French Competition Authority clears first football club acquisition
The French Competition Authority (FCA) recently closed its maiden merger control investigation into the football club sector and in August this year cleared the acquisition by UK-based chemicals giant Ineos of football club SASP Olympique Gymnaste Club de Nice Côte d’Azur (OGC Nice).
The FCA’s decision is novel in a couple of ways. It is the first merger control assessment undertaken by the FCA relating to the acquisition of a football club. The investigation therefore necessitated the definition of markets which had, to date, escaped merger control scrutiny of either the FCA or the European Commission. Second, the FCA granted, on unprecedented grounds, a derogation from the customary standstill obligation prohibiting companies from implementing a transaction prior to the regulatory clearance.
The deal represents Ineos’ latest addition to its growing portfolio of sports businesses, following the acquisitions of Swiss football club Lausanne-Sport FC in 2017 and UK cycling’s Team Sky earlier this year. Ineos’ CEO, Jim Ratcliffe, has also previously been linked with a potential takeover bid of Chelsea football club in the English Premier League. The target, a professional sports LLC under French law (“Société anonyme sportive professionnelle”), manages all activities relating to the participation of OGC Nice in football events, such as French Ligue 1 and Ligue 2 championships, as well as both national and international cup competitions.
In its highly anticipated decision, the FCA identifies the relevant markets in which football clubs operate in France. It focuses on the market for the transfer of professional players, which had not previously been defined for merger control purposes and which relates to the market where football clubs compete to attract the best players. The FCA reached the conclusion that this market is at least European-wide.
The decision also discusses the main parameters of competition between professional football clubs in this market. The FCA identified the following as key factors considered by professional players when choosing to sign with a club: net remuneration, club reputation, duration of contracts, competitiveness of the national championship, and international cup competitions in which professional football clubs compete.
Against that frame of reference, the FCA concluded that Ineos’ acquisition would not raise any competition concerns. OGC Nice would not benefit from an enhanced position as a professional football club, particularly in the market for the transfer of players. The FCA therefore unconditionally cleared the acquisition.
During its investigation, the FCA also granted the parties a derogation from the standstill obligation, which had effectively been preventing the football club’s owner-to-be from recruiting playing staff during the summer transfer window, a limited period during which clubs are permitted to transfer players for the upcoming season. The standstill obligation was lifted in mid-August upon request, so as not to unduly limit the football club’s ability to recruit players.
Last month’s decision, the first of its kind, is yet another example of the increasing interest in and exposure to sport and sport-related sectors of national competition authorities and the European Commission – see, for example, recent articles with respect to Japanese rules on transfer agreements, sports media agencies' fines in Italy, and the CCI's abuse of dominance investigations into the Indian Volleyball Federation.
The fact that the FCA defines a relevant market for transfers of professional players is also interesting in light of the complaint filed to the European Commission earlier this year as to whether a planned Italian flat tax scheme constitutes an illegal state aid. It is alleged that the scheme unfairly benefits Italian football clubs when competing for professional players with non-Italian clubs, and has been argued that this could be one of the biggest changes for the Italian football market in the last 25 years.
The case is also unique on a purely procedural level. It is only the ninth known instance of the FCA granting a derogation from the standstill obligation, which prohibits parties from implementing a reportable concentration prior to obtaining the FCA’s clearance. Moreover, this is the first instance in which the FCA has granted such a derogation on grounds not relating to the financial hardship of the target. Instead, it was granted in order to cater for the specific organisation of sports activities and transfers, and to allow the club to sufficiently prepare for the upcoming season.