The Luxembourg Trilogy

The Superleague case concerns the project by Europe’s biggest football clubs to launch a break-away super league to rival the Champions League, and the rules enacted by UEFA and FIFA on the prior approval of interclub football competitions and the exclusive commercial exploitation of the media and broadcasting rights to those competitions.  Following threats to exclude any club or player taking part in the Superleague from all UEFA and FIFA competitions, those rules became the centre of a legal battle between UEFA/FIFA and the company spearheading the creation of the Superleague before a commercial court in Madrid. This culminated in a preliminary reference to the CJEU concerning the compatibility of those rules with Article 101 TFEU (prohibiting agreements and decisions by associations of undertakings with the object or effect of restricting competition), Article 102 TFEU (prohibiting the abuse of a dominant position) and the free movement principles protected under EU law.

The ISU case originated from a complaint made by certain athletes to the European Commission about the rules of International Skating Union (ISU).  The ISU regulates figure and speed skating and is the largest organiser of international skating events, including all qualifying events for the Olympics. Under its “eligibility” rules, it can ban athletes from its competitions for participating in events not approved under its “prior authorisation” rules, resulting in de facto exclusion from the winter Olympics. The Commission found that the ISU’s rules prevented the emergence of competing speed skating events by stopping athletes from taking part in events organised by third parties.  It also found that the rules were disproportionate, lacked a clear procedural framework, and left the ISU with an almost unfettered margin of discretion. According to the Commission, the rules amounted to a decision by an association of undertakings which had the object and effect of restricting competition in breach of Article 101 TFEU. 

Moreover, the restriction of competition inherent in those rules was reinforced by mandatory arbitration provisions conferring exclusive jurisdiction to review decisions adopted by the ISU on the Court of Arbitration for Sport (CAS) in Switzerland, because the CAS’s arbitral awards could only be challenged before the Swiss Federal Supreme Court, whose jurisdiction did not extend to reviewing the compatibility of those awards with EU law. The Commission had its decision upheld by the General Court, except for its assessment of those mandatory arbitration provisions.  The ISU and the Commission both appealed to the CJEU.  

The Antwerp Football Club case is a preliminary reference by a Belgium court in an appeal bought against a decision by the Belgium Court of Arbitration for Sport, rejecting a validity challenge against the so-called homegrown player (HGP) rules adopted by UEFA and the Royal Belgian football Association to foster the training and development of local players by domestic football clubs. 

The HGP rules required clubs participating in UEFA competitions and the Belgium football league to have a minimum of eight players on their 25-player listed squad sheet who are trained locally (whether in Belgium or by the club in question). These rules were challenged by the Antwerp Football club and a foreign football player who argued that the rules limited the ability to recruit foreign players and restricted competition between football clubs. They also argued that the rules distorted competition in the transfer market, adversely impacting recruitment opportunities for players trained outside Belgium, contrary to the right of free movement for workers under the EU Treaty.

The CJEU held that Article 165 TFEU does not confer on sport a special status in relation to the application of EU competition law and the free movement rules governing the operation of the Single Market.  Sports governing bodies are undertakings and/or associations of undertakings which are subject to Article 101 TFEU - and insofar as they hold a dominant position, are also subject to Article 102 TFEU.  

The CJEU further emphasised that the conduct of such associations falls within the scope of the free movement principles of the EU Treaty (i.e. Articles 45, 49, 56 and 63 TFEU) which apply not only to Member States but also to professional bodies responsible for regulating a particular profession or activity, including sports associations regulating and controlling access to sport-related markets.  In return, those associations are, however, able to rely on public interest objectives to justify restrictions to the free movement principles which are necessary and proportionate. 

Only purely non-economic rules solely related to sport therefore fall outside the scope of EU law and this exception must be narrowly interpreted.  It applies, for example, to the exclusion of foreign players from national teams or to ranking criteria used to select athletes for international competitions but was previously held not to apply to the anti-doping rules of the International Olympic Committee.  These rules were instead held by the CJEU to fall within the scope of application of EU law.  It was therefore necessary to demonstrate that such rules pursued legitimate public interest objectives and did not go beyond what was necessary to achieve those objectives.³

In considering if a restriction of competition can be legitimised by public interest justifications, the CJEU distinguishes measures which have the object of restricting competition from those which do not.  Importantly, the CJEU held that the principle first established in Wouters v Algemene Raad van de Nederlandse Orde van Advocaten⁴ (subsequently extended to sport associations in Meca Medina⁵), according to which measures of professional regulatory bodies with the potential to restrict competition fall outside the scope of EU competition law if those measures are justified and necessary for the pursuit of legitimate public interest objectives, applies only where those measures have the effect and not the object of restricting competition.  

Measures which have the object of restricting competition are caught by Article 101.1 TFEU and can only be justified under Article 101.3 TFEU.  Sports governing bodies cannot justify such measures purely on public interest grounds. They must instead demonstrate that the competitive harm caused by such measures is outweighed by consumer benefits which could not have been achieved by less restrictive means and that competition is not eliminated in any relevant market.  The position is largely the same under Article 102 TFEU: measures which by their nature amount to an abuse of a dominant position must be justified by consumer benefits which outweigh or at least counterbalance, the exclusionary effects of those measures.

The potential justifications available to sports governing bosies therefore depend on whether the measures adopted by such bodies have the object or only the effect of restricting competition.  The rationale for such a distinction, which is not found in previous case law, is unclear and not articulated in the judgments, but the most likely explanation is that the CJEU wanted to limit the scope for public interest justifications under Article 101 and 102 TFEU.  

It follows from the above that it will be necessary in future cases to determine if a measure adopted by a sports governing body has the object or effect of restricting competition, before considering the potential justifications for the measure.  This also means that a measure could be justified on public interest grounds under the free movement rules but yet at the same time still infringe Article 101 and/or 102 TFEU if the measure is found to have an anti-competitive object, regardless of whether the measure is necessary to achieve a legitimate policy objective. 

Sports associations can compete in sports related markets and also exercise regulatory powers impacting the functioning of those markets.  According to the CJEU, it is also legitimate for such sport associations with regulatory powers to adopt homogeneous rules to preserve equal opportunities and merit-based sporting competitions which fit into an “organised system” of national, European, and international competitions.  Likewise, it is legitimate to have rules designed to safeguard the fairness, integrity, and ethical values underpinning professional sports.  

At the same time, the CJEU makes it clear that sports regulatory bodies cannot impose every conceivable restriction on the conduct of sports events or prevent the introduction of competition in sports related markets by using their position as gatekeepers to block new tournaments or leagues. There must be room for the introduction of competition, innovation, and consumer choice. Third parties must therefore be able to enter and compete in the market for the organisation or marketing of professional sporting events⁶. Accordingly, rules on the prior authorisation or conduct of professional sport events, which regulate access to sport related markets and the competitive parameters on those markets, must be based on objective, non-discriminatory, and proportionate criteria. These criteria must also be transparent and known in advance to prevent sports associations from arbitrarily exercising their regulatory powers.

The prior-authorisation and player eligibility rules before the CJEU in the Superleague and ISU cases fulfilled none of these conditions. Instead, those rules afforded UEFA, FIFA and the ISU almost unfettered discretion to decide whether or not to authorise competing sporting  events⁷. The CJEU held that such rules had the object of restricting competition and infringed Article 101 TFEU. This was in stark contrast to Advocate General Rantos who argued in his Opinion to the CJEU that such rules could have restrictive effects on competition, but this depended on their implementation. According to the CJEU, it was irrelevant how the rules were implemented in practice because the very nature of those rules was to restrict competition. In addition, the adoption of such rules by a sports association in a dominant position which is acting as a gatekeeper to sports related markets was also considered by the CJEU to amount to an abuse of a dominant position and an unjustified restriction to the freedom to provide services in the EU⁸.

The CJEU made it clear that it was not expressing an opinion on the merits of the Superleague. The question whether UEFA can adopt a set of rules that would enable it to veto a project such as the Superleague was therefore not addressed. UEFA can, however, take some comfort from the CJEU’s recognition of the importance of preserving equal opportunities and merit-based football competition since it can be argued that these objectives would be undermined by a quasi-exclusive and semi-closed football competition such as the Superleague. It is likely that such a justification will be tested if and when another attempt is made in the future to launch a football Superleague.

The CJEU found that HGP rules restrict competition and the free movement of workers but can in principle be justified.  Notably, the CJEU confirmed that HGP rules which do not have the object of restricting competition can be justified on legitimate public interest grounds – including the need to have uniform conditions for teams participating in interclub football competitions and promoting grass roots support by encouraging clubs to invest in the training and developing of local players.  However, the rules adopted by a sport association for such purposes must be transparent, objectively justified, and proportionate.  

Conversely, however, if HGP rules have the object of restricting competition, the exemption criteria under Article 101(3) TFEU must be satisfied.  More specifically, it must be established that the rules encourage professional football clubs to recruit and train young players, intensify competition through training, and create sufficient countervailing efficiency gains which accrue to players, clubs, and fans alike.  It must also be demonstrated that those benefits could not have been obtained via less restrictive means.

As to whether the HGP rules of UEFA and the Royal Belgium Football Federation have the object or only the effect of restricting competition, the CJEU held that this depended on whether those rules revealed by their very nature a sufficient degree of harm to competition.  This was a matter for the referring court to determine in light of the relevant circumstances, though the CJEU indicated that it would need to consider the fact that the rules limit an important parameter of competition and impact competition both on the upstream market for player recruitment and on the downstream market for inter-club football competition.  In addition, the referring court would also need to consider the number of players to which the rule applies.  While the weight attached by the CJEU to the limitation of an important parameter of competition by the HGP rules points to an object restriction, the reference to the number of players concerned could instead point to an effects case, depending on the numbers of players involved.  It is therefore not immediately obvious whether the HGP rules fall withing the object or effects “box”, and so it remains to be seen how the CJEU judgment will be implemented by the referring Court in Antwerp.

The CJEU held that the Commission had not erred in finding that the restriction of competition inherent in the ISU’s prior authorisation and player eligibility rules was reinforced by the ISU’s mandatory arbitration rules.  The Commission had been correct in reaching this conclusion because those rules effectively gave the ISU legal immunity from EU law in the exercise of its decision-making and sanctioning powers. 

It would seem that the practical consequence of the CJEU’s ruling is that decisions of sports governing bodies which could potentially restrict competition (for example where the decision concerns the organisation and/or marketing of sporting events) must be capable of effective judicial review before an EU based court with jurisdiction to refer questions to the CJEU.  The review of such decisions cannot be left exclusively to the Court of Arbitration for Sport.