Athlete Endorsement Restrictions As Unreasonable Restraints of Trade
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The University of New South Wales Master of Laws Thesis David Edward Thorpe Athlete Endorsement Restrictions as Unreasonable Restraints of Trade Supervisors: Professor Brendan Edgeworth and Deborah Healey of the Faculty of Law, University of New South Wales Admitted to the degree of Master of Laws by research: June, 2013 1 Preface The subject of athlete endorsement as a common law restraint of trade has been a largely ignored area of academic research or professional examination, in contrast to the plethora of articles and theses dealing with restraints of trade in sport, in particular salary caps and draft systems. As the first detailed analysis of the topic I have been very conscious that a broad approach to the subject matter was more valuable than a focus on a distinct aspect of it. It was necessary therefore, given the word limit of a Masters thesis, to pass over or merely touch upon material that, while relevant, was less important to the topic than that which is included. Issues concerned with inequality of bargaining power or insufficiency of contractual consideration as these relate to athlete endorsement are clearly relevant but were omitted to provide space to engage with the broader topic. For reasons of word length it has not been possible to consider in detail those arguments likely to be raised by sporting organisations that go to the question of reasonableness. Endorsement restraints are applied as a norm of the sports industry which itself suggests that the starting point of any research on this topic is to question the status quo. The imposition of endorsement restraints on athletes concerns matters of policy and fact that, although debated from time to time by athletes or in the media, has never been litigated. This thesis aims to consider the issue of athlete endorsement realising that, in common with most novel matters heard under the restraint of trade doctrine, this is the beginning of a process of refinement and adjustment over time. Although many are aware of the Nordenfelt principle of ‘reasonableness’ it is not often realised that the debate on a ‘test’ of reasonableness had been on-going for much of the 19th century before fact and policy finally brought change in 1894. Nor is it commonly realised that once the test of reasonableness had been established that further argument brought adjustments or ‘improvements’ requiring, for example, that a covenantee seeking enforcement bear the onus of proving a restraint was reasonable in respect to its interests replacing the contrary rule established in Tallis v Tallis in 1853. It was not until fifteen years after Nordenfelt that an enforceable interest was recognised in what was known as a covenantor’s ‘subjective property’. The propositions of this thesis must be seen in a similar light: the arguments examined and considered will find modification over time as the issue of athlete endorsement gains greater emphasis under the influence of the communications revolution. 2 ORIGINALITY STATEMENT ‘I hereby declare that this submission is my own work and to the best of my knowledge it contains no materials previously published or written by another person, or substantial proportions of material which have been accepted for the award of any other degree or diploma at UNSW or any other educational institution, except where due acknowledgement is made in the thesis. Any contribution made to the research by others, with whom I have worked at UNSW or elsewhere, is explicitly acknowledged in the thesis. I also declare that the intellectual content of this thesis is the product of my own work, except to the extent that assistance from others in the project's design and conception or in style, presentation and linguistic expression is acknowledged.’ Signed …… David Thorpe……………………………………….. Date ……… May 2013…………………………………….............. 3 Table of Contents Preface 2 Table of Cases 8 Abstract 11 Chapter 1: Introduction: ‘Athlete Endorsement Restrictions as Unreasonable Restraints of Trade’ 12 Chapter 2: The Factual Context – Marketing and Endorsement 17 1. Introduction .................... 17 2. Contractual Overview .................... 18 3. Sports Marketing .................... 23 3.1 Sponsorship .................... 24 3.2 The specific advantages of sports marketing .................... 24 4. The psychological theories underpinning sports marketing .................... 25 4.1 Image and symbolism .................... 26 4.2 The Psychology of Identification .................... 26 4.3 Marketing theory and identification .................... 27 4.4 Group identification .................... 28 5. Market divisions .................... 29 6. A brief history of sports marketing and the communications media .................... 30 6.1 The arrival of Sports Marketing in Australia .................... 36 7. Sports endorsement in a global market .................... 39 8. Some contextual statistics .................... 40 9. Conclusion .................... 42 Chapter 3: The Rise and Rise of Liberalised Trade 44 1. Introduction: the Adjustment to Technological Change .................... 44 2. Mitchell v Reynolds: establishing the ‘partial restraint rule’ .................... 45 2.1 Absolutism and the close market .................... 46 3. Establishing the partial restraint rule .................... 47 3.1 Technology and the ‘Partial Restraint Rule’ of Mitchell v Reynolds ............... 49 a) A comparison in transport and communications .................... 52 b) Village isolation and mobility .................... 53 4. The Rise of Laissez-Faire .................... 56 5. Freedom of contract or freedom of trade .................... 58 4 6. Why did a modern belief in the pre-eminence of laissez-faire occur? .................. 59 7. Why was freedom of contract excluded from discussion of enforcement? ............ 66 8. Freedom of contract confined to the issue of contract consideration ................... 69 9. Nordenfelt and the Influence of Technological change .................... 71 9.1 Introduction .................... 71 9.2 Technological change leading to Nordenfelt .................... 72 9.3 Technological change and the Nordenfelt decision .................... 74 10. Conclusion .................... 77 Chapter 4: Restraints of Trade in Sport 88 1. Introduction .................... 88 2. The ‘doctrinal’ recognition of sport: 1969-1971 .................... 81 2.1 The ‘special character’ of sport .................... 81 3. The tipping point: from pastime to ‘trade’ .................... 84 4. Elford v Buckley: a decision of a past era .................... 85 4.1 The League as an unincorporated voluntary association .................... 86 4.2 Not an employment relationship .................... 86 4.3 The obligations of Membership .................... 89 4.4 Not a form of trade .................... 90 4.5 The value of Elford .................... 90 5. The pre-Tutty factual matrix .................... 91 5.1 The fact of sport .................... 92 6. The media and the growth of commercialism in sport .................... 93 7. The watershed of Buckley v Tutty .................... 96 8. Conclusion .................... 98 Chapter 5: The Athlete and the Organisation 100 1. Introduction ................... 100 2. What is the Athlete employed to do? ................... 101 2.1 Introduction 2.2 Exemplars of employment restraints: the NRL and ARU ................... 102 2.3 Employment and restraints on endorsement ................... 102 2.4 The Collective Bargaining Agreement ................... 105 2.5 Is endorsement mandated work? ................... 107 2.6 Identifying the specific occupation ................... 109 3. A restraint during the currency of employment ................... 112 4. The obligation of fidelity ................... 115 5. Conclusion ................... 119 Chapter 6: Enforcement and Reasonableness I: 121 5 Single Factors bearing upon Endorsement Restraints of Trade 121 Section 1: Product grouping as a partial restraint of trade ................... 121 1. Introduction ................... 121 2. Partial Restraints of Trade ................... 122 3. Partial restraint as to product line ................... 123 4. Product categorisation as a ‘partial’ restraint of trade ................... 123 5. An exemplar: the ARU sponsors and product categorisation ................... 125 5.1 Player entitlements and limitations on the use of image ................... 126 6. Multiple organisations with multiple sponsors ................... 128 7. Sub-categorisation ................... 129 8. Legal Issues of Sub-categorisation ................... 131 8.1 A narrow or broad construction and sub-categorisation ................... 131 8.2 The growth in sponsor categories and unreasonableness ................... 134 9. Structural limitations of sport endorsement ................... 136 10. Conclusion ................... 137 Section 2: Athlete Persona as Subjective Knowledge ................... 139 1. Introduction ................... 139 2. The theory and rationale of subjective knowledge ................... 140 3. Extending ‘subjective knowledge’ ................... 142 3.1. Is ‘reputation’ or ‘image’ a protectable interest? ................... 143 4. The employee: an athlete or an endorser? ................... 146 5. Conclusion ................... 147 Section 3: Claiming the Digital Markets ...................149 1. Introduction ...................149 2. The fact of the digital market: reach and pervasion ...................150 3. The loss of partial markets ...................151