INDIA is amidst an exciting time in sports. Indians are realizing the importance of sport as a healthy activity as well as a source of entertainment. This is leading to a growing popularity of sporting events and thus the influx of money. The corporate have started perceiving sports as an industry and have started investing substantial sums of money in sports in the form of license/right to conduct an event, broadcasting rights, and sponsorship rights amongst others.
As the supply of a particular sport event is limited that is a particular team/player can play a limited number of matches depending upon the international calendar, there is increasing competition to get a slice of the sporting pie. Thus stakeholders who fail to get a share of the sporting rights often encourage breakaway leagues and tournaments and try to lure star sportspersons to these leagues.
The success of IPL in India has successfully demonstrated the commercial viability of franchisee and clubs based system in Indian sports. Besides cricket, leagues and independent events have begun to sprout up in kabaddi, hockey, motorsports, volleyball, boxing and chess. A pertinent question therefore arises; are the leagues and events held outside the aegis of the National Sport Federation (NSF) serving a beneficial purpose for sports?
Sports worldwide are organized in a pyramid structure, where a particular sport is governed and regulated by a single IF with various NSF affiliated to it. The IF governs the regulatory aspect i.e laying down the rules of the sport, eligibility criteria and playing conditions, the IF also makes the annual calendar for that sport and conducts the world championship and other international level events. A corollary at the national level would entail that the NSF would follow the regulations of the international federation as a condition of its membership and have exclusive powers to make the annual calendar, develop grass-root level of sport and conduct tournaments and training camps in the country.
The importance of the pyramid structure and the risk to the sports due to multiple sport federations has been recognized by IOC and has been addressed in the European Commission’s Helsinki Report and the White Paper on sport. The risks are the integrity and uniformity of the sport would be affected if the structure is not maintained and the grass-root development of the sport will suffer. Integrity and uniformity would entail non-discriminatory uniform rules that are applied to the sport worldwide. It includes sporting sanctions like disciplinary action, suspensions, fines and bans for behavior contrary to the spirit of sports which lie at the core of the sport movement and can be applied only within the sporting structure.
The directions of the Delhi High Court directing the competition commission to undertake enquiry against the All India Chess Federation for preventing its players from taking part in a tournament outside its aegis, BCCI’s sanctions on the Indian Cricket League and the conduct of the World Series Hockey by the Indian Hockey Federation allegedly fall within the ambit of the IF/NSF trying to curb the advent of breakaway leagues through their rules.
The challenges to the IF/NSFs rules restricting rival tournaments and release of players for these tournaments (e.g India) have come under competition/anti-trust laws that is the abuse of dominant position and anti-competitive agreements leading to unreasonable restraint of trade. The sports industry is a unique industry because the pyramid structure which ensures monopoly is essential in maintaining the integrity of sport and unlike other industries, the sports industry strives on competition rather than from the lack of it. This reasoning gives birth to the exception of ‘Specificity of Sport’ i.e certain sporting activities are excluded from the purview of the competition laws. The European courts while creating this exception have divided the IF/NSF activities into two parts. The first being pure sporting functions whereas the second being activities having a substantial economic impact.
Pure sporting activities like laying down the rules of the sport, defining the size and weight of the ball and dimensions of the playing field are excluded from the ambit of competition laws. But activities of the IF/NSF having substantial economic impact are within the purview of the competition law. The regulatory power of the IF/NSF if used to gain commercial and financial advantage would fall within this ambit.
Therefore the IF/NSF to justify their rules having a substantial economic impact needs to satisfy two essential conditions:
1) That their agreements are not anti-competitive i.e they do not attempt/cause appreciable adverse effect on competition; and/or
2) That they are not abusing their dominant position and are not imposing unfair or discriminatory conditions.
The European courts have held that these conditions in the sporting sector are satisfied when a particular rule though restricting competition has a proper objective in mind, this objective cannot be obtained without the restrictive rule and the restriction is essential for the integrity, continuity, organization and conduct of the sport at national and international level, and the rule is applied uniformly and transparently.
The Competition Commission of India is faced with a similar task today to recognize the specificity of sport and carve out exceptions in the Indian scenario. The decision of the CCI will have a huge impact on the Indian sport industry as many corporate await a chance to start their own breakaway leagues and commercially gain from the revenues generated from these leagues.
