Advocate General ECJ, 15 December 2022, European Super League case (C-333/21) – prior approval scheme and system of sanctions of FIFA and UEFA are compatible with EU law
On 18 April 2021 it was announced that a group of European prestigious football clubs wanted to establish the European Super League. The Founding Clubs have the objective of improving the quality of existing European competitions and to create a format for top clubs and players to compete regularly. This initiative led to criticism from football fans. The FIFA and UEFA also issued warnings with consequences to clubs and players that would participate in the European Super League. After the reactions of football fans and the warnings of the FIFA and UEFA most of the clubs announced that they would no longer participate in the European Super League (see e.g. BBC article).
Preliminary questions have been asked to the European Court of Justice (“ECJ”) on whether the Statutes of the UEFA and FIFA and the warnings issued by them are incompatible with EU law. Below are the most important elements summarized of the Opinion of the Advocate General (“A-G“) on the European Super League case . It is the role of A-G to propose to the ECJ in complete independence a legal solution. An A-G Opinion is not binding on the ECJ. The ECJ judgment will be given at a later date.
Summary opinion A-G
The A-G takes the view that the warnings issued and the non-recognition by FIFA and UEFA of an essentially closed competition, such as the European Super League, could be regarded as inherent in the pursuit of certain legitimate objectives. The purpose of that non-recognition and warnings are to maintain (i) the principles of participation based on sporting results, (ii) equal opportunities and (iii) solidarity upon which the pyramid structure of European Sports Model and European football is founded. The prior approval scheme and systems of sanctions are also proportional and are therefore not incompatible with EU competitive law (Article 101 and 102 TFEU). However, imposing sanctions on players who were not parties to the decision to set up the ESL seems disproportionate and is insofar incompatible with EU competitive law.
Facts and background
The FIFA is football’s world governing body and its objectives are, primarily, to promote football and to organise its own international competitions. The UEFA is football’s governing body at the European level. In accordance with their Statutes, FIFA and UEFA hold a monopoly in respect of the authorisation and the organisation of international professional football competitions in Europe.
European Super League Company (“ESLC”) is a company governed by Spanish law which was set up by prestigious European football clubs. Chairman of the ESLC is Florentino Pérez who is the president of the football club Real Madrid. The ESLC plans to organise an annual European football competition called the European Super League (“ESL”). Its business model is based on a ‘semi-open’ system of participation involving, on the one hand, twelve to fifteen prestigious professional football clubs with the status of permanent members. On the other hand a yet-undefined number of professional football clubs would be selected according to a pre-determined process. The ESL would exist independently of UEFA and FIFA. However, clubs participating in the ESL would continue to participate in the football competitions organised by the national football federations, UEFA and FIFA.
After the announcement of ESL’s creation on 18 April 2021, the FIFA and UEFA issued a statement in which they set out their refusal to recognise the ESL. They also warned that any player or club taking part in that new competition would be expelled from competitions organised by FIFA, UEFA and its confederations. Since ESLC took the view that the conduct of FIFA and UEFA had to be regarded as anti-competitive and incompatible with EU competitive law it brought proceedings before the Commercial Court of Madrid. That Court has requested the European Court of Justice (“ECJ”) to answer preliminary questions. A-G Rantos made an Opinion on this case.
European Sports Model
A-G Rantos starts the Opinion by making general comments on the European Sports Model. Article 165 of the Treaty of the Function of the Union (“TFEU”) takes note of the considerable social importance of sporting activities in the European Union (“EU”). It provides, among others, that ‘the Union shall contribute to the promotion of European sporting issues, while taking account of the specific nature of sport’. Article 165 TFEU gives expression to the ‘constitutional’ recognition of the ‘European Sports Model’. This model is based on a pyramid structure with at its base amateur sport and at its summit professional sport. Its primary objectives include the promotion of open competitions, which are accessible to all by virtue of a transparent system in which promotion and relegation maintain a competitive balance and give priority to sporting merit. This model is based on a financial solidarity regime, which allows the revenue generated to be redistributed and reinvested at the lower levels of the sport.
The A-G observes that Article 165 TFEU has been inserted by the EU legislature to distinct the European Sport Model from the ‘closed’ North American sport model like the NBA, NFL or NHL with fixed participants and franchised businesses. Another reason for the insertion is that sport is an area of significant economic activity. The EU wants to emphasise and protect the special social character of that economic activity. The references to the specific nature and to the social and educational function of sport may be relevant for analysing justifications for breaching EU law as the EU legislature seems to protect it by including it in the TFEU.
The A-G also observes that the UEFA performs a dual role: a regulatory role and an economic role. This may give rise to a conflict of interests. The UEFA is subject to certain obligations when performing its regulatory duties to not distort competition. The mere fact that the same entity performs the duties both of regulator and of organiser of sporting competitions does not entail, in itself, an infringement of EU competition law. Based on CJEU case-law, sports federations may also refuse third parties access to the market provided that (i) that refusal is justified by legitimate objectives and (ii) that the steps taken by those federations are proportionate to those objectives.
First question – do the provisions of the FIFA and UEFA Statutes concerning the system of prior approval and the system of sanctions distort the free competition within the EU?
The first referred question is whether Article 101 TFEU must be interpreted as precluding the provisions of the FIFA and UEFA Statutes concerning the system of prior approval and the sanctions envisaged by those federations. Article 101 TFEU prohibits cartels and any other agreements that could distort the free competition within the internal market of the EU.
The CJEU has acknowledged in case-law that it falls to the sports federations to lay down the rules appropriate to the organisation of a sporting discipline. The prior approval system and disciplinary regime appear to constitute an essential governance mechanism for the FIFA and UEFA in order to ensure (i) the uniform application of the rules of that sport, (ii) compliance with common standards between the various competitions and (iii) to ensure the coordination and the compatibility of football match and competition calendars in Europe. Without an ex ante control mechanism or system of sanctions, it would be impossible for FIFA or UEFA to ensure that the objectives pursued are achieved according to the A-G. In addition to the purely organisational ‘sporting’ aspects, such a system could also prove necessary to safeguard the current pyramid structure of European football and the objective of solidarity.
The introduction of the ESL would have a negative impact on the national European leagues by reducing the appeal of those competitions and therefore a loss of income. The ESL does also not appear consistent with the European Sport Model, under which participation in competitions is based on ‘sporting merit’ and the results achieved on the pitch. Furthermore, a competition with the characteristics of the ESL could have a negative impact on the principle of equal opportunities as certain clubs could book significant additional revenue. It will probably also affect the profitability of UEFA’s competitions (in particular the prestigious Champions League).
In context of this negative impact, it should be noted that the ESLC’s founding clubs still want to benefit from the rights and advantages linked to membership of UEFA, however without being bound by UEFA’s rules and obligations. Based on CJEU case-law on EU competition law, UEFA can therefore not be criticised for attempting to protect its own economic interests according to the A-G.
Considering the above, the A-G takes takes the view that the warnings issued and the non-recognition by FIFA and UEFA of an essentially closed competition such as the ESL could be regarded as inherent in the pursuit of certain legitimate objectives. The purpose of that non-recognition is to maintain the principles of participation based on sporting results, equal opportunities and solidarity upon which the pyramid structure of European Sport Model and European football is founded. The prior approval scheme and systems of sanctions are also proportional and therefore are not incompatible with EU competitive law. The A-G does however mention that imposing sanctions on players who were not parties to the decision to set up the ESL seems disproportionate, in particular as regards their participation in national teams.
Second question – do the FIFA and UEFA abuse their dominant market position by the prior approval scheme and the system of sanctions?
The second question in essence concerns whether Article 102 TFEU is to be interpreted as precluding the provisions of the FIFA and UEFA Statutes concerning the prior approval scheme and the system of sanctions. Article 102 TFEU prevents businesses from abusing their dominate positions in the market.
Similar as the reasoning for the first question, the A-G takes the view that UEFA’s refusal of the ESL and the issue of warnings of sanctions may be objectively justified both in sporting terms, having regard to the legitimate objectives pursued by that federation, and economically in order to combat free riding or a ‘dual membership’ scenario liable to weaken the position of UEFA and FIFA on the market. The prior approval scheme and system of sanctions are also proportional, unless these are harming players who were not parties to the decision to set up the ESL.