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By -Rishika Mendiratta (Founder and Managing Editor at KhelAdhikar)
“Competition is the spice of sports, but if you make spice the whole meal, you will be sick” – George Leonard
The above quote is an apt description of the relation of sports with both competitive sports and competition law. Last week, Part 1 of this article explored the unique conceptual cross-roads of the application of competition law principles in sports. In this article the author elaborates upon the interpretation and application of these principles in various Indian sports legal issues. The article also deliberates on the possible ways and means of balancing the various competing interests in sports governance and administration.
Application of Competition law principles in Indian sports – A complex legal interface
As per section 2(h) of the Competition Act 2002 (CA,2002) enterprise includes any firm or person engaged in activities relating to production, storage, supply, distribution, and acquisition etc. of goods or provision of services.
In accordance with the definition of section 2 (l) CA,2002 the sporting federations can be subsumed under the definition of ‘person’. The reason being, they qualify as, “an association of persons or a body of individuals, whether incorporated or not, in India or outside India” as per 2(l) (v) of the CA,2002.
In Hemant Sharma & Ors v Union of India and Ors, All India Chess Federation was considered to be an enterprise because it levied an entrance fee. In the Hockey India case it was stated that since the body was engaged in revenue generating economic activities such “organization” of sporting events involving grant of media rights and sale of tickets etc should be considered as an enterprise as per CA, 2002. It can be safely deduced from the reasoning of Competition Commission of India (CCI), that the yardstick is the ‘nature of activity’ to decide whether entity is an enterprise or not.
Therefore sports governing bodies can be considered as commercial enterprises with respect to their entrepreneurial conduct and are considered to be at par with their business establishments. Thus they come within the purview of the CA, 2002. Owing to which there have been various instances where they have been alleged to have be engaged in anti-competitive conduct as per section 3 or abuse of dominance as per section 4 of the CA, 2002.
As the sports federations are covered within the jurisdictional ambit of CA, 2002 there have been various legal battles wherein the question of application of competition law principles to sports has arisen time and again. The following cases involving some sports federations in the country briefly try to explain the various common issues that have come up before the India courts.
Not every victory shows up on the scoreboard
Not too long ago in 2011, the pride of Indian hockey and Rajiv Gandhi Khel Ratna recipient Dhanraj Pillai along with few other hockey players had filed a complaint before the Competition Commission of India (CCI) alleging abuse of dominance against Hockey India (HI)
Brief Facts– International Hockey Federation (FIH) is the international governing body for the sport of Hockey recognized by the International Olympic Committee (IOC). HI, is the National Sports Federation (NSF) of India for the sport of Hockey affiliated to the Indian Olympic Association (IOA), Asian Hockey Federation (AHF) and FIH. Indian Hockey Federation (IHF) is the NSF for the sport of Hockey affiliated to Indian Olympic Association, but it is not affiliated to FIH or AHF. In 2010, IHF along with Nimbus sports announced the launch of World Series Hockey (WSH) during 2011-12. It was a tournament premised on the lines of the franchisee model, which would include both domestic and international players. The informants alleged abuse of dominance by HI as in accordance with the direction FIH they could sanction events for hockey in India, and had entered into an a Code of Conduct (COC) Agreement with players that mandated disqualification in case of participation in unsanctioned events. This was alleged to be an exclusive supply agreement in contravention of the competition law principles.
Analysis– CCI in coming towards its decision relied heavily on the concept of proportionality as enunciated in the Meca-Medina judgment pronounced by the European Court of Justice. (ECJ) Basing its reasoning premised on the foundation of pyramid structure of sports the Commission stated that HI being the sole regulatory of sports, the COC agreement was well within the ambit of its authorized regulatory power to maintain an effective control mechanism. There was factual justification for the non –inclusion of certain players in the India squad which was not based upon their participation in the WSH. Besides, another factor that played in favour of HI was that both FIH along with HI were the authority to sanction events. Thus HI did not have sole regulatory power to sanction competitive events.
Besides, there was no instance of the arbitrary application of non-sanctioning of other competitive events. The same was not applicable to WSH as it came into existence before the sanctioning guidelines were released by FIH. HI also assured of putting in place an effective internal mechanism in place so as to ensure effective internal control system to its own satisfaction, in good faith and after due diligence, to ensure that there is no abusive or indiscriminate application of regulatory powers. This guaranteed the clear demarcation of regulatory and commercial functions, the overlapping of which necessitates a competition law analysis. Thus HI was not considered to be in abuse of its dominant position or any competition law principles.
BCCI’s IPL conundrum
Brief Facts– The main allegation against Board of Cricket Control in India (BCCI) was the abuse of dominant position by denial of market access as enunciated in section 4(2)(c) of the CA, 2002. This was because it had been stated in the Media Rights Agreement (MRA) for Indian Premier League (IPL) that BCCI was prohibited from organizing, sanctioning, recognizing or supporting any other professional domestic Indian T20 competition league which would be competitive to IPL. (The article has been elaborately discussed on an earlier blogpost)
Analysis– This case made it sufficiently clear that competition law principles are violated when regulator turns into a beneficiary. To come at this reasoning, CCI relied on The Statement of Good Governance Principles and ICC Byelaws, which state that – “There should be a clear demarcation between the governing body’s governance function and any commercial activities.” BCCI being the regulator of cricket had not abused its regul atory dominance but also leveraged its economic power to deny access to the market to various competitors. As per the Memorandum of Understanding (MoU) between with ICC, BCCI was the sole body in ‘control’ of the game in India. Therefore, the initiation of IPL with a restrictive clause in the MRA gave a direct consequence of the abuse of a dominant position as it led to an overreach of its regulatory functions.
Brief Facts– The informants in this case are the promoters of the Indian Cricket League (ICL) The league was started in 2007, prematurely ended in 2008 and since then has faced the brunt of BCCI’s discriminatory treatment. BCCI removed the privileges of the players participating in this league and also has not sanctioned its conduct. Additionally it started its own rival league IPL, on the lines of the same format. Having scuttled the rival league, the BCCI formulated the eligibility conditions of being an applicant for IPL’s Media Rights Agreement in such a manner that it effectively barred the informant from bidding for IPL media rights. The eligibility rule stated that any entity that was involved in litigation with the cricket body would be barred from submitting a bid. Pan India’s litigation with ICL is ongoing since over a decade and the above restrictive and discriminatory clause has been a part of the tender of IPL since the year 2010 and was also present in the 2018 tender.
Analysis– BCCI not only disallowed Pan India by not sanctioning ICL, it also prevented them from competing in the downstream market by preventing them to bid for the media rights. Thus CCI has stated that it certainly forms a prima facie case of abuse of dominance and thus has ordered for a detailed Director General (DG) investigation in June 2018. The updates pertaining to this case are eagerly awaited as the results of the same might be detrimental to BCCI but a breather of private sports event organizers.
All India Chess Federation – Checkmated?
This decision is demonstrative of the CCI’s approach in making the sports industry athlete friendly. It also reiterates the fact that sports federation rules cannot escape the principles of competition law under the garb of sporting exception.
Brief Facts– In this case, initially a writ was filed with the Delhi High against the anti-competitive practices of All India Chess Federation (AICF). Delhi High Court stated that AICF would qualify as an enterprise under the CA, 2002. Therefore the informants to go before the CCI. AICF was alleged to have indulged in anti-competitive practices as the registered players had to sign a declaration that they will not participate in any unsanctioned events. If they breached it , they were banned for a year from participating in any AICF events and had to give away 50% of the prize if they earned from the unsanctioned events to AICF. Also their ELO ratings which are a benchmark for chess players at the international level were taken away.
Analysis– The commission taking inspiration from the HI case considered the relevant market to be both the organization of professional chess tournaments and provision of services of chess players. AICF was found to be in breach of its dominant position as there was no criteria of debarment but a complete ban from participating in unsanctioned events. There was no definition of unsanctioned events in the AICF constitution and it exercised absolute arbitrary discretion in deciding the conduct of such events. Further there was no opportunity for the players to appeal against the decision of AICF and they were totally deprived of an opportunity of being heard. This was in complete contravention of the free and fair spirit of competition law principles. Thus the commission was found to be abusing its dominant position as per section 4(b) (i) and 4(2)(c) of the CA, 2002.
Athletic Federation of India’s legal run
Brief Facts –In the year 2015, in the Annual General Meeting (AGM) of Athletics Federation of India (AFI) it had been agreed that action would be taken against athletes and individuals who would participate in unauthorized events. The informant Ministry of Youth Affairs and Sports (MYAS) alleged that AFI was trying to kill the grassroots talent by having the sole discretion to approve any marathon in the country.
Analysis– In this case the relevant market was considered to be the market for organization of athletic activities. As the AFI had subsequently amended the propositions of the 2015’s AGM, in 2016 and no action had been taken to deter the organization of marathon by private organizers they were not considered to be in abuse of monopoly position. Although not sanctioning marathons is considered a legitimate objective of sports governance principles. This is because a restriction on the no. and the type of marathons in essential to ensure the growth and development of athletes in specific and athletics in general in the country.
The above case is a reminder that although sports federations are charged to guarantee the integrity and proper conduct of their sport, the protection of athletes’ health, and other fundamental values related to sports, it does not automatically mean that the rules enacted to pursue these objectives cannot be scrutinized through the lens of competition law.
Balancing the competing interests- A straightforward exercise?
“When you love competition, you don’t want the market to consolidate.” Xavier Niel
There is an inevitable relation between sports and competition law. The legal developments in India and across the country have certainly embraced their unique interactions in various spheres of organization and administration of sports events. As we look for reconciling the legal principles to their unique relationship with sports there can be certain regulatory changes by the sport’s governing bodies to assist in streamlining the process. The regulatory bodies should come up with a fair, standardized and non-discriminatory criteria for the organization of leagues and events by other organization. There should be a detailed and non-arbitrary procedure for the grant of No-Objection Certificates for the conduct of any event. There certainly needs to be a procedure for specifying sanctioned events. Otherwise private entrepreneurs will free-ride upon the investment of the sports federation and a there might be a possible breach of the duty of solidarity towards the sport by the players.
Unquestionably, the Meca Medina case has been the herald of good times for sports governance. Although with the disappearance of the defense of pure sporting rules, the sports governing bodies are in a precarious situation. This has had mixed reactions, but to bring in harmony in today’s largely commercial sports industry it is time for essential changes. As had been recommended by the European Commission’s White paper on Sports in 2007 instead of an outright exception of pure sporting rules as was advocated previously, there should be segregation. It was recommended in the report to have two categories- a) Rules/Activities which are essential for governance b) Activities which have economic repercussions. Both these exceptions should be categorized in accordance with the text of legitimate objectives and proportionality and sporting exceptions. Further in category ‘b’ all those which are amenable to exceptions because of specificity of sports should be separately listed. This will ensure that there is more certainty in the application of competition rules instead of the prevailing ambiguity in the individualistic scenario.
Are sports monopolies really beneficial? Although the answer is by and large positive, it might be time to take a different approach. Respecting the chance to compete of the athletes along with the objective of enhancing the quality of sports events, competition with respect to organizational aspects of sports will end up increasing the overall efficiency.
To bring a structured scheme for addressing the competition law issues in the country there can be a possibility of have an independent regulatory body for sports in country on the lines of Telecom Regulatory of India (TRAI). It could be an overseeing authority entrusted with the task of ensuring the necessary level playing field in the sports administration and organization. The same had been initiated by the Australian Sports Commission (ASC) by the introduction of the Australian Commission Act, 1989 which has increased the accessibility of sports for all athletes and sports organizations in the country. This measure if supplemented with a specialized dispute resolution of sports in the country can also help in bringing a proper system of check and balance and minimize the instances of abuse of dominance.
As we gradually move towards better governance and compliance mechanisms for sports in the country it can only be hoped that the standards of the game and the rules of conduct of the athlete are not sacrificed. This juxtaposed with the protection of the health and safety of athletes and integrity of games will help in preserving the required competitive balance in sports. It is time the Indian government and the sports bodies take some ex-ante initiatives to prevent ex- post consequences. After all, sports administration needs to be like Caesar’ wife and should be always above suspicion. Hope it soon turns into reality.