Search

Role of Competition Law in Sports in India

*Written by Amitoj Singh Chadha




Introduction:


At the time of the industrial revolution or rather when the world was facing urbanization, sports were regarded as a leisure activity rather than a means of livelihood. It was something which people looked towards to take a break from their daily monotonous lives. Post the world war years, most men and women developed an interest in viewing sports not only as a diversion from their daily lives but as a source of livelihood, something which they could enjoy doing while also earning money at the same time. Largely due to urbanization there was a substantial rise in working-class spending power and a concentration of free time on Saturday afternoons all encouraged the marketing of spectator sports, and in response throughout the modern world sports promoters and sport club executives enclosed their grounds, erected stadiums and started charging fees from people for entry[1]. This was the initial bit of commercialization in the sports industry which only caught up from there and developed into one of the major contributors to the world economy. While one may dismiss this claim at first, however, it is no doubt that the importance of sports in a country's economic development cannot be overstated. A recent report revealed by the European Commission in 2018 showed that the share of sports to GDP within the European Union is € 79.7 bn or 2.12%. Moreover, the sports industry employs close to 5,666,195 people, contributing to 2.72% of total employment.[2] Similarly in India, the Indian Premier League (IPL) made a contribution of $182 million to India’s GDP in 2019.[3] One cannot deny that the economic and social significance of sports is rapidly increasing.


Pyramidical structure and Competition law:


With the development of sports, there was a rise in sports bodies for different sports. In other words, there used to be governing organization for every sport on the national or the international level. For example, in India the governing body for cricket is the Board of Control for Cricket in India (BCCI), for chess, it is the All-India Chess Federation (AICF) and similarly, on the international level for football there is Fédération Internationale de Football Association (FIFA) and for cricket, there is the International Cricket Council (ICC). Sports all over the world follow a hierarchal structure or pyramidical structure of governance wherein the organization at the top calls all the shots and has all the power and authority to determine how the sport functions.[4] If a team or player even dares to go against them, they might face severe penalties in the form of hefty fines or even bans. Let us take the example of FIFA, which is the global governing body of football. FIFA sets out the rules for all competitions and organizes the World cups and other international trophies. Under FIFA there are the national federations some of which are CONMEBOL (South America); UEFA (Europe); CONCACAF (North and Central America and the Caribbean) etc. FIFA makes the rules for these national bodies who in turn organize the Copa America and Euro competitions. However, this pyramidical structure is one of the key reasons why such organizations indulge in anti-competitive practices. These organizations are extremely powerful and thereby do not allow any other organization to take part in the sport. For example, recently Europe’s top football clubs planned to initiate a ‘Super League’ without the involvement of FIFA for extra revenue generation and bragging rights. But due to the power of FIFA, these clubs failed to form such a breakaway league as FIFA threatened players with a ban on international tournaments if they participated in such a tournament.[5] Thus, plans for the ‘Super League’ were over as soon as they came to air. Therefore, from the following example, we observe that such a pyramidical pattern of governance allows a singular body to accumulate too much power and thus show monopolistic behaviour. When a single body has control over sponsorships, participation in competitive events, doping tests etc., issues of competition law are bound to arise.[6] This is where competition law steps in to monitor if the organizations are abusing their dominant positions in the industry or not. While these issues exist all over the world, this paper will keep its focus on India only.


COMPETITION LAW IN INDIA:


The Competition Act, 2002 is relatively new compared to the competition law of other major countries such as the USA and UK. While there had been in existence another law, namely the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), only dealt with restricting organizations or entities from displaying shades of monopoly. It aimed at reducing competition and one could say that was slightly outdated according to the current requirements. The Competition Act filled the void created by the MRTP Act as its main objective was to “prevent practices having an adverse effect on competition, to promote and sustain competition in markets, to protect interests of consumers and to ensure freedom of trade.”[7] In India, the implementation of the Competition Act is overseen by the Competition Commission of India (CCI). The duty of CCI is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers. [8] In furtherance, the relevant provisions which are generally used to govern competition law in India are Sections 3 and 4 of the Competition Act. Section 3 prohibits anti-competitive agreements “in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.”[9] Whereas Section 4 prohibits “abuse of dominant position in the country, through unfair purchase conditions, discriminatory pricing, conduct amounting to a denial of market access, tying agreements etc.” [10] As mentioned earlier that while the 2002 Act is relatively new, it has still made strides in the field of competition law. The CCI has given its ruling in certain key cases where organizations could be seen taking an undue advantage through their dominant position in the industry, conspiring in business activities, cartelization in business practices as well as bid-rigging.[11]


COMPETITION ISSUES IN INDIA:


1. Abuse of Dominant Position:


The Competition Act, 2002 defines dominant position (dominance) in terms of a position of strength enjoyed by an enterprise, in a relevant market in India, which enables it to:

  • Operate independently of competitive forces prevailing in the relevant market; or

  • Affect its competitors or consumers or the relevant market in its favour.[12]


To explain this in simpler terms it is the ability of an enterprise to behave or act independently of the market forces that determine its dominant position. Dominance is generally not considered bad till it promotes healthy competition, however, once an organization abuses its position in such a way i.e., exploitative in nature then it is deemed to be an abuse of power.


In furtherance to determine whether an organization has abused its dominant position in the industry the CCI follows a three-step process[13]:


First: Determining the relevant market


The Commission defines ‘relevant market’ as a market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets. “Relevant geographic market” means a market comprising the area in which the conditions of competition for the supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas; “Relevant product market” means a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use.[14] Thus, by understanding the above two definitions, we understand that the relevant market involves the description of the context in which certain economically harmful conduct could take place.[15]


Second: Determining the dominance in the relevant market


The next step simply involves determining how the enterprise is enjoying the dominant position in the market. This can be done by referring to Section 19(4) of the act, which mentions a few key factors to be considered by the commission while enquiring into the dominant position of an enterprise.


Third: Determining the abuse


Lastly, the commission is required to determine whether the enterprise is abusing its dominant position. This can be done through the help of Section 4(2) of the Competition Act, 2002, which provides a list of abusive conduct by the enterprise which shall amount to an abuse of a dominant position.[16]


2. Bid Rigging:


Another key issue is bid-rigging, commonly known as price-fixing. In bid-rigging, two or more parties collude to determine the winner of a bidding process, thereby fixing the winner before the bidding actually begins. This is an anti-competitive practice and is one of the issues which the Commission seeks to find. In 2018, the Competition Commission of India imposed a heavy penalty on sports broadcasters for manipulating the bidding process in tenders floated by sports broadcasters. Herein the accused parties exchanged privileged information in favour of bid prices and thereby were in violation of the Competition Act, 2002.


3. Exclusive Broadcasting Rights:


In the sports industry, a certain national or international body has the right to telecast the sport on television. These rights are generally sold to the highest bidder thereby promoting healthy competition. However, in certain circumstances, the sports body may misuse its dominant position in the industry and sell these rights for an astronomical valuation in exchange for a lengthy contract. For example, in India BCCI has been accused several times of selling exclusive broadcasting rights to its ‘exclusive partners’. In a recent example, the board sold its IPL viewing rights to WSG-Sony Entertainment on a 10-year basis for reportedly a whopping $1.03 billion. While the grant of exclusive broadcasting and telecasting rights is a common commercial practice in the sports industry, it is important to consider the impact of such long-term agreements on competition in this market. Such practices by the dominant player may promote anti-competitive practices and also might create barriers for new players to enter the market while also driving out the existing competition in the market. [17]


SIGNIFICANT CASE LAWS:


1. The ICL (Indian Cricket League) Case:


In this case, a petition was lodged by the Indian Cricket League (ICL) against the BCCI, alleging that the BCCI was abusing its dominant position in the market as mentioned under Section 4 of the Competition Act.[18] When ICL entered the cricket industry in India, BCCI viewed them as a direct threat and hence misused their power to impose certain limitations on anybody who was related to ICL. Such limitations included the banning of players, orders to connected organisations to remove ICL-related player jobs, absence of availability to cricket infrastructure and in addition to this anyone who sided with ICL they were disqualified from the criteria of receiving the advertising and broadcasting rights.[19] in furtherance, of these limitations, BCCI even denied access to certain key stadiums to ICL, which they were in control of. This came off as a major restriction to ICL due to which it was next to impossible to commence their tournament on a lack of playing stadiums. In response to such anti-competitive measures being adopted by the BCCI, the CCI conducted an enquiry in which they concluded BCCI to be abusing its dominant position in the market under Section 4(2) which talks about ‘indulging in practices which deny market access to competitors.’


In another previous case also, BCCI was on the wrong side of things as the CCI imposed a penalty of 52.25 crores for abusing its dominant position in the cricket industry.[20]


Such a case clearly indicates that a powerful regulating body, by the means of unfair targeting and adoption of discriminatory practices, can go on to have an extreme impact on the business of a private entity in the sport. It is also worth noting that the IPL with the support of the BCCI is one of the richest sporting leagues in the world and continues to rake in billions of dollars in terms of its valuation.[21]


2. Athletic Federations Case:


In the following case, a petition was filed by the Athletic Federation of India (AFI)[22] against its own members, which included marathon organisers as well as athletes. The following petition was filed as AFI suspected that its members were organising events, in particular marathons, without the consent of AFI. Such a petition was filed under Section 4 of the Competition Act, claiming that such events were anti-competitive in nature. After a brief investigation into the case, the CCI initially was of the opinion that AFI had wrongfully filed a petition under Section 4 due to a lack of fulfilment of requirements by AFI and hence further ordered the Director General (DG) to conduct further investigation.


On the basis of such investigation, CCI held AFI not be in violation of Section 4 and gave the certain reasons which are as follows. Firstly, CCI held that AFI was not in abuse of its dominant position in the athletic industry. To strengthen this claim CCI further mentioned that out of 300 marathons conducted annually a mere 11 marathons were AFI affiliated, indicating healthy and vibrant competition in the market. Secondly, AFI had not placed any restrictions on its player, athletes and even officials from taking part in third-party organised events. Owing to the following factors, CCI held AFI not to be abusing its dominance in any way and thus not liable under Section 4 of the Competition Act, 2012.


Despite having such stringent rules and regulations regarding competition law in the sports sector, we observe that time and again, organisations at the top end up in the news for indulging in corrupt practices. While in this paper we have covered only 2 landmark cases, there are several others such as the All India Chess Federation case [23], wherein the AICF which is the leading body for chess in India was found to be in abuse of dominance. Owing to such cases, CCI has also shifted its focus to eradicating the influence of the hierarchal structure of sporting bodies, i.e., the pyramidical structure. The restrictions in terms of player movements, and for third parties to start their own competitions, show signs of anti-competitiveness and this is what the CCI aims at improving.


SUGGESTING A WAY FORWARD:


The author would like to make a few suggestions, that he feels if implemented could provide a better interconnection between sports and competition law.


  1. In a developing country such as India, government expenditure on sports and sports-related activities is at the bare minimum, especially at the grass-root level. This is one of the major reasons why India fails to make it big on the international sporting stage and is also one of the key reasons why people involved in the sports industry are involved in anti-competitive practices. If the government were to increase its investment in sports, private organizations would not have to solely depend on their earnings.

  2. Another key point is that the regulations and policies being implemented by the government must be sport-specific and must be modified as the sport changes. This will help not only help in effective regulation but also provide an efficient regulatory framework.

  3. In order to prevent rigging and match-fixing at the highest level, the government must ensure that the entire process is made simple, predictable, open and transparent. This way sports bodies would not be able to cheat and would initiate a healthy and sustainable consumer rivalry while also eliminating the need for the competition commission to step in.








* The author is a law scholar at Jindal Global Law School, Sonipat, India.









(The image used here is for representational purposes only)





References

[1] The Peculiar Economics Of English Cricket Before 1914, Keith Standiford And Wray Vamplew, The International Journal Of History Of Sport, Vol.3, Issue 1986. [2] New Study on the Economic impact of Sport released by the European Commission (2018), EU OFFICE (23 MAY 2022), http://www.euoffice.eurolympic.org/blog/new-study-economic-impact-sport-released-european-commission. [3] Manas Tiwari, IPL economy: What the cash-rich league adds to India’s GDP, FINANCIAL EXPRESS (23 MAY 2022), https://www.financialexpress.com/sports/ipl/ipl-economy-what-the-cash-rich-league-adds-to-indias-gdp/1025063/. [4] Dhotre, Rutuja. “Competition Law in Sports.” Global Sports Policy Review, May 12, 2021. https://www.g-spr.com/post/competition-law-in-sports#:~:text=In%20India%2C%20the%20Competition%20Act,by%20other%20participants%20in%20markets. [5] Sky Sports, FIFA threatens World Cup ban on players who take part in proposed European 'Super League' Sky Sports (2021), https://www.skysports.com/football/news/19692/12194411/fifa-threatens-world-cup-ban-on-players-who-take-part-in-proposed-european-super-league (last visited May 23, 2022). [6] Saksham Malik, “Role of Competition Law in Sports”, penacclaims, Volume 8, January 2020, ISSN 2581-5504. http://www.penacclaims.com/wp-content/uploads/2020/02/Saksham-Malik.pdf. [7] The Competition Act, 2002 [8] Competition Commission of India, 15 March 2021, https://www.cci.gov.in/about-cci. [9] Section 3 of the Competition Act, 2002 [10] Section 4 of the Competition Act, 2002 [11] Ibid 5 [12] Ibid 9 [13] Dr. Sanjay Kumar Pandey, SPORTS AND COMPETITION LAW 1–31 (2013). [14] Section 2(t) of the Competition Act, 2002 [15] Kumar Yadav, Dr. Raj, Commercialization of Sports and Competition Law (December 24, 2016). Available at SSRN: https://ssrn.com/abstract=2889622 or http://dx.doi.org/10.2139/ssrn.2889622 [16] Section 4(2) of the Competition Act, 2002 [17] Ibid 13 [18] Pan India Infra projects Private Limited v. Board of Control for Cricket in India (BCCI), Competition Commission of India Case No. 91 of 2013. [19] Press Trust of India, CCI orders probe against BCCI for abuse of dominant position, The Economic Times, (June 5, 2018), https://economictimes.indiatimes.com/news/sports/competition-commission-orders-probe-against-bcci-for-abuse-of-dominant-position/articleshow/64465817.cms?from=mdr [20] Re Surinder Singh Barmi v. Board of Control of Cricket in India, Competition Commission of India Case No. 61 of 2010. [21] IPL brand value rises 7% to $6.8 billion in 2019, THE HINDU BUSINESS LINE (12 October 2019, 5:09 PM), https://www.thehindubusinessline.com/news/sports/ipl-brand-value-rises-7-to-68-billion-in-2019/article29458678.ece [22] Re Department of Sports, MYAS v. Athletics Federation of India, Competition Commission of India - Reference Case No. 01 of 2015- SCC OnLine CCI 17: [2016] CCI 18. [23] Hemant Sharma v Union of India 2011 SCC OnLine Del 4642; 2012 (1) ILR(Del) 620