During the past two decades, several first national league football clubs have struggled with insoluble financial problems. In response to such problems, some clubs have decided to use various forms of incorporation, as explicitly permitted by the Sports Act. Article 5(3) stipulates that legal persons in sports can be incorporated as:
- associations;
- companies; and
- sports institutions.
Sporting rivalry recently entered the legal sphere. Fans of football club Hajduk filed an initiative before the Competition Agency against rival clubs Dinamo and Lokomotiva for initiation of proceedings to establish a prohibited agreement. The applicants' issue was the fact that these two obviously associated clubs participate in the same league, which creates a non-transparent environment. However, they failed to take into account that Dinamo and Lokomotiva form a single economic entity, which precludes the agency from establishing a prohibited agreement. Regardless of the fans' passion for this issue, the agency rejected the initiative, explaining that the determined forms of cooperation between Dinamo and Lokomotiva did not violate the Competition Act. However, the agency stated that the forms of cooperation may potentially represent a violation of certain sports regulations – the implementation of which is not under its jurisdiction.
The agency found these two clubs to be 'undertakings' within the meaning of the Competition Act in cases in which they are engaged in certain economic activities (eg, the sale of television rights, ticket sales, sales of club souvenirs and equipment and transfer of players). This represents a consistent application of Article 3, which stipulates that undertakings are companies, associations and any other legal entities or natural persons, such as sports organisations, which operate in the market, irrespective of their form of financing, intent or actual realisation of profit and temporary, permanent or single participation in the market.
The agency concluded that only sports regulations can prohibit a certain football club from having two or more teams in the same level of competition. Moreover, provisions that prohibit natural persons or legal entities from controlling several sports clubs in the same league could – solely from a competition policy aspect – be observed as a limiting factor, because they restrict an undertaking's right to structure its operations in several business units. Therefore, it is necessary to draw a line between sports regulations(1) and competition law. In the case at hand, the agency referred to a European Commission case,(2) which stated that the provisions which limit the right of one person having control over more than one club in a competition organised by the Union of European Football Associations cannot qualify as distortion of competition, as the objective of such provisions is not the distortion of competition, but ensuring the regularity of sporting competition.(3)
Television rights to first national league football matches have become eagerly contested. A case which is pending before the agency, and whose resolution is expected by the end of 2013, relates to alleged abuse of dominant position by Hrvatski Telekom (a telecommunications incumbent) based on alleged restriction of competition to the detriment of consumers in the retail market for pay-television services. Arena sports channels and premium sports content (eg, live broadcasts of primarily football league matches) are available exclusively via Hrvatski Telekom's IPTV platform, which in the agency's opinion, could lead to hindering the development of competition and reduction of consumer choice in the relevant market. The agency's opinion would be especially valid if it were determined that Hrvatski Telekom, which is considered to be in a dominant position, imposed such exclusivity by unlawfully denying other competitors access to sports content.
Taking this case into consideration, the agency's reasoning is understandable, given that in the quest for higher profit margins, competition in the telecoms sector has extended to television service packages and has begun to affect the entire fixed telecoms industry. As telecoms operators are increasingly selling packaged services (triple and quadruple play), where pay television – whose dynamics are increasingly determined by exclusive sports content – has become an important component, this battle is key to the Croatian telecoms market.
For further information on this topic please contact Gabriele Wahl Cesarec or Mislav Bradvica at Wahl Cesarec & Partners in cooperation with schoenherrby telephone (+385 1 4813 244), fax (+385 1 4813 073) or email (g[email protected] or [email protected]).
Endnotes
(1) Which may contain a so-called 'independence of clubs' principle.
(3) Paragraph 32 of the European Commission's statement noted:
"Taking into account the particular context in which the rule is applied, the limitation on the freedom to act that it entails is justified and cannot be considered as a restriction of competition. Without the UEFA rule, the proper functioning of the market where the clubs develop their economic activities would be under threat, since the public's perception that the underlying sporting competition is fair and honest is an essential precondition to keep its interest and marketability."
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