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Summary Sports Enterprise Law 2024 (Readings and Statements) (17/20)

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by prof. Houben in masters Law and Business Economics Readings, Guest Lectures, Lectures and the 10 Statements This document provides first of all an analysis of the readings and presentations relevant to the more theoretical questions. In the second part, I have analyzed and argued the topic...

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  • August 22, 2024
  • 63
  • 2023/2024
  • Summary

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  • law
  • business
  • houben
  • guest lectures

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  • Universiteit Antwerpen (UA)
  • Toegepaste Economische Wetenschappen: Bedrijfskunde
  • Sports Enterprise Law
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Summary Sports Enterprise and
Law
This document provides first of all an analysis of the readings and
presentations relevant to the more theoretical questions. In the second
part, I have analyzed and argued the topics related to the ten statements.
By reviewing this document, you should be fully prepared; however, it may
be beneficial to revisit the presentations from the guest lectures, as one of
the theoretical questions is likely to be based on them. I prepared one of
the statements more thoroughly than the other nine and defended that
one during the exam, where I received a score of 17/20. Good luck!


Info on the exam
Please find below the statements for the exam. The idea is to build an
argumentation pro or contra. You can choose one statement yourself to
defend or refute as at the exam. You may prepare your answer at home,
bring your preparation to the exam and use it during the exam. In
addition, from the remaining 9 statements one statement will be randomly
allocated to you to defend or refute. With regard tot these remaining 9
statements, you may not bring your preparations to the exam. There are
20 points to earn as at the exam. The statements count for 7 points each
(so 14 points to earn in aggregate). The remaining six points can be
earned by correctly answering two more theoretical questions, worth 3
points each. These questions are not distributed to you prior to the exam.


Readings
1. Detailed Analysis of CAS Arbitration in the Context of EU Law and
Sports Governance
2. Detailed Analysis of the Diarra Case in the Context of EU Law and
Sports Governance
3. Key Insights from Szpunar’s Opinion
4. Detailed Analysis of the Meca-Medina Case in the Context of EU Law
and Sports Governance
5. Explanation of the Pyramid Structure in Sports




1

,Detailed Analysis of CAS Arbitration in the
Context of EU Law and Sports Governance
Introduction
The Court of Arbitration for Sport (CAS) is a crucial institution for resolving
sports-related disputes. However, its role and effectiveness in ensuring
judicial review and compliance with broader legal principles, especially EU
competition law, have been subjects of intense debate. This analysis will
break down the text into key themes, explaining their significance in light
of sports governance and EU law.

Article 165 TFEU and the ‘European’ Model of Sports
Article 165 of the Treaty on the Functioning of the European Union (TFEU)
emphasizes the development of the European dimension in sport,
promoting fairness, openness, and the integrity of sports
competitions. This article underscores the EU’s commitment to sports
as a public interest, mandating the protection of its values and
integrity.

Interpretations of Article 165 TFEU
Advocate General Rantos views open sports competition as a
constitutional value, allowing UEFA to oversee this principle. He argues
that UEFA, as a private Swiss organization, has the authority to
ensure the correct application of open competition in sports, a
stance reflecting the importance of maintaining fair play and
competition.

Conversely, Advocate General Szpunar argues that Article 165 TFEU
does not confer rights on private entities like UEFA, but is
directed at the EU itself. Szpunar’s interpretation suggests that the
article is meant to guide the Union’s actions rather than give regulatory
power to private organizations.

The Court of Justice of the European Union (CJEU) aligns with Szpunar,
stating that Article 165 TFEU is not a cross-cutting provision exempting
sports from primary EU law. This interpretation means that sports must
comply with EU competition and free movement laws without
special exemptions.




2

,Implications
The Court’s stance implies that while sports have unique
characteristics, they must still adhere to EU laws. Sports’ specific
characteristics can influence the application of these laws, recognizing the
unique nature of sports. However, sports organizations cannot claim
immunity from EU laws based solely on their unique status.



Double Hatting and Competition Law
Double hatting refers to sports governing bodies acting both as
regulators and organizers of competitions, often leading to conflicts
of interest. This dual role is problematic because it allows these bodies to
act in self-interest, potentially stifling competition.

Key Court Decisions
In cases like the European Super League (ESL) and International Skating
Union (ISU), the CJEU found that governing bodies’ prior approval schemes
(goedkeuringsregelingen), which denied market access to new
competitions, constituted an abuse of dominance under Article 102
TFEU and anti-competitive conduct under Article 101 TFEU. The Court
highlighted that the absence of safeguards in these schemes
allowed for arbitrary (random) decisions, restricting competition by
object, which is severely reprimanded by EU law.

Requirements for Compliance
To ensure compliance with EU competition law, the Court outlined several
requirements for prior approval schemes:

 Transparent, clear, and precise substantive criteria: Approval
schemes must be based on well-defined criteria to prevent arbitrary
decision-making.
 Non-discriminatory procedural rules: The rules must be fair and
not favor any party. They should include clear time limits and
decision-making processes.
 Effective judicial review mechanisms: There must be provisions
for decisions to be reviewed by an independent body to ensure
fairness and compliance with the law.

Effective Judicial Review
Effective judicial review is crucial for ensuring compliance with EU law. In
sports arbitration, this means that decisions must be appealable



3

,before courts that can enforce EU public policy, including
competition laws.

Limitations of CAS
CAS awards are appealable only before the Swiss Federal Supreme
Court, which does not have to consider EU law or refer questions
to the CJEU. This limitation undermines the effectiveness of CAS in
ensuring compliance with EU competition law because Swiss courts do not
provide the necessary oversight to guarantee adherence to EU principles.



Potential Reforms
To align CAS arbitration with EU public policy requirements, CAS could
establish operations within the EU. This would make its awards
subject to EU law scrutiny and allow for preliminary rulings by the CJEU
when necessary. This reform would enhance the credibility and legal
standing of CAS decisions within the EU.

Economic Efficiency and Legitimate Objectives
Sports governing bodies often justify their restrictive practices by
claiming they pursue legitimate objectives like maintaining the
integrity of sports competitions or achieving economic
efficiencies.

Legal Framework
Under Article 101(3) TFEU, anti-competitive conduct can be
exempted if it leads to quantifiable efficiency gains benefiting the
market and consumers. Additionally, the Wouters and Meca-Medina
exemptions allow for restrictions inherent in achieving legitimate
public interest objectives, provided they are proportionate.

Challenges
Proving these exemptions requires substantial evidence and
convincing arguments. The burden of proof lies with the sports
governing bodies, which must demonstrate that their practices meet
these stringent criteria. This means that vague references to the
integrity of sports or similar principles are insufficient without
concrete evidence of their benefits.

Implications for Future Governance
The CJEU’s decisions highlight a need for reform in sports
governance to align with EU law. This includes addressing conflicts of

4

,interest, ensuring transparency, and enabling effective judicial
review.

Possible Reforms
One potential reform is the separation of regulatory and commercial
functions within sports governing bodies. This separation would help
mitigate conflicts of interest and promote fairness. Additionally,
implementing objective standards for market access and good
governance, supervised by neutral bodies, could enhance
transparency and accountability in sports governance.

Another approach is enhancing stakeholder inclusion and collective
bargaining to balance the influence of sports governing bodies.
This could involve clubs, leagues, and players having more say in
regulatory decisions, thus creating a more balanced and fair
governance structure.


Detailed Analysis of the Diarra Case in the
Context of EU Law and Sports Governance
Introduction
The Diarra case presents a critical examination of the FIFA
transfer system under EU competition law. This case, pending before
the Court of Justice of the European Union (CJEU), challenges the
validity of the current transfer rules in football. It builds on recent
landmark decisions in the European Super League (ESL), International
Skating Union (ISU), and Royal Antwerp Football Club (RAFC) cases, which
have set a new framework for assessing competition law in sports.

The Concept of Double Hatting
Double hatting refers to the dual role of sports governing bodies as both
regulators and promoters of sporting competitions. This dual role creates
conflicts of interest, as these bodies can prioritize their commercial
interests over regulatory responsibilities. Advocate General
Szpunar highlights this issue, noting that sports federations, as
private entities, pursue economic objectives while claiming to act
as regulators. This inherent conflict can lead to decisions that hinder
competition and favor the governing bodies’ monopolistic control.

The Perfect Clash: Prior Approval Schemes
A key manifestation of the conflict of interest is in prior approval
schemes, where sports governing bodies have the right to

5

,approve or deny new competitions. This power can be abused to
protect their monopolies, as seen in the ESL and ISU cases, where new,
third-party competitions were denied access to the market. These
schemes, lacking safeguards, allow for arbitrary decisions that restrict
competition, which is a severe violation under EU law.

The Legal Framework for Double Hatting
In the ESL case, claimants argued that football’s governing bodies abused
their dominance, violating Article 102 TFEU, and engaged in anti-
competitive conduct under Article 101 TFEU. The CJEU reaffirmed that
the combination of regulatory and organizational power is not
inherently anti-competitive BUT becomes problematic when it
restricts market access without proper safeguards. To prevent
abuse, the powers of sports governing bodies must be subject to
transparent, detailed, and non-discriminatory rules, with effective judicial
review mechanisms.




Abuse of Dominance and Anti-Competitive Conduct
Applying this framework, the CJEU found that the prior approval schemes
in the ESL and ISU cases constituted an abuse of dominance and anti-
competitive conduct by their very nature (by object). The complete
absence of safeguards made these schemes inherently restrictive
of competition. This severe reprimand indicates that such rules were
designed to eliminate competition, which is unacceptable under EU law.

Efficiency Gains Defense
Despite finding severe infringements, the CJEU allows for an efficiency
gains defense under Article 101(3) TFEU. This defense requires
demonstrating that the anti-competitive conduct achieves
quantifiable efficiency gains benefiting the market and
consumers, is indispensable to achieving these gains, and does
not eliminate all effective competition. This exemption is difficult to
obtain, as it requires substantial evidence and rigorous proof that the
conduct benefits all stakeholders involved.

The Wouters and Meca-Medina Defense
Traditionally, sports governing bodies invoke the Wouters and Meca-
Medina exemption, arguing that any restriction of competition is inherent
in pursuing legitimate public interest objectives and is proportionate to
those objectives. However, this defense is available only for conduct that

6

,merely affects competition, not for conduct that inherently restricts it. The
CJEU clarified that for ‘by object’ restrictions, only the efficiency gains
defense is applicable, making it a more stringent test for sports governing
bodies.

(Sportorganisaties, zoals de FIFA en UEFA, gebruiken vaak een speciaal
argument om hun regels te verdedigen. Ze zeggen dat het soms nodig
is om de concurrentie een beetje te beperken om belangrijke
doelen te bereiken, zoals het beschermen van de integriteit van
de sport of het waarborgen van eerlijke wedstrijden. Dit wordt het
Wouters en Meca-Medina verweer genoemd.

Maar deze verdediging werkt alleen als de regels de concurrentie slechts
een beetje beïnvloeden. Als de regels de concurrentie heel sterk
beperken, kunnen ze dit argument niet gebruiken. Het Hof van Justitie van
de Europese Unie heeft gezegd dat als de regels de concurrentie heel erg
beperken (wat ze “by object” noemen), dan kunnen de sportorganisaties
alleen maar beweren dat hun regels tot efficiëntere resultaten leiden. Dit
is een moeilijkere test om aan te voldoen.)




The Diarra Case and the Transfer System
The Diarra case challenges the FIFA transfer rules, particularly the
co-debtor principle and the requirement for an International
Transfer Certificate (ITC) in the event of a contract dispute. The case
will test whether these rules restrict competition by object or by effect. If
deemed a ‘by object’ restriction, only the efficiency gains defense
is available, which Szpunar suggests is unlikely to be met in this case.

(By Object: Dit betekent dat de regels zó zijn ontworpen dat ze de
concurrentie automatisch beperken, zonder dat we naar de resultaten
hoeven te kijken. Het is alsof je zegt: “Deze regel is duidelijk slecht voor
de concurrentie, ongeacht wat er verder gebeurt.” Bijvoorbeeld, een regel
die zegt dat nieuwe voetbalcompetities verboden zijn, zou “by object” zijn,
omdat het duidelijk is dat dit de concurrentie beperkt.

By Effect: Dit betekent dat we moeten kijken naar wat er in de praktijk
gebeurt door de regels. We vragen ons af: “Wat is het daadwerkelijke
resultaat van deze regels?” Zelfs als de regels niet bedoeld zijn om de
concurrentie te beperken, kunnen ze dat toch doen. Bijvoorbeeld, een
regel die spelers verplicht om een transfercertificaat te krijgen kan “by


7

,effect” de concurrentie beperken als het in de praktijk heel moeilijk is om
dat certificaat te krijgen.)

Legitimate Objectives Under the ‘By Effect’ Route
If the CJEU categorizes the transfer rules as a ‘by effect’ restriction, it will
assess whether they proportionately pursue legitimate objectives
such as contractual stability, integrity of the game, uniformity of
rules, and financial solidarity. Szpunar argues that the current rules
are not proportionate, as they impose draconian sanctions and inhibit
player mobility and club operations.

Burden of Proof and Sports Washing
The burden of proof to justify anti-competitive conduct lies with
the sports governing bodies. They must provide convincing
arguments and evidence to prove that their rules achieve
legitimate objectives or efficiency gains. This emphasis by the CJEU
aims to prevent ‘sports washing,’ where governing bodies claim
legitimacy without substantial evidence.

Collective Bargaining as the Way Forward
Collective bargaining presents a potential solution for balancing the
interests of clubs and players while ensuring compliance with EU law. In
the US, collective action in sports is common and stands the test of
antitrust law due to labor law exemptions. Similarly, in the EU, collective
bargaining agreements pursuing social policy objectives are
exempt from competition law. This approach could lead to more
stakeholder inclusion and equitable solutions, reshaping sports
governance.

(collectief onderhandelen biedt een manier om de belangen van alle
betrokken partijen in de sport beter in balans te brengen, terwijl het
voldoet aan de wetgeving en bijdraagt aan een eerlijker en transparanter
sportbestuur.)

Conclusion
The Diarra case, along with recent CJEU rulings, underscores the need for
sports governance reform to align with EU competition law. The CJEU’s new
framework distinguishes between ‘by object’ and ‘by effect’ restrictions,
with only the latter allowing for a broader assessment of legitimate
objectives. Sports governing bodies must now rigorously justify their rules
with solid evidence, shifting the power balance towards greater
accountability and transparency. The future of sports governance may well



8

,depend on the successful adoption of collective bargaining agreements
and stakeholder-driven reforms.




Key Insights from Szpunar’s Opinion
Applicability of EU Law
Szpunar emphasizes that both Article 45 (free movement of workers) and
Article 101 (competition law) TFEU apply to FIFA’s rules concerning
compensation for contract breaches and the non-issuance of International
Transfer Certificates (ITC). This confirms that these rules could
potentially violate both EU labor mobility and competition
regulations.



9

, Restrictions on Free Movement of Workers (Article 45
TFEU)
Szpunar explains that FIFA’s rules, which impose joint and several liability
for compensation and allow for the non-issuance of an ITC, restrict the free
movement of workers. These rules make it more difficult for players to
move to clubs in other member states, conflicting with Article 45 TFEU.

Competition Restrictions (Article 101 TFEU)
Szpunar analyzes how FIFA’s rules constitute a “by object” restriction on
competition. This means that the rules are inherently designed to restrict
competition. According to Szpunar, these rules not only deter
players from terminating contracts without just cause but also
discourage clubs from hiring such players due to the financial
risks involved.

Proportionality and Justification
Szpunar discusses whether the contested provisions can be justified by
legitimate objectives, such as maintaining contractual stability and
ensuring fair competition. He emphasizes that any restrictions must be
proportionate and necessary to achieve these objectives. He questions
whether the joint and several liability and severe sanctions are
truly necessary or if they go beyond what is required to maintain
contractual stability.

Fundamental Rights under the EU Charter
Szpunar considers the applicability of Article 15 of the EU Charter of
Fundamental Rights, which guarantees the right to work and pursue a
profession. He argues that FIFA, although a private entity, should
be bound by the Charter when its rules affect the fundamental
freedoms guaranteed by EU law. This extends the scrutiny to
ensure that FIFA’s rules comply not only with competition and
mobility laws but also with fundamental rights protections.

Legal Certainty and Flexibility
Szpunar points out the lack of legal certainty in FIFA’s discretionary
application of rules, such as the possibility for the Dispute Resolution
Chamber (DRC) to restrict the joint and several liability principle. He
argues that this discretion does not provide sufficient legal certainty for
players and clubs, and the procedures for obtaining provisional measures
are too tenuous.




10

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