Trans-Atlantic Lessons from the EU Challenge to Exclusive Broadcast Territories: Guest Post by Prof. Stephen F. Ross
Stephen F. Ross is Professor of Law and Director of the Institute for Sports Law, Policy and Research at The Pennsylvania State University, and has co-taught sports business courses at the City University London’s Cass Business School.
If followed by the ECJ, the Advocate General’s Opinion will bring renewed attention in both Europe and the United States on anti-competitive restrictions among major sports league club owners. Stefan Szymanski and I have previously argued that the severe output restrictions that are often adopted by club-run leagues (which were the subject of litigation involving the EPL and the National Basketball Association in the 1990s) were likely the result of inefficient bargaining among the clubs: that is to say, more money could be had by all if more games were broadcast, but the clubs could not agree on how to divide up the revenues and therefore preferred to “leave money on the table.”
The appropriate model for competition enforcers to consider comes from big-time college football in the United States. (For the uninitiated, my own university in rural Pennsylvania fills a stadium of almost 110,000 for its games against top rivals, and broadcast rights are among the most lucrative in the country.) For years, the governing body for college sports (the NCAA) strictly limited the number of games broadcast to about five games per Saturday. In 1984, the U.S. Supreme Court found that this constituted an unreasonable restraint of trade in violation of §1 of the Sherman Act (the equivalent of Article 101 of the EU Treaty and Chapter I of the UK Competition Act). Afterwards, the number of games blossomed, and per game rights fell: a classic example of competition enforcement resulting in increased output and lower prices.
Today, the model permits colleges to collectively sell rights to exclusive time slots to major broadcasters, but permits individual schools to sell rights to unsold games (this is also the model that is used in the sale of UEFA Champions League matches). The problem of local blackouts to protect live gate is determined individually by each club.
The Advocate General’s Opinion was entirely based on European concepts of free movement, opening internal markets, and an interpretation of Art. 101 informed by these concerns. (British courts in earlier cases have expressly distinguished the EU jurisprudence on exclusive territories based on nationality from the appropriate analysis under Chapter I involving exclusive territories within the UK.) But there are some important lessons, both for Europe and the United States.
Within Europe, suppose, contrary to Prof Szymanski’s scenario in a related post, that the EPL responds by retaining its output-restriction at 138 games (the number sold for broadcast in the UK), and make these games available throughout the EU at roughly the same price. The internal market concerns that animated the AG’s decision would be met here. But Scandinavians may be quite unhappy with the output limitation, and could bring an Art. 101 challenge against the EPL clubs for agreeing among themselves not to sell more games on the market. This would require a more American-style analysis: the output reduction is clear, and the EPL would then have to demonstrate that there are some other efficiency justifications, under Art. 101(3), that are sufficient to warrant the output reduction. Frankly, I think this would be a challenging defence.
Meanwhile, on the other side of the Atlantic, we have an interesting puzzle of non-enforcement. In 1953, a district judge (equivalent to a UK High Court judge) held that National Football Leagues clubs violated the Sherman Act by agreeing not to broadcast their games into each other’s local market. Congress provided a limited a partial exemption to this holding, to permit the collective sale of games to free-to-air television networks. Although the NFL now sells almost all its games in this way, the other major sports leagues continue to allow most games to be shown on local television, sold by the individual club. And all the other leagues continue to use exclusive broadcast territories. One can purchase, from the league, access via satellite providers or streaming internet to ‘out-of-market’ games, but only at a high price, and subject to complicated ‘blackout’ rules. Curiously, no one has challenged the practices of these leagues, although they appear to be identical to the very practices that were found illegal 58 years ago! Perhaps the public attention on the EPL will change the mix here (keep in mind that in the United States plaintiffs do not risk incurring attorneys fees for unsuccessful claims if they are brought with a reasonable legal basis.)