Competition Law Kicking Governing Sports Bodies?

A look at two interesting orders by the CCI in the world of sport.

The Competition Commission of India ("CCI") has played a significant role in checking anti-competitive business practices and imposing high penalties on some corporates. During the course of this year, there have been some interesting orders from the CCI specific to sports bodies and their conduct. Two key orders have been the order against the Board of Cricket Control in India ("BCCI") and the order in case of Hockey India ("HI"). While BCCI burnt its fingers in the process, HI escaped by a narrow margin. The object of this article is to bring out similarities and at the same time some crucial differences between these orders.

A common element in sports bodies in India as well as several such bodies worldwide is the existence of a "pyramid structure". A pyramid structure comprises a global organization, containing single member (i.e. organization) from each country. These members in turn, often act as the governing body of the sport in their respective countries.

The above structure is common to both, the BCCI and HI. Whilst the core issue in both cases was whether there is an abuse of dominant position by the governing bodies, the conclusion drawn is starkly different. We deal with the facts of each case and the conclusion drawn, here -

Brief of BCCI order

• A complaint was made to the CCI in 2010 alleging irregularities in the grant of franchise rights for team ownership, media rights for coverage and sponsorship rights/ other local contracts relating to the Indian Premier League ("IPL"). After submission of the Director General's report, the CCI interalia observed that although BCCI is not statutorily recognised, it is empowered by the objects stated in its Memorandum of Association ("MoA") to regulate and control the conduct of cricket in India. It has the power to approve/disapprove cricket matches in India at all levels by the regulations laid by the International Cricket Council, which effectively, authorise it to permit/deny entry of any other bodies/leagues competing with IPL/otherwise, and recognises the team sent by BCCI to be called as the national team, the Government of India considers BCCI as the apex national body for regulating cricket in India, subject to approvals of the Ministry of Youth Affairs and Sports. The CCI held that BCCI is a de facto regulator of cricket in India.
• The CCI further held that BCCI has a dominant position in the relevant market which it had abused, and accordingly a penalty of approximately INR 520 million was levied on BCCI, along with cease and desist order in relation to the causes of abuse of dominant position. Presently, an appeal against this order is pending before the Competition Appellate Tribunal.

Brief of HI order

• This case was initiated upon information from some leading hockey players, against HI. The underlying reason for the complaint was the alleged imposition of restrictive conditions by HI on players for participation in unsanctioned prospective private professional leagues resulting in restrictions in the mobility of players and on prospective private professional leagues leading to a denial of entry into competing leagues. The key issues in this case were abuse of dominant position and the existence of anti competitive agreements between HI and the hockey players for participation in the World Series Hockey League ("WSH") organised by the Indian Hockey Federation in collaboration with the Nimbus Sports.
• The CCI held a contrary view to the BCCI case stating that HI had neither abused its dominant position nor entered into any anticompetitive agreements with the players. The rationale lay in the manner and contents of the code of conduct agreements ("CoC") entered with the players.
  

  
  

  Both the above cases test different aspects of the abuse of dominant position under Section 4 of the Competition Act, 2002 ("Act"). The dominant position of an enterprise means a position in which an enterprise is insulated from market forces. A dominant enterprise is said to be abusing its dominance if it indulges in activities like limiting production or supply, denying market access to others, entering into abusive contractual terms or using its dominant position in one market to enter another. In order to determine abuse of dominant position the CCI is required to examine factors like relevant market and dominance of an enterprise in such relevant market. Some of the important points leading to the findings of CCI are analysed below -

Relevant Market

Under the Act, relevant market is defined as a market determined by the CCI with reference to the relevant product market or relevant geographic market or both. There are three key components to determine a market i.e. producer on the supply side, consumer on the demand side and the underlying product/service.

• BCCI: The CCI, based on TRP reports and revenues generated from it, opined that cricket in India is considered as the highest source of entertainment and the entry of private professional leagues saw a merger between the sport and media & entertainment. This resulted in the emergence of a new genre of cricket with a larger target audience making it a distinct market in itself. The CCI considered the relevant market to be the organization of private/ professional cricket leagues/events in India.
• HI: Whilst the facts in relation to the existing competing leagues are similar to the BCCI case, in the present case, the CCI considered the relevant geographic market as being pan-India due to its mandate to look into anti-competitive practices impacting Indian consumers. The relevant product market was considered to be "the market for organization of private professional hockey leagues" in India and the relevant market for analysis of allegations relating to the restrictions on the movement of players was considered to be the market for services of hockey players.

Dominant Position

• BCCI: In assessing the existence of BCCI's dominant position, the CCI perused the regulatory powers of BCCI, calling it the weightiest source to depict BCCI's conclusive monopoly. Owing to these regulatory powers, along with the grant of several concessions in the use of infrastructure, control over the infrastructure, control over players, the ability to control the sport in the nation and entry of other players/leagues/bodies into the cricketing fraternity, the CCI held that BCCI was in a dominant position in the relevant market.
• HI: Similar to the BCCI case, given the scope of the regulatory powers of HI and its authority in organising hockey events, along with the control on the pool of players signing the CoC agreement in order to play in such event, the CCI concluded that HI was undoubtedly in a dominant position in the relevant market.

Abuse of dominant position

• BCCI: While the CCI granted that the monopoly of sports federations is a natural consequence of the pyramid structure of the sports federations, it weighs the applicability of the commercial aspects of such monopoly as opposed to regulatory roles. The CCI analysed the terms of the IPL media rights agreement. This contained a provision which restricted BCCI's regulatory powers, prohibiting it from organising, sanctioning, recognising or supporting any other professional domestic Indian T20 competition which would be competitive to IPL. This agreement was for a term of 10 years, creating an entry barrier for any entities/ persons wanting to enter into this market for a period of 10 years. This commercial exploitation of such regulatory powers, in the opinion of the CCI is a violation of Section 4(2)(c) of the Act.
• HI: The key allegations and resulting observations of the CCI in relation to the abuse of dominant position by HI includes misuse of regulatory powers - a denial of market access to rivals (Section 4(2)(c) of the Act). The CCI observed that the International Hockey Federation ("FIH") (a related party in the dispute) had, after the notification of WSH, issued bye-laws which required compliance by all members of the FIH. HI, being a member had to adopt the same and comply. The bye-laws provided events as being sanctioned and unsanctioned by FIH. A sanctioned event is one which is approved by either HI/ FIH as per the type of event it is. Any players participating in unsanctioned events would require prior approval from HI and FIH. Participating in unsanctioned events without approval would lead to forfeiture in playing any international events for a period of 12 months. The CCI opined that since a formal application for the sanctioning of WSH was not made either to HI/FIH and even the power to approve WSH was not with HI, therefore the present case could not be a misuse of the regulatory powers granted to HI. Further, since the bye-laws and rules applied prospectively, there was no denial of market access to the players.

A common factor in both orders is the reliance placed on the constitution documents, bye-laws and internal rules laid for governance and regulation, of each BCCI and HI. The MoA of the BCCI provided for "control" of the game of cricket in India while the same was absent in the HI's documents. In our opinion, this could have formed one of the key causes for the difference in the orders given by the CCI.

These orders have added another dimension to the sports laws in India by examining the role of the sports bodies from competition aspects. The latest controversy in the pyramidal structured world of sport is the Indian Badminton League which concluded earlier this year. The core issue of dispute related to cancellation of the slot of women's doubles and the introduction of an extra round for men's singles into the league. While presently, this does not appear to be a competition issue, given the rules and the league structure of the game, the looming of a controversy cannot be ruled out.

Disclaimer - The views expressed in this article are the personal views of the authors and are purely informative in nature.