Passing the ball to the opposition: Polish Competition Authority suspects collusion among basketball teams
The Polish Competition Authority (PCA) is investigating the behaviour of the Polish Basketball League (PBL) and sixteen of its member clubs. The PCA suspects that the PBL and the clubs jointly agreed on changes to employment contracts with basketball players at the outset of the COVID-19 pandemic in Poland.
The legal relationship between clubs and players continues to be under the antitrust spotlight.
The PBL organises the Energa Basket League (EBL), a professional men’s club basketball league in Poland. The most recent full season – in 2019/20 – saw 16 clubs participating in the EBL. The practices currently under investigation by the PCA are alleged to have taken place at the end of that season.
As with so many sports, the 2019/20 EBL ended prematurely in March 2020 due to the pandemic. Following the termination of the season, the clubs participating in the EBL issued a joint statement which announced that, due to financial losses, they would not be able to fully comply with their salary payment obligations to players and coaches.
The Basketball Players Trade Union (BPTU) criticised this approach and emphasised that any amendments to contracts should be negotiated individually. Further, it warned that any joint arrangements between clubs and the PBL may constitute an anticompetitive agreement. In fact, as acknowledged by its president, it was the BPTU which complained to the PCA.
In its preliminary proceedings, the PCA requested that the basketball clubs offer explanations for their practices. The PCA rejected the clubs’ justification that the COVID-19 outbreak rendered the further execution of contracts with basketball players impossible. While acknowledging that the clubs might have experienced financial difficulties, the PCA stressed that decisions regarding changes of contracts must be taken independently from other clubs.
Consequently, the PCA initiated a full-blown cartel investigation. The authority alleges that the PBL and associated clubs agreed on the termination of contracts with basketball players as well as on the suspension of payments of salaries. The proceedings are ongoing and it remains to be seen if the PCA will find an infringement of competition law.
If an infringement is found, the consequences are potentially significant. Fines for infringing parties can amount to up to 10% of a company’s annual turnover. Regulatory investigation and sanction may not be the end of the matter either, particularly given the BPTU’s focus on these issues. If the players can prove loss as a result of any infringing agreement, the PBL and the clubs could yet face the prospect of follow-on damages claims, i.e. further private litigation based on any PCA decision, as well as the associated costs and reputational harm.
Significance and impact
The proceedings by the PCA are another stark reminder that neither activities of sports clubs nor employment matters are immune from antitrust scrutiny. It is also another sign that – as we explain here and here – competition law has becomes the buzzword in sports regulation.
This is the first Polish case concerning the relationship between sports clubs and sportspersons but not the first case in the wider sector. The PCA has previously investigated exclusive licence agreements for broadcasting rights for matches of the Polish football league, concluded between one of the TV broadcasters and the Polish Football Association.
The present matter is based on well-established competition law principles:
- Sports clubs are undertakings from a competition law perspective and shall pursue their activities independently. Any coordination between them that has an impact on competition will be subject to review.
- Compliance with competition law decisions (e.g. statutes, resolutions, recommendations) taken by an association of undertakings – such as a sports association – can be reviewed by competition authorities. By way of example, a resolution by an association of undertakings compelling members to apply a prescribed price list or operate in predetermined geographic areas can be held to be an anticompetitive arrangement.
- Agreements between competitors on employment matters such as employees’ salaries are not in a special category or afforded particular protection. On the contrary, coordination amongst competitors regarding employee compensation is a hardcore restriction of competition rules and should be avoided at all costs. A finding of a breach requires no actual agreement – it is sufficient for there to be an expressed intent to fix wages or exchange sensitive information.
- Crisis situations (such as the COVID-19 pandemic) do not per se constitute a valid excuse for coordination between undertakings.
This investigation also showcases the cooperation between national competition authorities as well as the European Commission. The PCA has liaised with the Lithuanian Competition Authority, which is in the midst of its own investigation into basketball players’ pay. The PCA also discussed the matter with the European Commission in light of the application of EU competition rules alongside national rules.
Last but not least, this case demonstrates that companies should be very cautious about invoking the pandemic as a justification for anticompetitive conduct. COVID-19 does not provide carte blanche and the consequences of infringements are potentially significant, particularly given the financial pressures currently faced by so many sporting stakeholders.
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