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Restraints of Trade in Sport: an International and South African Perspective

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Restraints of Trade in Sport: an International and South African Perspective Restraints of Trade in Sport: An International and South African Perspective Christoph Kolonko A minithesis submitted in partial fulfilment of the requirements for the degree of Master of Law in the Department of Law, University of the Western Cape Supervisor: Ms. Patricia Lenaghan May 2006 Restraints of Trade in Sport: An International and South African Perspective Christoph Kolonko Keywords: • Restraint of Trade • Sport • Model of Sport • Europe • Pyramid Structure • Bosman • South Africa • Coetzee • Cronjé • USA • Collective Bargaining Abstract Restraints of Trade in Sport: An International and South African Perspective LL.M. minithesis, Department of Law, University of the Western Cape Christoph Kolonko The ongoing commercialisation of sport has generated new legal problems. One of eminent importance is the treatment of restraints of trade in the sport sector. Due to the increasing professionalism of sport and its growth into “big business” more athletes can afford to make a living from sport. Since sport has become their main source of income, they are no more willing to accept restrictions concerning the exercise of their professional activities, i.e. restraints of trade. As a consequence, they often decide to take legal action. The famous Bosman ruling of the European Court of Justice (ECJ), the judgment of the Cape High Court in the Coetzee case as well as the dispute about the reserve clause system in U.S. American sport exemplify this recent development. The application of the restraints of trade rule to the sport sector is highly complicated and controversial. Sport has some unique peculiarities which distinguish it from “normal” business. For once, the market conditions under which sport operates differ from other industries, since athletes and clubs have a vested interest in the strength and survival of their rivals. Furthermore, some rules, as the actual rules of the game, are inherent to sport and must not become subject to the courts. Therefore, courts are confronted with the difficult task to consider the peculiarities of sport and to separate the sporting aspects from the economic aspects of sports. Whereas U.S. courts already started to deal with the legal implications of restraints of trade in the sports sector about a century ago, the judging of restraints of trade in sport in Europe and South Africa is a rather recent development. Particularly in South Africa, the treatment of restraints of trade in sport is still little developed. Although some cases already dealt with restraints of trade in sport, South African courts in general do not have much experience with the issue. Hardly any guidelines have emerged that can already be seen as a South African sports policy. However, with South Africa’s economy growing, sport is going to be more and more commercialized and new legal issues related to restraints of trade will appear. The scope of the thesis is to develop guidelines and rules for the future dealing with restraints of trade in South African sport. These rules are developed from an analysis of the different legal approaches in Europe and the U.S.. The comparison of the legal situations against the background of the individual role of sports in Europe and the U.S. allows to demonstrate suitable ways of dealing with restraints of trade in the South African sport sector. Declaration I declare that “Restraints of Trade in Sport: An International and South African Perspective” is my own work, that it has not been submitted before for any degree or examination in any other university, and that all the sources I have used or quoted have been indicated and acknowledged as complete references. Christoph Kolonko May 2006 Signed: 1 INTRODUCTION................................................................................................................................................. 1 CHAPTER I: DEALING WITH RESTRAINTS OF TRADE.......................................................................... 3 1. THE RESTRAINT OF TRADE DOCTRINE OF THE COMMON LAW SYSTEM......................................................... 4 1.1. Definition of a Restraint of Trade........................................................................................................... 4 1.2. Application of the Restraint of Trade Doctrine ...................................................................................... 4 2. RESTRAINTS OF TRADE IN THE EUROPEAN UNION ........................................................................................... 5 3. THE RELEVANCE OF COMPETITION LAW ......................................................................................................... 6 CHAPTER II: RESTRAINTS OF TRADE IN EUROPEAN SPORTS........................................................... 7 1. OUTLINE OF THE EUROPEAN SPORTS MODEL .................................................................................................. 7 1.1. Pyramid structure.................................................................................................................................... 7 1.2. Amateur and Professional Sport ............................................................................................................. 7 1.3. System of Promotion and Regulation ..................................................................................................... 8 1.4. The Dual Function of European Sport Organisations............................................................................. 8 2. APPLICABILITY OF EUROPEAN LAW TO SPORT ................................................................................................ 8 2.1. Introduction ............................................................................................................................................ 8 2.2. Sport is not mentioned in the European Treaty ...................................................................................... 8 2.3. No EU Competence for the Cultural Sector ........................................................................................... 9 2.4. Distinctive Features of Sport .................................................................................................................. 9 2.5. The Economic Dimension of Sports..................................................................................................... 10 2.6 Conclusion............................................................................................................................................. 10 3. RESTRAINTS BASED ON INFRINGEMENTS OF THE BASIC FREEDOMS.............................................................. 11 3.1. The Birth of European Sports Law: The Walrave Case and the Donà Case......................................... 11 3.1.1. The Walrave Case........................................................................................................................................... 11 3.1.1.1. Introduction............................................................................................................................................ 11 3.1.1.2. The Facts of the Case ............................................................................................................................. 11 3.1.1.3. The Judgement ....................................................................................................................................... 12 3.1.2. Donà v. Manteo .............................................................................................................................................. 13 3.1.2.1 Introduction............................................................................................................................................. 13 3.1.2.2. The facts of the Case .............................................................................................................................. 13 3.1.2.3. The Judgement ....................................................................................................................................... 13 3.1.3. Conclusion to Walrave and Donà................................................................................................................... 14 3.2. The Breakthrough of European Sports Law: The Bosman Case .......................................................... 14 3.2.1. Introduction .................................................................................................................................................... 14 3.2.2. The Situation Prior to Bosman........................................................................................................................ 15 3.2.2.1. The System of Transfers......................................................................................................................... 15 3.2.2.2. Nationality Rules: Quota System (3 plus 2) ........................................................................................... 15 3.2.3. The Facts of the Case...................................................................................................................................... 16 3.2.4. The Judgement................................................................................................................................................ 17 3.2.4.1. The Transfer System .............................................................................................................................. 17 3.2.4.2. Quota System ........................................................................................................................................
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