Application to sport: defining markets

Deals may be treated as compatible with EU law because they are not within Article 101(1) TFEU at all or because they are within Article 101(1) but nevertheless able to benefit from the exemption available under Article 101(3). There is some practical significance in deciding which is the appropriate route. The burden of proof is different: it rests on the party making the allegation to show that a matter falls foul of Article 101(1), whereas the parties seeking exemption must show that their arrangements satisfy Article 101(3).[1] The similarities are, however, greater than the differences. Whether an arrangement is placed outwith Article 101(1) or treated as exempted pursuant to Article 101(3) the outcome is the same—it is not precluded by EU competition law. It is, moreover, plain that issues relevant to the examination are to some extent common. The structure of the market, and in particular the amount of competition within it, is significant in deciding whether a grant of exclusive rights falls within Article 101 in the first place. Then, if it does, a contract for sale of rights to broadcast sports events on an exclusive basis may fit within Regulation 330/2010—but here too market share will matter and concrete figures are stipulated in the Regulation, as explained in subsection 11.4.2.

The application of Article 101 TFEU depends on the precise nature of the practices under examination and it depends on the particular market. Obviously the more narrowly the market is defined the higher the market share and the deeper the anxieties about the exclusionary effect of the grant of exclusivity on other operators, and so the more likely it is that there will be a negative outcome from the application of EU competition law. This then translates into detailed decision-making. Examination of markets for the sale of rights to broadcast sports events is no more than a particular application of the general principles of EU competition law.

There are, however, prominent and distinctive features of the market for the sale of rights to broadcast sporting events: it is, to adopt the analogy used tirelessly elsewhere in this book, in important respects different from selling cars or sausages or financial services. Most of all, rights to broadcast top-level sports events are unusually attractive. They are eagerly watched by consumers (as viewers) and so they have become immensely important to broadcasters and suppliers of services using new audiovisual media which wish to protect or establish a powerful position in these fast-moving and lucrative markets. This leads typically to the assumption that holders of rights to broadcast top-level sport are in a position of economic strength because consumers (as viewers) want to watch that event and will not be satisfied with another less intense sporting event or another form of entertainment, such as a film. The right holder has a large market share. This in turn leads to attentive supervision of the potentially anti-competitive implications associated with the sale of such rights, in particular output restrictions and exclusive selling. Because high- profile live sport events are simply ‘must have’ for many consumers, it is, in short, more likely that arrangements to sell those rights on an exclusive basis will attract more concern where sport is involved than in most other markets. Most of all, in its decisions in this area the Commission has shown itself thematically anxious to sustain the potential for dynamic growth in the technologically agile and (compared to thirty years ago) lightly regulated broadcasting sector, which feeds so hungrily off sport.

The special, though not unique, sensitivities of inquiry into the sport sector emerge from the Commission’s decisional practice. Identifying market share presupposes an accurate definition of the market in the first place. This conventionally requires determination of the relevant market within which sales occur: both the relevant product market and the relevant geographical market. The inquiry is into the willingness of buyers to substitute products or services for each other, and to find a geographical location in which the conditions of competition are sufficiently homogeneous and distinct from those of neighbouring geographical areas. The Commission’s Notice on the Definition of the Relevant Market is most prominently concerned with Article 102 TFEU but on this point it is of service to Article 101 as well.[2] The assessment of substitutability requires case-by-case examination. Where the event for which exclusive rights are held is really ‘must see’, the point is that there is an absence of discipline by competition, and so a high level of market power. It will obviously exceed the 30 per cent market share which is the crucial threshold under Block Exemption Regulation 330/2010 and will more generally provoke anxiety about the anti-competitive effects of any sale on an exclusive basis.

A paper written in 1998, as the combined effects of deregulation, technological change, commodification, and juridification were emerging, by an official in the Competition Directorate-General, Anne-Marie Wachtmeister, neatly captures what is at stake.47 She noted that: ‘Exclusivity is an accepted commercial practice in the broadcasting sector.’ It maximizes profitability for the buyer and is the key to building up a new audience. But, she added, ‘duration, quantity and upstream and downstream market power need to be examined in order to assess whether the exclusivity seriously restricts competition’.

Champions League, a Commission decision of 2003, is primarily important for its exploration of the application of Article 101 TFEU to the collective selling of television rights.48 Its importance to such horizontal arrangements—those struck between parties at the same level in the supply chain—is examined later: the arrangements in question granted UEFA the right to sell commercial rights to the Champions League on behalf of the participating football clubs, and so eliminated any possibility of competition among the clubs as sellers. But the inquiry is relevant to vertical restraints too. For obvious commercial reasons, the arrangements in question involved a grant of rights by UEFA on an exclusive basis. The value of these rights is immense. The competition today known as the Champions League began life as the European Cup in season 1955—56, and entry was confined to clubs that had won their national championship in the previous season. Real Madrid were the first winners: in fact they won for the first five years. Beginning in 1992—93 the competition was re-named the Champions League. Re-naming was in truth mis-naming: this was a grubby triumph of branding over substance because the principal change was to widen participation to allow entry not only to national champions but also to clubs that had not won the national title in the previous season. The aim of including non-champions in the so-called Champions League was to enhance the level of involvement of rich clubs from the major leagues, most of them from Spain, Germany, Italy, and England, the four dominant powers of European club football. The purity of the original European Cup format, whereby a club had to win its own national title before aspiring to become Europe’s champion club, was sacrificed to achieve a far more vigorous commercial model. The competition is immensely popular. It comprises over 200 matches, but it is the later knockout rounds, taking place after Christmas, which are the focus and which culminate in a Final played at the very end of the season each year. The competition is eagerly watched and broadcasters are able to charge premiums of between 10 and 50 per cent for advertising spots during Champions League matches not only because of that core popularity but also because football is ‘a tool to reach a hard-to-get-to audience’.49

The Commission had issued a statement of objections in 2001, in which it objected to UEFA’s practice of selling rights on an exclusive basis in a single bundle to a single television broadcaster per territory for several years in a row. So the problem was not exclusivity per se: the problem was the size and shape of the exclusivity. Moreover, the problem was not the sport sector: the problem was the broadcasting sector. The Commission noted in its 2003 Decision that ‘in most countries football is not only the driving force for the development of pay-TV services but is also an essential programme item for free-TV broadcasters’ and so where ‘one broadcaster holds all or most of the relevant football TV rights in a Member State, it is extremely difficult for competing broadcasters to establish themselves successfully in that market’. 5° The arrangements were modified as a result of the Commission’s intervention. In particular, UEFA agreed to split up rights into several different rights packages that would be offered for sale in separate packages to different third parties. The final Decision refers to the splitting up


Champions League (n 34).

  • 49 ibid para 75.
  • 5° ibid para 20.

of collectively sold media rights to the Champions League into several different rights packages, which are offered for sale in a competitive bidding procedure open to all interested media operators. So, it is noted, this ‘allows several media operators to acquire media rights of the UEFA Champions League from UEFA’.5i And some rights were made available on a non-exclusive basis. This satisfied the Commission of the thematically central point that buyers had several possible sources of supply. This ‘unbundling’ is explained at careful length in the Commission Decision. And UEFA proposed, as a general principle, that media rights contracts be concluded for a period not exceeding three UEFA Champions League seasons.52 This was important enough for the Commission ultimately to grant an exemption for a period of six years, basing this explicitly on the duration of two cycles of contract periods of three years.53 The crucial point, then, was the concern of the Commission to ensure that the sale of rights did not adversely affect conditions of competition in broadcasting markets.

Grant of exclusive rights to show matches in the UEFA Champions League would generate no cause for concern if viewers were perfectly happy to watch something else instead of top-level club football. It was central to the Commission Decision that this was not so: it was the identification of a narrow market and consequently a dominant market share held by UEFA which led to alarm about the anti-competitive implications for the broadcasting industry of such aggressively enforced exclusivity. The market analysis in the Commission’s Decision is therefore fundamentally important to its conclusions. Having examined the attitude of viewers, it decided that a separate market existed for the acquisition of television broadcasting rights of football events that are played regularly throughout every year—that is, covering matches in national league and cup events as well as the UEFA Champions League and UEFA Cup. Football, unlike other sports, allows broadcasters to achieve high viewing figures on a regular, sustained, and continuous basis if they can get access to these rights.54 It considered that ‘The TV rights of football events create a particular brand image for a TV channel and allow the broadcaster to reach a particular audience at the retail level that cannot be reached by other programmes’.55 Prices charged for advertising were an important factor in sustaining this conclusion. The key finding, then, was that television rights to other sports events or other types of programmes, such as feature films, do not put a competitive restraint on the holder of the television rights to football events being played regularly throughout the year. This relatively narrow market definition meant that international club competitions are part of the same market as national club competitions, but the market is not much wider than that. And the Commission expressed a similar view about the structure of markets emerging as a result of the development of new media.

Consumers will not watch sporting events of lower prestige or films in substitution for top-level football of this type, and so prices are unchecked by the [3]

availability of other such content and broadcasters wishing to gain ground in the market cannot rely on such content to compensate for failure to win access to top- level sport. This approach to defining markets for rights to broadcast sports events taken by the Commission in Champions League was important but it was not pathbreaking. Eurovision concerned collective buying, rather than selling, of broadcasting rights.56 It was decided three years before Champions League. Relying on the preferences of viewers, the Commission had rejected the view pressed on it by the European Broadcasting Union that the relevant market covered the acquisition of the television rights to important sporting events in all disciplines of sport, irrespective of the national or international character of the event. It preferred a narrow understanding: it noted that for at least some sporting events, such as the summer Olympics, the winter Olympics, the Wimbledon Finals, and the Football World Cup, the behaviour of viewers does not appear to be influenced by the coincidence of other major sporting events being broadcast simultaneously. These major events stand alone: the Commission found a strong likelihood that there are separate markets for the acquisition of some major sporting events, most of them international, though it did not need to reach a final conclusion in the matter for the purposes of the case.57 So too in Newscorp/Telepiu, concerning a merger, the affected market was that for the acquisition of exclusive broadcasting rights for football events played every year where national teams participate (the national league, primarily first division and cups, the UEFA Champions League, and the UEFA Cup), because ‘this type of football contents constitutes a stand-alone “driver” content for pay-TV operators’.58 This was a decision adopted in April 2003, just a few months before Champions League,59 and clearly in the same vein. At stake was the acquisition of ‘premium’ sports rights on an exclusive basis for the purposes of making a pay-TV venture sufficiently attractive to viewers as consumers, and the consequent effect on buyers unable to gain access to such content was at the heart of the Commission’s concern about the effect of the proposed merger on the market. It allowed the deal to proceed but only on condition that undertakings were given which were designed to eliminate unacceptable anti-competitive aspects to the deal. These included restrictions on the length of the contracts granting exclusive rights to the new media group. This is a sports-specific concern in so far as the valuable prize of top-level sport is the reason why anti-competitive consequences may attach to a race for the prize where there is only one winner, but the real anxiety is with the effect on broadcasting markets, and this could conceivably arise where other premium content is at stake. So in Bertelsmann/Kirch/Premiere the Commission found that a proposed merger between powerful players in the media sector would harm effective competition and therefore blocked it, in accordance with the supervisory

  • 56 Comm Dec 2000/400 Eurovision [2000] OJ L151/18, paras 38—45.
  • 57 Dec 2000/400 was annulled, but not on the point of market definition, in Cases T-185/00 M6 and others v Commission [2002] ECR II-3805.
  • 58 COMP/M.2876 Newscorp/Telepiu Dec 2004/311 [2004] OJ L110/73, para 66.
  • 59 The proceedings that led to Champions League (n 34) are mentioned in the Newscorp/Telepiu decision (n 58) at para 56 fn 20.

powers granted by the EU’s Merger Regulation.[4] The Commission noted en route to this conclusion that a sufficiently attractive ‘pay-TV bouquet’ must include a combination of premium rights for the first broadcasts of films produced at the major Hollywood studios which, it added, are resources ‘in short supply, since, as a general rule, the broadcasting rights for premium content of this kind are given on the basis of longer-term exclusive contracts’^[5] But even here the weighty importance of sport could not be escaped: the decision was based also on the importance of ‘popular sporting events’ as resources in short supply.62 The theme is clear: the higher the market power acquired, the happier the buyer, but the more perturbed the competition authorities. This is general competition law, and to this extent sport is not special. But sport is unusual in generating rather narrow markets (for rights to the very top events) which are consequently marked by a typically high level of market power enjoyed by the organizer of the event, commonly the governing body of the sport.63

In Champions League the geographical market was defined as national. The Commission relied on the pattern of distribution, which is national due to the existence of local regulatory regimes, language barriers, and cultural factors.64 This reflected a long-standing understanding that licensing on a territorial basis is not inevitably treated as artificial market-partitioning in the EU, but rather may reflect the reality of divergent tastes, preferences, linguistic ability, and regulatory condi- tions.65 So Champions League fits with pre-existing practice which finds that markets in the broadcasting sector tend to be enduringly national.66 This too is likely to be volatile: the Eurosport channel and the rise of SKY show the possibility for a slow emergence of a European sports media. But even global events, such as the World Cup and the Olympic Games, tend to be shown on a national basis.

The practical question which emerges from this examination of the treatment of the sale of exclusive rights to broadcast major sporting events is just what is permitted under EU competition law. The commercial value of exclusivity, without which a seller would quite likely not be able to find a willing buyer or at least only a buyer at a much reduced price, means that it cannot in principle be the subject of routine prohibition, but equally the potential harm it causes to the competitive process in broadcasting markets means that it must be policed with care.

The solution to this conundrum lies in placing conditions on the grant of exclusivity. The Commission’s practice reveals concern to ensure that there is an open and transparent tendering process rinsed of any hint of discrimination based on nationality; commonly that there should be ‘unbundling’ of the package on offer to allow space for more than one buyer (which becomes ever easier as technology generates new forms of distribution); that the duration of exclusivity should be limited, and a duration of three years has become more or less standard; and the grant shall not be automatically renewed. The aim is to balance the need to address concerns about the open and competitive structure of the market against the autonomy of the commercial parties involved to create value.

In the wake of Champions League the Commission dealt with two further instances of collective selling of rights to broadcast high-level football matches, and it demonstrated how Champions League had set a pattern. The two Decisions concerned first the German Bundesliga and then the English Premier League, two of Europe’s four strongest national football Leagues (along with Italy’s Serie A and the Spanish Primera Liga).

The Bundesliga decision concerned the central marketing of media rights (television but also cable, satellite, and radio) to matches in the two top professional men’s football leagues in Germany, Bundesliga and Bundesliga II.[6] [7] The collective dimension to the sale restricted supply, and the Commission explicitly noted the commercial importance of being able to supply football content and therefore the potential harm in downstream markets caused by restriction of supply/8 This is examined further later. The geographical market was defined by applicable national law, the language and cultural characteristics, and was confined to Germany and potentially also German-speaking areas/9 The Commission decided a green light should be shone after receipt of commitments from the Bundesliga. These focused on the offer of nine distinct packages of rights on a transparent and non-discriminatory basis and on a duration that would not exceed three years. The aim was to increase competition in the market and the Commission was satisfied that the arrangements would ‘contribute to innovation and dampen the concentration tendencies in the media markets’/0 The Commission concluded that there were no longer grounds for action on its part—although it did not make explicit whether this was because the matter fell outside the scope of Article 101(1) TFEU or instead within the criteria of exemption set out in Article 101(3). Either way, exclusivity was permitted, but on terms that demonstrated a concern to keep broadcasting markets fluid.

The Commission’s 2006 Decision on the collective selling of the media rights to the English FA Premier League was similarly predominantly concerned with horizontal aspects of selling, which are examined later, but as part of the inquiry, it was necessary to consider precisely what was being sold by the FAPL to downstream markets/1 At the time the Commission first took an interest in the FAPL’s practices, the package sold typically covered three years, and was split between exclusive packages of live rights to televise matches, live rights for radio broadcast, and rights for use on mobile phones. There were also rights to show matches on a deferred basis. The Commission had opened an investigation in 2001, due to a suspicion that the arrangements restricted competition within the meaning of (what is now) Article 101(1) TFEU and that they were not entitled to exemption pursuant to Article 101(3). An extended period of negotiation ensued and a number of commitments were made by the Premier League with a view to securing a green light, which was eventually forthcoming in 2006. The Commission aligned its analysis explicitly with its Decisions in Champions League and Bundesliga. The broadcasting rights to premium football events played regularly through the season constitutes a distinct relevant product market. The geographical market was the UK market alone: the Commission noted once again that markets for media rights are usually defined on the basis of national or linguistic criteria. The Commission decided that the tendency to sell large packages of rights on an exclusive basis creates damage in downstream markets by raising barriers to entry, especially if there is only a single buyer. It is clear that the underlying primary concern is not sport but broadcasting: the link is the huge value of sports rights to broadcasters seeking to establish their presence. The changes made under adapted commitments of the FAPL included increased output (the availability of an increased number of matches), the sale of six packages of rights that would not be purchasable by a single buyer (though buying five of six was possible), splitting the sale of UK and Irish rights, sale on a transparent and non-discriminatory tendering basis, and that the duration of agreements would not exceed three years. The thematic concern was clear—more and fairer competition. The Commission concluded that there were no longer grounds for action on its part—although, as in Bundesliga, it did not make explicit whether this was because the matter was now outside the scope of Article 101(1) or instead within the criteria of exemption set out in Article 101(3).

Football is the main game in town, but in 2001 the Commission addressed Formula 1/2 Broadcasters had acquired exclusive rights for the contracted territory that were, in the Commission’s estimation, too long and therefore anti-competitive within the meaning of Article 101 TFEU. The agreed solution was to cap the length of new free-to-air broadcasting contracts at three years, albeit with exceptional provision for five-year deals where a particular need to encourage investment is present. The three decisions on collective selling in football just examined follow this preference for three years of contractually agreed exclusive rights as the norm: enough to generate the benefits of value-creation associated with exclusive rights but not so long as to harm competition in broadcasting markets. This is not a cast iron rule: assessment must depend on the particular market.73 Acquisition of exclusive rights to broadcast a popular football competition will be handled differently from acquisition of rights to broadcast a sport of interest only to a minority of viewers, such as weightlifting or bog-snorkelling. The markets are different: a long-term exclusive

  • 72 COMP 35.163, Notice published at [2001] OJ C169/5.
  • 73 See further Lefever (n 20) ch 9.

deal would be highly unlikely to escape the application of Article 101 in the former case but may plausibly do so in the latter. The fundamental issue is whether broadcasters can access other sources of material that will allow them to compete effectively. The less plausible this is, the more serious the foreclosure effect felt by both existing and potential competing broadcasters and the more harm is done to the competitive potential of the market.

  • [1] Council Regulation (EC) 1/2003 of 16 December 2002 on the implementation of the rules oncompetition laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/1, Art 2.
  • [2] [1997] OJ C372/5. 47 A-M Wachtmeister, ‘Broadcasting of Sports Events and Competition Law’, Competition PolicyNewsletter (Brussels, European Commission, No 2 of 1998 (June)), available via accessed 29 November 2016.
  • [3] ibid para 194. 52 ibid para 25. 53 ibid para 200. 54 ibid para 68. 55 ibid para 63.
  • [4] Case IV/M.993 Bertelsmann/Kirch/Premiere [1999] OJ L53/1. The current version of the MergerRegulation is Council Regulation (EC) 139/2004 of 20 January 2004 on the control of concentrationsbetween undertakings [2004] OJ L24/1.
  • [5] Bertelsmann/Kirch/Premiere (n 60) paras 48—49. 3 4 5 6 7 ibid.
  • [6] COMP 37.214 Dec 2005/396 Joint selling of the media rights to the German Bundesliga [2005]OJ L134/46.
  • [7] ibid para 23. 3 ibid para 19. 70 ibid para 41.
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