COMPETITION ISSUES IN SPORTS

(Assignment towards the partial fulfilment of assessment in the subject of Sports Law)

Submitted By: Submitted To:

Shubh Dixit (1245) Bipin Kumar
Section-B Faculty of Law

NATIONAL LAW UNIVERSITY, JODHPUR

WINTER SESSION
(JANUARY-MAY 2019)
 Introduction
At the beginning of any debate on ‘sports law’ or ‘sports and law’, the discussion begins with
the definition of the term ‘sports’. Though, there are several definitions proposed by different
authors, the exact definition of ‘sports’ seems to be impossible; however, some common
elements of the existence of a recognizable organizational structure, rules, physical exertion
and competition needs to be present. The term ‘sport’ derives from the French-determined
Middle English verb sporten, to divert, and also the Latin term desporto, literally ‘to carry
away’. The emphasis is therefore on it being a distraction, something that gives pleasure. The
historical evolution of sports can be traced back to the original Greek Olympics believed to
have been held in 686 BC. In India, history of sports can be traced back to the epic of
Mahabharata which narrates an incidence where a game called Chaturang was played
between two groups of warring cousins Pandavas and Kauravas. Instances of kings going for
hunting is well known, even now hunting can be seen as the precursor of much of modern
sport.
Moving to contemporary times, sport has become a truly global phenomenon. Modern sport
is going through significant changes and it is no more merely a past-time or recreational
activity, rather it has adorned a professional and economic dimension. Huge amount of
money is now being involved and for some it is an ‘industry’. With the growing role of sports
in the culture of population and public life, states take significant interest in these matters in
terms of regulating the same. The state intervention may be direct or indirect.

Sports And Competition Law Interface

Sports have been seen to have a competition law interface due to its ‘economic activity’
aspect. Sports and competition law interface has seen most of its development in the
European Union (EU) and is considered the vanguard of legal and regulatory interaction with
sport. The interaction of the sports and competition in EU has taken further dimensions with
specific emphasis by EU, especially in terms of the White Paper on Sports. The beginning of
this interface has been the differentiation between the pure ‘sporting rules’ and the rules
which affect the sports from an ‘economic angle’.
Sport has certain specific characteristics, which is often referred to as the ‘specificity of
sport’. This has been recognized in European Union as well as in other jurisdictions. In
European Union, there is no general exclusion for sport from the application of the
competition rules. However, matters which are of a ‘purely sporting interest and, as such,
have nothing to do with economic activity’ fall outside the scope of the law. This is because
(as in any other case) the law applies only to the extent that the agreement/concerted
practice/conduct in question constitute an economic activity.
Walrave & Koch was the first sports related cases to be brought before the European Court of
Justice (ECJ) in which the Court confirmed that EU law did not apply to rules that were of
pure ‘sporting interest’ on the basis that such rules had nothing to do with the economic
activities to which the EC Treaty relates. However, in a recent landmark judgment, Meca-
Medina and Majcen v. Commission, the concept of ‘specificity of sport’ has been narrowed.
In this case, ECJ clarified that “as regards the compatibility of the rules at issue with the
rules on competition, the penal nature of the rule at issue and the magnitude of the penalties
applicable if they are breached are capable of producing adverse effects on competition”
European and North American Model
While analyzing the ‘sports and competition law interface’ one can easily come across the
two distinct kinds of models of sports, i.e. European and North American model. Broadly
speaking, sports in Europe are organized on a ‘pyramid’ structure, with individuals joining
teams or clubs that are members of local or regional governing bodies who in turn are
members of national governing bodies, presided over by one international governing body
with ultimate regulatory authority over the sport. Thus, the European model reflects an open
system. In contrast, the structure of sports organisation in North America involves a closed
system of competition which is based not on promotion and relegation of teams, but rather on
a combination of owner preferences, usually for commercial reasons, and approval of joint
ventures of established teams.
The following five basic competition questions were identified during a Roundtable on sports
organized by OECD in which various countries participated:

(i) the nature of sports federations (should they be considered as normal commercial
enterprises subject to competition law or as private non-profit making bodies
which merely regulate the sports?)
(ii) the relationship between sports federations or leagues and the constituent clubs
(should the federations or leagues be viewed as cartels of clubs or as bodies
independent of the clubs?)
(iii) the nature of the product or service provided by the professional sports (should the
matches be viewed as separate events or is there a positive externality in that a
championship is more than a set of matches?)
(iv) the nature of the relevant market (are different sports substitutable for one another
or within the same sport are different competitions substitutable, particularly from
the broadcasting perspective?)
(v) the relationship between players and clubs (should the contracts be viewed as
contracts of employment excluded from competition laws or should they fall
within the purview of such laws?)

Competition Law In India

In India, the Competition Act, 2002 replaced the erstwhile Monopolies and Restrictive Trade
Practices Act, 1969 (MRTP) on the recommendations of the SVS Raghavan Committee.
Competition Act led to the formation of Competition Commission of India (CCI) to prevent
practices having adverse effect on competition, to promote and sustain competition in
markets, to protect the interests of consumers and to ensure freedom of trade carried on by
other participants in markets in India.
Competition Act in India, keeping in line with the international precedents provides for the
following four aspects:
(i) Anti-Competitive Agreements – Section 3 of the Act prohibits anticompetitive
agreements, both horizontal and vertical agreements.
(ii) Abuse of Dominant Position – Section 4 of the Act prohibits an abuse of dominant
position. A dominant position is said to be acquired when an enterprise is able to
operate independent of competitive forces and affect its competitors or consumers
in its favour. Abuse may be in relation to prices which includes predatory pricing,
limiting and restricting production and supply or technical development of goods
or services, practices leading to denial of market access, making conclusion of
 contracts subject to supplementary obligations (quantity forcing etc.) and uses it
dominant position in one market to enter into another market (leveraging).
(iii) Regulation of Combination – While the aforesaid two competition law
interventions involve an ex-post competition law analysis, regulation of
combination involves an ex-ante analysis of the proposed merger as to whether it
is likely to cause an appreciable adverse effect on competition or not. Section 5
and 6 deals with the same. The procedure of filing information and
inquiry/investigation is laid down in sections 19 and 26 of the Act. Commission
may receive information from any person or through a reference from statutory
authority or suo motu launch an investigation against the alleged violation of the
provisions of the Competition Act. First, the Commission forms a prima facie
view on the information and if it finds that the information calls for a detailed
investigation, the matter is referred to the Director General (DG) for further
detailed investigation. DG investigates the case independent of the Commission.
Once the investigation is complete, DG submits its report to the Commission,
when the inquiry continues and the parties are called to comment/object upon the
DG report. After hearing the parties on DG report, the Commission comes to a
conclusion in the case as regards violation. Commission/DG has got powers of a
Civil Court while conducting the inquiry/investigation. Commission may pass an
order to the extent of 10% of the average turnover for the last preceding three
financial years or in case of cartels three times of its profit for each year of the
continuance of such agreement. In cases of abuse of dominant position, the
Commission may order even division of enterprises.
(iv) Advocacy/Advisory Functions – One of the significant functions of the
Commission is to promote ‘competition culture’ and also to advise government on
issues relating to competition law and policy whenever requested under Section
49 of the Act.

Competition Law Interventions By CCI In Sports Cases

CCI is the competition law regulator and may look into competition issues in all kinds of
sector either suo motu or on the cases brought before it. In the sports sector, so far the
Commission has received the following three cases relating to the areas of Cricket, Hockey
and Chess.
BCCI Case:
This case was brought before the Commission by the informant alleging anticompetitive
agreements between BCCI, IPL and the IPL teams causing appreciable adverse effect on
competition in India. It was also alleged that there was abuse of dominance by BCCI-IPL in
the organization of T-20 matches. Commission formed a prima facie view in the matter for
further investigation by DG and upon submission of the DG report and hearing the parties
found that BCCI has abused its dominant position in contravention of Section 4(2)(c) of the
Act (practices resulting in denial of market access) and passed the following order:
(i) to cease and desist from any practice in future denying market access to potential
competitors, including inclusion of similar clauses in any agreement in future.
(ii) to cease and desist from using its regulatory powers in any way in the process of
considering and deciding on any matters relating to its commercial activities. To
ensure this, BCCI will set up an effective internal control system to its own
satisfaction, in good faith and after due diligence.
 (iii) to delete the violative clause 9.1(c)(i) in the Media Rights Agreement (long term
media rights agreement).
(iv) the Commission considers that the abuse by BCCI was of a grave nature and the
quantum of penalty that needs to be levied should be commensurate with the
gravity of the violation. The Commission has to keep in mind the nature of
barriers created and whether such barriers can be surmounted by the competitors
and the type of hindrances by the dominant enterprise against entry of competitors
into the market. The Commission has also to keep in mind the economic power of
enterprise, which is normally leveraged to create such barriers and the impact of
these barriers on the consumers and on the other persons affected by such barriers.
Accordingly, a penalty of 6% of the average annual revenue of BCCI for past
three years was imposed under Section 27(b) of the Act which amounted to Rs.
52.24 Crores.
Commission in this case noted that “BCCI’s economic power is enormous as a regulator that
enables it to pick winners. BCCI has gained tremendously from IPL format of the cricket in
financial terms. Virtually, there is no other competitor in the market nor was anyone allowed
to emerge due to BCCI’s strategy of monopolizing the entire market. The policy of BCCI to
keep out other competitors and to use their position as a de-facto regulatory body has
prevented many players who could have opted for the competitive league. The dependence of
competitors on BCCI for sanctioning of the events and dependence of players and consumers
for the same reason has been total. BCCI knowing this had foreclosed the competition by
openly declaring that it was not going to sanction any other event. BCCI undermined the
moral responsibility of a custodian and de-facto regulator.
Presently, this case is under appeal before Competition Appellate Tribunal. There has been
one more case brought before CCI against BCCI, however, the Commission closed the case
holding that there is no requirement of investigation in this matter as it has already been done
and the matter is pending before the Tribunal.
Hockey India Case:
This case was brought before CCI by the renowned hockey players (olympicians like Dhanraj
Pillay) for alleged anticompetitive practices and abuse of dominant position carried out by
Hockey India (HI). HI is the national body in India recognized by International Hockey
Federation (FIH) and is the only body responsible for conducting and governing
national/international hockey events in India. The informants entered into a player’s contract
with World Series Hockey (WSH) and Nimbus Communications for the hockey league in
India (like IPL for cricket). HI had issued statements prohibiting the players from
participating in WSH on the ground of WSH being an “un-sanctioned event”. It was alleged
that HI’s conduct was in pursuance of introduction of its own league in 2013 in collaboration
with FIH.
Commission while analyzing the DG report, which had found violations of Competition Act
against HI, did not find any violation by HI. However, held that the nature of the present
system itself, with the possible conflict of interest between the 'regulatory' and 'organising of
events' roles of Hockey India has raised certain potential competition concerns. The manner
in which rules relating to sanctioned and unsanctioned events and restrictive conditions
included in CoC agreement are applied becomes critical in this context.
The Commission observed that the lack of parameters that define and demarcate the scope
afforded by the term 'organization of events' can lend itself to several interpretations. A
regulator must necessarily follow the dictum that 'Caesar's wife must be above suspicion.' In
this case the DG report points out circumstantial evidence which, though not establishing
violation of the Competition Act, further persuades the Commission about the inherent
potential of violation, and the need for clear articulation and separation of the two roles of HI.
As pointed out in the Order on BCCI,
“The Commission strongly holds the view that competition is essentially for benefits to be
widespread. The game of cricket and the monetary benefits of playing professional league
matches must be spread out and not concentrated in a few hands, in a few franchisees. In a
country of large young population more private professional leagues opens up more venues
for youngsters to play cricket, to earn a livelihood and to find champions where least
expected. BCCI in its dual role of custodian of cricket and organizer of events has on account
of role overlap restricted competition and the benefits of competition. The objective of BCCI
to promote and develop the game of cricket has been compromised.”
CCI held that HI's economic power is enormous as a regulator. Virtually, there is no other
competitor of HI. The dependence of competitors on HI for sanctioning of the events, as also
dependence of players, has been total, considering the terms of Bye laws of FIH and CoC
Agreement. The Commission concluded that though these regulations are inherent and
proportionate to the objectives of sports federation, the manner of application is always a
concern given the duality of roles leaving scope for possible violations of the Competition
Act.
Accordingly, though the Commission did not find any violation of the Competition Act,
Commission directed HI under section 18 of the Act,
“that it would be appropriate if HI were to put in place an effective internal control system to
its own satisfaction, in good faith and after due diligence, to ensure that its regulatory
powers are not used in any way in the process of considering and deciding on any matters
relating to its commercial activities; and also set up a streamlined fair and transparent
system of issuing NOCs to the players for participating in events organized by foreign
teams/clubs.”
Chess Federation Case
This matter came up as a reference arising from a writ petition at Delhi High Court. The issue
in the case was that AICF prohibited chess players who were registered with it from playing
in any tournament or participating in any competition of chess, if such a
tournament/competition is organized by an association/federation or other body which does
not have the approval of AICF. Justice Vipin Sanghi, held that the matter does not end here
and it appears that AICF exercises its monopolistic and dominant position to stifle the growth
of any other association of chess players, by threatening the chess players registered with it,
with disciplinary action/expulsion. The policy and conduct of AICF may, therefore, call for
examination by the Competition Commission constituted under the Competition Act, 2002.
The issue is with regard to the right of the players of chess to form another association and to
organize tournaments in the country without the involvement of or the blessings of AICF.

Accordingly, the matter was taken up by CCI and investigation was ordered. DG investigated
the matter and submitted its report to the Commission; however, in the meanwhile a stay in
the matter has been given by Hon’ble Madras High Court on the issue of jurisdiction of CCI.
 Conclusion
The aforesaid primer on the ‘sports and competition law’ demonstrates the issues surrounding this
area of law and scope of development. The developments in this branch of law would be very
interesting to note, especially in view of the growing jurisprudence. The cases before the
Commission has definitely brought the issue of duality of roles exercised by the sports federation
and need for fairness in their dealings. Sometimes these federations act as monopoly buyers (for
services of the players) and the restriction on players by way of sanctioned or un-sanctioned
events may lead to foreclosure of competition. The issues are still open for interpretation before
the Competition Appellate Tribunal and High Court. Only time will tell, wind blows in which
direction.

Bibliography

Case No. 76 of 2011 – Hemant Sharma and Ors. Vs. All India Chess Federation (AICF)

Case No. 73 of 2011 – Sh. Dhanraj Pillay and Others vs. M/s Hokey India

Case 61 of 2010 in the matter of Surinder Singh Barmi vs. Board for Control of Cricket in
India (BCCI)

OECD, Competition Issues Related to Sports, OCDE/GD(97)128 (1997), available at

http://www.oecd.org/regreform/sectors/1920279.pdf

Nafziger, James A.R., A Comparison of the European and North American Models of Sports
Organization, S. Gardiner, R. Parrish and RCR Siekmann, EU Sports, Law and Policy,
(2009)

Lewis, Adam and Jonathan Taylor, Sport: Law and Practice, 2nd Edition, Tottel Publishing
2008

Singh, Vijay Kumar, A Primer on ‘Sports and Competition Law Interface’ in India (February
2014). Paper presented at the UGC Sponsored ‘National Conference on Sports Law’
organized by Dr. Ambedkar College, Deekshabhoomi, Nagpur on 15th-16th, February, 2014.