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Sports Governing Bodies face EU intervention: could their members actually leave the Hotel California as a result?

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The effect of having only one governing body for a sport is to make member clubs and individual athletes like the guests in the fabled Hotel California; they can check out any time they like but they can never leave because there is nowhere else to go to. Last week’s announcement that the European Commission is opening a formal investigation into the International Skating Union’s imposition of lifetime bans on skaters who wish to participate in events organised by third parties is therefore undoubtedly more bad news for beleaguered sports governing bodies as it could seriously undermine their monopolies.

Governing bodies are well known to have been living in fear that the European Commission would follow the European Court of Justice’s lead in the 2008 Greek motorcycling case (and the High Court English snooker case) and carry out an investigation into the fairly common practice of governing bodies of restricting participants from “playing away” – in spite of a former Competition Commissioner declaring his support for the principle of one governing body per sport in 1996. To date, only the Indian and Irish competition authorities have prohibited the common practice of banning those who “play away”. And the Indian decision fining the BBCI for effectively blocking the Indian Cricket League – a potential rival to its own Indian Premier League – was overturned earlier this year, albeit on procedural grounds.

The EU intervention comes at a particularly bad time. Sports “arbitration” – the unique sporting practice of forcing a participant in a sport to choose an arbitrator from a list which is provided by the governing body is under attack in the Pechstein case in Germany under EU law. The attack is made on the grounds that it is an abuse of dominant position for a governing body to enforce such a system of “arbitration” when it controls access to the sport.

Suppose Pechstein wins her case and overturns the “arbitration” provision in her sport with the support of FIFPRO (the football players union). Further suppose as a result of the European Commission’s action announced this week, governing bodies can’t “hold the ring” and justify their argument that only they provide “the real thing” any more and that their commercial power of reprisal against members who “play away” with other organisers is only permitted to enforce health and safety requirements (as the EC Commission seems to be implying in its Press Release). What are the combined effects likely to be?

Undoubtedly the effect could be that members, be they athletes or clubs, will be able to shop around. Promoters offering alternative competition structures will be able to offer more attractive competitions (for the most commercially attractive competitors of course). Even though governing bodies lose their gate keeper status and are no longer dominant, the effect of potential competition from other competition organisers will be dispute resolution mechanisms which will be a bit more even handed and more genuinely arbitral than those attacked in Pechstein.

But all this won’t happen overnight. It is noticeable in this case that the Commission says that its intervention has got nothing to do with governance. Sports governing bodies are likely to beg to differ on this point. They do so with some justification as it is very difficult to draw a clear distinction between attacking measures partly designed to maintain governance (such as bans on “playing away”) and governance itself. So some push back can be expected from governing bodies on this point. Scope for such pushback is hinted at in the Press Release itself where the Commissioner says that governance justifications for restrictions on “playing away” can include the “integrity of competitions”. Does this refer only to the availability of proper doping controls (where current governing bodies’ record is fairly dismal) or does it refer to the sporting integrity of competitions as well; for example, the (surely justifiable) requirements that star performers can’t skip the qualifying rounds to participate in the grand finals?

Clearly much needs to be worked out. But at the end of the day, the disintegrative effect of competition law means that governing bodies are likely to start having to be way more responsive to their members. In future, loyalty is going to have to be earned rather than expected of participants. If this is not delivered, members may indeed become not only able to check out but actually leave and choose another hotel.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.