Commercialisation of sports broadcasting rights under the spotlight

The €45 billion global sports broadcasting market continues to attract interest from antitrust authorities across the globe. Following the lead of the Italian Competition Authority, which fined media agencies for coordinating their bids for broadcasting rights of football matches earlier this year, July and August saw decisions issued and investigations opened in Africa and the US concerning the commercialisation of professional sports broadcasting rights.

COMESA’s competition authority investigates the Confederation of African Football

In August 2019, the Common Market for Eastern and Southern Africa’s (COMESA)* Competition Commission (CCC) requested the attendance of the Confederation of African Football (CAF) at an evidentiary hearing. CAF is the governing body of football in Africa and the exclusive holder of broadcasting rights for tournaments including the Africa Cup of Nations and the African Champions League.

The CCC’s antitrust investigation, the first of its kind, was launched in February 2017, when the authority began to examine an agreement between CAF and Lagardère, a private sports marketing company which had previously provoked the ire of Asian football fans by increasing the price of broadcasting rights for certain international football matches. Under the agreement, Lagardère was granted exclusive broadcasting rights over the main regional football competitions in Africa, including the Africa Cup of Nations, the African Nations Championship, and the African Champions League, between 2009 and 2016. It subsequently renewed its exclusivity until 2028, with an option to extend the contract until 2036. The agreement also contains a right of first refusal clause preventing CAF from seeking out other offers prior to the conclusion of renewal discussions with Lagardère.

Lagardère and CAF entered into agreements with several broadcasters and sponsors in order to commercialise the media and marketing rights. These commercialisation contracts, which last up to eight years, and which also confer rights of first refusal, are likewise under investigation by the CCC.

The CCC’s concern is that the lengthy durations of and rights of first refusal incorporated in the agreements may prevent third-party market participants from competing for the broadcasting rights. It notes that a maximum duration of four years in combination with a transparent tender procedure would create a competitive market by dividing the single broadcasting package into several more affordable lots.

The evidentiary hearing will allow CAF to present its version of the facts to the CCC. However, even if the CCC ultimately finds the agreements to be anticompetitive, its ability to impose fines and/or remedies remains limited. Any monetary penalty would have to be collected before the national courts of COMESA’s member states, and not all of these have enacted provisions allowing the enforcement of the CCC’s decisions.

Egyptian court upholds decision finding CAF guilty of abusive conduct

This is not the first time that the agreement between CAF and Lagardère has been investigated by competition authorities. In July, Cairo’s Court of Appeal upheld a decision by the Egyptian Competition Authority (ECA) finding that CAF abused its dominant position by entering into an exclusive licensing agreement with Lagardère for the award of broadcasting rights in Egypt for all African football tournaments.

In 2017, the ECA found that the absence of tendering procedures for such a long period of time and a right of first refusal prevented market entry. Moreover, the ECA took issue with the fact that, by selling broadcasting rights in a single package, CAF prevented more than one buyer from acquiring the rights. CAF was fined the equivalent of approximately €37.5 million.

The ECA required the agreement to be immediately terminated and for CAF to organise a new non-discriminatory tender. CAF’s tenders must offer smaller packages and ensure that no single buyer purchases all packages involving live broadcasting rights. Whilst acknowledging that private entities like CAF are not legally required to call for tenders, the ECA has identified this remedy as the only way to ensure effective competition in the current case.

Comment

Under EU competition law, joint commercialisation arrangements are considered legal if they fulfil certain conditions. The European Commission has established that the joint selling of sports broadcasting rights should (i) follow open, transparent and non-discriminatory tenders, (ii) offer several packages, (iii) ensure that no single buyer acquires all packages exclusively (iv) strictly limit in time the resulting agreements (up to three years as a general rule), and (v) allow clubs to market their rights individually if the league or association fails to sell them. Some EU member states, such as France, Italy and Spain have codified these conditions in their legislation.

It appears that these conditions continue to inspire and influence authorities well beyond EU’s borders, including the ECA and the CCC.

The CCC’s case also reveals important coordination gaps within COMESA. In order to avoid parallel investigations, the ECA, and any other authorities of COMESA’s member states, are competent to initiate investigations only where the CCC has not yet initiated its own investigation into a specific behaviour. In this instance, the ECA only notified the CCC of its investigation once it was concluded, thus hindering the CCC in commencing an overriding procedure. The subsequent parallel investigation of the CCC was triggered by media outlets reporting on the agreements.

The fact that COMESA’s nascent competition enforcement system focused on the sports industry to carry out its first ex officio investigation illustrates the growing economic importance of the sector. However, the parallel investigations also reveal that COMESA’s system is yet to mature. Companies may therefore face burdensome duplicate proceedings, potential conflicting decisions, and/or multiple fines for the same anticompetitive behaviour.

Watch this space! US court reinstates antitrust class action

Along similar lines, a US federate appellate court has revived a class action alleging the agreements between the National Football League (NFL) and its 32 associated teams, and between the NFL and broadcaster DirecTV eliminate competition in live game broadcasts. The plaintiffs are a group of subscribers to DirecTV’s “NFL Sunday Ticket”, a bundled package of all NFL games.

The final outcome of the class action is still uncertain. Defendants may settle, following the path taken by both the baseball and hockey professional leagues (MLB and NHL) in 2015 and 2016, in similar suits.

The sale of sports broadcasting rights continues to raise antitrust issues of major significance to both developed and developing countries. We will continue to watch this space with interest.

*Note that the Common Market for Eastern and Southern Africa (COMESA) is a free trade area in Africa with twenty-one member states. The trading bloc has its own competition authority, the CCC.