Meca-Medina: Overruling of reason? The interplay of sporting rules and EC Competition Law

AutorLuuk Bresser
Cargo del AutorStagiaire. Cleary Gottlieb Steen Hamilton LLP

Ver nota 1

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1. Introduction

Juvenals’ famous ‘Panem et circences’ highlights the important status of sports in the Roman empire, where circuses were considered to be one of the most important means to win popularity. The six leading politicians that returned to Roman soil some 2000 years later to create a new empire attached less value to this local history. Nowhere did their Treaty mention the special role of sport. Fortunately, the European Court of Justice (ECJ, the Court) realized that sport deserves special treatment, and successfully exercised its power when dealing with the first case which concerned the compatibility of sporting rules with the EC Treaty.

Ever since Walrave, sport has enjoyed a special status under community law: it is only subject to community law in so far as it constitutes an economic activity within the meaning of Article 2 of the Treaty2.

Furthermore, the Court has allowed for justifications for obstacles to the fundamental freedoms on "non-economic grounds concerning only the sport as such"3.

This special status is reflected in the declaration on sport, which is annexed to the final act of Nice and recognizes the social significance of sport4. In response, the Commission adopted the Helsinki Report on Sport, in which it confirms the social role of sport but also articulates its concerns with regard to the increased economic incentives thwarting the integrity of sport5. The Commission warns for an isolation of the protagonists of sports and calls for closer cooperation between federations, the European institutions and Member States. Finally, if the currently proposed

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amendments to the EC Treaty are adopted, Article 149 EC will refer to the specific nature and the social function of sport6.

However, Chapter 2 will show that the application by the European courts of the special status of sport has not been clear and consistent. The ECJ has applied different tests to assess the compatibility of certain sporting regulations with the free movement provisions. Furthermore, the Court never ruled on the compatibility of those regulations with the competition rules, even though this had been analyzed by different Advocate Generals on several occasions. The Court of First Instance (CFI), on the other hand, could not escape such analysis following the appeal of two commission decisions in which the IOC and FIFA’s regulations where found to be in breach of competition law. The judgments in Meca-Medina7 and Piau8reflect the confusion created by the ECJ. While the CFI reasonably applied the Walrave-test, taking a uniform stance towards the free movement provisions and the competition rules, it remained unclear which direction to go with objective justifications. In both cases, the appeal provided the Court "with an excellent opportunity to simplify and unify previous case-law"9.

The appeal in Piau was rejected by an order of the President. Therefore, only the ECJ’s decision in Meca-Medina can give any guidance. This central aim of Chapter 3 is to analyze this remarkable judgment, in which the Court ignored the sporting exception and instead decided to include sporting considerations within the scope of Article 81 EC. The judgment unnecessarily complicates the application of the competition rules, and

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depreciates the specific nature of sport, which is contrary to both jurisprudence and the objectives of the Helsinki report.

Finally, the closing Chapter will analyze whether Meca-Medina is sustainable. Most importantly, it will be analyzed whether those rules that are concerned with economic activity should be given a special status at all, since they pursue welfare enhancing goals such as increased demand. Economic models will be used to examine how the special status of sport should be given shape under EC competition law.

2. The relationship between sport and the ec treaty
2. 1 The origin of the rule of purely sporting interest

2.1.1 Walrave and Koch v Association Union Cycliste Internationale.

In its very first ruling on a sporting matter, the Court was asked whether a rule that required a ‘pacemaker’ to be of the same nationality as the ‘stayer’ was precluded by Article 39 of the EC Treaty, which prohibits any restriction on the free movement of workers10. According to the Court, "the practice of sport is subject to community law only in so far as it constitutes an economic activity within the meaning of Article 2 of the Treaty"11. It then added the following exception: "This prohibition [on direct discrimination based on nationality] however does not affect the composition of sport teams, in particular national teams, the formation of which is a question of purely sporting interest and as such has nothing to do with economic activity."12This means that rules of purely sporting interest, such as the composition of sport teams, fall outside the scope of the Treaty provisions, even if the rule in question is directly discriminatory. It was added that the restriction on the scope of the provisions has to remain limited to its proper objective13. The Court thus

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set a clear boundary to the application of the Treaty provisions, while acknowledging that purely sporting rules to some extent hinge upon economic activity.

2.1.2 Donà v Mantero.

Only two years later, the Court was again faced with a directly discriminatory rule dealing with the formation of a sport team. In Donà, the Court prohibited the Italian football association of limiting access to the Italian football market to Italian nationals only. It distinguished between club-teams and national teams:

"... [The free movement] provisions do not prevent the adoption of rules or of a practice excluding foreign players from participation in certain matches for reasons which are not of an economic nature, which relate to the particular nature and context of such matches and are thus of sporting interest only, such as, for example, matches between national teams from different countries."14

It can be concluded from the above that the formation of national teams is necessarily of a purely sporting nature. Therefore, rules facilitating the formation of national teams escape the Treaty provisions as long as they remain limited to their objective.

2. 2 Justification based on non-economic grounds relating to the sporting interest

2.2.1 URBSFA v Bosman.

It has been argued that the wording in Donà indicates that the Court shifted towards a narrower approach when accepting sporting rules, by referring to non-economic reasons rather than the absence of an economic activity15.

While this statement is disputable, since the Court found in both cases that

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the rules are of sporting interest only, the shift is clearly identifiable in the famous Bosman16judgment, a case which has probably had the largest impact on sport of all ECJ judgments. This ruling also underlines the importance of sport within the community: it is one of the few, if not the only, judgments given by the highest European court that is known by the wider public.

In this ruling, the ECJ was asked to review two different rules that were issued by UEFA. First, it was asked whether the transfer rules, which required acquiring clubs to pay a fee for the release of a player even after their contract was finished, were compatible with EC law. Second, the national court asked whether the Treaty provisions preclude the imposition by national federations of nationality clauses, which limit the possibilities of clubs to hire foreign players. It is interesting to note that this so-called "3+2" rule was approved by the European Commission.

Advocate General Lenz provided the Court with a short summary of the status of sport under the EC Treaty, referring to the Walrave and Donà judgments. He concluded that the field of sport is subject to Community law in so far as it constitutes an economic activity, and that therefore the activities of professional football players are subject to Articles 39 and 49. Even though, certain exceptions regarding the formation of a team are allowed. These exceptions remain restricted to rules relating to the exclusion of foreign players from certain matches. Moreover, the exception must be linked to non-economic grounds which relate exclusively to sport17.

With regard to the transfer rules, the Court made it clear that severing the economic aspects from the sporting aspects of football is difficult but necessary. It then concludes that a restriction on the scope of the application of the Treaty provisions based on the purely sporting nature cannot be relied upon to such an extent that it would exclude the whole of a sporting activity from the scope of the Treaty. Since the activity in question is the gainful employment or remunerated service of a

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professional football player, the transfer rules constitute an infringement of the free movement provisions by forming an obstacle to trade. It introduces a new test for sporting rules by using the "sporting exception" as a justification rather than an exclusion of the Treaty:

"[....] [T]he provisions of Community law concerning freedom of...

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