Editor’s
note: Thomas Terraz is a fourth year LL.B.
candidate at the International and European Law programme at The Hague
University of Applied Sciences with a specialisation in European Law. Currently
he is pursuing an internship at the T.M.C. Asser Institute with a focus on
International and European Sports Law.
1
Introduction
The International Olympic Committee (IOC), after many years of ineffective
pushback (see here,
here
and here)
over bye law 3 of rule 40[1] of
the Olympic Charter (OC), which restricts the ability of athletes and their
entourage to advertise themselves during the ‘blackout’ period’[2]
(also known as the ‘frozen period’) of the Olympic Games, may have been gifted a
silver bullet to address a major criticism of its rules. This (potentially) magic
formula was handed down in a relatively recent
decision of the Bundeskartellamt, the German competition law authority,
which elucidated how restrictions to athletes’ advertisements during the frozen
period may be scrutinized under EU competition law. The following blog begins
by explaining the historical and economic context of rule 40 followed by the
facts that led to the decision of the Bundeskartellamt. With this background,
the decision of the Bundeskartellamt is analyzed to show to what extent it may serve
as a model for EU competition law authorities.
2
Rule 40 in Context
Before dissecting the decision, the considerable impact of the IOC’s
rule 40 and its implementation by national Olympic committees (NOCs) must be
emphasized. Many athletes look to the Olympic Games as a unique opportunity to
gain exposure and benefit financially from their accomplishments, especially
considering that many athletes who qualify for the Olympic Games struggle to
make a living from their sport. Athletes are greatly reliant on external
funding, particularly from sponsors, to fund their career.[3] To
further complicate matters, many sports only enjoy a meaningful spotlight
during the Olympic Games. Hence, athletes in those sports view the Games as an
unparalleled occasion to become known to a wider public and gain new sponsors. So,
why does the IOC restrict these opportunities?
Rule 40’s existence is principally due
to The Olympic Partner Programme (TOP), a closed group of thirteen sponsors,
which was created in 1985 with the aim of diversifying and securing greater
means of funding for the Olympic Games. It
was the brainchild of Michael Payne who has defended the importance of
preserving the ‘value of the Olympic sponsorship program’ to prevent a return
to the days where the funding of the Games was highly dependent on ticket sales.[4]
For the IOC, preserving the value of TOP has meant taking aggressive actions
against ambush marketing, which according to Payne is ‘any communication or
activity that implies, or from which one could reasonably infer, that an organisation
is associated with an event, when in fact it is not’. Payne describes the ways
in which the IOC has attempted to tackle ambush marketing, which includes
educating the public about ambush marketing, preventing ambush marketing
through prohibiting non-sponsor association and controlling Olympic imagery
among other methods, and finally legal action, which according to Payne, ‘the
mere threat of this is often enough to bring the offending party into line’. In
this view, rule 40 can mainly be categorized as a preventative measure.
Rule 40 has also experienced an evolution ever since it
was first introduced in 1991 into the OC, which has also meant that ‘defining
the scope of rule 40 and understanding its nuances is a process that evolves
with each iteration of the games’.[5]
Although rule 40 has recently moved from a general ban on advertising with
limited exceptions into allowing it under severe restrictions, it remains to be
seen whether the IOC will fundamentally rethink the conditions applied to athlete
advertising. Meanwhile, athletes, who were partly the
initiators of the complaint to the Bundeskartellamt, have perhaps realized that
public awareness campaigns have not brought about the drastic change they had
hoped for. In the present case, the Bundeskartellamt’s attention was drawn to
rule 40 OC after a complaint from Athleten Deutschland (German Athlete
Commission) and Bundesverband der Deutschen Sportartikelindustrie (Federal
Association of the German Sports Goods Industry).
3
Background to the Decision
Before examining the substance of the Bundeskartellamt’s decision,
it is important to understand that rule 40, as it was analyzed in the decision,
was the one that was in place in the lead up to the Rio 2016 Games.[6] It
states:
“Except as permitted by the IOC Executive
Board, no competitor, team official or other team personnel who participates in
the Olympic Games may allow his person, name, picture, or sports performances
to be used for advertising purposes during the Olympic Games.”
In other words, a general ban on advertisement with limited exceptions.
The applicable conditions meant that only athletes with TOP sponsors could launch
an advertising campaign during the Rio 2016 Olympic Games and ongoing campaigns
from non-TOP sponsors were subject to authorization. Further complicating the
matter, NOCs could introduce additional restrictions or opt-out completely from
allowing their athletes to advertise during the frozen period.[7]
The German Olympic Sports Federation (DOSB), in its 2016
guidelines[AD1]
(page 78), distinguished between DOSB sponsors, Olympic sponsors and
non-Olympic sponsors.[8] In
the case of non-Olympic sponsors, ‘only advertising activities which had
started at least three months prior to the Olympic Games had a chance of being
approved’, which means potential sponsors needed to have early concepts ready
before that date (early April). It should also be noted that at that time, the
DOSB had not yet nominated any athletes for the Olympic Games. In addition to
the deadlines, references to the Olympic Movement were strictly forbidden,
which included an incredibly broad list of words and phrases.[9] If
they wanted to participate in the Games, athletes were forced to subscribe to
these rules via the athlete agreement (page 83) [AD2] and any breach could imply sanctions, which included removal from the
Olympic Team.[10]
The conditions that these rules impose is succinctly summarized by Grady
who explains that though the IOC claimed it had relaxed its rules, it ‘did not
create the kinds of opportunities that the IOC may have envisioned’, which in
effect ‘precluded almost all but the most powerful global brands from taking
full advantage of the ability to feature Olympic athletes during the Games’, a view
that was acknowledged by the Bundeskartellamt.[11]
4
The Bundeskartellamt’s Decision
Although the present case was resolved
through the commitments made by the IOC, the Bundeskartellamt still provided a
preliminary assessment concerning the relevant market, the abuse of a dominant
position, possible justifications, and proportionality, which are analyzed
below.
4.1
Relevant Market
Having decided to resolve the case on the basis of Article 102 TFEU,[12] the
Bundeskartellamt identified the relevant market on the basis of a ‘modified
concept of demand-side substitutability’ and defined the market as the ‘market
for the organisation and marketing of the Olympic Games’.[13]
It considered that the Olympic Games was an event that differed from other
major sport events from the consumers’ point of view because of the wide
variety of sports that are covered and because certain sports which perhaps are
not normally broadcasted in a particular country receive extensive media
coverage during the Games.[14] The
Bundeskartellamt supported its analysis of the relevant market by referring to MOTOE in which the CJEU also defined
the ‘relevant product market for the organisation (and marketing) of sports
events according to the type of sport’.[15] Lastly,
it found that the athletes participating in the Games to be ‘customers of the
organisation and marketing of sport events’.[16] ‘Other
well-known competitions’ could be considered as an alternative for certain
athletes, however, many athletes practice sports that receive very little media
attention outside the Games, meaning that overall the substitutability between
the Olympic Games and other major sports events is limited.[17]
4.2
An Abuse of a Dominant Position
Next, the Bundeskartellamt considered the members of the Olympic
Movement to be in a collectively dominant position in the aforementioned market
and deemed them to be undertakings regardless of the fact that they do not make
a profit.[18]
It also asserted that the members of the Olympic Movement were abusing their
dominant position, hindering effective competition, for several reasons. First,
the registration deadlines to request authorization were set too early since
athletes did not know whether they were even going to the Olympics in the first
place. Moreover, the Bundeskartellamt ruled that the very use of registration
and authorization criteria could have a prohibitive effect for certain kinds of
advertisements. Even though ‘ongoing’ advertisement could be approved, it was
still subject to restrictions since it could not use any ‘designations and
symbols as well as images and videos’ connected to the Olympic Games.[19]
As stated earlier, these are very extensive and make it ‘difficult to market an
athlete’s participation in the Olympic Games’.[20]
In the end, the sanctions that athletes could face exacerbated the restriction
on competition, especially since the sanctions had no proportionality
requirements and an appeal could only be made to the CAS.[21]
4.3
Justifications
At this point the Bundeskartellamt moved to make a preliminary
assessment as to whether the abuse of the dominant position inherently pursued
legitimate objectives and whether the restriction is proportionate to its
claimed objective (the Wouters
test[22]).
It is interesting to note that the Bundeskartellamt
decided to apply the Wouters test to an Article 102 TFEU case and expressly
stated that ‘it is to be assumed that the criteria are also meant to apply with
regard to the applicability of Art. 82 EC’ (now Article 102 TFEU) in referring
to the CJEU’s Meca-Medina case.[23] Only one of the pursued objectives of the IOC
was considered legitimate, while all the others, including ‘preserving the
financial stability and sustainability of the Olympic Movement and the Olympic
Games’, ‘preserving the value of the Olympic brand to finance the Olympic
solidarity model’, and ‘preventing the excessive commercialisation of the
Olympic Games’, were not found to be legitimate.[24] The
three rejected objectives reflects the decisional practice of the Commission
and the CJEU that ‘economic aims cannot justify restrictions’, which the Bundeskartellamt
directly acknowledges.[25]
This is why it is interesting that the Bundeskartellamt then found that the
‘prevention of ambush marketing during the frozen period in order to safeguard
the funding of the Olympic Games, facilitated in part by Olympic sponsorship
programmes, and thus to ensure that the Games can be held on a regular basis’
as the only legitimate objective.[26]
A literal reading of this aim seemingly exposes an economic dimension
since the IOC wishes to protect TOP and as a consequence, its own budget. However,
the Bundeskartellamt was convinced by the IOC’s contention that this was no
economic objective,[27]
since the ultimate aim of the objective is to ensure the Olympic Games’ consistent
occurrence. It could be argued that there are in fact two objectives mangled
into one: (1) the prevention of ambush marketing to protect TOP (an
economically motivated objective) and (2) ensuring the regular occurrence of
the Games (a non-economically motivated objective). The Bundeskartellamt
decided to not disentangle the two and accepted that they were in fact one inseparable
objective, whereby the latter sub-objective ultimately sidelines the economic dimension
of the first. On the other hand, the CJEU’s case law on economic justifications
has not been entirely consistent and there has been occasions where it has
accepted economic justifications.[28]
Furthermore, an efficiency defense could also allow for economic justifications
in which the IOC could argue that preventing ambush marketing in order to
protect TOP benefits consumers, outweighing any negative effects to
competition.[29]
In the
end, it might be desirable that any future analysis of this dual objective at
least acknowledge that there is an underlying economic interest. [TT3]
4.4
Proportionality
Before analyzing the proportionality of the measure in terms of the
prevention of ambush marketing, the Bundeskartellamt defined ambush marketing
as ‘the planned endeavour of a company, which is not an official sponsor of a
major (sports) event, to attract public attention to its own business by means
of marketing activities related to the event, and thus to profit from the
communication performance of the event (e.g. high profile, image) without
making a financial contribution’.[30]
In the corresponding footnote, the Bundeskartellamt makes reference to the
definitions of ambush marketing on Wikipedia, which upon closer inspection is taken
from Manuela Sachse’s book Negative Kommunikationseffekte von
Sponsoring und Ambush-Marketing bei Sportgroßveranstaltungen. It is rather unfortunate that the
Bundeskartellamt did not elaborate on why it chose this particular definition
of ambush marketing.
Nonetheless, on the formal aspects, the Bundeskartellamt held that the
DOSB’s pre-authorization scheme for individual advertisements was
disproportionate, especially due to the deadlines. Moving to substantive
aspects, it maintained that individual advertisement could only be prohibited
if it violated specific legal provisions such as intellectual property rights
or specific contractual obligations.[31] Violations
of property rights ‘only exist in cases where the public perception is that
there are economic and organisation relations between the owner of the property
rights and the company which uses Olympic designations’, referring to the
jurisprudence of the German Federal Court of Justice.[32]
The Bundeskartellamt makes reference to the reasonably well-informed consumer
standard, which is also recognized in EU law,[33]
to explain that consumers are able to differentiate between ‘a sponsor’s
advertising and a reference to the Olympic Games in a promotional context’ and
that simply a positive association or temporal connection with the Olympic
Games and Olympic Movement is not a violation of intellectual property rights.[34]
In this regard, the Bundeskartellamt only found prohibiting the use of ‘Team
Deutschland’ during the Olympic Games and the use of ‘a combination of the
respective location and the year’, e.g. Rio 2016, during the frozen period to
be proportionate, while finding the other restrictions to be disproportionate.[35] In
terms of the restrictions on photos and social media posts, the
Bundeskartellamt held that the general prohibition of taking photos at Olympic
venues for individual advertising measures and posts on social media accounts
that do not have any protected ‘designations or symbols’ to be disproportionate.[36]
Ultimately, the sanctions, in particular sporting sanctions, were judged
to be disproportionate because of their potential impact on athletes’ careers,
since they could affect the athletes existing and future sponsorship
opportunities and a competition ban could also, depending on the athlete’s age
and the ban’s length, end an athlete’s career. The very existence of sporting
sanctions could have a ‘deterrent effect’.[37] Additionally,
the CAS’ exclusive jurisdiction over disputes could jeopardize the
effectiveness of competition law since ‘there is no guarantee that the parties’
action against an athlete will also be subject to judicial review under
European antitrust law’, especially when considering that neither the Swiss or
German courts would conduct such a review in an action against the enforcement
of the award.[38]
Sports sanctions are also typically
carried out by the sport bodies themselves, without intervention of public
bodies. Interestingly, the Bundeskartellamt acknowledged the German athletes’
position that the CAS proceedings were longer and more costly than proceedings in
front of German courts, which directly contradicts the IOC’s claimed benefits
of sports arbitration.[39]
5
The Commitments and Potential
for Further Intervention Under EU law
After two rounds of negotiations, the DOSB was able to put an end to
its infringements by making several commitments that brought its policy on
athlete advertisement into line with the Bundeskartellamt’s findings. The
commitments submitted after the first round did not go far enough to quell the
competition concerns and most sponsors and athletes found ‘little or no
improvement in the modified guidelines’. The original commitments were deemed
to be too restrictive on the protected Olympic related terms, not provide
sufficient opportunities for advertising on social media, not sufficiently
delineate the responsibilities of the different parties, and the exclusive jurisdiction
of the CAS coupled with sporting sanctions continued to have ‘a strong
deterrent effect’.[40] After
the second round of negotiations, the most important commitments included: (1) no more
authorization required for advertisements during the frozen period and instead
athletes can request that the DOSB review planned advertisements beforehand to
confirm if it meets the admissibility criteria; (2) advertisement campaigns may
now be launched during the frozen period; (3) pictures of athletes during
Olympic competitions may be used for advertisement so long as it does not
include protected Olympic logos, symbols or designations; (4) videos[41]
are restricted only to the German House, the Olympic village or the back of
house areas and (5) sports related sanctions are no longer available (only
economic sanctions are possible) and athletes may have recourse to German
courts. All in all, the new Guidelines will allow athletes to advertise during
the Games provided that they observe certain restrictions that mainly relate to
intellectual property rights.[42]
This compromise fosters a far better balance between the IOC’s interests to
protect the value of the Games and TOP and the athletes’ wish to expand their
financial opportunities during perhaps the most important time of their
careers.
The analysis undertaken by the Bundeskartelamt is likely to
influence any future intervention of the European Commission on this issue.
After all, it is quite possible that the Commission may have to take action
since the Bundeskartellamt’s decision ‘is enforceable only as regards
individual advertising and marketing activities of German Olympic athletes on
the German market’. In doing so, the Commission may have to elaborate whether a
pre-authorization scheme for advertisements with reasonable deadlines could be compatible
with EU law and perhaps further scrutinize the definition of ambush marketing
and potential objective justifications that are completely void of an economic
motive. The Commission would likely evaluate any advertisement pre-authorization
regime in light of the ISU criteria.[43] From
a pure competition law perspective, it could also be an opportunity for the
Commission and ultimately the CJEU to expressly confirm whether the Wouters
test extends to Article 102 TFEU.
Regardless, Commissioner
Verstager explained that this is ‘an example of the way the network
operates, with the Commission and the German competition authority working
closely together’. She also underlined that the Bundeskartellamt’s decision
could ‘create incentives for a change of the relevant rules at national and
international level, with the Commission following closely any developments in
this direction’. Thus, the possibility that the Commission will at some point
intervene seems dependent on how seriously the IOC takes this decision. In the meantime,
British athletes have also threatened legal
action on the basis of EU competition law against the British Olympic
Association over its implementation of rule 40, which demonstrates the ongoing
nature of this saga.
6
Conclusion
The Bundeskartellamt’s narrow interpretation of ambush marketing and
emphasis on the protection of intellectual property rights will most likely
influence the IOC’s strategy to protect the value of TOP. For example, it could
prompt the IOC to place greater efforts into expanding its protected
properties. Nevertheless, the IOC’s war against ambush marketing has widened
from its original concept and even Michael
Payne has been one to express his concern about the extent to which the IOC
has gone in order to protect TOP and has expressed the need to apply the rules
with ‘balance and common sense’. Albeit these comments were made concerning the
rules for ‘clean’ venues at the London 2012 Summer Olympics, there is a certain
resonance to the present situation and begs the question whether drastically
restricting athletes in their often one-time chance to earn decent money
through sponsoring is absolutely necessary to protect the economic viability of
the Olympics as a whole.