1st February 2020

Balancing Athlete Interests and The Olympic Partner Programme: the Bundeskartellamt’s Rule 40 Decision

Introduction

The International Olympic Committee (IOC), after many years of ineffective pushback (see here, here and here) over bye law 3 of Rule 401 of the Olympic Charter (OC), which restricts the ability of athletes and their entourage to advertise themselves during the ‘blackout’ period2 (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 scrutinised under EU competition law. This article 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 analysed to show to what extent it may serve as a model for EU competition law authorities.

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 emphasised. 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 career3. 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 (TOP) Programme, 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 programme’ to prevent a return to the days where the funding of the Games was highly dependent on ticket sales4.

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. 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 categorised 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 realised 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).

Background to the Decision

Before examining the substance of the Bundeskartellamt’s decision, it is important to understand that Rule 40, as it was analysed in the decision, was the one that was in place in the lead up to the Rio 2016 Games6. 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 authorisation. Further complicating the matter, NOCs could introduce additional restrictions or opt-out completely from allowing their athletes to advertise during the frozen period7.

The German Olympic Sports Federation (DOSB), in its 2016 guidelines  (page 78), distinguished between DOSB sponsors, Olympic sponsors and non-Olympic sponsors8. 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 phrases9. If they wanted to participate in the Games, athletes were forced to subscribe to these rules via the Athlete Agreement (page 83)  and any breach could imply sanctions, which included removal from the Olympic Team10.

The conditions that these rules impose is succinctly summarised 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 Bundeskartellamt11.

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 analysed below.

Relevant Market

Having decided to resolve the case on the basis of Article 102 TFEU12, 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 Games14.

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 limited17.

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 profit18. 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 authorisation 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 authorisation 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 Games19.

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 CAS21.

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 test22. 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 case23. 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 legitimate24.

The three rejected objectives reflects the decisional practice of the Commission and the CJEU that ‘economic aims cannot justify restrictions’, which the Bundeskartellamt directly acknowledges25. 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 objective26.

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 objective27, 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 justifications28.

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 competition29. 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.

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 obligations31. 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 Justice32.

The Bundeskartellamt makes reference to the reasonably well-informed consumer standard, which is also recognized in EU law33, 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 rights34. 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 disproportionate35. 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 disproportionate36.

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 jeopardise 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 award38.  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 arbitration39.

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, did not provide sufficient opportunities for advertising on social media, did 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 authorisation required for advertisements during the frozen period and instead, athletes can request that the DOSB review planned advertisements beforehand to confirm if they meet 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 an advertisement, so long as it does not include protected Olympic logos, symbols or designations;
(4) videos41 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 rights42. 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-authorisation scheme for advertisements with reasonable deadlines could be compatible with EU law and perhaps further scrutinise 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-authorisation regime in light of the ISU criteria43. 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.

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 expressed his concern about the extent to which the IOC has gone in order to protect TOP and has highlighted the need to apply the rules with ‘balance and common sense’. Albeit, although these comments were made concerning the rules for ‘clean’ venues at the London 2012 Summer Olympics, there is a certain resonance with the present situation, which 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.

• This article was originally published on the Asser International Sports Law Blog on 22 January, 2020. Click here for the original.


Footnotes

1. When the blog refers to rule 40, it refers specifically to bye law 3 of rule 40 OC.
2. The ‘blackout’ period starts 9 days before the Olympic Game’s opening ceremony to 3 days after the closing ceremony.
3. Nicholas Gary Schlereth and Evan Frederick, Going for Gold: Social Media and the USOC [2017] 27 Journal of Legal Aspects of Sport 19.
4. Michael Payne, Ambush Marketing: The Undeserved Advantage [1998] 15 Psychology and Marketing 323.
5. John Grady, ‘Analyzing Rule 40’s Restrictions on Using Atheletes in Olympic Sponsorship at Rio 2016’ [2017] 15 Entertainment and Sports Law Journal 1.
6. Bundeskartellamt, Decision pursuant to Section 32b GWB Public version, B-226/17 (25 February 2019) para 3.
7. ibid para 5.
8. ibid para 7.
9. See ibid para 8 for examples.
10. ibid para 11 and 65.
11. Grady (n 7) and ibid para 69.
12. Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) para 41.
13. ibid para 44 and 56.
14. ibid para 46-47.
15. ibid para 46.
16. ibid para 53.
17. ibid para 54.
18. ibid para 58-63.
19. ibid para 71.
20. ibid.
21. ibid para 75-76.
22. Case C-309/99 Wouters and Others [2002] ECLI:EU:C:2002:98, para 97.
23. See Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) footnote 52.
24. ibid para 102-105.
25. See International Skating Union’s Eligibility rules (CASE AT. 40208) [2017] C(2017) 8240, footnote 350 and ibid para 95.
26. Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) para 96.
27. ibid para 27.
28. For an exploration of accepted economic objectives see Sue Arrowsmith, ‘Rethinking the Approach to Economic Justifications under the EU’s Free Movement Rules’ [2015] 69 Current Legal Problems 307.
29. See for example, Case C-209/10 Post Danmark A/S v Konkurrencerådet [2012] ECLI:EU:C:2012:172, para 41-42.
30. ibid para 97.
31. ibid para 108-109.
32. ibid para 110, referring to Federal Court of Justice, judgment of 15 May 2014 – I ZR 131/13, Olympia-Rabatt.
33. Case C-210/96 Gut Springenheide and Tusky v Oberkreisdirektor des Kreises Steinfurt [1998] ECLI:EU:C:1998:369, para 31.
34. Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) para 110-111.
35. ibid para 115-118.
36. ibid 119-120.
37. ibid para 122.
38. ibid para 124.
39. ibid para 124.
40. ibid para 128.
41. Protected Olympic logos, symbols or designations are also not allowed in videos.
42. Decision pursuant to Section 32b GWB Public version, B-226/17 (n 3) para 136-148.
43. A pre-authorisation scheme must (a) ‘provide for sanctions and authorization criteria that are inherent in the pursuit of legitimate objectives’, (b) ‘provide for objective, transparent and non-discriminatory sanctions and authorisation criteria’ that are proportionate to its objectives, and (c) ‘provide for an objective, transparent and non-discriminatory procedure for the adoption and effective review of decisions’.

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