COMPETITION LAW ISSUES REVOLVING TO THE ESTABLISHMENT OF ESL.
Updated: Jul 2, 2021
This post has been authored by Mr. Yashovardhan Agarwal and Mr. Rajiv Yadav.
Yashovardhan Agarwal is a second-year law student pursuing B.A.LL.B. (Hons.) from Hidayatullah National Law University. Rajiv Yadav is a second-year law student pursuing B.B.A. LL.B. from National Law University, Jodhpur.
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The European Super League [“ESL”] is a breakaway league with the motto ‘The Best Clubs. The Best Players. Every Week’. On the eve of 18th April, Florentino Perez [president of Real Madrid], first chairman of the ESL announced the league with 12 founding members. Within a mere 3 days into its founding, 9 founding clubs withdrew from the league amid widespread backlash from players, fans, etc with only 3 clubs remaining.
Post the announcement, there was a widespread backlash from football governing bodies like UEFA (Union of European Football Associations), FIFA (Fédération Internationale de Football Association), etc. Further, the fans of these clubs led widespread protests at various places, they’ve come out on the roads to express their discontent and disagreement. Furthermore, politicians have also condemned the formation of such a league, such as British and French prime ministers who have claimed that the ESL will hamper the growth of insignificant clubs and thereby creating an unfair playing ground for the football clubs.
The operations of the ESL are currently halted, but the league proposed to feature 20 clubs with 15 permanent clubs and 5 temporary clubs that will be selected based on their performance in their respective leagues. This means that the founding teams would be permanent and thus will not get relegated at any point in time regardless of their performance. Thus, making it a semi-closed league.
COMPETITION LAW PERSPECTIVE
The ultimate goal of any competition law is to ensure consumer welfare. The idea of ESL’s consisting of Europe’s best teams will certainly decrease competition in the domestic football market ultimately hampering consumer welfare who watch the sport for its spirit of competition. The domestic league through the help of these major team’s viewership helps less fortunate teams to grow and establish their name among the football fans. But this would not happen if there is a single league consisting of only the major football clubs as this will divert the viewership from domestic leagues to a single event. This is most certainly incompatible with the EU competition laws.
European professional football clubs are required to comply with EU Competition Laws. Article 101(1) of the Treaty on the Functioning of the European Union [“TFEU”] restricts agreements and undertakings which would in any way harm the competition of the internal market. Article 102 of the TFEU regulates the abuse of dominance by a market leader within the internal market. The ESL in every way violates the instant provisions.
The ESL being a semi-closed league hosting clubs that enjoy a significant share in the European football market, most certainly creates a collective dominant position of its restricting other teams from entering the league and benefitting from the big profits (basically forming a cartel). Taking the English premiere league [“EPL”] as an example. All the big 6 clubs are supposed to participate in the ESL. Presently if we look at the EPL table Leicester City FC is ahead of some of these big 6 clubs which qualifies it to play next year’s Champions League [“CL”]. But since these 6 clubs would receive approx. 200 million EUR, which will make these 6 clubs more able to invest money in improving their squad making it unlikely for clubs like Leicester to prevail in the coming seasons. Hence permanent members of the ESL will have substantial power to add power to their squad which will ultimately hamper competition in the long term. We must take into accord the EU Commission’s Master Card Decision. Herein the court observed that setting high bank fees for the purpose of effective working of credit cards was not at all necessary but in turn increased consumer prices. This similarly must apply to the ESL because entry barriers may not ensure effective functioning but will most certainly be anti-competitive.
The UEFA, FIFA, and other domestic governing bodies in lieu to curb the creation of ESL threatened to ban the players of the participating teams from other international and domestic leagues. But this move is also in violation of EU competition laws, as the European Commission in the case of International Skating Union [“ISU”] held that the act of banning professional skating athletes who participated in the tournaments not authorized by the ISU was not lawful. The commission further observed that the penalty system was “disproportionate” which could hamper the careers of skaters.
The major counter from the ESL’s side could be, the formation of a separate league is pro-competitive as it brings a real alternative to the UEFA’s CL. The ESL promotes competition in the market of top-tier European clubs which in turn would compel UEFA to increase its standards, therefore increasing overall consumer welfare.
ESTABLISHING THE LEAGUE
Initiating an altogether new sporting event is not an objectionable act within the perspective of the European Competition laws. The specific nature of this sporting event can attract the application of competition laws. Articles 101 and 102 of the TFEU prohibit the formation of a closed league which subsequently reflects pervasive abuse of market domination, which essentially affects the business of smaller clubs and closes the door for newer entrants.
The monopoly of UEFA in the European market is condescending. This justifies the position of an ESL to rightfully break the persisting monopoly but the sole justification is not favourable for the formation of an ESL. There is a prevalent reason that there can exist only one ultimate league because the viewers all around the globe prefer to watch a single ultimate sporting league which in the instant case was the CL organized by the UEFA wherein all the domestic European league champions would participate in a single event wherein only a single team will emerge as the best team in the entire continent. This justifies the notion of UEFA’s monopoly, as noted by Pijetlovic in his book EU sports law and breakaway leagues in football, “It is a peculiarity of professional sports production that championships must possess a monopoly status to achieve consistent ranking and increase their value for consumers”.[i] The notion of “one sport, one federation” is pretty relevant in the present context. So, through this, we can say that ultimately a monopoly would have emerged amongst the two, ESL and UEFA. But then the question would have been which monopoly is the best taking into consideration all the stakeholders.
The tussle between ESL and UEFA is pervasive but the UEFA is trying its level best to not let the top revenue-generating clubs make their own league. This made UEFA adopt the “Swiss Model” from the year 2024, through which it ensures these clubs greater financial incentives. The model essentially increases the competition in the CL by increasing the team composition. This increases the number of matches that will be played in the competition from 125 to 225 with a subsequent increase in the number of participant pool as well, from 32 to 36. The matches will be determined through a seeding system wherein, each team will play an equal number of games amongst the low, middle, and high ranked teams. The teams who reach the quarter-finals would straight away qualify for the next season.
Presently 9 out of the 12 founding clubs retracted their names from the ESL as a result of constant criticism from the fans and governing bodies. But two clubs (Real Madrid and FC Barcelona) are still in favour of the tournament. A court in Madrid also stepped in and banned the intervention of UEFA and FIFA in the initiation of the ESL. Both the UEFA and the ESL have their respective justifications but ultimately all boils down to one question; which of these two is the best league for promoting free and fair competition in the European Football market.
The CL gives an opportunity to 32 teams including the big and small clubs alike to participate in it on the basis of teams’ performance. On the other hand, ESL only gives space to 5 teams to play in the league on its performance as 15 founding clubs have their births fixed in the league regardless of their performance.
This nature of the semi-closed format of ESL leads to blatant discrimination as majority of the revenue is received from the viewership and these 15 permanent clubs enjoy the largest part of the viewership pie around the world. This leads to a decrease in competition, uncertainty, and chances of small clubs to make a mark through their talent and hard work. Therefore, due to the aforementioned reasons, the CL is a more lucrative option for protecting and promoting free and competition in European Football Market.
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Cite as: Yashovardhan Agarwal and Rajiv Yadav, Competition Law Issues Revolving to the Establishment of ESL, Extra-Cover: The Sports Law Blog of India (1st July 2021), Accessed at https://www.extra-cover.org/post/competition-law-issues-revolving-to-the-establishment-of-esl [Date of Access].
[i] Pijetlovic, K. (2015), EU sports law and breakaway leagues in football, page 246.