Sports & Antitrust – Indian Volleyball Federation under investigation for alleged abuse of a dominant position

In August 2019, the Competition Commission of India (CCI) announced the opening of a formal investigation against the Volleyball Federation of India (VFI) for alleged abuse of a dominant position in relation to the organisation of national and international volleyball events.

The investigation joins a series of other recent decisions by the CCI relating to sports federations. Since 2009, the authority has investigated the national governing bodies of cricket, hockey, athletics and chess, and found evidence of anti-competitive behaviour in several instances. The organisations subject to infringement decisions were heavily fined and ordered to cease the anti-competitive practices. For example, a fine of approximately EUR 6.8 million was imposed on the Board for Control of Cricket in India alone.

Background

VFI is the official governing body for volleyball in India. It manages every aspect relating to the sport in the country, from the organisation of championships to sponsorships, merchandising and sanctioning players.

The CCI launched a preliminary investigation into VFI’s conduct in 2018 following a complaint by several professional volleyball players. According to the complainants, VFI’s agreement with Baseline, a sports consultancy and marketing company, amounted to abuse of VFI’s dominant position as the sole authority regulating the sport in India. Under this agreement, the VFI grants Baseline exclusive rights to organise volleyball tournaments for a period of 10 years. The VFI further commits not to permit any other volleyball event to be organised within its jurisdiction.

Furthermore, the VFI commits to ensure that players will compete in Baseline’s tournaments only and not in competitions organised by other entities. The latter restriction on the players even extends to international events such as the Olympics and the Asian Games if these competitions were to clash with events organised by Baseline.

Decision

The CCI found sufficient evidence to open a formal investigation to determine whether VFI’s conduct violates Indian antitrust rules. In particular, the CCI found that by banning the staging of any other volleyball event in India, the VFI potentially forecloses access to the relevant market for competitors of Baseline. Further, the CCI had concerns that the agreement limits the volleyball players’ right to participate in tournaments promoted by other organisations, thus foreclosing other organisers and limiting the players’ right to freely provide their services. On a preliminary basis, the CCI did not find any justification for this conduct.

Developments in other jurisdictions – European Union

Similar investigations have been conducted in the EU, where the European Commission and the national competition authorities have increasingly taken a tougher stance on sport governing bodies.

Initially, sport was seen as falling outside the scope of EU (competition) law. This was due both to its cultural significance and to the perception that sport was not a typical economic activity. This status quo was first questioned in the late 90’s. Whilst EU primary law still expressly recognises the “specific nature of sport”, the so-called sporting exception has progressively been eroded in the case law of the EU courts.

Most recently, following a complaint made public on Twitter, the European Commission investigated the International Skating Union’s (ISU) rules providing for severe penalties against athletes who participate in competing events not organised by the ISU itself. In its final decision, the Commission found that these rules were highly restrictive of the athletes’ freedom to provide services. Moreover, by being deprived of the athletes’ services, organisers of rival events were prevented from carrying out their activity. The extent of the limitation was such that it could not be justified by the need to promote health or safety standards.

On this basis, the Commission found the restriction to be disproportionate and therefore in breach of EU competition rules. Although the Commission did not impose a fine, the ISU was ordered to bring the infringement to an end. While the ISU has complied with the obligation, it has also appealed the Commission’s decision before the General Court of the EU. The case is now pending.

Comment

The CCI’s opening of a formal investigation does not prejudice the outcome of the case. The authority must now carry out a detailed assessment of the facts and the justifications put forward by the volleyball governing body. Nonetheless, there are a number of interesting parallels between the European Commission’s decision against the ISU and the CCI’s investigation into the VFI’s agreement with Baseline. It remains to be seen if and how the CCI reaches a decision similar to that of the European Commission.

We are likely to see more examples of competition authorities bringing actions against sports organisations in the future. Indeed, there is evidence to suggest that the next step in this global trend of antitrust investigations might relate to the European governing bodies of football and basketball. This highlights the need for such bodies to closely scrutinise their own rules, and their agreements with third-party organisers of events, as well as the opportunities for rival organisers of sporting events to use competition rules as a tool to obtain access to the market.