PROFESSIONAL SPORT IN THE INTERNAL MARKET (PROJECT NO IP/A/IMCO/ST/2005-004) Commissioned by the Committee on the Internal Market and Consumer Protection of the European Parliament on the initiative of Mr Toine Manders (MEP) SEPTEMBER 2005 T.M.C. ASSER INSTITUUT THE HAGUE THE NETHERLANDS IN COOPERATION WITH EDGE HILL COLLEGE, UNITED KINGDOM (LANCASTER UNIVERSITY) SPORT 2B, THE NETHERLANDS RESEARCH TEAM Dr Robert Siekmann (T.M.C. Asser Instituut / General Manager) Dr Richard Parrish (Edge Hill College): EU Law and Policy on Sport Pieter Verhoogt (Sport2B): Economic framework and sports market Roberto Branco Martins (T.M.C. Asser Instituut): Freedom of movement issues Marjan Olfers (T.M.C. Asser Instituut): Competition law issues 2 Table of Contents Table of Contents 3 Executive summary 5 1 Introduction 7 1.1 General purpose of the study .................................................................................. 7 1.2 Detailed research questions..................................................................................... 7 1.3 Research method ...................................................................................................... 8 2 The EU’s law and policy position with regards to sport 11 2.1 The legal status of sport in the EU........................................................................ 11 2.1.1 Sport and the Free Movement of Workers .............................................................. 11 2.1.2 Competition Law and Sport ..................................................................................... 15 2.1.3 Sport and Social Provisions.................................................................................... 18 2.2 The policy position of sport in the EU.................................................................. 19 2.2.1 Sports Policy as a Means of Promoting the EU...................................................... 19 2.2.2 Sports Policy as a Means of Implementing Other Policies...................................... 20 2.2.3 Sports Policy as a Means of Mitigating the Effects of the Bosman Judgment......... 21 2.2.4 Sport and the Constitutional Treaty......................................................................... 22 2.3 The European Model of Sport .............................................................................. 23 3 The economic framework for professional sports 25 3.1 The definition of the sports market ...................................................................... 25 3.1.1 Definition by the involvement in sports.................................................................... 25 3.1.2 Definition by the nature of sports ............................................................................ 26 3.2 The European Model of Sport .............................................................................. 26 3.2.1 Pyramid structure .................................................................................................... 27 3.2.2 Amateur and professional sports ............................................................................. 27 3.2.3 Promotion and relegation ........................................................................................ 28 3.2.4 Utility ....................................................................................................................... 28 3.3 The American Model of Sport .............................................................................. 28 3.4 The economic dynamics of the sports market ..................................................... 30 3.4.1 Sport management: ambitious or opportunistic?..................................................... 30 3.4.2 Sports economics: sporting competition, economic solidarity ................................ 30 3.4.3 The winner-takes-all: a threat to solidarity ............................................................. 31 3.4.4 Financing models: SSSL and MMMMG .................................................................. 31 3.5 The European Model of Sport and economic dynamics: ................................... 32 problems and developments.................................................................................................... 32 4 Analysis of relevant sporting issues 35 4.1. Freedom of movement ........................................................................................... 35 4.1.1 Home Grown Players Rule and the European Union.............................................. 35 4.1.2. Use of fixed-term contracts in sports with the focus on football ............................. 42 4.1.3. Sport Agents in the European Union ...................................................................... 45 4.1.4 Diploma’s: The Recognition of Sports Qualifications............................................. 49 4.2 Professional Sport and competition law issues.................................................... 50 4.2.1 Introduction.............................................................................................................. 50 4.2.2 Rules of purely sporting interest .............................................................................. 53 3 4.2.3 Sporting rules in breach of competition laws, but legitimate .................................. 54 4.2.4 Restrictions in the labour market............................................................................. 55 4.2.5 Restrictions in the exploitation market .................................................................... 56 4.2.6 The formation of a new league (break-away leagues)............................................. 59 4.2.7 Licensing .................................................................................................................. 62 4.2.8 Player release .......................................................................................................... 64 4.2.9 State aid.................................................................................................................... 64 4.3 Social Dialogue ....................................................................................................... 65 4.3.1 Introduction.............................................................................................................. 65 4.3.2 What does Social Dialogue mean? .......................................................................... 65 4.3.3 Content of the agreements between both sides of the industry at European level... 66 4.3.4 Effect of agreements of European social partners in a member state ..................... 66 4.3.5 Implementation of European agreements by social partners at the national level.. 66 4.3.6 Implementation of European agreements through a decision of the Council.......... 66 4.3.7 Criteria for social partners...................................................................................... 67 4.3.8 Social Dialogue in Football..................................................................................... 68 4.3.9 EC Treaty Article 137 .............................................................................................. 68 4.3.10 Subjects for collective consultation and the content of agreement in European professional football ................................................................................................ 69 4.3.11 Article 137 paragraph 3........................................................................................... 70 4.3.12 Subjects outside the scope of article 137 ................................................................. 71 4.3.13 Sporting Rules .......................................................................................................... 72 4.3.14 Conclusion: First a European Commission initiative?............................................ 72 4.3.15 Who represents the clubs? ....................................................................................... 73 4.4 Miscellanea ............................................................................................................. 73 4.4.1 Trademarks in EC law ............................................................................................. 73 4.4.2 The Database Right and the Spin-off Theory........................................................... 76 5 Conclusions 78 Option 1: A Case By Case Analysis ....................................................................................... 78 Option 2: The Social Dialogue................................................................................................ 81 Option 3: The use of Soft Law................................................................................................ 81 Option 4: Treaty Revision ...................................................................................................... 82 Option 5: Block Exemption .................................................................................................... 83 Assessment of the Options....................................................................................................... 84 Questions & Answers............................................................................................................... 85 4 Executive summary Sport is unlike any other business. At one level it performs educational, public health, social, cultural and recreational functions. At another level, sport is big business capable of generating considerable revenues. Sport also operates under different market conditions to other industries with competitors