The UEFA Champions League reform: a barometer of the regulation of the competitive balance of sport under European Union law

Pierre-Benoît Drancourt, diplômé du Master Droit économique et ancien Rédacteur en chef de la Revue, et Stanislas Julien-Steffens, Rédacteur en chef de la Revue et étudiant au sein du Master Droit économique. 

Any club or player involved in such a competition would as a consequence not be allowed to participate in any competition organised by FIFA or their respective confederation.”[1] In a statement published at the end of January 2021, the President of the International Football Federation (Fédération Internationale de Football Association (FIFA)), Gianni Infantino, and the presidents of the six confederations that make up FIFA, issued a clear warning to players who would decide to participate in “a competition,” whose project has caused controversy in 2020 in the football governing bodies but also among football fans: the Super League.

The idea of the so-called European Super League, a version of the current Champions League of the Union of European Football Associations (Union des Associations Européennes de Football (UEFA), where access to the competition would be guaranteed for certain football clubs and no longer conditioned by their sporting results, as is currently the case, was reactivated by Andrea Agnelli, the Chairman of the Juventus FC and of the European Club Association, at a summit in March 2020.[2] The UEFA Champions League, the annual competition bringing together the best football clubs in Europe, is organized by UEFA. UEFA is one of the six-member confederations of FIFA. It is the second largest with 55 full member associations and the first in terms of turnover.

In an interview given in August 2020, Aleksander Čeferin, the UEFA President, reacted to this Super League project and said that “the lack of competitive balance in the European game threatened to eventually ‘kill football’ if left unchecked, and dismissed the idea of a closed ‘Super League’ as ‘boring’.”[3] These statements were in line with those made at the beginning of his term of office as UEFA President, when he indicated that “the biggest challenge over the next few years” on UEFA’s agenda would be precisely “competitive balance.”[4]

The competitive balance can be defined as a measure of the intensity of sporting rivalry. This balance has always been at the heart of the tension between, on the one hand, sports club owners who want to keep their best players and, on the other hand, players who want to go to a club offering better salary and/or sporting prospects. As such, competitive balance can be defined as “the balance of competitiveness among the participants of a sports contest.”[5]

If Aleksander Čeferin has strongly criticized the Super League project, as envisaged by the chairmen of some of Europe’s most reputable European clubs, he is nonetheless open to the idea of reforming the UEFA Champions League rules.

At the beginning of February 2021, the sport press provided massive coverage to a reform project that could be adopted as early as March 2021 at a UEFA Executive Committee meeting and come into effect as of the 2024-2025 season.  The main changes in the organization of the competition brought about by this reform would be the number of qualified teams. It would increase from 32 to 36 and the first round, which now consists of pools, would be replaced by a form of championship between clubs.

This reform raises an “equity issue” in several respects.[6] First, teams would be ranked after having played ten games, even though they would not all have played against the same opponents. Second, access to the competition would be reviewed and would allow UEFA to re-qualify two non-qualified teams on the basis of results in their national championships, relying on the UEFA-coefficient of these teams. This would be advantageous for the big clubs of the main European championships that benefit from a better UEFA coefficient as the UEFA coefficient is based in part on the trophies these teams won in the past.

The UEFA Champions League reform project, like the Super League project, because they aim to reform the access of European football clubs to the most prestigious European competition, directly impact the competitive balance in European football and, more broadly, of the European sports system. Therefore, the question arises as to what extent European Union (EU) law can be used to regulate these projects with a view to preserving the competitive balance within the European sports system.

(i) The growing consideration for the competitive balance in sport under EU law through the conditional autonomy granted to sporting bodies

 

The 2007 European Commission’s White Paper on Sport (2007 White Paper) defined the “specificity of sport” as “the need […] to preserve a competitive balance between clubs taking part in the same competition”. Although its provisions are non-binding, the 2007 White Paper was the first text from an EU institution to state that the « specificity » of sport can be « accommodated within the interpretation and application of EU internal market.”[7]

The adoption of the Treaty of Lisbon, which came into force in December 2009, brought the field of sport into the conferred competences of the EU. This is expressly provided for in Article 6(e) of the Treaty on the Functioning of the EU (TFEU) and further elaborated in TFEU Article 165. This article enshrines the “specific nature of sport” into EU law.[8] Although the term “competitive balance” does not appear in Article 165, this article anchors in EU law the approach initially adopted by the 2007 White Paper to address sports issues in the EU Sports System: the “conditional autonomy of the lex sportiva under EU law.”[9]

The approach adopted under EU law has thus allowed for autonomy to be granted to sports federations. It is however not absolute but conditional, thus preventing the establishment of complete self-regulation of the EU sports system by European sports federations.

The powers of European institutions also remain limited in terms of sports regulation. The main limit of the regulation of the competitive balance of sport is precisely that, under Article 6 of the TFEU, the field of sport belongs only to the “supporting competences” of the EU. This implies that the EU can “only intervene to support, coordinate, or complement the action of EU countries[10] in the regulation of sport in general and football in particular.  Thus, the EU has the competence to adopt “incentive measures concerning sporting bodies, without having the possibility to regulate them through binding legislative standards.”[11]

 

(ii) The halftone regulation of the competitive balance of the European football system through the implementation of Financial Fair Play

 

Financial Fair Play (FFP) refers to the rules set out by UEFA, and implemented since the 2011-2012 season to “impose a break-even requirement[12]  in order to improve the overall financial health of European football clubs.

In 2010, asked about the compliance of FFP’s rationale with the EU’s action in the European Parliament, former European Commissioner for Internal Market and Services Michel Barnier answered in the affirmative, insisting that these new rules seemed to him to be “promoting fairness in sporting competitions.”[13] As the preservation of the competitive balance can be defined as a measure of the intensity of sporting rivalry and that was one of the objectives of the 2007 White Paper, one can assume that the term “fairness,” used by Commissioner Barnier, encompasses the issues of the competitive balance. That is however not in line with the implementation of the FFP, since its inception in 2011, and its effects.

 

Because of the current conditional autonomy of sporting bodies under EU law, the FFP tends not to be subject to the rules of competition law and to have the effect of “protecting already well-established clubs from potential new market entrants capable of providing fresh competition.”[14] It has a direct impact on the competitive balance of European football competitions, as “[u]nder a break-even principle, the clubs that earn more will ultimately always have more to spend.”[15]

Since the establishment of the FFP in 2011, only five clubs (i.e., Chelsea FC and Liverpool FC one time, Bayern Munich and FC Barcelona twice and Real Madrid four times) from three national championships have won the last ten editions of the UEFA Champions League. In the previous 54 editions, 21 clubs from ten different championships had won the Champions League. The 2019 edition of the Champions League was the culmination of this competitive imbalance, as it was the first time in the history of the competition that the teams qualified for the round of 16 were from only five European championships.[16]

The implementation of the FFP is controlled by the UEFA Club Financial Control Body (CFCB), whose measures and sanctions may only be appealed before the Court of Arbitration of Sport (CAS). On 13 July 2020, the CAS annulled the two-year suspension, pronounced in by the CFCB February, of Manchester City from all European competitions for having infringed the FFP.[17] This arbitral sentence will have negative consequences on the future functioning of the FFP. In fact, in this decision, the CAS reversed the burden of proof by stating that it was up to the CFCB to prove violations of the FFP.[18] This will make future CFCB investigations and rulings even more complicated. The decision of the CAS raises questions as, according to the German magazine Der Spiegel, Manchester City lied during these proceedings before the CAS.[19]

However, it is important to keep in mind that UEFA’s objective in implementing the FFP was precisely not to establish a competitive balance between clubs but to adopt “an initiative to curtail spending, and link it to income made, making thus spending sustainable in the medium run at least,” whilst “some dominant soccer clubs” were facing situations of over-indebtedness.[20] Thus, while the implementation of FFP has produced “considerable results in terms of financial stability for clubs,” FFP’s effects have not “directly addressed the competitive balance issue.”[21]

(iii) Insufficient consideration of the preservation of the competitive balance in the debates on the UEFA Champions League reforms

 

Although the direct authority of EU institutions on the regulation of sport remains limited, the UEFA Champions League reforms must nevertheless be analyzed in light of EU competition law. Indeed, FIFA has threatened to expel players who would participate in the Super League format. European jurisprudence is clear. This type of threat can be analyzed the light of competition law because it is an undertaking’s behavior.

In the words of Advocate General Poiares Maduro, the “submission of an entity to Community competition law is subject to its qualification as an undertaking.”[22] The terms of Advocate General Poiares Maduro are unequivocal. There is no application of competition law without an undertaking. The European treaties were and remain silent on the definition of this concept.[23] In fact, the casuistry of the Court of Justice of the European Communities (CJEC) has not defined this criterion of application without difficulty.[24] In the Höfner decision, the CJEC adopted a purely functional meaning: “an undertaking is considered to be any entity, irrespective of its legal status, which carries on an economic activity.” Economic activity refers to “an activity of production, distribution and service.”[25]

This criterion developed by the Luxembourg Court is deliberately flexible. This flexibility authorizes the Commission to introduce an active competition policy through this stigma. European competition law is becoming a variable-geometry law that establishes and safeguards the internal market and its various objectives. From the point of view of the EU’s competition policy, it is the main means of achieving the internal market, promoting competitiveness, growth and mobility for both businesses and consumers.[26]

It is essential to determine whether UEFA or FIFA can be regarded as an undertaking within the meaning of competition law.

In 2017, the European Commission had to decide whether an international sports federation like International Skating Union (ISU) could be regarded as a company in the light of Article 101 TFEU.[27]

The Commission considered that “the ISU is an association of undertakings within the meaning of Article 101 TFEU. It engages in economic activity insofar as it conducts commercial activities related to the organisation and commercial exploitation of international speed skating events. Specifically, the ISU is an association that is composed of individual national associations which administer speed skating and conduct economic activity at the national level. Since the Members themselves qualify as undertakings, the ISU is an association of undertakings within the meaning of Article 101(1) TFEU.”

 

In this case, the ISU had threatened skaters with life suspension if they competed in a private competition in Dubai. The petitioners had brought the case before the European Commission, claiming that this prohibition constituted an undertaking agreement and was a restriction by object[28] and effect[29] in light of Article 101 TFEU.

The 2014 and 2016 ISU eligibility rules restricted the opportunities for professional speed skaters to participate freely in international speed skating events organized by third parties and therefore deprived potential organizers of speed skating events of the athletes who were necessary to organize these competitions.

In Meca-Medina’s case, the CJEU ruled that the rules of eligibility for a competition, when they are issued by undertakings within the meaning of Article 101 TFEU, generally fall within the scope of the application of competition law.[30] However, the CJEU also considered that eligibility rules may escape the application of Article 101 TFEU in certain circumstances. It is necessary, for that purpose, to consider “(i) the overall context in which the rules have been made or are having their effects and, in particular, their objectives, (ii) whether the resulting restrictive effects on competition are inherent in the pursuit of those objectives, and (iii) whether they are proportionate to those objectives.[31]

 

In the case of the ISU, the European Commission did not retain this exception and considered that the ISU rules essentially violated competition law because the lifetime exclusion was disproportionate.

Could the analysis made by the European Commission in this case apply to the exclusion threats made by FIFA?

Firstly, it is clear that FIFA has to be considered as an undertaking in the light of ISU’s case criteria.

Second, it would be legitimate to consider that the exclusion of football players from all international competitions could amount to a restriction by object of competition of the organization of football competitions in light of Article 101 TFEU.

Against all expectations, the European Commission announced at the beginning of February 2021 that it could support FIFA against the creation of a Super League.[32] At first glance, one could think that the European Commission has changed its position with regard to the market power of international federations. Some elements justify the European Commission’s opinion.

From a legal point of view, the European Commission could apply the criteria established by the CJEU in the Meca-Medina case and consider that the eligibility rules should not be subject to competition law. Unlike in the ISU case, the Commission could also recognize that the company cartel falls within the framework of the exemptions recognized in Article 101 al.3 TFEU.

This opt-out clause allows companies to enter into an undertaking’s agreement within the meaning of Article 101 al. 1 TFEU “which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives (a) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question (b).”

In a proactive way, the competition’s regulator could analyze eligibility rules like an undertaking agreement, which contributes to promoting economic progress and sports competition. This element demonstrates a variable-geometry approach. Actually, the European Commission does not defend a pure competition between economic actors. It is trying to strike a balance between economic interests and sports interests. In this potential case, we are facing a perfect antagonism between football undertakings like major football clubs and sportive general interest.

In the ISU case, the main problem was that speed skaters were in financial difficulty because it is a low-profile sport with no significant financial returns. Football is radically different because TV rights are currently valued at 4.9 billion euros per year worldwide. It has been shown that such a project would increase the income differentials between small clubs that cannot participate in the UEFA project and large and powerful clubs that will directly benefit from this new environment.

Conclusion

Because the European Commission is the guardian of the general interest in the EU, but also the interests of citizens and small enterprises, it must take into account their interests in its policy action. It is the main goal of the EU competition policy. It is an offshoot of the regulator’s ordo-liberal approach. Thus, it seems fundamental to oversee the European commission approach; it could be the main guardian of an ethic and regulated football with a geostrategic interpretation of competition law.

In order to address or even redress more effectively the competitive balance in the EU sports system, an option could be the integration of sport into the shared competences of the European Union, in the sense of TFEU Article 4, to allow EU institutions to adopt binding regulatory frameworks aimed at further harmonizing the conditional autonomy granted to sporting bodies. However, at present, this prospect seems to be more of a utopia than a concrete possibility. In the meantime, the fact that Andrea Agnelli, one of the main defenders of the Super League, has given his support to the UEFA Champions League reform project[33] tends to worry, especially many fan groups that fear that this reform will have a lasting effect on the competitive balance of European football[34] and will therefore be the first step towards the inevitable establishment of this Super League.

But while waiting, perhaps in vain, for the European Commission’s legal response, the response to the Super League project has so far been on the pitch. Indeed, Juventus FC, the club presided by Andrea Agnelli, has been eliminated from the UEFA Champions League in the last three seasons by three teams not included in the Super League project: Ajax Amsterdam, Olympique Lyonnais and, last week, FC Porto. This reminds us that the beauty of football’s competitive balance is precisely that it does not always tip in the direction of the strongest.

[1] FIFA, “Statement by FIFA and the six confederations,” 21 January 2021: https://www.fifa.com/who-we-are/news/statement-by-fifa-and-the-six-confederations.

[2] The Independent, “Juventus chief Andrea Agnelli drops latest hint over plans for European Super League,” 5 March 2020: https://www.independent.co.uk/sport/football/european/european-super-league-champions-juventus-andrea-agnelli-roma-a9377766.html.

[3] RFI, “’Any Super League will become boring’ – UEFA chief Ceferin ready to take fight back to elite clubs,” 13 August 2020: https://www.rfi.fr/en/wires/20200813-any-super-league-will-become-boring-uefa-chief-ceferin-ready-take-fight-back-elite-cl.

[4] Inside World Football, “Ceferin puts ‘competitive balance’ top of UEFA agenda,” 5 September 2017: http://www.insideworldfootball.com/2017/09/05/ceferin-puts-competitive-balance-top-uefa-agenda/.

[5] O. Budzinski, T. Pawlowski, “The behavioural economics of competitive balance: Implications for league policy and championship management,” Ilmenau Economics Discussion Papers, No. 89, 2014, p. 3.

[6] J. Guyon, Le Monde, « Réforme de la Ligue des champions : avantages et inconvénients du ‘championnat incomplet’ » (in English: “Champions League reform: advantages and disadvantages of the ‘incomplete championship’”), 13 février 2021: https://www.lemonde.fr/sport/article/2021/02/13/reforme-de-la-ligue-des-champions-avantages-et-inconvenients-du-championnat-incomplet_6069847_3242.html (Free translation from French, in the original text : « Un problème d’équité »).

[7] S. Weatherill, Principles and Practice in EU Sports Law, Oxford European Union Law Library, 2017, p. 138.

[8] Id., p. 140.

[9] Id., p. 148.

[10] EUR-Lex, “Division of competences within the European Union,” last update 26.01.2016: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=LEGISSUM%3Aai0020.

[11] Id.

[12] S. Weatherhill, op. cit., p. 270.

[13] Quoted in. Id., p. 277.

[14] Id., p. 274.

[15] D. Plumley, G. M. Ramchandani, R. Wilson, “The unintended consequence of Financial Fair Play: An examination of competitive balance across five European football leagues,” Sport, Business and Management: An International Journal, Vol. 9 No. 2, 2019, p. 130.

[16] L’Équipe, « Jamais la Ligue des champions n’avait été aussi fermée » (in English: “Never before has the Champions League been so closed.”), 12 December 2019, http://lequipe.fr/Football/Actualites/Jamais-la-ligue-des-champions-n-avait-ete-aussi-fermee/1089397.

[17] CAS 2020/A/6785 Manchester City FC c. UEFA, 13 July 2020.

[18] Id., Point 272, p. 75.

[19] Der Spiegel, « Interne Mails stellen Zeugenaussagen infrage » (in English: « Internal mails question testimonies »), 30 July 2020: https://www.spiegel.de/sport/cas-urteil-zu-manchester-city-interne-mails-stellen-zeugenaussagen-in-frage-a-9ce67020-5f9e-4c3b-b307-cc855f04c0c7.

[20] P. C. Mavroidis, “All Quiet in the Western (European Football) Front: Regulation of Football in the European Continent,” Paper No. RSCAS 2018/26, Robert Schuman Centre for Advanced Studies Research, June 2018, p. 10.

[21] European Commission, Final Report to the DG Education, Youth, Culture and Sport of the European Commission, An update on change drivers and economic and legal implications of transfers of players, March 2018, p. 56.

[22] M. Poiares Maduro, Conclusions, 10 November 2005, in Fenin a/ Commission, C-205/03 P.

[23] L. Arcelin-Lécuyer, « La notion d’entreprise en droit interne et communautaire de la concurrence », Juris-Classeur concurrence consommation, Fascicule n° 35, 1, 2014.

[24] ECJ, 12 July 1984, Hydrotherm v. Compact, aff. 170/83, ECR p. 2999; JCP E, 1985, 14267, obs. G. Bonet and J.-B. Blaise; CJEC, 27 September 1988, Ahlström v. Commission [Wood pulp], joined cases 89/85 and others, ECR, p. 5193; RTD eur. 1989, p. 341, note by L. Idot; JCP 1990, II. 21429, note by M.-C. Boutard-Labarde, L. Vogel; F.-C. Jeantet, « Regard sur l’action de la CEE dans la police de la concurrence internationale », JCP, 1990, I. 3426; T. Christoforou, « Le champ d’application territorial du droit communautaire de la concurrence : l’arrêt ‘Pâte de bois’ », Rev. aff. eur., 1990, 5; TPIEC, 10 March 1992, aff. jtes T-68/89, T-77/89 and T-78/89, Società Italiano Vetro SpA v. Commission: Rec., CJEC 1992, II, p. 1403; Contrats, conc. consom. 1992, comm. 82, obs. L. Vogel; JCP E, 1993, I, 208, p. 31, obs. Ch. Gavalda, G. Parléani; RAE, 1992, No. 3, p. 114, obs. J.-B. Blaise, C. Robi.

[25] CJEC, 23 April 1991, Höfner and Elser, aff. C-41/90, Rec., I, p. 1979.

[26] A. Müller-Armack, “The Social Market Economy as an Economic and Social order,” Review of Social Economy, Vol. 36, n°3, 1978, pp. 325-331: “In this model, the State is the explicit guarantor of the economic and social order, the former being based on liberalism, which requires a State with strong authority in the regulatory field. This willingness to reconcile seemingly contradictory elements may appear to be the major innovative essence of the social market economy. De facto, it must be a regulator and not an operator in an economic market.

[27] European Commission, Case AT.40208, 8 December 2017, International Skating Union’s Eligibility Rules.

[28] The European Commission defines restriction by object as whose: “which in light of the objectives pursued by the Community competition rules have such a high potential of negative effects on competition that it is unnecessary for the purposes of applying Article [101(1) TFEU] to demonstrate any actual effects on the market” as they have by their very nature the potential of restricting competition.

[29] A restriction by effect requires the European Commission to demonstrate the effects of the anti-competitive practice on the relevant markets.

[30] CJEU, David Meca-Medina and Igor Majcen, 18 July 2006, Case C-519/04 P.

[31] Ibid.

[32] Politico, “Brussels steers clear of legal battle over European football ‘super league’,” 8 February 2021: https://www.politico.eu/article/brussels-steers-clear-of-legal-battle-over-european-football-super-league/.

[33] The Guardian, “Andrea Agnelli says agreement on ‘ideal’ new-look Champions League is close,” 8 March 2021: https://www.theguardian.com/football/2021/mar/08/andrea-agnelli-champions-league-reforms-premier-league.

[34] Deutsche Welle, “Fans oppose Champions League reforms as new 36-team ‘Swiss model’ edges closer,” 13 March 2021: https://www.dw.com/en/fans-oppose-champions-league-reforms-as-new-36-team-swiss-model-edges-closer/a-56854354.  

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