The Quarterly Journal of Economics (1964) 1

17 Aside from the need for multiple teams, there is the notion of leagues or tournaments. These are bundles of matches, resulting in a championship also known as the “league product”. Having a champion at the end adds to the attraction of the league or tournament. There is also a correlation between the uncertainty of match results and the number of consumers71. For the public, the uncertainty of match outcomes and championships adds to the attraction.

Finally, there is a need for agreements in sport. The interdependence between sport clubs, usually established through a professional league, asks for mutual agreements and rules72. There must be agreement on the rules of the games, schedules and planning of games, scores and results in games, doping, etc.

3.2.2. The relevant market The relevant market has to be determined for 101 TFEU because the examination of possible interferences of competition requests the definition of the market73. The relevant market consists of the relevant geographic market and the relevant product market.

3.2.2.1. The product market The relevant product market consists of all products and services which are regarded as interchangeable or substitutable for the consumer, because of the products’ characteristics their prices and their intended use74. To determine the product market, it is necessary to discern any substitute for that product75. There are three competitive constraints that undertakings are subject to: demand substitutability, supply substitutability and potential competition76. Demand substitutability indicates how fast consumers can switch to other products, supply substitutability means supplier are able to switch production to the relevant products relatively easy and potential competition could indicate that competition may enter the market easily which might lead to different behaviour of the undertaking at hand77.

Following Stix-Hackl and Egger, there are three types of product markets for professional sport: The supply market, which is upstream of the contest market, which is upstream of the

71 Stefan Szymanski, ‘The Assessment: The Economics of Sport’ 19 Oxfrod Review of Economic Policy (2003) 467, 471 72 Weatherill (n 36) 3 73 Case C-234/89 Delimitis v. Henninger Brau AG [1991] ECLI:EU:C:1991:91, para. 15 74 Notice on Relevant Market (n 68) 13 75 ibid 15 76 ibid 13-24 77 ibid 13-24

18 exploitation market78. This view was given by AG Stix-Hackle after the Balog v Royal Charleroi Sporting Club ASBL (c-246/98) case was settled on the day that AG Stix-Hackle’s conclusion was supposed to be published79, this view is generally accepted as an informal conclusion to this case80.

The supply market is where clubs compete for the most important production factor, players. The contest market is the market in which clubs play against each other and produce the final product, the match. In the contest market the sport governing bodies play an essential role by designing the rules that regulate the matches and limit access to competitions. The product is the result of a joint production by two clubs. Although the product is not the result of individual isolated matches. The exploitation market is where the product is commercialized81.

The Super League offers a product comparable to the UEFA CL and El, a league product with matches played in transnational club leagues in Europe. The Super League’s relevant product market is the market for provision of organisational services of a transnational club in football in Europe. This is a different market than the market of organisational services of national club football82. In the organizational market, the organizations generate revenues by charging for their services: They take a portion of the revenue from the exploitation market83.

In DLG, the ECJ determined that the relevant market are the commercial activities within the organisation, rather than the access to the organisation84. In MOTOE and in the ISU decision, the relevant market was not only the organisation of sport events but also their commercial exploitation85. The organisation and exploitation market are not interchangeable but functionally complementary86. In Meca Medina, the relevant market was not defined87. In Piau the CFI did not elaborate; it determined that the relevant market was the market affected

78 Alexander Egger and Christine Stix-Hackl ‘Sports and competition law: a never-ending story?’ (2002) 23 ECLR 2, 81, 85 79 An Verneersch Europese spelregels voor sport (2009 Maklu Publishers) 240 80 Pijetlovic (n 30) 170; Vermeer(n 79) 268; M Olfers Sport en Mededingingsrecht (Kluwer Deventer 2008) 211 81 Egger and Christine Stix-Hackl (n 78) 85 82 ISU (n 31) para 110 83 Pijetlovic (n 30) 234 84 DLG (n 41) para 19 & 48 85 Case C-49/07 Motosykletistiki Omospondia Ellados NPID v Elliniko Dimosio (MOTOE) para 33; ISU (n 31) para 104 86 MOTOE (n 85) para 33; ISU (n 31) para 84 87 Meca Medina (n 44)

19 by the rules in question which was the market for provision of services where the buyers are clubs and the sellers are agents88. In ENIC, the relevant market for assessing the competitive impact of the rule was held to be the supply of club football in the EU89. The Commission did not elaborate on the relevant market as the rule in question was not a restriction by object or effect due to the rule’s legitimate aim.

In DLG and MOTOE, the cases were about restricting the exercise of specific activities restrictive to organisations that were already active in the organisational market90. The rule in question is the inability of the clubs to access the ESL. When the ESL is realized, the organisation is established and thus the ESL and their Founders have access to the exploitation market via the ESL. Both markets are functional complementary. Therefore, the relevant product market is together with the exploitation market.

The exploitation market is the market in which sport associations exploit their commercial rights through advertisements, sponsorship, the sale of broadcasting rights, merchandise and tickets91. In 2017/2018 43% of a club’s income was from broadcast revenue, which heavily depends on the form of distribution of their national league and European league, and the performance in those leagues92. The revenue generated, was 40% commercial revenue, which consists of sponsorships deal, merchandise sale, commercial operations such as pre-season tours. 10% is matchday revenue which is the sale of tickets and corporate hospitality sales93. Leagues compete to get the highest earnings from the sale of the broadcasting rights of their leagues; this leads to higher amounts of money distributed to clubs. Clubs compete for sponsorships, merchandise sales, and ticket sale. For consumers, the media companies in the market of broadcasting rights, the sponsorships, merchandise and ticket sale are not interchangeable with the broadcasting rights. Thus, the relevant product market is the market for provision of organisational services of transnational club football in Europe together with the market for exploitation of broadcasting rights. Not included are the exploitation market of commercialisation and matchdays, these exploitation markets are merely connected.

88 Case T-193/02 Piau v Commission [2005] ECLI:EU:C:2005:22, para 112 89 ENIC/UEFA (Case COMP/37 806) Commission Decision [2002] IP/02/942 para 12 International Skating Unions Eligibility Rules (Case AT.40208) Commission Decision 2018/C148/06 [2018] OJ L148/9 90 MOTOE (n 85) 91 Deloitte Sports Business Group ‘Football Money League’ (January 2019) 2 92 ibid 93 ibid

20 In the market for exploitation of the broadcasting rights, the ESL is on the supply side, with UEFA’s transnational football leagues as sole competitor. Big media companies are on the demand-side. The downstream market comprises the markets in which broadcasters compete for advertising revenue, which depends on audience rates and pay-TV subscribers94. The demand side on the exploitation market of broadcast rights is driven by the attraction of a league to the masses, represented by the final consumers in the vertical chain of supply. Therefore, it is the substitutability for the final consumers that determines the substitutability of demand in the exploitation market95. This is strengthened because final consumers in football show more consumer-loyalty to a particular brand (team)96. Sport entertainment markets are not in the same product market as in other forms of entertainment97. As in other sports, as consumers are fans and prefer to watch certain sports98. There is a difference between football leagues and matches that are held regularly and events that are once every so often99. So, the relevant exploitation market of broadcasting is defined by the final consumers that watch transnational European football during the regular season.

In the exploitation market of broadcasting, joint selling agreements are standard practice when sport clubs entrust the selling of the broadcast rights to their sport association, which then sells the rights collectively on their behalf. This arrangement is a horizontal agreement which prevents individual clubs from competing against each other in the sale of sport broadcast rights. Joint selling agreements in upstream market leads to competition restrictions that are not likely to have occurred in the absence of the agreements100.

In three cases the Commission has decided about sport broadcast rights on the basis of 101 TFEU101. The collectively sold rights risked restricting output and to foreclose access for operators on the downstream market. The Commission gave various remedies to decrease negative effects of the joint selling. Examples are objective and non-discriminatory tendering

94 Joint Selling of Commercial Rights (UEFA CL) (COMP/C.2/37.398) Commission Decision [2003] OJ L 291/25 para 80 95 British Interactive Broadcasting/Open (Case Comp IV/36.539) Commission Decision [1999] OJ L 312/1 96 Case T-114/02 BaByliss SA v. Commission [2003] ECLI:EU:T:2003:100; Case T-290/94 Kaysersberg SA v. Commission [1998] ECLI:EU:T:1998:255 97 Case TPS (No IV/36.237): Commission Decision [1999] OJ L 90/6, p. 6. 98 Group Canal+/RTL/GJCD/JV (COMP/M.2483) Commission Decision [2001] OJ L 2985, para 19. 99Group Canal+/RTL/GJCD/JV (n 98); Joint selling agreements (n 94) 100 Communication from the Commission Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements OJ C11/1 14, para 237 101 Joint selling agreementsl (n 94); Joint selling of the media rights to the German Bundes Liga (Case 37214) OJ 2005 L 134/46; Joint selling of the media rights to the FA Premier League (Case COMP/38.173) Commission Decision OJ C 7

21 procedures102, limitation of exclusive contracts103 and no single buyer obligation104. The Commission recognized that joint selling may create efficiencies under 101(3) TFEU. The creation of a league product, branding efficiencies and reducing transaction costs have the potential of improving the product and its distribution to the advantage of clubs and viewers105.

3.2.2.2. Connected upstream markets of clubs’ services The connected upstream market to the market for provision of organisational services of transnational club in football in Europe is the market for clubs’ services. Clubs provide input services by participating in leagues. Clubs are on the supply side and organizations on the demand-side. This market mirrors the organizational market. Clubs need an entity performing organising functions that will regulate the supply market for players, club licensing and other factors of production. ESL is on the demand-side and is the ‘buyer’ of services of clubs on the European level. UEFA is the competitor on the demand side.

The service on the market of clubs’ services is quite unique, the both levels of the vertical chain of supply; the clubs’ services and the organizational levels are interdependent in a quid pro quo arrangement instead of a classic wholesale price106. Clubs offer their services and the organizations take a portion of the revenue in the exploitation market.

ESL and UEFA will be rivalling organisers which means their organisational service in European-wide football leagues will be substitutable for each other. Notably, the ESL will consist of 16 of the top teams of Europe.

3.2.2.3. Geographic market The geographic market is the area in which the undertakings are in involved in the supply and demand of a product or services in which the conditions of competition are sufficiently homogenous, and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas107.

102 ibid 103 ibid 104 ibid 105 Siekmann (n 43) 108 106 Pijetlovic (n 30) 170 107 Relevant Market (n 68) 14

22 With the ESL, the demand is comparable to the CL; UEFA’s geographic market is in all countries where the UEFA competes, which is the whole of Europe108. The ESL will not have clubs from every country in Europe, but the football fans like to see the best teams play at the highest level. In comparison, the CL has viewers from all over the world109. So, it is safe to assume that every football consumer in Europe will be intrested in the league. However, the connected downstream exploitation market is national. Although the product may be transnational, the product is sold on a national level due to the national characteristic of distribution110.

The relevant market is the market for provision of organisational services of transnational club football in Europe together with the exploitation market of broadcasting of European transnational club football in national markets. The supply market for club’ services is the connected upstream market.

108 Valerie Kaplan, ‘UEFA Financial Fairplay Regulations and European Union Antitrust Law Complications’ (2015) 29 Emory Int. Law Review 109 ibid 110 Siekmann (n 43) 106

23

3.3. The classification of the European Super League A legal entity that acts as a facilitator to a cartel can be an undertaking even though it does not itself produce the goods or services that are cartelised111. In the case of the Super League this means that ESLCo itself could be liable for infringement of 101 TFEU. When classifying the organization at hand there is a functional approach; the classification as an economic activity must be carried out separately for each activity exercised by a given entity112.

The clubs themselves are undertakings to the extent they carry out economic activities: not only the selling of merchandise or tickets but the practice of football too is an economic activity113. From the caselaw of the Court it is clear that clubs are undertakings within the meaning of 101 TFEU and therefore national associations grouping them are associations of

111 Case C-194/14 P AC-Treuhand v Commission [2015] ECLI:EU:C:2015:717, para 33-36 112 MOTOE (n 85) 113 Joint Selling Agreement (n 94) para 106; Piau (n 88) para 69

24 undertakings within the meaning of 101TFEU114. Sporting rules that are regulations of sport associations are categorized in the caselaw as decisions of an association of undertakings115. Even though football associations do not participate in some areas of the market, the UEFA and national associations still regulates services that are provided in the market. The regulations governing the operation of an association have been held to be a decision116.

For 101 TFEU to apply, coordination of market behaviour by two or more undertakings in the form of an agreement or concerted practice or a decision of an association of undertakings is needed. This means that not merely the commercial contracts between sport clubs and third parties concerning broadcasting rights, sponsors or advertisements fall under the scope of EU competition law, but sporting rules too, meet this condition117. The agreement establishing the ESL is an agreement between undertakings or decision of an association of undertakings. Both possibilities could be argued for, but this would not change the situation since 101 TFEU applies the same way in both categories.

3.4. Restriction of Competition under 101(1) TFEU? The legal question is whether an agreement to set up a league such as the ESL can be considered anti-competitive in the sense of 101 TFEU. The Founders are unable to relegate, and they will decide which teams will partake in the lower division league and thus which clubs have the chance to promote to the Super League118. In other words, clubs outside of the ESL do not have access to this league and the Founders have total control over the accessibility of the Super League.

Two comments beforehand; first, the interdependency between sport teams provides that two teams are necessary for the product. The Founders exclude other clubs to play games against them. In principle an undertaking is free to decide with whom it wants to do business. The Founders only want to play against each other, the other ‘top’ teams. The issue is that clubs are interdependent and as ‘lesser’ clubs they are excluded of the ESL, they will be unable to play top teams and thus improve their product. In the caselaw of the EU, the specificity of

114 Piau (n 88) 115 Joint Selling Agreement (n 94) para 108; Piau (n 88) para 69; ENIC (n 89) decision para 26 116 Visa International – Multilateral Interchange Fee (COMP/29373) OJ [2002] L 318/17, para 55 117 Steven Jellinghaus and Guido Hahn (red), Capita Sportrecht (Gompel & Svacina 2008) 131 118 TS Section ‘Whereas’ under B; TS 2.1.2.a.iii.3

25 sport is taken into account in the treaty law assessment119. Aspects of specificity of sport is recognized as a legitimate objective that could exempt the application of competition law120. The issue at hand is whether aspects of the specificity of sport could substantiate the claim that organisational structures are anti-competitive in the field of sport.

Second, the players will be divided into two separate structures; the ESL and the UEFA pyramid. However, the supply market for players remains the same, the Founders can still buy players off and sell them to the UEFA structure. In this supply market of players, the Founders are still competing for players with each other and with clubs outside of the ESL as the agreement of establishing the ESL does not preclude the sale or purchasing of players outside of the ESL leagues. Players are free to reject or to sign a contract with a club and thus as such, determine themselves whether they are bought or sold to a club in the ESL or in the UEFA structure (or vice versa).

Agreements and decisions are only prohibited under Article 101 TFEU when they aim for the prevention, restriction or distortion of competition in the internal market. Hence, the agreement by clubs by establishing the Super League that the eleven founders are never able to relegate and thus that they will always participate while on the other hand certain teams have to be invited by the Founders to the league means the object or effect to restrict competition.

As mentioned in chapter 2, EU law recognizes the principles of the specificity of sport; the interdependence between competing teams. On the structural aspect, it acknowledges the autonomy and diversity of sport organisations, a pyramid structure of competitions from grassroots to elite level and organised solidarity mechanisms between the different levels and operators, the organisation of sport on a national basis, and the principle of a single federation per sport121.

After the establishment of the ESL, the current pyramid structure of grassroots to elite level will be ‘broken’. An aspect of this pyramid is the organised solidarity mechanism between different levels and operators. The Commission has recognized that the pyramid along the

119 C-325/08 Olympique Lyonnais [2010] ECLI:EU:C:2010:143 para 40 120 See 2.4 121 White Paper (n 50) 13

26 financial solidarity system supports the development of European football by ensuring that revenue is distributed more fairly122. It could be argued that the pyramid is necessary to maintain the solidarity system. However, the ESL will allocate 70% of 8% (=5.6%) of their revenue to general solidarity purposes123. In comparison, the UEFA allocates 7% of the CL revenue the CL for solidarity payments. So, this aspect will be respected.

Still, there is a new league outside of the pyramid and there will not be a single federation per sport. The Commission cannot enforce compliance with the European model of sport with promotion and relegation, except in so far as the departure from the system it involves EU law124. In the Meca Medina Case and the ISU decisions, the rules were found to be restrictive of competition, these rules were from incumbent sport associations to athletes who tried to participate in alternative leagues. In ISU, the rule was held to be a quasi-insurmountable entry barrier for potential competitors125. The rule was restricting for athletes to participate which made an entry in the market of organising ice skate events practically impossible. In Meca Medina, the restrictive rule was to pursue a legitimate objective and thus permitted. (although about 102) In MOTOE and FIA/Formula one, the issue was about the regulatory and commercial functions in the same body, which led to blocking competing organisations and preventing market access126. In case of the ESL, the new alternative league has a rule that makes it hard for other competitors/clubs to join, and impossible for ESL-competitors to be forced out of the market.

There is no caselaw or commission decisions about a closed league. A study of the Commission (2013) has shown that the CL is slowly becoming a de facto system of closed leagues at the elite level127. Still, however small the chance may be, every football club has the opportunity to start at grassroot level, rise through the ranks, and ultimately become the best of their national league and qualify for the CL, with all the financial benefits that come with it. by performing well, clubs can play against the top teams and thus improve their product.

122 Case 26/76 Metro v. Commission [1977] ECR 1975, Case 42/84; Remia v. Commission [1985] ECR 2545 and; Cases 56 and 58/64 Consten and Grundig v. Commission [1966] ECR 299. 123 Term Sheet 4.3.1 124 Weatherill (n 36) 199 125 ISU (n 31) 197 126 MOTOE (n 85); FIA regulations (Comp/36.638) Notification by the Commission) [2001] OJ C/169 127 Study by KEA – CDES for the Commission ‘The Economic and Legal Aspects of Transfers of Players’ (2013)

27 The product of the Super League is the transnational league which will be sold on national exploitation markets of broadcasting rights in Europe128. This league product consists of matches played by clubs which is exploited in the downstream market. The ESL is a joint production between undertakings129. A horizontal production agreement is the agreement between parties to produce products or services together. This can be in the form of a joint venture130. Horizontal agreement is between is competitors, the Founders are competitors. Still, the ESL agreement consists of arrangements on different levels of the supply chain, the contest market and the exploitation market. Agreements with vertical aspects entered into between competing undertakings are assessed as horizontal agreements131.

Relevant market is the market for provision of organisational services of transnational clubs in football in Europe and the commercial exploitation market of transnational club football in Europe132. The upstream market is the supply market for clubs’ services. Production agreement may lead to direct limitation of competition between competitors, coordination of the parties’ competitive behaviour as suppliers leading to higher prices or reduced output, and anti-competitive foreclosure of third parties in a related market133. A production agreement will have spill-over effects in the upstream or downstream market134. These spill-over effects are relevant if the markets are interdependent and the parties are in a strong position on the spill-over market135. The Founders are in a strong position on the exploitation market for two reasons: they are the most popular football clubs and on the supply market of clubs’ services because every club wants to play them to improve their product. These markets are also interdependent on the relevant market of organising transnational club football in Europe136.

BER No 1218/2010 specialisation agreement encompasses a joint production agreement137. Article 2 provides for an exemption for specialisation agreements under 101 TFEU.

128 See 3.2.3.2 129 Jeff Borland ‘The production of professional sports’ in Wladimir Andreff and Stefan Szymanski (eds) Handbook of Economics of Sport (Edward Elgar 2005) 54 130 Guidelines (n 100) para 150 131 ibid para 1 132 See 3.2.2 133 Guidelines (n 100) para 150-157 134 ibid para 156 135 ibid 136 MOTOE (n 85) para 33; 137 Para. 1(a) Commission Reg. on the application of Article 101(3) of the TFEU to certain categories of specialisation agreements.

28 There is also no hard-core restriction of Article 4(2) of the BER because it is the volume in a context of a joint production agreement. The question is whether the combined market share of the joint parties is more than 20%, and, if so, the agreement falls outside of the scope of the BER138. A company's market share is its sales as a percentage of the industry's total revenues. Ten of the eleven Founders are in the top 12 clubs that generate the most revenue in the market139. In 2017 the 12 clubs with the most revenue made 39% of all European clubs’ revenue140. It is a prediction, but it is probably safe to say that the ESL will have a combined market share of more than 20% in the market for provision of organisational services of transnational club in football in Europe.

The legal criterion of a restriction of competition by object is: ‘that such coordination reveals in itself a sufficient degree of harm to competition’. Certain types of coordination between undertakings are considered by their very nature, as being harmful to the proper functioning of competition141. An essential element is that such coordination reveals in itself a sufficient degree of harm to competition142. Agreement may still be a restriction by object if it does not have restriction of competition as its sole aim but also pursues other legitimate objectives143. The content of the agreement, the objectives it seeks to attain, and the economic and legal context it is part of, must be regarded to assess whether an agreement has an anti-competitive object144. The subjective intention may be relevant but is not necessary to prove to establish a restriction by object145. Restrictions by object have such high potential of negative effects on competition that it is not necessary for the purpose of article 101 TFEU to demonstrate actual effects on the market146. The de minimis doctrine does not apply to restrictions by object147.

Competitors who agree to restrict the volume of their supply or production capacity is seen as a restriction of output148. It could be argued that the ESL is a limitation of output because the Founders do not allow other teams to play against them. Restriction of output mentioned in

138 Article 5 BER No 1218/2010 139 Deloite (n 91) 140 Deloite (n 91) 141 Case C-67/13 P Groupment des Cartes Bancaires [2014] EU:C:2014:2204 para 50 142 ibid para 57 143 Case C-26/75 General Motors v Commission [1975] ECLI:EU:C:1975:150 144 Guidelines (n 100) para 25 145 Case C-277/87 Sandoz Peosotti Farmaceutici v commission [1989] EU:C:1989:363; Cartes Bancaires (n 141) para 54 146 Commission notice Guidelines on the application of 101(3) [2004] OJ C 101/08 para. 41 147 Case C-226/11 Expedia [2012] ELCI:EU:2012:795 148 Guidance on restrictions of competition "by object" for the purpose of defining which agreements may benefit from the De Minimis Notice Accompanying the De Minimis Notice (C2014 4136)

29 Article 101(1)(b) TFEU and thus a restriction by object. In the context of production agreements, output restriction is not a restriction by object when parties agree on the output directly concerned by the production agreement, provided that other parameters of competition are not eliminated149. In case of the ESL, the output, the number of matches, is directly affected by the agreement. Thus, assessment is needed on the overall content of the agreement, and whether it gives rise to restricted effects on competition150. ESL is not merely production agreement; it also entails a collective exclusive dealing arrangement; all the founders agree to distribute their broadcast rights through the ESL exclusively, which will in turn sell the broadcasting rights exclusively through a joint selling agreement on the exploitation market of broadcasting rights151. Vertical elements between competitors are assessed under horizontal guidelines152. Commission has condemned rigid collective exclusive dealing arrangements153.

The exclusion of other clubs other than the Founders and Initial Guests could also be prohibited because it amounts to collective discrimination. Joint discrimination by undertakings is prohibited “in so far the discrimination has the effect of placing them at a competitive disadvantage”154. Discrimination that is organized between competitors is collective discrimination and it could amount in a collective boycott155. Collective action to cut off supplies or purchases to or from a particular supplier is collective boycotting as a special form of discrimination. “The collective boycott is traditionally considered one of the most serious infringements of the rules of competition, since it is aimed at eliminating a troublesome competitor. Such a boycott constitutes an intentional infringement of Article 85 (1)” and is a restriction by object156. If multiple firms agree to deal only through certain channels, it is a collective boycott. Most common is an exclusive dealing agreement operated through a trade association157.

149 Guidelines (n 100) para 160 150 ibid para 161 151 TS 4.1 152 Guidelines on Vertical Constraint European Commission [1010] OJ C 130/1 27 153 Re Italian Flat Glass OJ [1981] L 326/32 Re gas water-heathers OJ [1973] L 213/34; Re bomée Stichting OJ [1974] L 329/30; groupement d’exportation du Leon v Societte d’investments et de Cooperation Agricoles (cauliflowers) [OJ [1979] L21/23; Re Stoves and Heaters OJ [1975] L159/22; Donck v Centraal bureau voor de rijwielhandel OJ [1978] Re Ima Rules OJ [1980] L 321/1 154 T Dutch Cranes, CFI Oct. 22, 1997, 1997 ECR I-1739, para. 149 155 Lennart Ritter and David Braun European Competition Law: A Practitioner’s Guide (3rd end, Braun and Ritter 2003) 203 156 Papiers Peints de Belgique (case IV/426) 74/431/EEC [1974] OJ L 237/3 157 Susan Singleton and Alison Firth Comparative law of Monopolies (Supplement No. 2018-1, April 2018) pp. 195 - 274.32 Kluwer Law International) 227

30

Most cases about collective boycotting, are about trade organizations with an agreement between competing suppliers and the agreements are designed to strengthen the anti- competitive effect of contractual obligations (e.g. to charge certain prices or use specified distribution channels)158. Restrictions upon terms of admission to trade organizations which impose upon members forms of refusal to deal with third parties will usually infringe Article 101159. However, for a sports league it is necessary that members (clubs) are obliged to refuse to deal with clubs outside of the league. Otherwise the league would not be a league. An agreement that imposes a system providing product quality which requires participants to deal only with firms whose goods meet the prescribed quality standard is permitted.

Trading associations defending the professional interests of their members are unlikely to infringe Article 81 (1), provided they do not discriminate against non-members, in particular by refusing access without objective justification or applying discriminatory fees160. Thus, it is significant whether the ESL is discriminating against non-members, other clubs, or refuse access without objective justification. Some undertakings do not want to deal with a certain undertaking for a legitimate reason. Therefore, distinction should be made between naked restraints that are clearly intended to be exclusionary and agreements which promote efficiency and therefore are permissible161. The question is: does ESL does not aim to produce a product with most of the clubs; Is this to exclude competition or because they want to have the best product possible i.e. the best possible league with the highest quality of matches. In the Terms Sheet it is clear that the objective is to maximize global reach and commercialization162. It seems the inability to relegate is to ensure themselves of revenue and exclude other competitors. Still, the Founders are also inviting other clubs. Thus, it is not a complete refusal of access but a non-equivalent measure towards Founders in comparison to others. Founders are unable to relegate, others are not; the Founders are positively discriminated. It is not mentioned on what basis teams will be invited, thus as the objective is to maximize commercialization commercial value may be the main requirement163. Rules that

158 Ritter and Braun (n 155) 203 159 Papiers Peints (n 156) para. 68; 160 Case T-77/94 VGB and Others v Commission [1997] ECLI:EU:T:1997:70 (later upheld on appeal) 161 Whish (n 12) 561 162 TS 2.2.1 163 TS 2.2.1

31 lack openness about requirements for access to a trade organization are a restriction of competition as they prevent access to a market164.

Traditionally clubs could participate in European transnational leagues by performing in their respective national league. The barriers of entry that the ESL entails have an anti-competitive foreclosure effect. In VISA Europe/Morgan Stanley, Visa (consists of a number of undertakings) was fined for refusal of access to a system without objective justification165. The barriers of the ESL are the need of an invitation by the Founders, it could be with an objective justification, but it is clearly not on the basis of sport performance. For example, AC Milan, a Founder in the ESL, is ranked as 78th on the UEFA coefficients ranking on the basis of the last 5 years166. The lack of criteria on which clubs could get invited to the ESL and the positive discrimination towards the owners Founders are an anti-competitive combination. The Founders have an exclusive dealing arrangement with the Super League. When looking at the overall economic and legal context, these measures result in the collective boycotting of clubs. It could be argued that in the context of a joint venture created that these restrictions are not a restriction by object because directly concerned production agreement. However, as noted before, other parameters of competition cannot be eliminated167. Thus, assessment is needed whether the agreement gives rise to likely restricted effects on competition168.

When assessing the restrictive effects on competition of an agreement, account should be taken of the actual conditions in which the agreement produces its effects. In particular, the economic and legal context, the nature of the product concerned, the real operating conditions and the structure of the market concerned169. An objective analysis of the impact of the agreement on the competitive situation is required170. Whether a production agreement is likely to give rise to restrictive effects on competition depends on the situation that would occur in the absence of the agreement with all its alleged restrictions171. A scenario that is on the basis of a hypothesis should be based on plausible developments or likely developments

164 Case T-213/95 and T-18/96 CK and FNK v COMMISSION [1997] ECLI:EU:T:1997:157 para 240 165 T-461/07 Visa Europe v Commission [2011] EU:T:2011:181 para 161-191 166 The UEFA rankings are accessible via : < https://www.uefa.com/memberassociations/uefarankings/club/#/yr/2019 > accessed on 10 July 2019 167 Guidelines (n 100) para 160 168 Guidelines (n 100) para 161 169 Cartes Bancaires (n 141) 170 Case T-328/03, GmbH & Co. OHG v Commission [2006] ECLI:EU:T:2006:116 para 77 171 Guidelines (n 100) para 163

32 that occur on the market in absence of those arrangements172. Article 101 TFEU is also about potential competition on a relevant market173 and the potential effects of an agreement174. Production agreements which also encompasses joint distribution carry a higher risk of restrictive effects on competition175. The agreement establishing the ESL does encompass distribution, the distribution of the broadcasting rights.

There is a high interdependency of the exploitation market and the organization market. Access to an organization means also access to the exploitation market176. An agreement in the market of organization may lead to a restriction of competition in the market of exploitation. In the exploitation market of broadcasting, the ESL will compete with the UEFA CL and EL. The UEFA CL and EL will probably decrease in value. Competition in the broadcasting market will increase the UEFA has an actual competitor. The joint selling, as is common in the exploitation market of sports, will still have to obey the rules made in the case law177. A closed league could be treated as a purely commercial entity rather than as a sport governing body that possesses specificities which can earn it a soft application of the law and exempt it from application of Article 101 TFEU to collective sales of broadcasting rights178. In that case, the ESL is definitely restriction of competition in the broadcasting market, by joint selling agreements and by excluding club’s participation.

In the exploitation market the UEFA is at a competitive disadvantage, the best clubs are no longer in the joint production that is the CL and EL. The Founders are in the ESL in an organizational market, they are not competitors in the supply market of club’ services anymore and they are assured of participating in the ESL. In the market of club’ services, the ESL is on the demand side of the market. The ESL is a supplier in the market of provision of transnational club football, clubs are in demand. Those clubs are excluded by ESL because founders agreed not to play against these clubs. Excluded clubs cannot expect to be invited on the basis of sport performance. As the Term Sheet does not give criteria for the invitation of

172 C-382/12 P Mastercard Inc. and Others v Commission [2014] ECLI:EU:C:2014:2201 para 173 173 Joined cases T-374/94, T-375/94, T-384/94 and T-388/94 European Night Services Ltd (ENS), Eurostar (UK) Ltd, formerly European Passenger Services Ltd (EPS), Union internationale des chemins de fer (UIC), NV Nederlandse Spoorwegen (NS) and Société nationale des chemins de fer français (SNCF) v Commission [1998] ECLI:EU:T:1998:198 para 13 174 Case C-345/14 SIA [2014] ECLI:EU:C:2015:784 175 Guidelines (n 100) para 167 176 MOTOE (n 85);DLG (n 41) 177 Joint Selling Agreements (n 94) 178 Pijetlovic (n 30) 307

33 Guests. Considering the objectives of the Super League, teams will most likely be invited on the basis of their commercial value179.

Output restrictions directly concerned by the production agreement are not restrictions of competition provided other parameter of competition are not eliminated180. Most clubs are unable to compete with the Founders as suppliers in the supply market of club’ services. The clubs cannot participate in the ESL with the Founders in the market of provision of organizational transnational football, they can participate in the organizational market in the UEFA Cl and EL.

The founders are ensured of participating in the ESL. After establishment of the ESL, clubs may be excluded from the ESL because they are commercially less valuable. The clubs cannot compete with the Founders as suppliers in the supply market of club’ services. This leads to a restriction of competition on the market of club’ services. Before the establishment of the ESL, all the clubs were under UEFA pyramid, thus the clubs were not competing in the market of club’ services. Now the situation has changed, clubs have to compete in the market of club’ services, they want to participate in the structure in the organization market that is the most successful to improve their product. There is an elimination of competition in the market of club’ services. Hence, other parameters of the competition are eliminated.

To conclude, setting up a league such as the ESL, means clubs in the ESL are unable to relegate and other clubs are unable to participate on the basis of clear criteria. The objective is maximising commercialisation, which is not an anti-completive objective by itself in light of the product the organizations it tries to protect. Looking at the content of the agreement and his overall legal and economic content; the joint production, combination with the joint distribution and selling and taking into account the interdependence between sport teams, the ESL results in an effective collective boycott of commercial less valuable clubs. There is a distortion of competition in the market of club’ services. This is a restriction by object as long as the founders do not provide clear criteria which allow clubs to enter the ESL because of their sports performance.

179 Term Sheet 2.2.1 180 Guidelines (n 100) para 163

34 3.5. The Meca Medina test The Meca Medina case shows that the rules that are a restriction of competition of sporting organisations can pursue a legitimate objective when taking into account the overall context, if its restrictive effects are inherent in the pursuit of that objective and if they are proportionate to it181. A legitimate objective of sporting rules will normally relate to the organisation and the normal conduct of sport. The specificity of sport will be taken into consideration when testing if there is a legitimate objective182.

In the case of the Super League, the rules relate to the organisation of the sport. The legitimate objective is harder to pinpoint. The rule has nothing to do with ensuring fair sport conditions, ensuring uncertainty of the results, protection of the athletes’ health, ensuring of financial stability for the clubs or the protection of spectators183. The term sheet speaks of the aim of: “maximising the number of matches played between top European clubs, and, hence, maximising its global reach, broadcasting audience and commercialization”184. Thus. the ESL is organised in a way to generate as much revenue as possible by making the best possible product with only the top teams and thus attracting most of the consumers. This does not relate to the proper functioning of the sport. Even if maximising the number of matches between top European clubs is a legitimate objective. The rule is most definitive not inherent in pursuit of its objective. Maximising matches between top teams could also be established in other ways, with less restrictive measures.

3.6. 101(3) TFEU Article 101(3) TFEU provides for a legal exception to the prohibition in article 101(1) TFEU. The first paragraph is declared inapplicable if the agreement, concerted practice or decision of an association of undertakings satisfies four conditions in 101(3) TFEU. Any type of agreement can be defended under 101(3), even restrictions by object.185 The four cumulative conditions are: (i) the conduct must contribute to improving the production or distribution of goods or to promote technical or economic progress, (ii) while allowing consumers a fair share of the benefits, and which do not (iii) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;(iv)

181 See 2.3.4 Meca Medina 182 Siekmann (n 43) 103 183 Working staff document annex to White Paper (n 65) 184 TS 2.2.1 185 Case T-19/93 Matra Hachette v Commission EU:T:1994:89

35 afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

The conduct must contribute to improving the production or distribution of goods or promoting technical or economic progress. In the ESL; improvement of production could be argued for as the teams will play at a higher level more often against a better team. However, the improvement must be an economic efficiency186. It is hard to predict, but it seems unlikely that clubs from the Super League will have an economic efficiency187. Even though, the Court has used non-economic considerations in two other cases related to sport188.

Indispensability of the restrictions is a twofold test: reasonably necessary to achieve efficiencies and the individual restrictions of competition flowing from the agreement are reasonably necessary for the attainment of the efficiencies189. The rule at hand seems to be dispensable. A better product, better football matches are easily achieved in another way. For example, by making an open league where other teams have the chance to promote to the highest league. Thus, article 101(3) TFEU does not give an exception for the agreement setting up the ESL.

3.7. Conclusion In this chapter it is explored to what extent the Super League restricts competition within the meaning of 101 TFEU. The individual assessment is made on the way the league is organised; the fact that the eleven Founders are never relegated to a lower division and the ability of Founders to regulate who participates in the league. After taking into account the interdependence between sports teams and looking at the content of the agreement and his overall legal and economic content; the joint production, in combination with the joint distribution and selling, the ESL produces an effective collective boycott of commercial less valuable clubs. There is a distortion of competition in the market of club’ services. This is a restriction by object, as the Founders do not give clear criteria for participating in the league and favour themselves heavenly with the rules that apply. It is concluded that the way the Super League is organized is a restriction of competition by object under 101 TFEU. The Meca Medina test nor Article 101(3) TFEU does not provide an exemption.

186 101(3) Guidelines (n 146) para 48-72 187 In Piau (n 88),some non-economic efficiency improvements were considered. 188 Piau Piau (n 88) para ; Joint selling agreement (n 94) para 164 189 101(3) Guidelines (n 146) para 73

36

37

Chapter 4. The desirability of the Super League The ISU case has shown that monopolistic organisations can be punished for enforcing their monopoly to players or teams of that sport. Still, the decision is not about the pyramid structure of European sport190. If the Super League becomes a reality, there will be enormous effects for European Football. It will be the first time in football in Europe that two leagues compete for consumers (fans) in the same geographic area and the first time that there is a closed league in football. In this chapter it will be investigated whether the Super League and its consequences are desirable.

4.1. European Model of Sport vs American franchise leagues Sport in Europe was developed and practiced in voluntary clubs and associations in Europe, while in the USA sports is developed and practiced in schools, colleges and universities. In chapter 2.2 the structure of sport governing bodies and leagues in Football in Europe is illustrated. The open league system with promotion and relegation, the pyramid structure in whole of Europe, and the monopolistic position of the governing bodies are its main characteristics.

In contrast, in America the leagues are closed and franchised, which means that teams have a guaranteed (bought) spot in a league every season. If a new team wants to enter the league, it has to buy a spot from another team, or the league has to expand. Usually leagues expand by competing leagues merging. Franchises have territorial rights, so no local rivals. Most American leagues are divided in geographic areas. At the end of the season, the best teams per area play a playoff tournament to determine the champion of the league. Some teams may never face each other in a regular season191. American sports were commercialized and professionalized earlier than European sports. America’s closed leagues are mainly national in scope and established under profit-oriented control without a regulatory body. This has led to the formation of competing leagues in the same sport branch192.

190 Stefano Bastianon, ‘The ISU’s decision and the Slippery Side of Eligibility Rules’ (Asser Sports law blog, 5 January 2018) < https://www.asser.nl/SportsLaw/Blog/post/the-isu-commission-s-decision-and-the-slippery- side-of-eligibility-rules-by-stefano-bastianon-university-of-bergamo > accessed 1 June 2019 191 Maarten Bottenburg, ‘Why are the European and American sports worlds so different? Path- dependence in the European and American sports history’ in Tomlinson, Alan, Young, Christopher, Holt, Richard (eds.), Transformation of Modern Europe: States, Media and Markets 1950-2010, (Routledge 2011) 1 192 ibid 2

38 4.2. Two competing leagues The UEFA has the monopoly on European-wide football leagues in Europe. When the Super League becomes reality, there will be competition between the CL and the ESL. This means both the UEFA and the Super League will compete for fans, players, sale of merchandise and the sale of broadcasting rights. This has beneficial effects for consumers as who will get the best product for the best price. Monopoly leagues will cause significant harm to tax payers, fans, and players193. Competition law should ensure that there are no agreements by leagues that hinder new entrants from participating in the market of the provision organizational services of sport. Absent governmental intervention to the monopoly position of leagues will lead to reduced output and renders output unresponsive to consumer demand194.

Currently there is competition between national leagues in Europe; they compete for players and viewers. When the Super League is established, the UEFA continental leagues have to compete with the Super League. The question remains, is it beneficial for the fan that two leagues will compete and try to improve their product or decrease their price as players are divided over two competing leagues and will not compete with each other.

4.3. A closed league or an open league The founding of the Super League leads to the “closed versus open league structure” debate. The European model of sport has always advocated a system in which low tier teams are able to promote195. Teams could rise all the way from amateur level to the highest league in a relative short time and become national champions which gives access to the CL. Ultimately a team has the chance to compete with the other champions of Europe in the CL. A disadvantage of the EU system is that the federations are regulators, but they do not have public accountability and leagues cannot choose to not fall under the regulations of the federation196.

An argument for a closed league is the maintenance of competitive balance. Competitive balance is the balance between sporting capabilities, the more balanced the teams in the league, the more uncertain the outcome of each match. Uncertainty provides for more

193 Stephen Ross, ‘Monopoly Sport Leagues’ (1988) 73 Minnesota L Rev 643, Section I 194 Stephen F Ross and Stefan Szymanski, 'Open Competition in League Sports' (2002) 2002 WIS L REV 625 195 See chapter 2 196 Ben Van Rompuy, 'The Role of EU Competition Law in Tackling Abuse of Regulatory Power by Sports Associations' (2015) 22 MAASTRICHT J EUR & COMP L 179

39 spectators197. It is easier to monitor and thus regulate in a closed league. The competitive balance is higher in America as teams the financial difference between clubs is not that big. of the league and more teams per season are able to win the league. The competitive balance is a vital point in American leagues and is maintained by interference in the market, in particular with a draft system, salary caps or budget caps. A higher competitive balance optimizes turnover, profit and economic growth for a league198. The specificity of sport acknowledges the objective of competitive balance, uncertainty of results fairness and openness, in a closed competition the competitive balance is easier to maintain199. The competitive improved competitive balance could be an argument to permit a closed league. However, under the current Meca Medina test, a restrictive measure has to be inherent of the objective its pursuing. An improved competitive balance could also be achieved with other measures instead of permitting a closed league200

Another argument for closed leagues is that with a guaranteed spot in the league and exclusive local rights clubs have the chance to monopolize their local fan bases in their territories201. This helps them grow significantly. Furthermore, a guaranteed spot, and thus a guaranteed amount of revenue ensures that clubs are willing to invest in their players or stadium. However, economic models prove otherwise202. Promotion and relegation tends to raise consumer welfare by increasing effective competition among teams in a league. Relegation will result in participating in a lower division with less fans and viewers, and hence less revenue generating potential. Therefore, teams want to promote and thus have a greater incentive to invest in players than teams in closed competitions203. Scholars have established that European clubs are striving for win-maximization and American clubs pursue commercial maximization204.

197 Oughton, Christine & Michie, Jonathan, ‘Competitive Balance in Football: Trends and Effects’. Football Governance Research Centre. FGRC Research Papers. (2004) 198 Troels Troelsen and Trudo DeJonge, ‘The need of Compeititve balance in European professional soccer: a lesson to be learned from the North American professional soccer leagues (2006) 199 Bosman para. 106 200 E.g the UEFA has a financial fair play system. 201 Stephen Ross, ‘Monopoly Sport Leagues’ (1988) 73 Minnesota L Rev 643, 726 202 Stephen F Ross and Stefan Szymanski, 'Open Competition in League Sports' (2002) 2002 WIS L REV 625 203 Ross and Szymanski (n 202); Roger Noll, ‘The Organization of Sports Leagues’ (2003)19 Oxford Review of Economic Policy 530 204 Késenne S. and Jeanrenaud, 1999, Introduction. In: C. Jeanrenaud and S. Késenne (Eds.), “Competition Policy in Professional Sports - Europe After the Bosman Case.” Standaard Editions, Antwerp,; Garcia-del- Barrio, P and Szymanski, S., 2009. “Goal! Profit Maximization and Win Maximization in Football Leagues.” Review of Industrial Organization, 34

40 Furthermore, promotion provides market-based means of permitting new entry to check the power of incumbent clubs to exercise market power205. 206.

4.4. Conclusion The establishment of the Super League has two main consequences. First, UEFA who was a monopolist in the market of the European continental football leagues will have a competitor. And second, the introduction of a closed league in football in Europe.

From an economic perspective it is beneficial for the consumer to have two rivalry leagues on European level. Monopoly leagues will cause significant harm to tax payers, fans and players. Closed leagues are a known concept from the US. Scholars agree that this is a detriment to competition and that a league with promotion and relegation is far more beneficial to the consumer. The competitive balance can still be regulated in an open system, but it is harder to enforce.

To conclude, the Super League is desirable because it brings competition to the European- wide football league market. On the other hand, the Super League’s closed system is undesirable because an open model results in better competition.

205 Ross (n 201) 206 Stefan Szymanski ‘The promotion and relegation system’ in Wladimir Andreff and Stefan Szymanski (eds) Handbook of Economics of Sport (Edward Elgar 2005) 685

41

Conclusion The aim of this thesis was to answer this question: to what extent should EU competition law prohibit the creation of a European Super League?

To answer the question, the caselaw and legislation of the EU developed over the years were examined in the second chapter. It was concluded that the establishment and definition of specificity of sports is the most important takeaway from EU competition law in the context of sport leagues. It acknowledges the special characteristics of sport that make sport different from other industries. Meca Medina was the defining case in which a framework to test organisational rules of sporting bodies was established. In the third chapter it is concluded that the Super League restricts competition within the meaning of 101 TFEU. The Meca Medina test and Article 101(3) TFEU do not provide an exemption. In the last chapter it is concluded that the concept of a Super League is desirable, it brings competition to the European-wide football league market. Nevertheless, the Super League’s closed system is undesirable.

Thus, in my view the current concept of the Super League is a breach of EU law by falling under the prohibition of Article 101 TFEU. However, the Super League could be beneficial to football in Europe if the Super League adopts an open league structure with promotion and relegation.

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47

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Appendix

48 49

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51 52 53 54 55 56 57 58 59 60

61