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When Law, Football and Broadcasting Collide A Legal Perspective on the interplay between Football and Broadcasting By Daniel Geey

A Dissertation submitted in partial fulfilment of the requirements of Manchester Metropolitan University for the degree of Master of Laws


MASTER OF LAWS When Law, Football and Broadcasting Collide A Legal Perspective on the interplay between Football and Broadcasting

By Daniel Geey 16/07/2004

Broadcasting rights have been and still are, big business in Europe. The advent of the Champions League has brought with it a huge pot gold, furnished with many lucrative deals aimed at making more money for the elite clubs of Europe. Yet recent events such as the slump in advertising revenues in the media generally, coupled with high profile failings of some of Europe's largest media groups (ITV Digital, ISL and KirchSport) have all demonstrated that sport whilst it is a money making commodity, falls emphatically inside the realm of various legal authorities. Broadcasters in tapping into the public's passions and pockets have been able to reap large rewards for televising premium sporting events. To this degree, the Re Premier League Ltd case in 1999, brought by the OFT, contrasts with the majority of rulings on main land Europe, about the question of ownership of television rights for certain games. In the KNVB v Feyenoord, (2000) for instance, it was held that the individual club owned the rights to exploit the commercial opportunities for home matches, To this extent my prime motivation in this paper is to chart the past and present challenges that have faced broadcasters, clubs and league authorities alike, over recent times. This paper will analyse and question the incremental approach that has taken place towards football regulation, Legal challenges have forced sporting associations to change existing policies, with the threat intervention should the reforms not be carried out. It may be that sport is special, yet it cannot be granted blanket immunity from national and European law. It seems that a balanced approach to

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regulation is to be envisaged. This examination of the extent to which competing national and European legal and political requirements can be reconciled, is illustrated, along with an insight into public interest exemptions to competition law. In the current climate, it remains to be seen whether the existing Premier League rules in England would pass by unchallenged in the European Courts or by the Commission. To this degree, further analysis is necessary to illustrate the balance between the process whereby anti-competitive practices are denounced, and the retention of a system that has worked effectively in the past.

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Introduction Chapter 1: Literature Review Chapter 2: Monopolies and Mergers Report on the Proposed Takeover of Manchester United by BSkyB Chapter 3: The Restrictive Practices Court Decision concerning The Premier League and its Incumbent Broadcasters Chapter 4: The TvDanmark Case Chapter 5: Analysis of the Themes emanating from the Case Studies Introduction Market Definition Exclusivity Listing of Events Chapter 6: Conclusion

8 13


39 54 62 62 75 79 95 104

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This dissertation could not have happened without the help of my tutor Mark James. His constant help, ideas, comments, and constructive criticism have all been vital in planning, and completing this work. Many of the ideas and comments that are set out, are the culmination of brainstorming sessions between the two of us, though I take full responsibility for any mistakes, errors or omissions! Many thanks must also go to others. I am so be grateful to David Conn for giving me his time and opinions especially, whose `Football Business' book has become my football bible, and whose comments on collectivity and redistribution were vital in forming many of my initial ideas. Professor Szymanski at UCL, was also kind enough to be devils advocate on a number of taxing points including the legalities of collective and exclusive agreements. Adam Brown at Manchester Metropolitan University, for his insight into the world of toeholds and Football Taskforces. Jonathan Taylor of Hammonds Suddards Edge, for allowing me a preview of his recently published `Sports Law' book, as well as his perceptive commentary into the TvDanmark case and helpful comparisons between US and European perspectives on sports regulation. Luis Morcillo, of Ashurst, for his knowledge of the TvDanmark case and Torben Toft, the principal administrator of the DGIV, Competition Commission in Brussels, for his practical advice in dealing with the legalities of exclusivity clauses on a European wide basis. I would also like to thank my family, especially my mum, for trying to stay as interested and as enthusiastic as possible, and my dad, for his notorious red pen!

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This is dedicated to my late Grandparents Amy and Sol. `What's worth having is worth working for.' x

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Monopolies and Mergers Commission Report into the Proposed Merger between BSkyB Group plc and Manchester United Football Club plc (Cm 4305, 1999) Re: F.A. Premier League Ltd. Agreement Relating to the Supply of Services Facilitating the Broadcast of Premier League Football Matches (Restrictive Practices Court, 28th July, 1999) Regina v Independent Television Commission, Ex parte TVDanmark 1 Ltd [2001] W.L.R. 1604 [2001] UKHL 42 Case IV/36 033 KNVB/Sport7 [1996] O.J C2228/4

The Sports Broadcasting Act, 15 USCA ss 1291-1294 (2000) (America), Section 31 GWB, BRDr, 852/2/97 (Germany) Broadcasting Act 1996 Article 81 and 82 of the European Treaty Restrictive Trade Practices Act 1976 Fair Trading Act 1973

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Broadcasting and sport are now hugely synonymous with each other, each fulfilling a mutually beneficial goal. Television's money has transformed the football industry especially in the post 1992 era of Premier League football in Britain, whilst in turn sport's popularity has jettisoned BSkyB's satellite subscription services to new profit levels. In terms of British football, European and world stars have been attracted to the Premier League, increasing the global attraction of the League as the most popular in the world. However this money flowing into football has come at a cost. In Britain issues such as terrestrial television's right to screen important live national events has been called into question1, as has the ability of a leading broadcaster to purchase a top football club2; whilst the very essence of how the Premier League as an organisational entity conducts its commercial affairs has been recently challenged3. These issues form the backbone of this piece of work, At stake is the future pathway that sport and its closest, but most tenuous ally; television, must tread carefully. The aim of this piece of work is to highlight a number of conflicting approaches to regulation in the football industry. Football authorities have been at pains to defend and advance their broadcasting capabilities. The overall effect has been to create a number of decisions, which whilst strengthening the position of the authorities in some jurisdictions, have also subverted and undermined the autonomy of rights holders in other Member State countries. These are the effects that the maintenance of exclusivity clauses have brought, compared to the inhibiting effects on rights holders of the Television without Frontiers Directive (TWFD). All three case studies will draw out the potential for conflict within the UK and European regulatory frameworks, The aim of this dissertation is to demonstrate out of the main three stakeholders in football, namely the broadcasters, fans and clubs, who has benefited most significantly. The emphasis of this paper has evolved quite significantly from the outset. The research questions that were originally posed concerned European and national disparities in the field of broadcasting rights. Yet as this piece of writing took shape its emphasis switched to a more domestic approach towards broadcasting regulation in the UK. The three case studies highlighted

See Chapter 4 concerning the TvDanmark case and Chapter 5 analysing the repercussions of the


See Chapter 2 concerning the Monopolies and Mergers Commission Report into the proposed

takeover of Manchester United by BSkyB, and Chapter 5 discussing the legalities of the Report.

See Chapter 3 concerning the Restrictive Practices Court case involving the Premier League,

BSkyB and the BBC, in an action brought by the Office of Fair Trading (OFT), and Chapter 5 assessing the ramifications of the decision. 10889848 v1 8

the different ways intervention into the same area of law is possible, through various commissions and courts. This ultimately created a new set of questions surrounding the adequacy of the regulatory framework in the UK to deal with various distinct facets of broadcasting conflict.
A National and European Sphere

An important theme running throughout this dissertation is the attention that has not been afforded to consumers, whilst decisions that ultimately affect them are made without any constructive consultation4. Football fans supposedly give their tacit consent to the status quo by continuing to support their club. A recurring complaint throughout football supporters organisations and football pressure groups including the Football Taskforce was that those who put the most into football (i.e. fans through their support) receive the least in return. This irony is not lost when one considers that the regulatory bodies that were supposed to be defending consumer interests brought the RPC case and the recent Premier League and Champions League investigations, yet were generally without public backing5. Ironically, these are the bodies, which were supposed to defend consumer welfare yet consumers were at best ambivalent towards the challenge and at worst (especially in the RPC case) highly critical of the action. This then begs the question namely what was the rationale for the investigations taking place, and what were the aims of the enquiries. It could be questioned whether these investigations were actually to protect the interests of clubs, or conversely to advance notions of free market deregulation. Whatever the objectives of the various actions, it should be come clear that consumers' interests have not been given the highest priority when football matters have been considered by various football organisations and committee's. Although the challenges have not had much public support from supporters groups, the aim of this dissertation is to assess the reason for the lack of such support and whether more backing in the future needs to be canvassed to give such investigations and enquiries greater credibility and legitimacy. Such care is needed because accusations of illegality in the sporting sector are now becoming more commonplace in the post Bosman era, where sport and the law are becoming increasingly intertwined. Television's hold over football is in itself a contentious issue. Games commencing on Saturday mornings or Monday evenings, have lead many to label the League as a new `Americanised' sport in order that television can recoup the best advertising revenues through prime time catchment television audiences. Its effect has caused major fragmentation of the

For example, television deals, season ticket prices, replica kit prices, or a voice on how the game

should be run in the future.


Not only do the supporters groups then not have a say in the running and organisation of the game,

but also ironically the authorities are investigating into areas that they do not feel is worthy or necessary of investigation and are not of regulatory importance. 10889848 v1 9

traditional Saturday afternoon fixture list. In terms of legality, an issue of importance throughout this dissertation is the ability of Member States to `blackout' just over two hours per weekend of televised live football in order to maintain a (somewhat) comprehensive list of games6. This affords lower leagues the financial protection of larger crowds because popular matches cannot be viewed at certain times. In football aiming to fight back against potential broadcasting encroachment, it remains to the seen how much power the football and regulatory authorities have in order to curtail television's incessant need for greater football coverage on television.
The Case Studies

In examining three specific case studies, many constant themes run through this dissertation. These include notions of anti-competitive behaviour, dilemmas over free-to-air broadcasts, whilst also stressing the conceptual problems of collectivity and exclusivity7. Collectivity is the term used to embody a group of clubs acting together in forming a league, playing in competitions and negotiating as one entity in commercial and television deals. It is the last part of this definition, which has raised and continues to raise much consternation and concern for regulatory bodies. This is due to the accusation that the Premier League, acts as a cartel. Many commentators view the Premier League in this way. For example, the league limits the amount of live games and maximises revenues because it is a monopoly supplier. Others however, counter this label by arguing that the League needs to be organised in this way in order to efficiently manage the twenty competing clubs. The Restrictive Practices Court decision8 (RPC) and the Monopolies and Mergers Commission decision9 (MMC) especially, add great weight to the debate surrounding collective agreements and the possible consequences if certain restrictions were to be outlawed. In the light of these rulings it may be possible to conclude whether the collective selling of rights is in the best interests of the clubs, broadcasters or supporters. Equally, exclusivity is the means by which a broadcaster can effectively guarantee large audiences for a popular product. By paying an exclusivity premium, consumers can only view a selected event through one medium. This enables a satellite broadcaster to coax subscribers into paying money with the enticement of programming unavailable elsewhere. In turn this is extremely beneficial to the rights holder (i.e. the Premier League) because it can maximise

See Chapter 5 for a closer examination of the debate surrounding whether lower league football

clubs should be afforded protection against Premier League teams having live games broadcast at 3pm on a Saturday afternoon.

These issued are thoroughly analysed in Chapter 5. In Chapter 3. In Chapter 2. 10

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revenue potential, because of the exclusivity premium broadcasters pay. To this end, whether notions of exclusivity and collectivity can be reconciled with aiding consumer choice, whilst increasing competition in the broadcasting market become pertinent questions. At present, with the European Commission investigation into how the Premier League sells its rights, and its recent conclusion10, it seems necessary to question whether the two competing concepts of consumer welfare and broadcaster dominance are immiscible. There is no more pertinent an illustration of the clash between football and the regulatory authorities than the proposed takeover of Manchester United by BSkyB in 1999. Issues such as collective agreements and exclusive television contracts ran through the heart of the decision by the Monopolies and Mergers Commission, as they had to potentially theorise numerous solutions over any potential future television deal. This was because of the simultaneous timing of the RPC case which ran parallel to the Commission's own investigation11. At face value, the proposed takeover illustrated the importance that broadcasters have more recently attached to football and as importantly, the significance to football of the largest British broadcaster trying to buy the most dominant English football team of the 1990's. In order to consolidate its position in the broadcasting and football industries, it is worthy of further enquiry to assess why ownership of Manchester United was of such strategic importance to BSkyB. The broadcaster's plan and the consequences of the two industries being dominated by one swollen organisation, demonstrate the necessity of further investigation into the Commission's enquiry and its potential knock-on effects for both broadcasting and football markets12. Since 1992, Premier League football has not been viewed live on terrestrial television. BSkyB, whose presence in the broadcasting markets can be witnessed throughout this piece of work, have paid huge amounts to enable live games to be screened by paying through pay-television subscriptions only. This has left many wary of the growing threat of subscription broadcasters paying exorbitant fees to entice rights holders, in order to guarantee large audiences, because of the popularity of certain events. As a matter of contention, the Courts have dealt with a particular


After negotiations with the Commission ending in late June 2003, the Premier League decided

against giving a single broadcaster blanket exclusivity on live Premier League games. Instead, a number of differentiated packaged live games will be on offer from the 2004/5 season.

It is interesting to note that at no time did the Restrictive Practices Court or the Monopolies and

Mergers Commission jointly investigate any common themes, like the notions of collectivity, exclusivity, or market definition. As will be assessed later, there are major discrepancies especially in the market definitions given by the two regulatory authorities, of the British football market. Such a disparity may complicate any future investigations.

Further elucidation apart from the analysis in Chapter 2 is given in Chapter 5 under the Toeholds

subsection. 10889848 v1 11

case. The TvDanmark case was brought to assess whether events of national importance should be protected from pay-television broadcasters13 Ultimately this paper will try to theorise as to whether such protection is warranted or unwarranted. The question will be asked whether European legislation is unduly restricting the rights of pay-television broadcasters, or whether it safeguards the European citizens' right to view certain events. In contrasting this decision with other legal challenges concerning the listing of national events it may be possible to decipher whether in relative terms, it is better for the consumer, or broadcaster to be favoured by the regulatory authorities.
Conflict or Consensus?

There can be little doubt that broadcasters have had a hugely influential role to play over coverage dictation due to their huge fiscal input. It is therefore of little surprise that in broadcasters' dealings with sporting authorities and governing bodies, matters have ended up in the courts14. Interestingly, the three cases have all taken different forms and shapes, ranging from exclusivity clauses and cartel accusations, to the ownership of football clubs and the legality of listed events. The outcomes of the three cases have determined the future roles of the key players within the sporting industry. As recently as June 2003 and as a result of recent Commission consultation with the Premier League, the way future Premier League matches will be purchased and viewed will change irrevocably15. All of these issues will be covered in detail in order to come to a conclusive conclusion over these past legal disputes and to speculate as to future potential conflict.


The TvDanmark case is assessed in Chapter 4 along with a discussion of the wider debate

surrounding the listing of events in the European context in Chapter 5.


The only more recent broadcasting case that has not been dealt with here is the fall-out of the

OnDigital fiasco and the legal proceedings that ensued. Apart from this case, the three case studies are the most significant decisions involving sport and broadcasting in the United Kingdom in the past five years.

The Premier League tender document for the next broadcasting deal commencing in 200415

season, has been altered to allow now four packages of live Premier League football. This can be contrasted from previous deals from 1992 onwards that only allowed one broadcaster (BSkyB). 10889848 v1 12

Chapter 1: Literature Review*

The literature review is divided into a number of sections in order to illustrate the differing problems facing sports associations, football clubs, broadcasting companies and legal institutions alike. The cases and subsequent academic debate indicate television's growing hold on sport and on football in particular. Many current dilemmas are interlinked, such as the need for competitive balance between clubs and the inherent sporting interest to try and maintain some kind of sustained equality. The necessity to preserve the fundamental need for uncertainty of results between teams is analysed, along with divergent perspectives on sport's role within the European Union embracing both economic and socio-cultural perspectives.
Collectivity and Exclusivity

Two of the main areas of discussion permeating this paper are the notions of collective selling and exclusivity. Nitsche points out that collective selling has always been seen as a a kind of economic prerequisite benefiting sports associations16 and in turn assists the game, due to greater flows of money which leads to better players, facilities and more exciting games. One can deduce that it minimises the risk involved to all parties concerned. Limiting supply extracts a higher price for the league while exclusivity clauses, which usually go hand-in-hand with collective selling, gives one broadcaster a unique product. Access to the later is restricted, increasing demand and subscription and/or pay-per-view (PPV) revenues. Brink examines whether it is in the interests of the fan for clubs to be able to negotiate individual contracts. If contracts were negotiated on a club-by-club basis, it would have the result of clubs like Manchester United and others becoming more dominant and clubs less equal in both wealth and playing terms. One wonders whether it is a lesser evil to maintain the current system because all the other alternatives are so unpalatable. Unlike the British decisions which are analysed in the case studies, one maybe sceptical at best about the possibility that this logic would hold sway with the Commission and the ECJ. This may be so due to the ECJ's reliance on the principles of proportionality and weighting. Thus, a court's decision must be weighed against the anti-

the exclusive right to televise live games. This change has been made at the behest of the European

Commission, who were anxious that the broadcasting market not be foreclosed and therefore not allowing dominant broadcasters to potentially abuse their market. There will no longer be an exclusive Premier League television contract.

Nitsche, Collective Marketing of Broadcasting Rights: [2000] E.C.L.R. p209 13

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competitive effects of the breach, and a conclusion reached as to whether the aims could not be attained in a less restrictive way17. The economic reality is that supply of football games generally is restricted through collective selling. Brink points to the KNVB case in Holland as evidence of a league driving up prices, whilst the process being zero-sum in nature, with the winner taking all. In effect the buyer gets all or nothing.18 Competition law is trying to protect consumers and producers from a situation where the seller is in a powerful, monopoly situation (e.g. the Premier League). Brink finds ambiguity in the jurisprudence of different European Member State jurisdictions. For example, the RPC favours collective selling, because of the fear that competitive balance would be lost, whilst Dutch, German and Italian courts have favoured an individual broadcasting rights approach. In taking an historical viewpoint, one would argue that the adverse effects of collective selling were not apparent until recently because of the dearth of competition in the television market. In times past, the European Broadcasting Union (EBU) ironically acted as a legitimate cartel in securing broadcasting rights to major events at less than their market price. Only with the advent of subscription television and more recently PPV, has the market value of these rights been realised. Against this backdrop, Bishop and Oldale in their analysis, conclusively point to three complete misconceptions the Office of Fair Trading in its investigation into how the Premier League functions on an economic level19. In the Premier League Case, the OFT was defeated in its quest to rule illegal the way the twenty Premier League clubs sold their television rights collectively. The OFT presumed three untruths. Firstly, that consumers benefited from numerous competing sellers (of television rights, i.e. the clubs) rather than one (the Premier League). Second that as a monopolist, the Premier League could restrict output of televised games to maximise the price of the television contract. And lastly, that the exclusivity clause was anti-competitive, and restricted competition between other broadcasters. On all three counts, the RPC in taking a closer analysis of the true market conditions refuted these charges. Szymanski and Parlesca however cite the negative economic effects of the collective selling arrangement. Their main theme is that liberalisation in the broadcasting market has not been mirrored by that of the owners of those rights. As a result they contend that the clubs are still effectively acting as a cartel to restrict output in order to increase potential revenues. In the


Nitsche, Collective, 209 Van den Brink: E.C Competition Law and the Regulation of Football: Part l:[2000] ECLR 361 Bishop and Oldale, Sports Rights: The Premier League Football Case [2000] E.C.L.R. p185 14



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specific instance of the Premier League case, they seem critical of the reasoning of the Restrictive Practices Court (RPC). They deem that collective selling increases media concentration, hampers competition between broadcasters, and reduces consumer choice.20 They both question the logic of the PRC in deciding that the English league was best served by its current system of collective selling, by asking whether such a system is indispensable. ...[I]t is no defence of a restrictive practice to argue that if the restriction is withdrawn the parties will refuse to seek out some reasonable and less restrictive alternative.21 However, one could point to the fact that in the past the bigger clubs have not, and may not in the future, be willing to share with the less fortunate clubs any increases in revenue. Indeed, one could ask whether they should share their individually negotiated deal? Thus to many it may seem unlikely that if collective selling is abolished, any other system would be able to the job of redistribution as well. It brings fairness of distribution that cannot be replicated.22 Still it must be acknowledged that in Italy specifically, the solidarity fund argument debated above was not a sufficient argument to justify the competitive restrictions for collective selling23. Parlesca and Szymanski also claim on a number of counts that the current system is distorting the market to the disadvantage of the consumer/supporter. Collective selling reduces consumer choice, as consumers are restricted as to the games they can watch, and are exploited because they have to pay monopoly prices to watch premium football (especially in Germany and England), On the demand side too, they argue that there is an unsatisfied market for more live television games as in many cases only a small percentage of league games are broadcast live (most notably in the English Premier League24). In terms of the suppliers, it impedes market


Szymanski, S and Parlesca, S, When the whole is less than the sum of the parts: The negative

effects of central marketing of football television rights on fans, media concentration and small clubs [2000] p1

Szymanski, S, Collective selling of broadcast rights to sporting events, A paper presented at a

Hearing of the European Parliament on Collective Selling of Broadcast Rights, Brussels, 31st May 2001 p5

Rick Parry, Liverpool FC in the Global Football Age in Williams, John, Hopkins, Stephen, and Long,

Cathy, Passing Rhythms: Liverpool FC and the Transformation of Football, (Oxford: Berg, 2001) p224

Szymanski, Collective, 10 Before the renegotiated contract signed in 2001 between the Premier League and BSkyB, only 60


of the 360 games were shown live, and only a third of games in Germany up until 2001. 10889848 v1 15

access to small companies, due to the usual exclusivity provisions negotiated in such contracts meaning that only one, established broadcasting company, can successfully win the live broadcasting rights. In another analysis, Brink investigates whether the individual marketing of broadcasting rights, would have a detrimental effect on smaller league clubs25. In essence, his concerns may be well justified, especially if few solutions can be found to solve such a predicament. One plan that the author advocates is a type of solidarity fund, into which all clubs pay a premium of their percentage of their television rights It would remain to be seen whether this could be a realistic and viable proposition however. Brink assesses that the proposed takeover of Manchester United by BSkyB, would have led to the first instance of vertical integration between a virtual monopoly supplier of live Premier League football (BSkyB) and the most profitable and successful British football club in the last ten years (Manchester United). He interestingly compares other European countries more liberal approach to broadcasting companies buying into football clubs. Examples such as the Italian premier and media magnate Silvio Berlusconi's controlling interest in AC Milan, and Canal Plus' ownership of Paris St. Germain, illustrate closer links between the two industries on the continent than at home26. Since the MMC decision to throw out BSkyB's proposed takeover, many have felt that media and broadcasting companies have found an alternative way to exert influence within football clubs. One idea of a `toehold' i.e. when a company buys a relatively small amount of shares in a football club (around 10%) in order to benefit from ever-closer relationships with the club. Strategically it means, that the company with the toehold will be more aggressive in the bidding stakes because ultimately part of that inflated bid will come back to it by virtue of its shareholding27. This is very much to the disadvantage of competing broadcasters, and is viewed by the Binmore as a way to exert disproportionate influence. Ultimately its net result may well be to distort the sale of football television rights as much as the wholesale takeover of Manchester United would have done.28


Brink, Football, 363 See Chapter 5 on the subject of Toeholds for further explanation. Harabard and Binmore: Toeholds, Takeovers and Football: [2000] ECLR p142 Harabard, Toeholds, 144 16




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Brinkman and Vollebryt define three inherent problems facing competition authorities29. Firstly it is not always apparent who owns the actual television rights. Rulings in different Member State countries have varied, with some jurisdictions siding with the clubs and others with individual Leagues. Second, is the restrictive quality of the exclusive contract. The Commission has been critical of such agreements if the scope and duration of the contract is excessive. Hence a sevenyear exclusive contract was deemed anticompetitive in the Sport 7 case30. Lastly, it is difficult to define the relevant market for football broadcasting, hence the terrestrial market for football highlights is different from live football games on a subscription based service. In economics terms, the degree of substitutability between programmes and markets can vary quite considerably. As a result, future challenges to the football industry from a legal perspective may be difficult to determine because of the problems cited above. Another obstacle may be the sociocultural reasons as to why sport should be afforded special status.
Competition Law

For clubs to maximise their revenue streams, it is deemed necessary to sell the broadcasting rights on a collective and exclusive basis. Such practices may be caught under Article 81 of the European Treaty if a broadcasting agreement has the object or effect of preventing, restricting or distorting competition. In this instance it may be that only larger media groups would be able to purchase these rights because of the cost, leaving many broadcasters unable to obtain any rights because the package is an exclusive deal31. In the longer term consumers may have fewer broadcasters to choose from because exclusivity has lead to a concentration of a few major television broadcasters32. This in turn could lead to barriers to entry for infant broadcasting companies. Therefore, depending upon the length of the exclusive contract, prevention, restriction or distortion could come in the form of a vertical agreement between an organisational body i.e. UEFA or the Premier League and the exclusive broadcaster. This is why the Commission has been keeping a watchful eye on the length of the exclusive deals that are being negotiated. If auctions for these highly sought after exclusive rights only take place sporadically, it may leave many broadcasters without any premium football content for a considerable length of time.


Brinkman and Vollebryt: The Marketing of Sport and its Relation to E.C Competition Law: [2000]

E.C.L.R. p281

European Commission Report 1997, p.122 Michael Beloff, Tim Kerr, and Marie Demetriou, Sports Law, (Hart Publishing: London, 1999) p145 Simon Gardiner, Sports Law, (Cavendish Publishing: London 2001) p398 17



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Brink looks at Competition Laws relationship with the regulation of football33. His main thoughts concern the possible break away of Europe's elite clubs to form a European Super League. He claims that the ever widening wealth gap between the minority top clubs and the majority of league clubs will manifest itself in a reduction of footballs most attractive characteristic; unpredictability. This polarisation of football with its top clubs taking most of the cream has worrying consequences for the long-term health of football.

David Conn was of the opinion that there are worrying parallels between the unregulated European football leagues, and a future European competition in which the top clubs have absolute control over how revenues are distributed34. It has therefore been the role of the Commission and the ECJ to provide a necessary counterbalance to combat European football Associations restrictive and anti-competitive practices in a relatively unregulated industry. His emphasis on how football has been literally stripped apart because of the industry's quest for money, Similarly he argues that self-regulation in football has lead to clubs governing their affairs for own selfinterest. Conn analyses how the drift toward television consumption operates to the detriment of the lower league clubs and speculates as to whether football has reached its saturation point. To certain economists including Szymanski, the strongest survive, and whim of the market will determine success. As a result, consolidation35 takes place, whereby the football sector shrinks to the number of businesses it can economically, not emotionally support. There are worrying parallels between the introduction of the Premier League, and any kind of proposed inception of a European Super League. It has ramifications for the dismantling of any kind competitive balance and relative equality between clubs within the domestic and European setting. The wider the monetary divide, the more perilous the position may become.


Brink, Football, 370 Appendix: Interview Conn F Dempsey, Paul, and Reilly, K, Big Money, Beautiful Game, (Nicholas Brealey Publishing: London,



1998) p23. 10889848 v1 18

Competitive Balance

Nitsche notes that relationships in the football arena between clubs are mutually beneficial, and not competitive in the sense that one competitor wishes to acquire monopoly status over others36. There needs to be a level of reciprocity, so that rivalries continue, and clubs are not driven out of business. This stems from the presumption that clubs unlike traditional businesses need to maintain competition. A football club cannot survive on its own and needs other competing clubs. Brink stresses that uncertainty of outcome is paramount to football's current and future appeal, and because of this it may be in the interest of healthy competition to protect the weakest competitors.37 Clubs are therefore in a unique and paradoxical position of wanting to further their own aims whilst also maintaining collective success for the league. Indeed Nitsche points to the Restrictive Practices Court decision and the MMC decision, to illustrate that measures to maintain the balance between clubs are legitimate and possibly even mandatory under competition law.38 To this extent, it can be seen that the two British decisions were based on the premise that protection of the football industry was a crucial and overriding factor. If it is the principal aim of competition law to protect the consumer, it is surely against the interests of fans for football to be dominated by a minority of super rich clubs and a handful of broadcasters exploiting the television rights. Kuypers and Szymanski illustrate that the main way to maintain any kind of outcome uncertainty be it, match, seasonal or long term in nature, is to have a system of competitive balance within the league39. This has traditionally taken the form of collective selling agreements. Interestingly, they try to analyse why in their view there has been a decrease in the competitive balance within the European leagues generally. The overall consensus is that the earning power of the largest clubs has grown disproportionately compared to the majority of clubs in the league. This has manifested itself in different forms but has been heavily shaped by reputation, fan base, and television coverage40.


Nitsche, Collective, 211 Brink, Football, 420 Brink, Football, 359 Szymanski, Stefan, and Kuypers, Tim Winners and Losers: The Business Strategy of Football




(London: Viking 1999) p256


Szymanski, Winners, p264 19

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Foster makes an important distinction in terms of revenue redistribution. He stresses the tension between the effects of vertical and horizontal solidarity41, namely whether money is reallocated to the elites alone, or whether there is a mechanism for a wider form of apportionment throughout the whole game, Brink too indicates that imposing cross-subsidising regulations on football clubs distorts the operation of the free market. In this sense, there is an underlying tension between competition laws aims of liberalisation and football's need for some kind of protectionist policy. To this extent it could be questioned whether competition law can protect and further football's aims and not simply those of the free market. Unless a fund was somehow legally entrenched, there would be little likelihood of acceptance of any other form of redistribution. This comes at a time when the larger clubs are pressing for more money from UEFA, and discussing the `inevitability of a Super League, which would further paralyse footballs lower league clubs. Kuypers and Szymanski illustrate that in the past, any lack of competitive imbalance has been controlled by the use of wage caps, gate revenue and television sharing, but most if not all have been phased out as a consequence of the larger clubs insistence on wanting to keep a significant share of the pot. US measures such as player drafts, merchandising revenue sharing, and anti-trust exemptions all prevent the wealthier clubs dominating competitions. This does not happen in Europe. To this extent, Kuypers and Szymanski point to a re-modification of competitive balance and outcome uncertainty. It will simply mean the top teams in each European country becoming more competitive with each other, to the detriment of the rest of their `national' league competitors. Interestingly, Brink tries to find avenues to justify potential breaches by footballs authorities by citing ancillary restrictions within Article 81. Hence there may be some constraints that are imperative to the existence of competition, if they have potentially beneficial effects on competition.42 It would remain to be seen as to whether it would be the fans or the broadcasters that would benefit more. Hence in this specific instance Brink questions whether a scheme to deliver balance between football clubs would be a legitimate use of an ancillary restriction, and thus necessary in order to achieve the goal of preserving the sporting balance in football.


Foster, Professional, p57 Brink, Football, 421 20


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Socio-Cultural Perspectives

Fosters main focus is on how the traditional environment of sports associations autonomy has been irrevocably eroded. He analyses how a whole new slipstream of potential legal and regulatory intervention is emerging due to Competition Law's renewed activism in certain sporting practices. In essence, Bosman and its aftermath brought to the fore many questions that had been effectively silenced up until then. New topics like sports federations positions as natural monopolies, and leagues acting in collusive ways, began to be brought to the attention of the Commission. Foster makes the comparison between the US, to illustrate how in America, the courts have used statutory exemptions to shield national sports from antitrust regulations. Even the most optimistic advocate of European sports inherent non-economic qualities would not envisage the broad immunity 43 that US sports are afforded. To this extent, one could question whether an exemption sportif'44 could be a practical solution to Europe's sporting conundrum. The Commission seems to be drawing a certain distinction between two types of sporting practice, in terms of how they conflict with European dictates45. Karel Van Mert in 199746 described two situations in which sport and the law has relevance. If sport fosters positive integration via educational and cultural benefits for vast populations, it seems that the EU will not look to regulate such activity. On the other hand, if sport is fulfilling an almost absolute economic purpose, it must fall in line with European regulation. The problem, as assessed by Weatherill is that such distinctions are easy in theory to make, but highly contentious in practical terms. Weatherill draws on the Declaration on Sport attached to the Amsterdam Treaty to illustrate how vague notions about the desire to protect sport are difficult to convert into operational norms in the face of clear cut vigour of the basic EC Treaty freedoms.47 This is a hard logic to refute. In essence what justifications can be given to give sport some kind of legal immunity? One of the principle questions that the Commission and perhaps ultimately the ECJ need concern themselves


Foster, Ken, Can sport be Regulated by Europe? An analysis of Alternative Models in Caiger,

Andrew, and Gardiner, Simon (eds) Professional Sport in the EU: Regulation and Re-Regulation, (The Hague: Asser Press:2000) p55

Foster, Professional, p56 see IP/99/133 of February 24th 1999 Weatherill, Resisting, 163 21




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with, is whether the perceived benefits of sport in general, (and of collective selling and exclusivity specifically,) outweigh the adverse effects on competition? Weatherill looks to the Helsinki Report hinting that Europe may use its power to exempt restrictive practices as a way of promoting the social and educational function of sport, as a stipulation for allowing collective selling to take place. Thus any form of collusive agreement which is not in the better interest of the Community at large would run the very real risk of surrendering any kind of collective agreement48. This type of moral clause could be a way of giving more back to the grass roots of sport whilst also maintaining sports economic attractiveness to advertisers, sponsors and broadcasters alike. Parrish however is wary as to how the EU through its sports policy is keen to foster European solidarity, and Community identity. He seems at pains to emphasise sports function as a medium to counter social externalities such as poverty and crime. He illustrates the two entrenched camps in Europe, one that is staunchly regulatory, legalistic and economic in approach, and the other which emphasises the need to balance legal intrusion with explaining sports unique socio-cultural aspects. It is this tension that the author questions and asks whether such policy polarisation can indeed be reconciled. A good example of the conflicting approach the EU has taken to broadcasting is encapsulated in the Television Without Frontiers Directive. This does provide evidence of a protectionist approach, which Europe has taken in order to retain key sporting events on terrestrial television whilst also trying to use Competition law to liberalise many aspects of football industry's relationship with television. This friction between two European policy ideals has already caused conflict in the TvDanmark case49. Whilst the Weatherill is at pains to stress the legal ramifications of rampant commercialism in sport, he is scathing of the short sightedness of some clubs in pursuing commercialisation without adequate respect for the nature and purpose of sport in society.50 Hence sports role as a social unifier and promoter of healthy competition and fair play is being exploited by many in sport as an adequate cover from legitimate legal rules. It means the balancing game between legitimate sporting exemption and genuine economic activity is sometimes a hard distinction to make. Even more so if such decisions are to the detriment of the consumer/fan.


Weatherill, Resisting, 160 see Chapter 4. Weatherill, Resisting, p178 22



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The next chapter links closely with many of the topics that have been discussed in the literature review. The Monopolies and Mergers Report brings together notions of wealth polarisation, conflicts over football club ownership, disparities between national and European economic theory, whilst Chapter 5 assesses why the decision was taken to block the proposed takeover bid.
Methodology of the Case Studies

The original idea for this paper was to delve into comparative approaches across Europe in order to contrast various decisions, which would have repercussions Europe-wide. However, the research that was consequently undertaken led to a narrower focus and dealt with issues which the British regulatory authorities in their different guises had found it necessary to rule upon. In the event, what emerged instead, were three distinct case studies with separate characteristics based primarily on the domestic sphere of English regulatory control. Although this was inadvertent, the research illuminated various avenues which opened up the prospect of further exploration, the effect of which was that, it was not necessary for the main body of the paper to go beyond certain British decisions. This resulted in a deeper insight into three highly contentious and topical domestic decisions. Only after dealing with them thoroughly would it be possible to contrast these decisions with the recent proposals by the Commission into the future trajectory of football broadcasting in Britain. These next three chapters were written completely separately from each other. At the time they were written, there was not the intention to find such linkages between the subject matter contained in the case studies that were later found. Therefore the original idea was to examine the three separate cases in isolation, with football and broadcasting being the only constant theme. The original objective was to come up with three distinct conclusions and try to find similar threads of symmetry between them, to arrive at a unified ending. But as the analysis chapter began to take shape, it became clear that all three became intertwined in the same debate concerning broadcaster/consumer conflict and the recent sporadic need for intervention from various regulatory sources. As it is clear that all three case studies are highly relevant to the same debate, it was first suggested that the case studies should therefore be linked together from the outset. But by interlinking the next chapters, it would be in a sense betraying my methodology as the linkages only became apparent as the unifying ideas came together in the analysis chapter. Therefore, it is felt better to offer retrospective linkage in Chapter 5 rather than connect these three case studies together, when at the time, it was felt that there was not enough symmetry to justify such a connection

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Chapter 2: Monopolies and Mergers Report on the Proposed Takeover of Manchester United by BSkyB51 Introduction

On the ninth of September 1998 Manchester United's Plc board accepted what BSkyB initially considered to be a straightforward takeover bid. Little did either company envisage the controversy that would ensue. BSkyB, and its parent company News International, under the auspices of Rupert Murdoch was seen not as the saviour of British football by many (in contrast to the inauguration of the Premier League, and subsequent exclusive BSkyB television rights in 1992), but the villain who would ultimately do only ham to the wider football fraternity. The battleground was the forum of the Monopolies and Mergers Commission (MMC) where the two parties contested numerous assumptions made by various organisations and supporter groups. The overall Report by the MMC was over 260 pages long and canvassed views from almost every facet of British football. It collated opinions right across the spectrum from Premier League football clubs, to media companies, supporter associations, and local councils. Whether or not the merger was in the public interest was part of the Commissions remit and as a result one of the most diverse and comprehensive canvassing of opinions took place. This was against the backdrop of almost universal condemnation at the proposed takeover from all but the Premier League clubs and (significantly) some journalists at the Times newspaper. This review will be split up into six segments and will deal with a number of differing issues that the Commission thought pertinent, These issues related to the correct market definition for BSkyB and for Manchester United, the reasons given by the two companies in support of the merger, the public interest issues which included a full range of consequences (bearing in mind the Restrictive Practices Court case) whether the merger should proceed, the effect the merger might have on competition, and the knock-on effects on consumers and the wider football industry, as well as the remedies that could prove a check on any anti-competitive effects of the proposed merger.


The continuing uncertainty throughout the MMC report should be stressed due to the outcome of

the RPC case being unknown. Both investigations and judgments were occurring almost simultaneously. 10889848 v1 24

The Relevant Law

The Secretary of State Peter Mandelson, on the 29th of October 1998, referred the proposed acquisition of Manchester United by BSkyB to the MMC. The statutory grounds for the reference were made under sections 64, 69(2) and 75(1) of the Fair Trading Act 1973. The MMC were required to report scrutinise and report back on various aspects regarding the merger, with specific remit as to whether the takeover would operate in the public interest.
The Nature and Definition of the Two Companies' Relevant Markets

The primary concern of the Commission, as set out in the early part of the Report was the problem that BSkyB and Manchester United (if taken over) would occupy a large crossover segment of the sports broadcasting service content (playing the football matches) and provision market (production for television). The Commission concluded that the main tie between both organisations was the sale of television rights52. This was the link between the worlds of football and broadcasting, and, significantly meant that is was possible to increase market share as a result of the take-over, whilst in effect holding a monopoly position in relation to access to Manchester United. An even greater cause for concern would be whether the two dominant companies from interconnected markets, could consolidate their own respective financial futures in a mutually beneficial manner, via for example, the individual selling of rights, by the most popularly supported club in the Premier League. In competition law the main tool for market definition is the notion of substitutability, which questions how readily alternative products can be substituted for one another, Hence there were two divergent markets that the Commission had to investigate. It was necessary to assess whether Sky was part of a wider television market, which included terrestrial broadcasters, or constrained to a narrower pay-television definition, and whether Manchester United was part of the leisure services industry or more restricted to the market for Premier League football. Manchester United and BSkyB argued that the wider definitions applied. In BSkyB's case if it was concluded that the terrestrial television market was to be in the same relevant market place, it would significantly dilute its alleged dominant position in the television market, as account would have to be taken of all terrestrial broadcasters53.


Monopolies and Mergers Commission Report into the Proposed Merger between BSkyB Group plc

and Manchester United Football Club plc (Cm 4305, 1999) section 2.9

In Chapter 5, analysis is undertaken to come to a comprehensive conclusion concerning the correct

market definition for Premier League football, in comparing other European jurisdictions judgements and decisions. 10889848 v1 25

In terms of the broadcasting market, which BSkyB operated in, it was decided that the company was active in the supply of rights, programmes, channels and the distribution and retailing of the channels54. It was suggested by the Commission that terrestrial television was at two major disadvantages when competing with premium Sky channels. First, channels such as ITV or BBC1 were identified as having capacity constraints55 to the extent that they have to show a broad range of divergent shows, documentaries, news broadcasts, and soap operas. Sky Sports for example, has no such restraints, and can devote many more hours of programming time that could justify the huge outlay to secure exclusive rights to premium sporting content. The second difference is the continuing ability of premium channels to charge direct subscriptions for their service. In the past this had the effect of making sports events extremely valuable. BSkyB contested these assumptions arguing that terrestrial television had the overall capacity to show 60 live games per season, and that ITV recently outbid BSkyB for the Champions League rights56. The Commission however came to the conclusion that free-to-air television and pay television were not ready made competitors. This was because the BBC could rarely broadcast attractive rights. This was the case in 1996 (and 2001) when no terrestrial channel competed against any pay television channel. It was decided that terrestrial broadcasting was a complementary rather than substitutable good, because in order to purchase any additional subscription based service, a customer would have to buy a television set and a licence, and only then become a potential subscriber. The pay television market and the free-to-air markets were correctly deemed separate, and as a result the relevant broadcasting market was narrowly deemed to be the pay television sports premium channels57. In defining the market for Manchester United, the Commission considered that there was a problem differentiating between the market for live games at a stadium and watching them live, through television broadcasts58. It was also argued that there was no substitute for watching live games at the stadium, and as a result each club was in effect a monopolist in their own market59. Even more troubling was that regardless of whether there was substitutability between the two forms of watching Manchester United live, BSkyB would be the ultimate monopoly supplier of both forms of Uniteds live output. In the football market, could the definition of Uniteds relevant market be designated as the leisure services industry or more narrowly assessed as the


MMC Report 2.5 MMC Report 2.27 MMC Report 2.28 MMC Report 2.51 MMC Report 2.21 MMC Report 2.18 26






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market for Premier League matches? Indeed the leisure market was seen as a very poor substitute because if prices rose by over ten percent60, it would not dissuade many fans from watching United play on a Saturday afternoon (or Sunday, Monday or Saturday morning).
Reasons Supporting the Merger

There were obvious benefits for both parties of the proposed takeover. BSkyB were at pains to stress that they wanted to branch out into the realm of owning content61 as an avenue to maximise their current and continuing role as programme makers. There were however other more strategic reasons why purchasing United would have made business sense. There were three very compelling defensive reasons advanced by BSkyB as to why they acted to takeover United. It is however significant that these reasons were played down at later hearings62. First, if the RPC held that collective selling was illegal, BSkyB would be in a much more precarious position, because its dominant role in terms of exclusive rights to the Premier League would vanish over night. To this extent, BSkyB could build a solid UK base around which a compelling soccer package could be built in almost all conceivable scenarios. 63 Secondly the acquisition of a football club would be buying a seat at the UK negotiating table.64 The third defensive reason was that in the event of a European Super League, it would be well placed to deal with other interested media and football parties throughout Europe65. These three main reasons formed the rationale for BSkyBs takeover proposal alongside the more obvious fact that football was and remains the leading sport in the European television markets.


Which is the economic test for substitutability of a good. Nicholas Finney, The MMCs inquiry into BSkyBs merger with Manchester United Plc, in Football in


the Digital Age, Who's Game is it Anyway, eds., Sean Hamil, Christine Oughton and Steven Warby (London: Mainstream 2000) p75

MMC Report 2.77 MMC Report 2.75 (d) MMC Report 2.75 (e)



Such ramifications are discussed in detail when the issues surrounding the effect of the merger on competition in various markets is discussed in Chapter 5, but if one club is able to guarantee its vote to BSkyB in rights negotiations, it places other broadcasters at a serious disadvantage.

MMC Report 2.75 (f) 27

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United saw the takeover as a great opportunity to be part of a vast and highly resourced company. It was seen by many on the board as a logical step towards an increasingly successful football club which could provide for the main British broadcaster the knowledge, expertise and capital, whilst simultaneously sustaining the clubs growing prosperity and dominance on the football field.
Public Interest Issues

These issues fall into two categories. The first relate to the ramifications of the merger and the resulting competition for television rights. This issue was complicated by the uncertainty about the outcome of the RPC case. In all, there were four possible results each of which was analysed in order to gauge their effects on competition between broadcasters. The second category was concerned with the possible effects on consumers/fans and football in general.
Effects of the Merger on the Competition for Television Rights


The Effect of Existing Selling Arrangements

The first scenario that the Commission envisaged was the conclusion by the RPC that collective selling was legitimate, and the present merger was the only one to take place. BSkyB would become the controller of television rights to United games. The Commission was wary of this as it could potentially create significant advantages in the competition for rights over other broadcasters. The two most telling consequences of BSkyBs takeover would be their inside influence which would assist the company to persuade other members of the Premier League to support the sale of future broadcasting rights to it66. No other broadcaster would have such influence and position of strength. Moreover, it would also mean that BSkyB would have a seat at both sides of the negotiating table67. In defending such a situation the two companies stressed that United would only have one vote and that in any event, the Premier League designed the voting system so that no one club could have an overriding influence over the outcome of negotiations. Whereas United and BSkyB denied that such a situation would give it an unfair advantage in the market, NTL, a cable operator, explained to the Commission that one of its reasons for wanting to acquire Newcastle United was the desire to have direct influence on Premier League decisions, and advance the


MMC Report 2.87 This is a major advantage as BSkyB as a broadcaster and the potential owner of Manchester


United would be negotiating with itself, and as importantly have access to information that no other broadcaster would be privy to, manifesting in a clear advantage to BSkyB. 10889848 v1 28

cause for the individual selling of League rights68. This argument was strengthened by the Commissions belief that there would be plenty of opportunity to exert influence before the start of formal negotiations. As a result, Sky's position as the incumbent broadcaster together with its strong reputation, would enable it to promote the strengths of its bid whilst emphasising the weaknesses in the bids of other potential broadcasters. It would clearly be in a position that no other broadcaster could occupy69. To an even larger degree, the Commission rejected the two companies for their analysis of the voting structure, as it underestimates the importance of a committed vote70. Hence in the vote for a new rights contract, 14 votes are needed for agreement and 7 for a veto. It means a bidder who owns a club begins with 7% of the vote needed to win or 14% needed to veto the bid. Any potential competitor would have no such vested advantage. There were three other main issues that the Commission saw as problematic to BSkyBs dual role as owner of United and of Britain's premier premium sports broadcaster. Primarily, BSkyB would be able to obtain privileged information about the selling of broadcasting rights that would not be available to any competing bidders. To this extent, BSkyB would not only have a seat at both sides of the negotiating table, but would be in the position of having a continuous flow of information to use to its benefit. In rebuffing the insistence by the two companies that they would have little competitive advantage in terms of information gathering, the Commission rationalised that, if Sky had the opportunity to obtain relevant information not available to its competitors, it would be in its commercial interests to ensure it got this information.71 In any commercial situation, if a company can gain an advantage over its competitors it would seem inconceivable that it would not exploit such a position. The second topic concerned the notion of toeholds. As described in the literature review, it is a situation in which a company buys a relatively small share in another company. A problem arises where the two companies are connected in a particular way. In the football industry this has


MMC Report 2.90 MMC Report 2.94 MMC Report 2.96 MMC Report 2.105 29




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arisen when a broadcaster has bought less than 10% of a football club, as an investment. However the motives for media companies may also be strategic in nature72. To this extent, all competing bidders cannot be in an identical situation, as the bidder who has the toehold can bid more aggressively because a certain percentage of the bid will return to the bidder in the form of their ownership stake. This advantage is compounded by the operation of the winner's curse.73 Such a situation occurs when there is some uncertainty about the value of the rights being bid for. As a result, if the other companies know that the bidder with the ownership stake can afford to pay more (due to some of the money being returned to it through its share holding), a bidder without the ownership stake who wins an auction may have in fact paid a sum above the value of the rights in order to secure the rights package. The more likely outcome is that the bidder with the ownership stake will usually win an auction simply because its competitors will be wary of paying an inflated price, and bid more cautiously. The Commission felt that although it would not be a major advantage to BSkyB it would expect it to gain some benefit in the overall rights-selling process.74 The final problem that the Commission envisaged was the situation where if BSkyB lost the rights to the Premier League in any future rights auction. If one of BSkyBs reasons was to secure the worlds richest club in order to exploit its television rights, it would seem plausible that it would simply not agree to allow any competitor to screen Uniteds games. Even more worrying would be the situation of simple withdrawal from the Premier League. In essence any paternalistic notions of maintaining footballs traditional structures of league competition would not be uppermost in BSkyBs thinking. It may be in the commercial interest of the company to withdraw, if there were potentially more lucrative deals involving a European Super League. if the club were owned by Sky it would be that broadcast considerations rather than football club considerations might dominate.75


Adam Brown in an interview 1 conducted with him (Appendix: Brown Interview A) assessed that it

would take BSkyB many years to recoup the initial investment in United. In stock market terms, 623 million for a company that had a turnover of 90 million in 1998 and a 25 million profit margin was a dubious high amount for simply investment purposes. He concludes that it should be viewed primarily as a strategic purchase to gain control of Uniteds television rights.

MMC Report 2.107 MMC Report 2.117 Finney, MMC, 76 30



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Other fall back options for BSkyB included destroying the collective selling arrangements. If it lost out on the collective rights, BSkyB could decide to cover United exclusively and refuse access to any other broadcaster, thereby paving the way for a legal battle or perhaps for individual rights packages to surface in the Premier League. To BSkyB this could be seen as a viable way to maximise Uniteds television revenue by individual selling and pay-per-view. Far from being detrimental to United, it would almost certainly increase its television revenue, because it would no longer need to share with the rest of the Premier League76. The ultimate threat of withdrawal from the Premier League by United seemed unlikely, but not inconceivable.77 Fellow broadcasters expressed concern that there would be a significant risk in that if Sky were not to win future rights auctions and the merger went ahead; Sky would press for individually negotiated television deals78. The Commission came to the conclusion that taken together, United's influence in the Premier League, BSkyB's potential advantage in being able to access information, the toehold situation, and BSkyB's fall back options may expect to significantly improve Sky's chances of securing Premier League rights,79 and it would therefore not be in the public interest for one broadcaster to play such a large role in British Premier League football. (b) Individual Selling and Single Merger

The second model that the Commission looked at was based on the decision by the RPC that collective selling was illegal and that individual selling was more proportionate, whilst the BSkyB Manchester United deal remained the only merger in the industry.


The average viewing of the Premier League on Sky when United are playing is 33% higher than an

average Premier League game. Adam Brown and Andy Walsh in Not for Sale, Manchester United, Murdock and the Defeat of BSkyB, (London: Mainstream 1999) p132

Finney, MMC, 76

This quote taken from one of the Commission members illustrates the potential for conflict if BSkyB were to fail in it bid for the collective Premier League package.

MMC Report 2.127 MMC Report 2.40 31


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The main concern expressed by many parties would be that a free-for-all would occur with numerous broadcasters wishing to televise Premier League games in which each tried to negotiate individually with different clubs. In essence clubs like Manchester United, Arsenal, Liverpool and Newcastle among others, would be able to extract a much higher price for their television rights than the collectively negotiated agreement, by which money is shared on the basis of league position and television appearances. Indeed within the Report, the Commission acknowledged that through an investigation by Spectrum Strategy Consultants, United in particular, would be considerably better financial position if they were able to sell their rights individually80. The Commission came up with two main reasons to explain why such a situation would benefit BSkyB81. The company would be at an advantage because no one else would be able bid for the rights for United. As a result, BSkyB would be the only potential broadcaster that would theoretically be able to include all Premier League games in one package. No other broadcaster would be in such an advantageous position. Thus the company would create the nucleus of a package to which all clubs would gravitate.82 This `magnet effect' whereby other clubs would wish to be associated with BSkyB and United in any future television rights package, was an attractive proposition. Quite interestingly BSkyB claimed that it was not improbable that the company would sell the rights to United to another broadcaster, although this seems wholly fallacious (as BSkyB would have the most popular product in the Premier League). Indeed it was widely assumed that the main reason for acquiring United was to give it exclusive control and use of Uniteds hugely popular and relatively untapped television rights. The Commission asserted that BSkyBs claim that they would potentially be willing to sell Uniteds rights to a competitor, contradicted previous statements made by the company. In this scenario too, the Commission decided that the merger would give BSkyB an advantage from which they would benefit but which would also be to the detriment to other broadcasters thereby leading to reduced competition for the individual rights of Premiership clubs (c) Existing Selling Arrangements and Multiple Mergers

This situation would occur if the current collective selling arrangements were deemed legal by the RPC, and the current takeover precipitated other takeover bids by broadcasters who wished to


MMC Report 2.146 MMC Report 2.150 (a) and (b) MMC Report 2.151 32



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own football clubs. It is worthy of note also that NTL, a cable broadcaster was contemplating a bid for Newcastle United, and was waiting for the outcome of the current investigation before deciding whether to launch a formal bid. If both broadcasters became owners of the two clubs, the advantages of information, toeholds (in terms of the auction process) and fallback positions emphasised above would become pertinent. These distortions would potentially manifest themselves to a greater degree because there would then be two broadcasters taking advantage over their competitors, which could in turn lead to a reduction in competition in the broadcasting market for television rights. Such a problem would only worsen if other broadcasters considered that they were losing out in the auction process and in turn decided that their only option would be to buy into football clubs, in an attempt to secure some rights. This would place the collective agreement in danger because broadcasting rivals would be unwilling to permit their club's images being broadcast on a competitor's station. The resulting potential stalemate could increase the possibility of individually negotiated rights. Consequently the Commission found that in this scenario, competition between broadcasters would be weakened, because each could potentially own a number of clubs and be unwilling to relinquish the rights. In this sense competition in the market for collective rights would be virtually meaningless, unless some sort of agreement could be hatched between the broadcasters, although such a plan could run the risk of being deemed anti-competitive itself83. (d) New Selling Arrangements and Multiple Mergers

This final situation for consideration would occur where the RPC viewed collective arrangements as illegal, and the takeover bid had the effect of encouraging other broadcasters to invest in football clubs. As illustrated above, a single merger could result in a domino effect of many other mergers taking place. Hence the strategic buying of clubs in the interest of broadcasters in order to safeguard certain rights, may not have the effect of furthering the ambitions of the individual club, but would represent a means to permanently secure valuable property rights.


MMC Report 2.165

It would remain to be seen whether if multiple broadcasters owned multiple clubs, the collective agreement could still be a viable model for broadcasting Premier League games. It would seem unlikely however because various broadcasters would have vested interests in different clubs. The end result would be to stifle competition because if BSkyB for example owned Manchester United but United games were being broadcast by a rival competitor, it may defeat the reason why BSkyB bought United in the first place. As a result, it would seem that BSkyB would not let such a situation happen, thus stifling competition within the market. 10889848 v1 33

It could have the effect of destabilising the Premier League in that the voting mechanism of the League would have to be restructured in order to take account of competing vested interests. The effect of such a predicament would almost certainly lead to individual selling, as little or no agreement could realistically be anticipated, unless matches could be exchanged between different broadcasters84. As a result, no broadcaster would be able to consolidate a position as the dominant broadcaster and thus an oligopolistic market would take shape with a small number of broadcasters owning clubs. Competition would be severely weakened as the allocation of rights would tend to reflect club ownership rather than most efficient use.85 Consequently this dual situation would reduce competition due to the fact that multiple mergers would take place whilst fair competition for the rights would be hindered because of the ownership stakes in a number, if not all, of the clubs.
Effects on Football



One of the chief concerns that many football supporters groups argued, was that if access to United was exclusively regulated by BSkyB, there would be little chance of a competitive market for football clubs. Hence if Sky owned both forms of viewing, it would be possible to optimise both sources of revenue to maximise local monopoly rent.86 It was therefore submitted that at the present time although United operated in a highly successful commercial way, the company still had strong links with the local community. This was clearly a mutually beneficial process of investment in Manchester area reciprocated with additional fan support for United. If BSkyB were able to takeover United, it was claimed that the club would no longer have such an affiliation with its surrounding area. BSkyB would have little obligation to its local community because the main reason for Uniteds acquisition was purely commercial in nature. The overall fear was that because BSkyB would have complete access to United, it would stifle competition among other broadcasters. United would also be used to serve other aspects of the News International empire. It was speculated that this could take the form of altered kick-off times to suit the emerging Asian markets viewed by Murdock as the next untapped revenue stream for the company. The Commission however was quick to assess that due to television's rising investment in football, it was somewhat inevitable that television dictated the kick-off times to suit prime time audiences. Although this may be the case, the Commission felt that


MMC Report 2.167 MMC Report 2.169 MMC Report 1.191 34



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scheduling preferences of the broadcasters would sometimes conflict with that of travelling supporters. It will clearly be detrimental to the interests of fans if broadcasters get their way.87 The supporter clubs particularly, were keen to stress that football supporters possessed a unique and quite intangible quality of (usually) unwavering support. The model of football fans loyalties is far beyond any usual product affiliation. Thus there is an emotional entanglement between fan and club that is far in advance of brand loyalty that businesses and consumers share. As a result, supporting a football club is not necessarily about value for money or even the best product, but more to do with family, geographical or sentimental ties. As a result, football supporters are an ideal target market, as their loyalties are usually for life. If BSkyB was able to takeover United it could well be the case that fans could be exploited to an even greater extent than at present, in terms of ticket prices, merchandising and television subscription prices. (b) Competition between Clubs

A key conflict that may have arisen as a result of the merger was the situation where BSkyB as the current Premier League broadcaster would wish to see a close, exciting competition with no one team dominating88. This would be contrasted with Uniteds fortunes over the last decade, where they have enjoyed almost unparalleled success in the Premiership. It would remain to be seen whether BSkyB would or could be able to subvert Uniteds success in order to advance the Premier League product as a collective entity. There were two other notions raised by various organisations to explain why the takeover would have destabilising effects on competition between clubs. As discussed above, if many clubs were bought by broadcasting companies, a small elite group of clubs could be formed, with the financial and broadcasting resources available to buy better players etc. thereby resulting in a reduction of competitive balance in the league and the lessening of a key ingredient in professional sport namely; uncertainty89. Such a scenario could therefore manifest itself as an even greater problem. This second notion is the idea of greater inequality of wealth. Since the inauguration of the Premier League money has circulated within the top League, with little flowing into the lower tiers. This has led to the larger clubs like United becoming dominant due to larger financial backing, If the takeover were allowed it would only inflame the problem further, and contribute


MMC Report 2.201

It needs to be stressed that broadcasters already do get their way when it come to scheduling preferences for Saturday morning, Sunday and Monday night games.

MMC Report 2.202 MMC Report 2.204 35


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to an already growing wealth gap. It was assessed by the Commission that growing inequalities of wealth between clubs are generally against the public interest90. (c) Effects on the organisation of football

The issue here was whether BSkyBs influence over the running of football would become overbearing. It would remain to be seen whether the company would have growing authority in the Premier League because of its ownership in United. The core argument why BSkyB could cause damage was that the broadcasting company would want to exploit its own valuable product (i.e. United). The anticipated conflict would arise when the interests of the broadcaster are not the same as the interests of those whose primary concern is with the governance of football.91 There is therefore a tension between the long-term health of the game in the eyes of the football authorities, and the short-term commercial gains that potentially BSkyB may wish to exploit. The Commission felt there was a need to stress the public interest argument in this situation because most, if not all fans, would not want to see the football industry disintegrate due to the decision by the Premier League to allow broadcasters to become too dominant in the organisation of football. In essence media companies who have a vested interest in certain clubs, and who have little value in protecting football's sporting values and traditional structures ought not govern footballs future. Decisions based on football authorities' perception of the long term interests of the game are more likely to be in the public interest than decisions based on the commercial interests of broadcasters.92 The Report stresses the need for football to be governed for footballs sake, and not for the interest of certain media companies. They conclude that if the merger went ahead it was probable that some decisions may be taken that would have a detrimental effect on the long-term health of British football. (d) Effects on competition among news media

As BSkyB is partially owned by News International, who in turn owns The Times and The Sun newspapers, many felt that this consolidation of newspaper, broadcasting and football club ownership, could have serious consequences. It may well be the case that News International would gain a competitive advantage over other competitors in the form of preferential treatment,


MMC Report 2.206 MMC Report 2.210 MMC Report 2.210 36



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and could in fact lead to greater amount of promotion and publicity given to United because of its status as a part of News International group. The Commission thought it likely that the News International newspapers would gain a commercial advantage from a link with Manchester United,93
Public Interest Conclusion

The terms of this section, which embrace the four scenarios envisaged by the Commission, to the effect of competition on different groups if the takeover was successful, led the Commission to stress that it was unable to identify any public interest benefits from the proposed merger.94 The Commission felt that regardless of any of the four situations occurring, a reduction in the competition for the broadcasting rights of Premier League would take place. In addition to this analysis more inbuilt problems such as the growing wealth gap between clubs, would only worsen if the takeover was approved, and that it could give BSkyB additional influence in the organisation of football, which may not be in the long-term interests of the game95.

Before coming to its judgement, the Commission sought ways to try and alleviate the proposed takeover's anti-competitive features. It was felt that the undertakings that could potentially solve such situations, were however unduly restrictive. The primary recommendation was to remove United from the rights selling process, and consequently exclude it from receipt of information about competing bids. Both companies thought that such an imposition was unnecessary and disproportionate96. Secondly, there would be the continuing problem of regulation in terms of the constant supervision that would be necessary to make sure the undertakings were being adhered to. Such frequent investigation would be an almost impossible task. This was coupled with submissions from supporters groups that examples such as the Times takeover and the Australian Rugby League debacle illustrated how Rupert Murdock, the icon of the News International Group, had acquired a notorious history of non compliance with promises made to various competition authorities including the DTI97.


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The last sticking point was the wariness on the part of other broadcasters, who doubted that the undertakings conceded by the two companies would wholly remove any competitive advantage gained by BSkyB. Other broadcasters would be suspicious of such an agreement; because of the affect and influence it would have for future rights on the bids by other competitors. The only undertaking that credibly may have been able to alleviate the public interest concerns, would be the removal of BSkyB from the entire rights selling process, which it was accepted, would have been unfair to the two companies. It was concluded therefore that there were no binding undertakings that could significantly lessen the anti-competitive effects of the merger proceeding. As a result the MMC decided that, based on the principal fact that competition for television rights would be stifled no matter what decision was reached by the RPC, with the prospect of a resulting decline in competition for the sports premium channel market, the concerns about competition between clubs, and doubts about who would run the organisation of football in the best interests of the sport, the takeover was ultimately rejected.

Skys probable worst-case scenario would have been the refusal by the Commission to allow the takeover and that the decision that collective selling remained. This can be explained by the need by BSkyB to continually find benefit and advantage in the decisions they make, in order to maximise revenue and market share in common with any other business. Their primary reason for supporting the collective agreement in the RPC case was that it had hugely benefited them in the past, and would continue to do so in the future. However, as soon as it became no longer in their commercial interest to retain the current system, their control over United would hold the key to the pay-per-view market, as they would have the Premier League's Golden Fleece. In such instances, it would be the broadcasting market where decisions would be made, and as a result football considerations would be relegated to second place.

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Chapter 3: The Restrictive Practices Court Decision concerning The Premier League and its Incumbent Broadcasters Introduction

The Restrictive Practices Court decision followed extremely quickly on from the MMC's decision into Sky's proposed takeover Manchester United. The Commission vetoed the takeover on the 12th' of March. The RPC judgment was delivered on the 28th of July. While the Commission was deliberating on the competition issues arising from the takeover and the effects that the RPC case could have on present and future takeovers in the broadcasting and football markets, the RPC had only to decide whether the restrictions that the Premier League had imposed concerning League rules and exclusivity clauses were indispensable and necessary. The restrictions had to be in the broader public interest in order for the respondents (the BBC, Sky and the Premier League) to defend the restrictions successfully, The Director General of Fair Trading took action against the respondents in 1996, under the now defunct Restrictive Trade Practices Act 1976 (RTPCA). This has since been replaced by the Competition Act 1998, which only came into force on the 1st of March 2000. As will be analysed later, it remains to be seen whether the Office of Fair Trading would have been better advised to have challenged the Premier League rules under the new legislation.
The Relevant Law

The Restrictive Trade Practices Act 1976 provided for agreements between firms which involve restrictions of specified kinds to be registered with the director-general of Fair Trading [and the] director general can then apply to the court for a declaration of whether any restrictions are contrary to public interests.98 The Statutory framework for the case meant that section 19 of the RTP stated that each restriction that the OFT felt was contrary to the public interest would not be deemed appropriate unless it was able to pass a two fold test. Primarily, the restriction would have to pass through one of the designated gateways, which governed the public interest defence. Secondly, the restriction should not be unreasonable having regard to the balance between circumstances which enable it


Cave, Football, 181 39

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to pass through a gateway.99 This second stipulation was very much a balancing exercise between benefit and detriment flowing from the restrictions, which the court had to determine. The three gateways that were being used in the present case were (b), (g) and (h). The one which the respondents placed most emphasis on was gateway (b) which stated, that the removal of the restriction...would deny to the public... specific and substantial virtue of the restriction.100 In essence, the case hinged not on whether there was a significant restriction but on whether the effects of the restriction were justifiable and worthy of continuance. The restrictions fell under four categories of which two will be the mainstay of this analysis. First, was the Premier Leagues ability to grant exclusive licences to broadcasters. This was Premier League Rule D.7.3, which prevented clubs being able to grant licences to broadcasters for televising Premier League games. It ultimately meant that the Premier League as a collective entity controlled televised matches. Second was a joint provision stating that until the end of the 2000-2001 season, the right to broadcast exclusively live games was reserved for Sky only101. It had the effect that no one else would be able to broadcast live games, and that the amount of live games would be restricted to sixty per season102. Similarly, the BBC had a similar stipulation granting them exclusive rights to a popular highlights package,103 Match of the Day.104 It is worthy to note an immediate European dimension to proceedings. The general thinking in Britain and in the rest of Europe is the need to balance television exposure with the problem of spill-over. This occurs when games are televised at the same time as other games are going on. Although this may not have a substantially detrimental effect on the top division clubs around Europe, for smaller clubs the repercussions can be highly significant. If Premier League or Champions League games clash with lower league fixtures, attendances are usually down quite considerably as fans are more likely to watch a more desirable game from the comfort of their


Re: F.A. Premier League Ltd. Agreement Relating to the Supply of Services Facilitating the

Broadcast of Premier League Football Matches (Restrictive Practices Court, 28th July,1999) p5

F.A. PL Ltd 5 Clause 2.2 The Premier League contract has since been renegotiated again with Sky paying a reported 1.1



billion over four years with the ability to televise 66 live games, along with at least one pay-per-view game every weekend.

Clause 2.3 Since the renegotiation of the Premier League deal in 2000, ITV secured the highlights package to


Premier League matches, bidding in excess of 183 million. 10889848 v1 40

home105. Due to this potentially unsatisfactory situation, UEFA in 1993 sought to try and maintain a time window when televised football could not take place. The organisation adopted Article 14, which was later modified to 44. The times of pertinence to the English Premier League were prohibition of televised games between 13.00 and 18.00 and on Sunday between 13.00-17.00. Two potential areas conflict can be identified. Firstly if the Director General succeeded in the present case and all games could potentially be televised, then this could hinder when games could be played. Secondly, the Competition authorities in Europe might have deemed the regulations disproportionate and struck them down.

One of the main themes running through the judgment was the role that the exclusivity clauses play in unduly restricting the choice of consumers and of other broadcasting companies who were not able to purchase the rights because they were only available in exclusive format. Therefore the debate centres around the premise of whether the Premier League is better served by dealing with exclusive contracts through one broadcaster (the present format) or varied number of differentiated Premier League products to numerous television providers (the Director General's preferred option). There was one distinction, which was thought crucial to debate surrounding exclusivity. Professor Cave an economist called on behalf of the Director General cited two very differing notions of exclusivity, one being `narrow' and the other being broad exclusivity. Broad relates to the current situation where Sky has the unique right to broadcast live games that no one else has. Broad exclusivity covers the whole championship, whilst the term narrow exclusivity describes a circumstance when a potential broadcaster only has the right to show a one-off, specific live game. The Director General was of the opinion that any kind of broad exclusivity was unacceptable106 and that he was much more likely to tolerate a form of narrow exclusivity although it would still inevitably involve some acceptance of restrictions.107 Broad exclusivity prevents another broadcaster from showing different material. Such exclusivity denies the public opportunities for choice and distorts competition108


In a survey conducted for the RPC case by the nationwide league (encompassing the three

divisions below the Premier League) the report found that on nights when Premier League or European fixtures were taking place, attendances were reduced on average by nearly 10%.

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The second important issue for the courts to delve into concerned the status of the Premier League. The Professor Cave for the Director General purported that the League was in economic reality a cartel and that Rule D.7.3 effectively created a monopoly situation whereby the Premier League as a group of clubs coming together to sell their television rights collectively, formed an illegal cartel. This was so because broadcasters could not buy the product from any other source, whilst the League was also able to alter its output, (i.e. the amount of games it allows Sky to broadcast live). Thus artificially raising the price for broadcasters and consumers alike. Professor Yamey, an economist called on behalf of the Premier League explained that unlike other cartel-like situations the Premier League produces a product, which inherently needs all its members in order for it to function properly. The League Championship consists of a series of matches over forty weeks in the season. It is this reciprocity between clubs and the need for all the clubs to compete towards one aim (i.e. to finish the Championship and see how successful they have been over the year) that means all the teams have an equal part to play. If one club decided to not participate in the Premier League, there would be no way that the particular club would be able to continue to produce the product that is the Premier League. In comparing other industries. Professor Yamey described how if in a widget cartel, one of the members decides to break away from the group, the individual company could still produce widgets. This could not happen in the Premier League because the main reason that the clubs come together is because they need each other. In essence there is not the same reciprocity required in other cartel agreements, which is fundamental in the current Premier League arrangement. Although an argument in its own right, collectivity has the additional knock-on effect of maintaining the quality and equality of football in the League. Due to the collective television deal, money received is distributed throughout the League through objective performance indicators such as television exposure and League placing, along with a set amount for being in the League in the first place. Hence the argument that this maintains the competitive balance within the League is a hard presumption to rebut. As analysed earlier in the MMC Report, the need for greater equality in the League to maintain its unpredictability is to many paramount. It was equally important that the court felt it necessary to stress how the effect of the collective agreement benefits the League. The existence of a scheme for redistribution of television income is in our view, an extremely important factor in the creation and preservation of competitive balance which is a vital factor in maintaining the quality and interest in Premier League football.109


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It is vital to note that the court was at pains to emphasise the need for and importance of some redistributory system. Although this is simply an effect of the collective agreement, it is a highly important side-effect because not only is the money distributed relatively equally within the Premier League, but money is circulated to the Football League, the Football Trust and the Professional Footballers Association. If the collective agreement was toppled, money would more likely stay at the top clubs and not flow down through the football industry. In coming to a decision on the validity of the conflicting economists views, interestingly the court preferred Professor Yamey's conclusions. Yet the court stated that whether or not the Premier League was a cartel or not, was not of great significance to the RTP as such definitions were outside the scope of the Statute. We consider it is unsafe to evaluate Rule D.7.3 and the exclusivity clauses in terms of whether or not the Premier League may be said to be a cartel.110
Collective or Individual Selling?

Another main objection on the part of the Director General was that Rule D.7.3 did not allow any of the clubs to exploit their own matches and negotiate with broadcasters directly. Some argued however that the OFT however missed the point because it is the Premier League that is the creature of the clubs. It only exists because the member clubs have formed it, and desire to keep it in existence.111 Therefore the collective agreement and the exclusivity clauses have the support of the Premier League. In essence it seems paradoxical that the Director General was defending the clubs against the collective and exclusive arrangements when it was the clubs that had voted for them in the first place. The court agreed with the above rationale, yet on slightly different grounds. The general consensus was that there would be major problems about who would have the authority to market the rights, and uncertainty in finding that, for example, both the Premier League and an individual club had sold the rights to different broadcasters, whilst they also doubted the desirability of trilateral deals112 involving the home and away club, and a broadcaster. If such arrangements had to be made for every televised match, the benefits of certainty of timing for regular games and certainty of channel provider for each game would surely be detrimental to the consumer.


F.A. PL Ltd 96 F.A. PL Ltd 68 F.A. PL Ltd 100 43



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A secondary reason already discussed earlier, through UEFAs guidelines on appropriate television times for games, was the effect that televised football has on live match attendances. If the situation whereby Rule D.7.3 was ruled unduly restrictive, it would become highly improbable that the League would be able to control the volume of televised games if it was to no longer have the only television broadcast contract. Hence the spill-over effect of attendances dropping as a result of a live game being played on the television. Theoretically if games were broadcast every night of the week, the lower leagues could find themselves in the position of dwindling crowds as a direct result. Although many argue that consumers should at least be given that choice, as will become apparent throughout this paper, the playoff between liberalisation (in this instance, more games) and protectionism (less televised games to aid the lower leagues) takes place in many forms and on many levels. The general consensus agreed to by the court was that broad exclusivity through a collective agreement would be more likely to attain a higher price than that of narrow exclusivity or indeed no exclusivity. The premium that broadcasters pay for exclusive rights is the need for differentiation, and to have a product that a competitor does not have. The court sought the advice of Professor Yamey in assessing the risks that clubs would theoretically take if individual selling took place and the consequential risk of adversely affecting the value of those rights. In summary these risks included uncertainty of club performance, interest in a game, availability for television, rival television broadcasters games and visiting clubs co-operation. There was also the danger of not being able to acquire ample amounts of rights to entice regular viewers over the season. It was therefore argued that to broadcasters exclusivity is tantamount. It creates certainty not just for the consumers as to the regular `appointment to view' Sunday and Monday games, but also for producers. As exclusive sport and first run movies have been Sky's main method of attracting subscribers to invest in a set-top box, and in continuing to pay subscriptions, differentiation is powerful tool. According to Dr Bishop, an expert economist called on behalf of Sky, the collective way the rights package is marketed is an advantage. The broadcaster will prefer rights which can be acquired simply and with certainty. This most easily achieved with a single seller.113 It would therefore seem that on face value the two types of interests that the OFT were trying to defend (i.e. the clubs and the broadcasters) were more than happy with the current arrangements. It was even argued that the broadcasters that lost out on the exclusive packages would still rather compete next time the rights were renegotiated on an exclusive level, because to broadcasters the Premier League was such a popular and valuable commodity to broadcasters.


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Alternatives to Exclusivity

The Director Generals prime argument throughout the case centred on the distinction between broad and narrow exclusivity. The former could not be tolerated whilst the later was actively promoted by the OFT. This type of deregulation of the British football television market would open up opportunities for smaller, less affluent broadcasters to buy a selection of lesser rights, whilst also giving the clubs a direct negotiating position with broadcasters to sell their matches on an individual level. The OFT suggested that at least two live packages be available to broadcasters, giving a more limited form of exclusivity to more than one television operator. It should be noted with extreme interest that the Director General was not as concerned with the problem of the collective agreement (i.e. the cartel accusations) as he was with the problem of broad exclusivity. To this degree, he envisaged two sets of live rights being auctioned, yet these packages would be sold as collective deals. It is important to emphasise that collectivity was not the main driver to bring the case to court, as has been shown above, the 1976 Act had little interest in the cartel argument, as a means of the court reaching their judgment. Therefore if the Premier League collective agreement continued and it was only exclusivity that was diluted, it could well be argued that many of the respondents arguments surrounding redistribution and competitive balance would be nullified114. The court however was not of the opinion that such a blueprint would be a desirable structure for the Premier League. The court assessed that it would be extremely uncertain what the additional rights package would consist of and who it could potentially be sold to. Secondly, it was envisaged that it could significantly affect the value of the rights in total because no broadcaster would be paying a premium for the right to blanket exclusivity115. This would be significant to clubs who rely quite heavily on the collective agreement to fund player purchases and excursions into the transfer market. In keeping the value of the League programme, the court also felt that pay television broadcasters would be less likely to pay significant amounts to a Premier League package that would be available on terrestrial television. It would mean effectively that the


Professor Szymanski, who was called by the OFT, makes a convincing argument for why the

OFT's case was defeated on a technicality. The OFT wanted two separate live deals, and not the free-for-all that was envisaged by many in the football and broadcasting worlds. The problem that the court assessed was that there was no way of guaranteeing this arrangement if they struck down the restrictions. This will form an inherent part in my analysis section in Chapter 5.

A Scottish example was illuminated, as in 1998 with the selling of two separate packages, with the

smaller package going unsold. It meant that Sky who had bought the larger television deal did not have to pay the additional premium if it had been an entirely exclusive deal. It must be born in mind that it would be doubtful that such a predicament would happen to the Premier League rights, due to its wider appeal, international following and higher standard of competition between the top clubs. 10889848 v1 45

Premier League could be competing with itself on different broadcasting platforms. It would also be less likely that the pay television broadcasters would in future bid for substantial rights if consumers would be able to receive live games free. The value of the rights could therefore plummet116, The Director General was still of the opinion however that widening the choice for the consumer, and not limiting it to a subscription based monopoly supplier of live Premier League games was the more desirable option. The court however was averse to this line of thinking. We consider that Premier League football...would always be worth having, but its value on a nonexclusive basis, or on the basis of narrow exclusivity would be substantially less because it would have lost its differentiating power.117 It seems the court was siding with the broadcasters in evaluating exclusivity's virtues. It would appear to be a producer based argument, discounting to a certain extent the benefit that consumers may gain if they were able to watch more live Premier League football. To a degree the argument appears weighted towards broadcasters to enable them to exploit exclusivity to their advantage, not necessarily to the benefit of the consumer.
Do Rule D.7.3 and the exclusivity clauses pass through gateway (b)?

Importantly, the court was keen to emphasise that what the Statute asked of them was a comparison between the current restrictions and a world where no restrictions occurred. There was no middle ground. Therefore in order for the restrictions to be justified the court had to be certain that the shift from the current model to a world without restrictions would not deny to the public...specific and substantial virtue of the restriction.118 It was therefore necessary to weigh up whether the current situation conferred greater advantages on the consumer than would be the case if the restrictions were struck down. This would be done by assessing the advantages and drawbacks to the current arrangements.


It must also be examined that many commentators have questioned the role of Sky in

disenfranchising the large majority of non-Sky subscribing football fans, who may not be able to afford over twenty pounds per month. Whilst Sky delivers average audiences of just over one million people per Premier League game, the BBC and ITV regularly maintain audiences five times the figure of Sky's broadcasts.

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Benefits that would be lost if restrictions were abrogated: (1) the Premier League's current ability to sell the complete package of the League championship

The court was not able to find a way in which collective selling and individual match selling could co-exist. It would lead to a great number of uncertainties, including the variables that Professor Yamey stressed earlier. It would also be questioned as to which games would be part of the collective deal and which would be allowed to be sold separately. If the criterion was popularity alone, it would seem unlikely that Manchester United, Liverpool or other top clubs would be able to sell many of their games individually if the League wished to maximise its revenue, bring in the greatest viewing figures and keep most of their games within the collective agreement. It was also argued that the current system of selling guaranteed exposure to all twenty clubs, at least three times per season, as part of the Premier League contract was beneficial in that broadcasts would feature a complete cross section of clubs, not just concentrating on the top half of the League. The problem with the courts enquiries was that they could only envisage two outcomes to this case as was laid down by statute. They could either maintain the status quo or ban the restrictions outright. It could not have a say in the most credible alternative if the restriction were struck down because it would be beyond its remit. Due to this it could be argued that the court was always going to be more conservative in its approach to the case. If it could have little control over what would happen if it outlawed the restriction, it would be akin to opening up a Pandora's box of uncertainties119. Therefore, The free-for-all which would result from uncontrolled individual selling would not, in our view, represent an improvement from the point of view of either broadcaster or viewer.120 It was concluded that if Rule D.7.3 were abrogated the benefits listed above would almost certainly be lost.


Interestingly, the new Competition Act 2000 does give the courts discretion and uses harder

terminology in order to give the courts more leeway to formulate less restrictive agreements if the restrictions are disproportionate. Something that the RTP was unable to do. This will again be part of my analysis section.

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the capacity to invest in television revenue in stadium improvements, players and other things that benefit the public121

As has been already stated, if the restrictions were outlawed, the court thought with certainty that the value of the television rights package would decrease significantly. If there was a diminution in the value of rights, because no broadcaster paid an exclusivity premium, it was widely thought by the court that it would in turn constrain clubs ability to fund better stadium facilities for their fans, pay top wages for better players, invest in leisure facilities including bars and restaurants, and construct academies for future `home grown' talent. Consequently the court felt that this level of expenditure could not continue if the restrictions were abrogated and would substantially impair the ability of the clubs122 to maintain their current financial commitments. (3) the maintenance of an equitable distribution of television money

The Director General was keen to stress that some form of redistribution was vital for the longterm health of the game. This is presently done through circulating money throughout the football leagues, grants to the Football Trust and Professional Footballers Association with the effect of maintaining competitive balance throughout Premier League and lower leagues. The collective agreement effectively maintains the sporting balance in the League because it has the result of dispersing revenues throughout the league rather than the money being kept by the top clubs. One of the main reasons for keeping the present arrangements was that if the top clubs were given the licence to negotiate their own deals the mechanism that worked well in rewarding merit yet distributing money relatively equally vanishes123


F.A. PL Ltd 142 F.A. PL Ltd 151 At present, 50% of the television money is allocated to all clubs who participate in the Premier



League over the season. A further 25% is based on the amount of television appearances a club makes throughout the championship and the final 25% is dependant on League placement at the end of the season. 10889848 v1 48


ability to advance football outside the Premier League would be diminished

As with benefit (2) the same arguments arise as to how the Premier League contract stipulates payments to a number of organisations, which are ultimately beneficial to the wider public. It was assessed that revenue generated by football should be put back into community projects and trusts so that the community benefits from football's continuing success. (5) problems posed by rescheduling matches to suit television and the subsequent fall in attendances

The fears of many groups interested with regard to individual selling and a loss of broad exclusivity was that more games could potentially be disrupted to suit the times of television. If more games were to be shown, this would become a clear prospect. Supporters over the last ten years since Sky started televising games on a Sunday and Monday have slowly seen the traditional Saturday afternoon games disappear in favour of Saturday mornings or evenings, Sunday afternoons, Monday nights and even mid week games. Another problem would be the potential for broadcasters to avoid head-to-head matches, in order to protect their investment, which would cause more disruption to the fixture list and to fans travelling arrangements. The court was also of the opinion, based on evidence previously heard that attendances will tend to drop if live football is on television and that by limiting the number of matches shown on television, the Premier League has the ability to limit this tendency. It is interesting that the court see this as an advantage, when some would question whether restricting the number of matches is detrimental to consumers wishing to watch live football at home. Professor Szymanski argued that supporters are simply not given the choice124 (6) exclusivity which promotes competition between broadcasters which is beneficial to the public would be "impeded, not encouraged125

The court came to the conclusion that exclusivity was and is vital to broadcasters wishing to be able to differentiate their scheduling from their competitors, Quite vociferous was the courts backing of the broadcasters right to gain exclusive rights. The court commented that, if exclusivity is struck down, competition between broadcasters would be significantly diminished. Although this is the conclusion that the court held when ascertaining that this benefit would be lost if the restriction were struck down, there have been many, who cannot find just reason in the court's argument. As will be assessed in chapter 5, exclusivity only makes competition between


Appendix: Interview Szymanski B F.A. PL Ltd 160 49


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broadcasters for one product. This can only be seen to benefit the producer/broadcaster and not the consumer/fan. Whilst it is true that zero-sum competition would be impeded in a winner takes all market place, a liberalised, non-exclusively marketed product would potentially give consumers more choice as opposed to the current monopoly supplier Sky. The other arguments as to the benefits of the current arrangements can be summarised to a certain extent, due to their carrying less weight than the previous arguments. The point was raised as to maintaining the size of the pool of players that could represent England. If the collective deal was struck down, this pool could potentially diminish. The court dismissed this claim as not strong enough to warrant significantly reducing any benefit that may have been sustained previously. Secondly, an alleged benefit, which would be lost, would have been the resulting inefficient use of resources by television companies covering the same product if individual rights were allowed. The court however felt that theoretically it would be up to the broadcasting company to decide on the issue of viability for programming and that the court should have no say in what companies decide to broadcast. In order for the balancing exercise to be complete it was necessary to consider the detriments under the current scheme and whether they would be enough for the court to deem the restrictions unreasonable.
Detriments likely to occur with the maintenance of Rule D.7.3 and the exclusivity clauses


public demand goes unsatisfied for games which cannot currently be shown

The conclusion that the court came to was that they agreed that if the rules were done away with there would be less dissatisfaction that a game would not be televised, yet they did not see this as a detriment that has great weight.126 They took the view that supporters' groups and club representatives are of the opinion that too many games were already being televised. The court simply rationalised that it is difficult to satisfy everyone's needs, and on balance, disregarded the claim127.


F.A. PL Ltd 172 It is important to note that there is a current challenge being brought by the European Commission


(IP/02/1951) Its basis is that consumers are losing out because the Premier League is restricting the number of games on television. Although the RPC does not seem to give this argument much weight, Europe certainly is. 10889848 v1 50


stifling programme choice

The concern of the OFT was that the present clauses prevent broadcasters other than Sky or the BBC from televising Premier League matches indefinitely, over the period of the contract. The court was particularly troubled by the way the restrictions prevented a wider range of programmes containing Premier League football and the inhibition of the broadcasting of Premier League football on a Pay-Per-View basis.128 The Court again however was extremely wary opening up avenues, which then could not be sufficiently regulated. As previously analysed, the court was unwilling to find in favour of the Director General in this particular section because it was not possible for the court to prescribe what ought to happen.129 Secondly, if the court was to strike down the regulations any other possible broadcasting avenues would be plagued by many variables and uncertainties, like the types of programme the broadcasters may wish to produce, the price that may be demanded for the rights' and indeed whether the rights holder could withhold the rights indefinitely. To this extent, the RPC felt that none of these factors would be within the control of the court. (3) the restrictions make it easier for Pay television broadcasters to charge higher prices for subscriptions

The RPC thought that this argument was misleading. The court assessed that the broadcasting companies did not price their product according to their base cost but rather the competitive market price. They therefore found no distinct correlation between the subscription prices charged and their underlying total cost. Secondly, the court examined the effect of the exclusivity clauses being rendered obsolete and reasoned that prices might come down if exclusivity was deemed unduly restrictive but it would be more likely that other Pay television broadcasters would enter the market, meaning consumers costs may actually increase due to the need to buy another box and subscription to more than one broadcaster130 (4) the capacity constraints of high prices and fill grounds hinder people going to games

It was envisaged by the Court that this situation could not be taken to be unique in the entertainment industry. Indeed many concerts, operas and musicals have limited capacity and


F.A. PL Ltd 172 F.A. PL Ltd 173 It seems that the court is trying extremely hard to rationalise how a monopoly supplier is better



than a series of competing suppliers. In almost every other industry such logic would be disapproved of. It would very much depend on the alternative programme's content and whether the two would or could be directly substitutable. 10889848 v1 51

high prices. The court assessed the danger here was when these capacity constraints turn into something that can be classed as a detriment to the public as a whole and that therefore any event organisers could potentially claim the same right. Other arguments included issues such as quality of coverage by Sky and the BBC in limiting other innovative ideas that other broadcasters might have if the restrictions were not in place, which although the court thought interesting, was not significant enough to cause the public detriment. Other detriments covered the lack of rights to enable a broadcaster to become established in the market. The court came to the conclusion that rights take their best form as exclusive material because it gives broadcasters a unique product, and in the competitive market place only one broadcaster could own the rights at any one time as a result.
Applying the Tailpiece as to whether it would be unreasonable to strike down Rule D.7.3 and the exclusivity clauses

It only remained for the court to decide whether firstly, after assessing both benefits and detriments whether the restrictions passed through gateway (b) and secondly if the detriment to the public would be worse than if the restrictions were abrogated. In the circumstances, the court was of the opinion that the public would be denied the benefits under heads (1), (2), (3), (4) and (6), if there was abrogation of Rule D.7.3 and the exclusivity clauses whilst although heads (1), (2), (3), and (4) of the detriments did hold some sway, it was not of sufficient counterweight. The court was of the overall opinion that the arguments concerning the reinvestment of monies throughout the whole of football, coupled with the equitable notions of redistribution throughout the league was a big enough reason to maintain the current League structure. The problem that the court faced was that they could come to no intermediate solution. They had to outlaw the restrictions completely, without entirely knowing the repercussions of their actions or simply find reason to maintain the current system. As will be assessed later, it could be argued that if the court, (as the US Supreme Court and the ECJ can do,) was able to negotiate new undertakings in order to retain any benefits claimed, the decision in this case may have been very different. As will be ascertained too, one could question why the case was brought when the RTP was to be repealed and the Act that was replacing it would have been more likely to have achieved the desired effect for the OFT. Continuing themes that will be advanced in the analysis section is that the RPC and at present the European Commissions recent conclusions, suggesting that collectivity has not been the main anti-competitive problem. Exclusivity is the major concern. Although the judges in the case came to the conclusion that exclusivity was pro-competitive and enhances competition in the broadcasting market, this decision was probably reached because they were left in a precarious all or nothing predicament where they would either have to outlaw the restrictions or find reasons enough to keep them. In opting for the conservative approach to maintain the status quo, authority

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has been unwittingly passed to European institutions to conclude whether the Premier League is acting illegally in how it markets its television rights package131.


Expansion of the European Commission's stipulations over the future Premier League television

deals is dealt with in Chapter 5 and the Conclusion. 10889848 v1 53

Chapter 4: The TvDanmark Case Introduction

The final case study concerns a matter that brought much consternation to the English courts. The theme of the dispute was, like the previous two that have been discussed in previous chapters, the role of sports broadcasting in the British legal and regulatory environment. The difference with this last case was a European dimension, which was not apparent in the previous two. What makes this last illustration even more pertinent was the highly volatile nature of the case, with the High Court and the House of Lords differing in their conclusions with the Court of Appeal.

TvDanmark 1 Ltd (TVD) was a licensed broadcaster, beaming pictures out of England to Denmark. As a new entrant to the broadcasting market the company tried to acquire premium rights to certain events to boost subscription uptake. They succeeded in bidding for the rights to exclusively televise live, the Danish football team's away qualifying fixtures for their World Cup programme. It is important to note that their bid succeeded in a competitive tender auction process against two other free-to-air broadcasters yet the terrestrial broadcasters bid considerably less than the market price for the rights. The Danish government had listed these games, as special events, under the Television Without Frontiers Directive, meaning they were not available on pay television channels unless the public broadcasters could broadcast them in some capacity. A concern was also whether the Independent Television Commission (ITC) would give their consent to broadcast the matches because it conflicted with Danish stipulations. The ITC refused to give consent after consulting with Danish officials, rationalising that they were not so required to follow their own Code where doing so would cause conflict with European legislation. In a second reason, the ITC was not sufficiently persuaded that the two terrestrial broadcasters DR and TV2 had been given adequate opportunity to gain the rights on fair and reasonable terms.132
The Relevant Law

The matter hinged on two contentious statutes namely the Broadcasting Act 1996 and European Directive, Article 3a(3) of Council Directive 89/552/EEC. In terms of the UK legislation, section 101b of the Act, gave the ITC the ultimate ability to refuse or grant consent to broadcast a particular event. This meant that if the ITC declined to give consent to TVD they would be


Regina v Independent Television Commission, Ex parte TVDanmark 1 Ltd [2001] W.L.R. 1604 p74 54

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unable to broadcast the matches as planned. This consent however would be based on a number of factors drawn up by the ITC in the Code under section 104 of the 1996 Act, to give assistance when deciding if permission would be appropriate In terms of the European Directive, Article 3a(3) of Council Directive 89/552/EEC, as amended by Directive 97/36/EC, required every Member State to regulate how broadcasters exercise their purchasing power in buying other Member State's exclusive programming. Hence the Television Without Frontiers Directive (TWFD) was of major importance to the ITC in it instructed that, each Member State may take measures in accordance with Community law to ensure that broadcasters under its jurisdiction do not broadcast on an exclusive basis events which are regarded by that Member State as being of major importance for society in such a way as to deprive a substantial proportion of the public in that Member State of the possibility of following such events via live coverage or deferred coverage on free television.133 In particular, the concern was that it could potentially hinder the ability of a Member States nationals to watch a sporting event that was deemed of such significance that it should not be sold on an exclusive basis, depriving much of the population of the opportunity to view it. In the current case, the Danes considered it appropriate that should less than 90% of their population not have the ability to watch such an event, then that was deprivation enough. Therefore, because TVDs transmissions only reached 60% of the population, and even then it was not certain that all of those 60% would be subscribers to the station, Article 3a(3) was being breached.
The Case

TVD as a result of the ITC's decision not to grant consent applied for judicial review of the decision. Primarily, they sought a declaration that refusal by the ITC was unlawful, irrational and/or unfair.134 The High Court at first instance sided with the ITC arguing that it was lawful for the Commission to refuse consent if they envisaged the possibility of depriving at least 10% of the Danish population the ability to watch the football game. The appeal however was allowed on the basis that the construction and aim of Article 3a(3) was to allow the public at large to watch protected games, yet this objective should not be achieved at any cost. Therefore there were other considerations the court could take into account such as the need to maintain competition within the broadcasting market, making sure that public broadcasters would not become too dominant (as they would be in a privileged position when it came to future listed events) and the need to maintain accepted commercial practices like certainty of contract.


Television Without Frontiers Directive 89/552/EEC Article 3a 1. Regina v Independent Television Commission, Ex parte TVDamnark 1 Ltd [2001] W.L.R.1604 p74 55


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Court of Appeal

One of the main issues in the case was TVD's contention that they satisfied the conditions of the ITC's own code and that there should be no reason as to why consent was refused. Under section 104 of the Broadcasting Act 1996 such matters that would have been taken into account to decide whether approval could be granted included whether the broadcasters had been given ample opportunity to win the bidding for the rights on fair and reasonable terms, whether the auction was in the form of a public advertisement or closed tender, and that the price sought must be fair, reasonable and non-discriminatory.135 In TVDs opinion there seemed little the ITC could do in their power but grant consent as they had fulfilled all the necessary criteria. In the opinion of Kennedy LJ in the Court of Appeal, (the ITC) rightly took the view that domestic legislation must be interpreted in the light of European legislation. No one doubts the propriety of that approach. What is disputed is the validity of the interpretation which the ITC chose to adopt.136 Therefore did the ITC go beyond the power conferred on them by acknowledging that the code requirements were fulfilled yet still not granting consent to the television company? The applicant's argument in the Court of Appeal seemed to hold sway with the judges. The overall concern was that if the literal meaning of Article 3a was upheld major problems such as distortions in competition, promotion of dominance through public broadcaster weighted support and the curtailment of commercial certainties like the upholding contractual obligations, could signal further reservations for a broadcaster that wished to purchase exclusive rights. The court was wary of the limitations that Article 3(a) would impose on broadcasters. Issues like the notion of public service broadcasters having a second chance to bid for rights they had already lost, was seen as a major negative effect of the legislation. Moreover, the ITC had intimated to TVD that their case for consent would be greatly strengthened if the two Danish broadcasters were given secondary rights to the matches, It was the exclusivity that TVD found attractive however. Rationalising that they had satisfied the ITC's strict criteria, it was thought inconceivable that after bidding successfully for exclusive rights, they could then be forced to make their programme look much less appealing by sharing the rights. The whole auction process would be merely a front for other broadcasters to demand a rights package even after they had lost the bidding war. Secondly, the particular question of certainty over programme matter would be lost too. If at any time up until transmission there would still be the possibility of another broadcaster being able to


Broadcasting Act 1996 section 104 paragraphs 12-16 R v. ITC ex p TVD p 78 56


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use the rights, issues such as advertising the game through publicity campaigns and forecasting revenues from sponsor advertising deals would be impractical at best, and at worst, impossible. It would invariably be the case that only terrestrial broadcasters would be interested in future deals, as the risk of uncertainty to commercial pay television stations would be too great. Similarly, public and terrestrial broadcasters, in order to depress the market price for rights, might simply not bid at the auction at all but still gain the rights because of their privileged position. This would negate all certainty that the winner of the auction would gain the rights and would spell great unease for the sporting organisations. The respondents were clear in their argument. Article 3(a) is very precise in its wording, in that a company like TVD with the rights to televise exclusively a listed event coupled with only having a potential 60% of the Danish audience, would not be allowed consent, whilst any broadcaster with the required level of population penetration, remained interested in buying the rights. It was still acknowledged that at the time of the hearing, both DR and TV2 were still interested in showcasing the games. Therefore the ITC was justified in withholding permission on the grounds that there were still broadcasters wanting to televise the game, regardless of the fact TVD could do nothing else to satisfy the Commission, bar give some rights to the other broadcasters. What remained to be seen was whether the object of the article, being maximum coverage, would be sacrificed or upheld. The Court of Appeal was of the opinion that the ITC was bound by its Code and that deviating from the set standards would produce a dangerous precedent. Their main concern was that all differing types of certainty would be lost. Primarily, certainty of result of auction would be forsaken, whilst the certainty of the ITC code, which the Commission was duty bound to take account of, would be negated. Waller LJ in the Court of Appeal was keen to stress that the Directive should not be interpreted as placing an absolute embargo on broadcasting to a limited number [of television companies].137 The Directive could still be followed but not to the extent that all commercial thinking could be entirely discounted. In essence, the type of protection that the Directive afforded was disproportionate to the aim to be achieved. He affirmed that as regards the question of public access, the correct interpretation was whether the population had been denied the possibility to view the game. This was satisfied because the terrestrial broadcasters had bid for the rights but had ultimately lost out. Therefore the possibility of the public viewing the games had been if the Danish broadcasters had been successful. Hence, if they are so deprived (the Danish public), they were deprived by the refusal of the public broadcasters to pay the price in a fair auction process.138


[2001] W.L.R. 1604 [2001] W.L.R. 1604 57


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Thus if all broadcasters have had the legitimate, fair and reasonable opportunity to bid for the rights, the blame for it not being broadcast to the majority of the population lies at the public broadcasters door.
House of Lords

The decision came before the Law Lords as to divining the intention of the Directive, and whether it was compatible with the decision of the ITC to refuse consent to TVD. The Lords had to assess whether the Directive's aim in significantly inhibiting broadcasters' ability to buy exclusive rights could be justified, or alternatively, whether the ITC was going beyond its remit in refusing permission to TVD to broadcast the games. The task was to find which factor would be afforded priority after the Court of Appeal found in favour of TVD. The Lords considered that not enough weight had been given to the notion that the ITC were justified in consulting with their Danish counterparts, and that Danish rules contained an additional stipulation that a successful non-qualifying broadcaster should offer to share the rights with the qualifying broadcasters.139 This additional qualification was of vital importance because the regulatory framework of the Danish list system relied on such a clause. Otherwise any broadcaster could buy up exclusive rights making the Directive unworkable and otherwise pointless. Lord Hoffman delivered the unanimous verdict of the House. Although TVD argued that the Danish regulations were not applicable as they were seeking consent from the United Kingdom court not the Danish authority, the Lords considered that maintaining the objective of the Directive was the prime concern of the House. Indeed, the ITC and the Secretary of State for Culture, Media and Sport suggested that if the Lords sided with the television company, not only would the Danish public be banned from the right to watch a listed event, but the whole reasoning of the TWFD would be nullified. It was therefore vital that listed events remained in such a protected manner in order for the public to view sports of national importance. To legitimise this viewpoint, the House used three main arguments. (1) Construction of the Directive

The Directive could only be assessed in line with the aim to be achieved. Lord Hoffman was keen to stress that it was the House's obligation to safeguard the wishes of the legislators. Although the Court of Appeal pointed out there would be side effects to such a course of action, Lord Hoffman was of the opinion that the


[2001] UKHL 42 58

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result is no way qualified by competition, free market economics or the sanctity of contract.140 Thus, Europe would not have enacted such a Directive if it felt the side effects would be more harmful than the ultimate goal. The House agreed with the Secretary of States and the ITC's logic. The effect of the Directive was to allow a substantial proportion of a population their right to watch a designated event on free-to-air television. This right would be wholly lost if the case went the way of TVD. (2) The Extent of Member State Discretion under the Directive

Second, the House was of the opinion contrary again to the view held by the Court of Appeal that Article 3(a) gave each Member State the discretion of whether to intervene when exclusive rights are being awarded to non-terrestrial broadcasters. In essence the House agreed that the ITC had within its power the ability to take into account other jurisdictions concerns, and that section 10lb of the Broadcasting Act 1996 gave the Commission the power not to consent in certain situations even if all obligations set out in their Code were fulfilled.


[2001] UKHL 51 59

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The Public Right to Access Broadcasts

Finally, the House of Lords was again in conflict with its lower Court in their assessment of the public's right to access the broadcast. Waller LJ in the Court of Appeal was satisfied that the reason for preventing the exercise by broadcasters of exclusive rights was in order to enable the public broadcasters had had opportunity to bid for the rights. Therefore if this was satisfied then the Directive was being followed, The Lords however did not see this interpretation as correct. The House was also wary that if Waller's LJ interpretation was correct, then the listing of events would carry no weight and that any commercial broadcaster, with more financial backing than public operators, would secure the exclusive rights every time. For the Directive to have any effect, the public needed to be safeguarded to a higher degree than just the initial commercial auction taking place. This would be to ensure that pay television broadcasters would not exploit a country's listed events. Lord Hoffman made it quite clear that what the Directive required was more than the possibility of the public viewing the matches. This possibility would be rendered nil if the rights did not go to the public broadcasters. What was necessary was the possibility of nationals being able to watch the game. The example that was used by the Court was whether any citizen in the specific Member State could have the ability to follow the event by simply choosing to switch on their television.. Any less a possibility meant that citizens could potentially stiffer the consequence of not viewing a listed event, Therefore the possibility was whether or not to turn on a television set, not as to whether the public broadcasters had the possibility to acquire the rights in the first place. The House went further to point out that it was even more necessary to safeguard the listed events from pay television broadcasters because there was only a set amount of listed events that any one country could protect. Therefore, the events that each country protects must be of a highly significant nature. For instance, English Premier League matches, the most popular League in Europe are not listed. Just as in the RPC case, the Court was forced to weigh many competing interests in order to balance free competition against some form of protection from market forces. The current case had to balance the same issues and once again came down on the side of protectionism. In this instance the maintenance of the wishes of the EU over the commercial incentives of free competition between broadcasters was the requisite standard. The aim of the Directive was to protect the public interest in free access to important sporting events against market forces...It may well be that [the]...broadcast will be unattractive to the Pay-television broadcaster and that the value of rights will be depressed. But that is the consequence which inevitably follows from the protection which the Directive was intended to confer upon the public right of access to such events.141


[2001] UKHL 52-53 60

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The House of Lords held in favour of the ITC. However many have felt that the decision and indeed the effect of the Directive was and remains highly controversial. It may be appropriate to comment that the whole notion and aim of listing events was to stop scenarios like the TvDanmark case ever arising. The Court may have been well advised to unequivocally state that their decision would be based entirely on a public policy rationale, and assess that the Directive was inhibitive but the restriction was entirely necessary. It may have been best if the judges had tried not to justify the Directive and simply state that political intervention into the legal environment to safeguard certain events is not logical, but the provision should still remain, It may have made their job considerably easier. The decision has certainly reared questions concerning the subsequent bias that is afforded to public/terrestrial broadcasters. As important, is the widespread concern (expressed in the Court of Appeal) that public operators can gain a second opportunity to acquire some rights to listed events even if they have conclusively lost the auction. It puts commercial and Pay television broadcasters at a huge disadvantage as in the Danish example, TVD could never have the exclusive rights because they do not meet the 90% viewing threshold. Therefore there is a certain amount of discrimination based on market penetration. Although this was justified on the need to maximise potential audiences, TVD would never be legitimately able to broadcast the rights exclusively if a public broadcaster wanted to screen them too. Such commercial interference in the broadcasting market may not a warranted or justified, yet it would be doubtful any sports fan would argue against the Directive in a growing age of digital and subscription based television services. It just remains to be seen whether one of the best things in life (sport) remains free on television.

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Chapter 5: Analysis of the Themes emanating from the Case Studies Introduction

This chapter is to analyse and expand upon the decisions and consequences of the three case studies. It is extremely pertinent to detail many issues and themes emanating from the cases, in order to illustrate similarities and disparities between the cases, and especially potential conflicts which may impair future European and domestic investigations. The sub-headings relate to the numerous themes that have been debated previously. For example, there is overlap between themes and cases, with the market definition section encompassing both the Restrictive Practices Court (RPC) case and the Monopolies and Mergers Commission Report (MMC). Exclusivity and collectivity feature heavily throughout this chapter due to these notions assuming a highly important position in the RPC case and the MMC investigation. Similarly, exclusivity arrangements seem to conflict heavily with the premise of championing consumer rights and freedoms, whilst the authorities in past years have leant towards giving broadcasters the ability to maintain long-term exclusivity clauses. Such contracts are usually only of detriment of the consumer142. Whilst some sections deal with specific issues attributable to just one area like toeholds, which were debated in the MMC investigation, the aim of this chapter is to illustrate how Competition Law is allegedly defending consumer interests, ironically without much backing from the very group they are trying to protect.
Collectivity and Redistribution

It is interesting to analyse the Restrictive Practices Court (RPC) case in terms of the collective arguments put forward by the Director General of the OFT. In stating that the Premier League acts as a closely-knit cartel, all of the anti-competitive features of a monopoly supplier were apparent. These traits included the reduction of supply by limiting the amount of live games available, whilst keeping prices for the product excessively high143. The broadcaster would therefore be in a dominant position to maximise excess profits. The anticipated problem with this theoretical economic benchmark, that advocated many competing sellers in a deregulated market place for football rights, was that it would be in the best interests of the consumer. While it is true that the Premier League model is more akin to a cartel arrangement than a model with numerous competing sellers, the Court was of the opinion that collective selling was an undoubted beneficial tool for football.


It can be argued that this has been addressed to a large extent by the recent Commission

investigation into the Premier League.


Bishop and Oldale, Sports Rights: The Premier League Football Case [2000] E.C.L.R.p186 62

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Cooperation between suppliers in normal business practices is heavily condoned, yet many including expert witnesses in the RPC case, rationalised that clubs disassociate themselves with the stereotypical cartels because the Premier League as a collective entity cannot function without the cooperation of all of the teams. Professor Yamey who demonstrated this position when using the example of a widget cartel, which clearly differentiates the Premier League from usual cartel agreements, illustrated this unique characteristic in the RPC case. In essence, the Premier League would no longer be available if the very cooperation that is needed for the running of a successful league is branded illegal. ...a football match cannot be separated from the competition it falls within...without destroying the economic value of the matches. There is little logic in attaching the emotive label of cartel to describe the tournament organising body.144 Therefore one could argue that the Premier League is not a cartel because its members do not act like rational competitors in the market place. This is because unlike other industries, cooperation is vital to football clubs in order to maintain a viable, sustainable and ultimately profitable industry. There is a large gulf of opinion between whether the Premier League is acting illegally or whether in fact it is merely acting as an impartial coordinator. Unfortunately, as many authors have stated145, the wealth gap between the richer clubs and poorer teams, even within the elite Premier League, has accelerated especially with the advent of the Champions League. Collectivity is seen as a way to maintain an element of competitive balance. Unpredictability is the main ingredient in football. Therefore for the uncertainty of result to be preserved, the argument is advanced that redistribution needs to take place to safeguard the longterm sustainability of football.146 Some even go a step further in pressing not just for redistribution to continue, but also for it to be expanded across all the Leagues.


Simon Came, The FA is not offside over TV rights,' The Times Newspaper, February 9th, 1999


e.g.Simon Carne, The FA is not offside over TV rights,' The Times Newspaper, February 9th, 1999

David Conn, The Football Business, (London: Mainstream, 2001) and Simon Banks, Going Down Football In Crisis: How the game went from boom to bust, (London: Mainstream, 2002)

Examples are given of the Dutch and Portuguese leagues where a few teams such as Ajax and

PSV and Feynoord dominate in Holland and Benfica and Porto in Portugal. They almost exclusively compete for the League and Cup honours, where the unpredictability of result has diminished to a large extent, and the league is a vehicle for a few teams to contest the main honours. 10889848 v1 63

It is important to maintain collective selling, but collective selling throughout football generally, not just the elite of the Premier League. Distribution need be universal, not selective.147 However, the economist Stefan Szymanski puts much less emphasis on the need to maintain competitive balance148. He argues that as domestic uncertainty of result decreases a new European competitive balance will become the new equilibrium where by the top and most successful teams play each other, having outgrown their domestic leagues149. This can be partially illustrated by the new UEFA Champions League set up. There each victory for clubs outside Italy, Germany, Spain, France and England, is worth less than the amount a club from those countries could earn. For example, if Barcelona of Spain lost to Ajax of Holland, Ajax would not receive the same amount of victory money that Barcelona would earn if they won the same match within the Champions League competition, This is primarily because UEFA has been effectively bullied by the G14, a pressure group of leading European clubs who have insisted on receiving more money, and threatened to leave the competition unless their demands were met. This seems more in line with Szymanski's analysis of a new European transnational super league football elite150, undermining national competitions and national redistribution policies. Instead of maintaining and safeguarding the roots of each domestic league, Szymanski's logic is that teams should not have to cross subsidise other businesses in order to be able to compete with them on a more effective and efficient level. Although football clubs do not wish to put other clubs out of business, why should clubs be forced to share football's wealth? Weatherhill in his assessment seems to side with Szymanski in his approach in that, ..removing the rewards of success and muffling the pain of failure by compulsory wealth distribution may damage sports competitive edge.151 Although according to the above approach, redistribution is not necessary, the redistributory effects as a consequence of the collective deal were a very important part of the Courts decision


Appendix: Interview Conn F Appendix: Interview Szymanski B In an economic sense, this may be seen as progression, yet from a political, socio-cultural point of



view, the maintenance of the domestic league as the primary competition of each national club, from a fans perspective would probably take priority. Indeed, the popularity of a European league may waver, if local derby's were no longer and fans had to make long , and expensive round trips to Europe ever week.

Van den Brink: E.C Competition Law and the Regulation of Football: Part I:[2000] ECLR 365 Weatherill, Law, p174 64


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to uphold the collective and exclusive joint BBC and Sky deal. Although only a side effect of the agreement, much weight was given to the beneficial impact that revenues generated by the Premier League had on the wider football community. In 1998 5 million was allocated to the Football League, 7.5 million to the Football Trust and 7.5 million to the PFA, together with parachute payments paid over three consecutive years to clubs relegated from the Premier League152. This is without doubt one of the most egalitarian systems currently in operation throughout Europe153. In Italy for example, individual sales of television rights take place almost entirely throughout the Lega Calcio. Top teams in Italy are regularly receiving 30 million per season in return for their television rights. In Spain Real Madrid and Barcelona have sold their future rights for up to 50 million per season154. Whilst this means massive income for the larger clubs, the lesser teams do not benefit from any collective deal. It is generally accepted that the type of redistribution promoted by the Premier League benefits football significantly more than an individual selling model by which the clubs take all, and give very little back. The consequences of the collective deal i.e. that redistribution, can easily take place on an alternative basis by voluntary contributions by the clubs, is not a view shared by the football clubs. To some extent it is easy to understand their reasoning. If the collective agreement were struck out in the RPC case, it would be the end of any enforced redistribution. A major part of the Court's rationale for keeping the present arrangements, was the inherent uncertainty that may ensue from a television rights free-for-all. Yet the Premier League clubs would not be able to use the redistributory effects of the collective agreement as a reason to maintain the current system, if a solidarity fund was established, working separately from any television deal. If this occurred, the rationale used by the Court for maintaining the system would become defunct. It would be even less likely that the Competition Commission would deem the television contracts to be legitimate and proportionate if one of the most beneficial aspects of the agreement was not apparent.


Paul Spink and Philip Morris, The Battle for TV Rights in Professional Football in Caiger, A and

Gardiner, S, Professional Sport in the EU: Regulation and Re-regulation, (The Hague: Asser, 2000) p181

In Italy, 12% of gate receipts are given to the away team and in Germany, in terms of European

matches 30% of revenue is pooled in a collective revenue system.


Rick Parry, Liverpool FC in the Global Football Age in John, Williams, Stephen Hopkins, and

Cathy, Long, Passing Rhythms: Liverpool FC and the Transformation of Football, Oxford: Berg, 2001 p222 10889848 v1 65

Indeed in July 2001, the Commission considered that Champions League joint sales were not an indispensable guarantee for solidarity between clubs155. Similarly, German, Dutch and Italian Courts156 concluded that the consequence of the arrangements (i.e. the positive effects of redistribution) did not justify exemption from their own competition authorities. It could be speculated that this is because the redistributory effects of these countries television contracts were not as effective, generous and rewarding to lower league clubs, associations and grass roots projects, as the Premier League seems to be. Yet in December 2002 the Commission sent its `Statement of Objections' to the Premier League and reached the conclusion that the, selling of the media rights as practiced by the FAPL is not indispensable for guaranteeing solidarity among clubs...and that it is possible to achieve solidarity without incurring anticompetitive effects.157 It may seem that the Premier League in particular is seeking to maximise the number of options available to it, by pronouncing that no redistribution will take place if the collective agreement is ruled illegal. It seems to negate the choice that the clubs have by entering the contract at all. If a structure in the guise of the present system was implemented but not incorporated into the collective deal, there would be one less significant reason why collective selling would be deemed legitimate and therefore an adequate legal defence. David Dein, vice-chairman of Arsenal FC and Rick Parry, chief executive of Liverpool FC, in statements made before the RPC were of the opinion that such a scheme would not be viable, as clubs would want to maximise revenues if the collective agreement no longer existed. The problem with this logic is that they could voluntarily maximise their revenues at present by ending the collective agreement, but they do not. Therefore they should be advocating individual selling to maximise television revenues for their own clubs. As they are not doing so, Premier League clubs in the RPC were in effect holding the court to ransom, contending that no redistribution would take place without their agreement. The irony is that they are content with the current system where they are getting less money, yet they would be wary of sharing if the plan was voluntary. Although many PLC's would be extremely wary of giving money away to lesser clubs if a scheme of redistribution was voluntary, this situation is almost identical to the


John Ratliff, Major Events and Policy Issues in the European Community Competition Law

I.C.C.L.R. 2002,13(2), P63


Hof Amsterdam, November 8, 1996 ,RvdW/KG 1996 No 46,Feynoord/KNVB ( Dutch), the

Bundesgerichtshof ruled as an order of September 2 1994, B6-747000-a105/92, BKartA 2682 (German)


Commission opens proceedings into joint selling of media rights to the English Premier League,'

1P/02/1951, 20/12/2002 10889848 v1 66

situation that is occurring at the moment. The only difference is that all the clubs voted for this distribution mechanism. They could very easily do the same for any voluntary plan. This employs a defunct logic158 The larger clubs are effectively voluntarily hamstrung by the collective agreement. Why should a different logic apply if collective selling is abolished? The argument is entirely fallacious that collective selling is the only way to maintain redistribution. Just because it does not now happen voluntarily, should not mean it would not occur if collectivity were to go. Although not necessarily advocating a voluntary scheme of redistribution tied to the broadcasting deal, any such scheme would mean that the Premier League would have one less reason to argue against the Court disrupting the status quo, as it then could not be used as an adequate defence, as was the case in the RPC. The current example of the Commission's agreement with UEFA in relation to the Champions League broadcasting negotiations has illustrated the Commission and Professor Szymanski's assessments over the potential negative effects of the central marketing of broadcasting rights. These potential competition concerns include DG IVs fears about increased media concentration, a lessening of competition between broadcasters and reduced consumer choice159. Collective selling is usually coupled with exclusivity which manifests in one package being sold on an exclusive basis, usually to an entrenched broadcaster who can afford a large outlay because it has subscribers who pay for the privilege of being able to watch premium sports programmes. In Germany, Premier, a Pay-TV station which was owned by the now debt ridden Kirch media group, tried to broadcast every Bundesliga match from the 2001 season160, whilst in Britain Sky continues to have exclusive rights to 66 live Premier League games, out of a potential 380.Only recently, Marseille of France have threatened to take legal action due to the revenue sharing


It needs to be stressed however that there are many variables and potential problems attached to

individual television contracts. Clubs like Real Madrid, Barcelona, Bayern Munich, Juventus and AC and Inter Milan may be able to reap large rewards of individual contracts, but English clubs may not be able to generate as much revenue. Top clubs such as Manchester United, Arsenal, Liverpool, Newcastle and Chelsea, may be able to make large sums, but even variables like playing performance, the demands of the PLC board, and even the wavering support of their fans are all serious concerns. These potential problems are not apparent to the same degree in any collective deal, and therefore the risk is lessened by pooling their rights.

Stefan, Szymanski, and Susan, Parlasca, When the whole is less than the sum of the parts: The

negative effects of central marketing of football television rights on fans, media concentration and small clubs [2000) p1

Szymanski, Negative, 4 67

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model of the French League's distribution of broadcasting money161. Spain, Italy, Mexico and most recently Greece all sell their matches to broadcasters on an individual basis, with a few minor exceptions,162 unlike Britain, France and Germany . This approach can be contrasted with the Premier League, the DFB (German League) and the UEFA Champions League who all market their product in a collective manner. This is usually somewhat problematic because there is generally only one buyer, which prevents any competition at all for broadcasters throughout the period of the collective contract. Only in times of contract renegotiation does competition intermittently occur. By using German and British examples, Szymanski assesses that fans lose out when collective deals are struck because the agreement limits the number of games that can be shown. Although the Court rejected the argument advocated by the Director General in the RPC case, it was the Premier League that restricted the number of games televised and Szymanski believes a form of consumer deficit is occurring. For example, in Germany until 2001, only 102 out of the 306 games of the Bundesliga were being televised live and from the Premier League163 only 60 out of 380 games shown live in Britain. Therefore consumers are not able to watch the game that interests them the most but are subject to the broadcaster's choice of matches that are deemed to be representative of the League as a whole. The option of choosing between matches is beyond the consumer in Britain, and the recent advent of pay-per-view, only alleviates this restriction to a degree164


Each club in the French League receives the same amount of broadcasting money irrespective of

the amount of times they are on television, and therefore is not performance or popularity based. From the start of the season ,of the 30 games played up until March 9th 2003, 26 have involved Marseille, whilst Troyes the Leagues bottom team receive the same money as Marseille but have not been televised this season yet. in 'Marseille to sue French soccer federation over TV fees,' 13 March 2003

For example in Italy, the government decided to set a limit of 60% for matches that could be

screened by any one pay-per-view broadcaster in order make sure the Murdock owned broadcaster Telepiu could not monopolise the market for football rights.

Szymanski, Negative, 5 This however does potentially require consumers to invest in additional subscriptions, set-top-


boxes plus the fee for the game too. 10889848 v1 68

Table 1: Live broadcasts of national league matches in certain Member State countries in 2000 Total number of games England 380 Free to air 0 Pay TV 60 Pay Per View 0 (40 after the 2001 TV negotiations) 204 238 304 Matches broadcast live 16%

Germany Italy Spain

306 306 380

0 0 38

102 68 38

100% 100% 100%

Source: In broadcasting, if the collective package only allows one broadcaster the opportunity to televise games, smaller broadcasting companies with fewer resources and considerably less money than established pay-TV broadcasters, will be at a significant disadvantage. Therefore collectivity as opposed to individual selling could potentially have damaging effects to lesser companies, which would manifest as effective barriers to entering the industry165. If market access is constrained, the consumer may lose out because choice will be restricted and subscription prices may increase due to the reduction in competition and the consequent market strength of the remaining broadcasters. This could cause potential breaches of Article 81(1) if it can be found that an agreement (i.e. the television contract) has distorted competition within the European Common Market, and has had the consequence of effecting Member State trade. Potential defences can be raised through Article 81(3) and exemptions are made if the restrictions are deemed beneficial. For example, if it aids technological development or is beneficial to consumers. In Germany, Bertelsman and Kirch in 2000 had a 85.2% share of television advertising revenue in the pay-TV market166. Such forms of media domination make it even harder for younger companies to establish themselves in a dominated market place. It is worthwhile noting the contrast in the value of sports rights over the last 40 years. In 1962 the American National Football League (NFL) sold its rights for $5 million, Now they are worth $2200 annually, which is a real growth of 13% each year. In 1984, French football was worth


Recently it has been claimed that Bayern Munich, Germany's most successful club may be heavily

punished for accepting payments to the sum of 42 million Deutschmarks (14.6 million) to accept the central marketing scheme of television redistribution. Something Bayern was vehemently opposed to, as it would have been more financially viable to sell their rights on an individual basis, in Bayern warn PA over TV punishments, ' S. Staff, 10th April 2003,

Szymanski, Negative, 9 69

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FF5 million to French broadcasters167. In 2001, the League authorities gratefully received FF2600 million168. The collective and exclusive traits of television broadcasting deals are now worth astronomical amounts, The NFL's contract is worth over $15 billion over eight years169. Indeed the rational choice to maximise revenue according to Fort and Quirk, is for a League to have a form of revenue sharing as part of a collective deal, in order to obtain a more even distribution of competitive balance throughout the League170. Table 2: The Increasing Revenues Paid by Broadcasters for English Football Rights Year Amount paid ( millions) Amount paid per year ( millions) 1986 6.3 3.1 1988 44 11 1992 191.5 38.3 1997 670 167.5 2001 1,100 366

Source: Sir Norman Chester Centre for Football Research, British Football on Television171 Television coverage has increased by more than 600% over the period 1988 to 1999. The 1996 Premier League contract was worth 60 times more than 1987/88 figures. Even more staggering is the total value of the 2001 deal (1.6 billion), which is a 213% increase on the previous deal172.


In mid-April 2003, the French football association announced it was extending the current

broadcasting deal with its incumbent broadcasters after protracted television rights rows over the next deal. In essence the contract has simply been "deferred until the following season...after the Leagues original decision to award the next three year contract to Canal Plus alone. It means the rights will be shared among Canal Plus, TPS and TF1. in 'French soccer TV contract extended after rights row,' April 11th 2003

Szymanski, Negative, 1 Peter Sloane, 'The Restrictive Practices Cowl case, broadcasting revenues and league balance,' in


Sean Hamil, Christine Oughton and Steven Warby Football in the Digital Age, Who's Game is it Anyway, eds., (London: Mainstream 2000) p176

R, Fort and J.Quirk, Cross-subsidisation, Incentives and Outcomes in Professional Team Sports

Leagues Journal of Economic Literature, Volume 33, September 1995, p1265

171 Banks, Going Down, 50 70


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As recently as August 2002, the Italian League was thrown into chaos due to clubs not agreeing terms with potential broadcasters, before the season began. In Italy, collective deals are not negotiated on a League-wide basis and clubs have the ultimate power to choose their own broadcaster. However, in reality many smaller clubs group together to increase their bargaining position and potential marketability. Whilst the top clubs like Juventus, AC Milan and Roma were courted by the two major pay-television networks Telepiu and Stream173 due to their huge fan base, the smaller clubs were of the opinion that RAI's (the state broadcaster) offer of 55m174, which was only half the amount they received the previous year, was nothing less than derisory. To complicate matters, the Italian Prime Minister Silvio Berlusconi, had been accused of manipulating the already chaotic situation to his advantage. Not only does Mr Berlusconi, as head of the state broadcaster, control the running of the public television network, but also to compound matters, he is the owner of AC Milan, and extraordinarily is also the owner of the most dominant commercial broadcaster Mediaset. Unlike in the BSkyB takeover bid of Manchester United, where the Commission were concerned with BSkyB having a seat on both sides of the negotiating table, Berlusconi seems to have three seats on both sides of the table. This seems an untenable conflict of interests, especially if he uses his power in his state broadcasting capacity by offering a smaller figure only for his own television company to save the day and return with a slightly better offer. Whilst Juventus and AC Milan have been offered upwards of 40 million per season, the smaller clubs without contracts only received just over 2.5 million per season175. It may therefore be the case that the collective agreements in place in France, Germany and England disproportionately benefit the smaller clubs. It remains to be seen whether the larger clubs in these leagues will stand by whilst their competitors gain quite significant financial advantages, through the individual sales of their television rights. The Director General in the Premier League case was much more concerned about the anticompetitive effects of the exclusivity arrangements rather than concerns over the collective nature of the Premier League's deal, The OFT was of the opinion that the broad form of exclusivity that was currently being exploited by Sky should be recycled into a new form of narrow exclusivity, so that two or more live collective packages containing differentiated rights could be sold to different broadcasters, thereby fostering greater competition in divergent broadcasting markets176.


These two companies are now in the process of merging, subject to competition authority


Paul Betts, `Italian Fans Mourn Football Season Delay,' The Financial Times 21st August 2002 Berhrsconi caught up in conflict of interests controversy,' Sport and the Law Journal Volume 11


Issue 1 page 18

This may indeed happen in the coming months if the European Commission decides the current

rights set up is illegal. 10889848 v1 71

Professor Cave, who was an expert witness in the RPC case thought that the emphasis of the OFT's case was the ability of the Premier League to limit supply to one exclusive live broadcaster. Therefore if it was simply a matter of having more matches on television, the collective agreement was not the prime restriction; it was the exclusivity clauses, which inhibited choice177. In the most recent Premier League contract, three broadcasters were sold different packages. Sky was rewarded with the three year exclusively live deal, with coverage of 66 games per season for 1.1 billion, whilst ITV were given the highlights show for 183 million and NTL were successful in bidding for the pay-per-view rights to screen a maximum of two additional live games each weekend for 100 million178. The involvement of more broadcasters in bidding for various rights illustrates the Premier League's concern over potential political conflict with British and European Competition Authorities179. Sky is faced with a variety of different sources of competition, as the Premier League could negotiate separately with all broadcasters, rather than deal exclusively with Sky180. Indeed as UEFA has done with its Champions League rights, it may be more valuable for the Premier League in the future to sell different packages on a nonexclusive basis to different broadcasters181 In the RPC Professor Cave was of the opinion that the Court had little option than to err on the side of caution. It has become apparent that the Court used the inadequacy of the RTP to find in favour of the Premier League,182 rather than contemplate remedies for the situation. The problem was however, that the Court conceded that they would have had no power, control or ability to manage such a system if the whole scheme was overturned. In that event, it was clear that football authorities would have no guidance as to how they should put their house in order. This problem was augmented by the almost universal public support for maintenance and continuance of collective selling. The judges were not in a position to find any kind of intermediate solution, yet they could not even propose a more satisfactory structure to replace the current system.


Martin Cave, `Football rights and competition in broadcasting' in Sean Hamil, Christine Oughton

and Steven Warby Football in the Digital Age, Who's Game is it Anyway, eds., (London: Mainstream 2000) p183

Banks, Going Down, 103 Although consumers get more choice, it way be necessary to pay for subscriptions to NIL and


BSkyB to watch the majority of Premier League games


Cave, Broadcasting, 188 Patrick Harveson and Cathy Newman, `Sky may see no limits in TV football coverage,' Financial


Times, July 29th 1999, p10


Cave, Broadcasting, 189 72

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The RTP invited a question that was `all or nothing' nature, which allowed no leeway for the court. Many commentators agree that the OFT lost on a technicality183, as the Act asked the Court to take only two extreme scenarios into account. Interestingly, when comparing the Italian and German examples to the RPC case, there is still a certain tendency to assume that because the Court held in favour of maintenance of the status quo, the judges sided with the Premier League on the issue of collectivity. In reality, no British court has effectively analysed the collective selling of broadcasting rights. The decision of the RPC was almost entirely centred around the notion of exclusivity because the now repealed RTPA 1976, did not allow the Court to make a judgment on the legality of the Premier League as an active cartel. The Court could only evaluate the advantages from the agreements in relation to a situation in which, there were no broadcasting restrictions of any kind. Szymanski speculates that had the Court taken an example of a world where some restrictions were still in place as a comparative benchmark, then there would not have been the adverse effects of a television rights free-for-all that was feared184. In practical terms, if the restrictions were seen to be the collective deal and the exclusivity clauses, an intermediate solution involving the maintenance of the collective agreement and the scrapping of exclusivity, would create a structure with fewer restrictions. The Court needed to see the possibility of a system with few constraints remaining rather than the `all or nothing' test that the court had to envisage. Such a situation may be beneficial, as it would allow two or more broadcasters collectively packaged rights, without the added exclusivity restriction185. This would alleviate the larger concerns of a lack of consumer choice and broadcasting market foreclosure, as both consumers and broadcasters would have greater opportunity to pick packages to suit their own needs, potentially whilst the collective part of the agreement, maintaining the Premier League competition, could continue unhindered. Significantly, the case was almost completely characterised by a total lack of support for the OFT by the wider public. It was deemed to be against the interests of football, as most feared individual selling would be a natural consequence, leaving the wealth of the game in the hands of a few elite Premier League clubs. However when one analyses the decision, it becomes apparent that if the Court had been able to prescribe an alternative, intermediate remedy, and had not been


Szymanski and Cave are of the opinion that if the Court had been given more scope for discretion

an alternative to the current system would have been found.


If Rule D.7.3 was struck down, no collective agreement among clubs would have been legally

enforceable and there would have been nothing to stop any club offering to sell its matches that were previously part of the collective package to another broadcaster.

Stefan Szymanski, `Hearts, minds and the Restrictive Practices Court case,' in Sean Hamill,

Christine Oughton and Steven Warby Football in the Digital Age, Who's Game is it Anyway, eds., (London: Mainstream 2000) p203 10889848 v1 73

constrained by the Act's statutory requirements, it would have been highly likely that a different decision could have been reached. Contrary to much speculation, it probably would not have thrown the game into chaos, but given consumers and producers greater choice and added freedom186. If the OFT had known the test the Court was going to apply, prior to the hearing, it is speculated that the case may have been dropped altogether187. Szymanski is highly critical of what the law required the court to imagine and that in essence, the one regime that the court considered was the one most unlikely to occur in practice.188 There was a definite misunderstanding as to the aims of the OFT. The Director General only wanted to deregulate the football television rights industry so as to have more games on television. The individual selling of all matches would not have taken place (if the OFT's case had gone to plan), as they only wanted to sell games that were currently unavailable to view anyway. Once Sky has taken its 60 (now 66) games out of the total 320, as the collective agreement allowed, the Director General wanted more of the games that were not to be televised, to be made more widely available and accessible. The problem was that the Competition authorities did not win the backing of the very people they are trying to defend i.e. the public/consumers. There was in effect, little reason for the challenge189. In contrast, the new Competition Act 1998 which came into force in 2000, and replaced the RTPA 1976, now regulates agreements between firms in that they can negotiate undertakings designed to retain any benefits they may have but eliminate any anticompetitive features.190 This is very significant because courts using the new legislation will be able to look into other alternatives to come to a satisfactory solution. One could question why the case was brought given that this Act was likely to achieve the desired result for the OFT.


This however must be weighted against the possibility of consumers in Britain then purchasing Sky

subscriptions, cable feeds, pay-per-view broadcasts, and a free-view box for terrestrial digital.

Szymanski, Hearts, 202 Szymanski, Hearts, 195 see Daniel Geey, Collectivity v exclusivity' conflict in the broadcasting arena, Ent LR (2004) Vol.15



No.1 7-11

Cave, Broadcasting, 190 74

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The RPC was empowered only to impose a blanket prohibition on those restrictions found to be contrary, which left them with a stark choice between outright prohibition...with far reaching and unpredictable consequences or preservation of the status quo191 Importantly though, the British Competition Commission, the European DG IV and the ECJ operate under no such constraints. There is much interest in the restrictive notions of exclusivity and collective agreements. The European Commission is at present investigating the Bundesliga and Premier League, over issues concerning competition abuses192. It remains to be seen whether a new statute will give rise to a fresh challenge or whether Europe will acquire the ultimate authority in this field.
Market Definition

One of the major considerations that can be drawn from the conclusions of the MMC and the RPC was the need for differentiation between free-to-air and pay television stations, in assessing the relevant market for certain broadcasting rights. In the MMC report, the focus of the investigation centred around the two types of broadcasters being complementary in nature, because a consumer could not subscribe to a pay television station, without concurrently having terrestrial channels available too. The RPC accepted that there were divergent markets for the two broadcasters to operate within, yet the similarities between the two judgments end there. The judgments reveal a complete lack of symmetry and agreement on ultimately the same question; is the Premier League product readily substitutable against any other football competition or is the market as narrowly defined as the rights for Premier League games? There are a large number of variables, which need to be taken into account when deciding on the correct market classification, such as whether the specific coverage is only available on an exclusive basis, the extent of televised coverage (live, highlights etc.), the time of coverage (same day, delayed next day etc.) or whether the matches are screened on free-to-air channels (decreasing the value to pay-television broadcasters)193. In the MMC for example, where the two parties had an active link in the football broadcasting market, and where both may be deemed to be in positions of dominance, a 1996 OFT Report and a similar 2002 report concerning the BSkyB's resale contracts with its retail competitors in the


Spink, Professional, 187 Paul Waugh, Collective TV deal vital to game, say MP's,' The Independent, 3 April 2003 Szymanski, Hearts, 6 75



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pat television market,194 backed up the MMC's conclusions that BSkyB continues to be dominant in its market. In looking at the relevant product market, the test that both courts utilised was whether any other product would be wholly or partially substitutable with Premier League rights. The defendants in the MMC investigation contended that Manchester United's relevant market was as wide as the leisure services industry whilst Sky Premier League broadcasts were only part of a much wider market, which included all terrestrial television's sports broadcasting. It seems quite absurd to suggest that a devout Manchester United supporter, or a supporter of any other Premier League team, would see their club as part of a wider leisure market when deciding what to do with their Saturday afternoons195. To this extent there does not seem to be a case for any substitutable good whatsoever that would be a ready made alternative for being able to watch a supporters preferred club. Therefore the wider the market, the less chance for dominance. The leisure services defence put forward by BSkyB and Manchester United however was not enough to convince the MMC that the relevant market was that for pay television sports premium channels. This warrants further elucidation due to the sharp contrast with the RPC's conflicting approach. We do not see grounds for a wider definition involving the whole of football, as it does not seem credible to us that matches involving clubs drawn exclusively from divisions other than the Premier League would be acceptable substitutes for matches between leading teams.196 In essence, their definition decisively concludes that there is no ready-made substitutable product able to compete with Premier League matches. With no discernable and closely linked substitutes available, in the opinion of the MMC, the Premier League had and continues to have a very strong bargaining position; a position some argue has been abused. The RPC in contrast were willing to give the Premier League wider latitude in relation to their market definition197. There is however one particular reason for this approach. In order for the


Harbord and Ottaviani, Anti-Competitive Markets in the UK pay television market, [2002] E.C.L.R.


Therefore consumers as a collective group of football supporters or as part of the 20 divergent

Premier League teams would probably concur that watching live football games, be it on live on television or live at the ground, holds little comparison to any other leisure activity and indeed has no substitutes.

2.23 Monopolies and Mergers Commission Report into the Proposed Merger between BSkyB

Group plc and Manchester United Football Club plc (Cm 4305, 1999) 10889848 v1 76

court to justify the restrictions, the judges would have to find a way to promote the use of exclusivity, and undermine its beneficial effects. Once it had been established that collectivity was outside the scope of the statute, and that no intermediate compromise was possible, if they still wished to maintain the status quo, then it was fundamentally necessary to give the Premier League as wide a definition as possible. By advocating the advantages of exclusivity, it would become necessary to define the market as widely as possible because this would result in Sky's exclusive dominance being diluted and would therefore not be a prime concern for the Court. In the light of the European Commission's recent comments on the anti-competitive features of exclusivity198, it seems perverse to state that, possession of the rights to Premier League live matches...has improved, sharpened or enabled competition more...than the arguments that it has distorted or discouraged it. Interestingly, in the German Competition Authority enquiry into the selling of rights on a collective basis for German UEFA matches, the DFB claimed that the relevant product market was the acquisition of broadcasting rights for sports events199. It is important to ascertain that this included all sports, rather than just the Bundesliga or even the wider interest of German football. In determining the substitutability of football on television, the Dutch authorities found a middle ground between the MMC and the RPC's deliberations. They assessed in the KNVB decision that sports rights are only to a limited extent substitutable with other television rights.200 Some have even come to the inevitable conclusion that rights to certain sporting competitions have become separate markets in themselves. Season long events such as the Premier League or NFL could potentially be classed in this category, as a result of its popularity and subsequent rights appeal to broadcasters201.


Page 161 of the RPC judgment. "We think that it is putting it too high to say that there is no

substitute for Premier League football so far as Pay-TV is concerned, for this underrates such football competitions as the FA Cup and the UEFA Champions League."

Torben Toft, TV Rights of Sports Events, European Commission Competition DG, Broadcasting

Competition Law, Brussels, 15 January 2003 www/site_sources/comm/competition/speeches/text/sp2003_002_en.doc


UK EC & Competition Law Developments in conjunction with Berwin Leighton

Van Brink, Competition, 361 Brinkman and Vollebryt: The Marketing of Sport and its Relation to E.C Competition Law: [2000]


E.C.L.R. p286 10889848 v1 77

These variations in market definition across Europe and within England do pose problems for any European body, which seeks to harmonise Competition Law throughout the EU. It would have been more interesting if the two British cases had fallen slightly further apart, so that the RPC could have had the chance to view in full the MMC's reasoning, before coming to their own conclusions. Equally important however, could be any investigation by the Commission into the sale of football rights202. The difficulty with such an enquiry is that it is more likely that one of the conflicting approaches taken by the MMC and the RPC is likely to be deemed to be incorrect, There is uncertainty as to which holds more weight, due to the differing nature of the two enquiries, yet as there is no conclusive agreement on what the correct market classification is for the Premier League, the European Commission is at a significant disadvantage given the existence of conflicting persuasive evidence. Any future European ruling will not change the outcome of past cases, yet it may very well lead to the discounting of one approach. If an alternative definition deemed more appropriate was put forward by any future European investigation, the competition regulatory scheme of Britain might need alteration to fall in line with European findings. From all of the conflicting approaches to market definition across Europe, the most convincing argument is most likely the MMC's report, because their market definition falls in line with the current European Commission position. Substitutability is the key because the Premier League does not seem to have any closely substitutable goods. Competitions like the FA Cup and England international matches could be branded inferior products, or part of divergent football broadcasting markets. As stated above, the RPC seemed to have its own reasons for advocating a broader market definition for football, just as the MMC, had their reasons for a more constrained approach. If the Premier League was a product with many alternative substitutes, then pay television broadcasters would not attach as much significance to the acquisition of the rights, as the ready made alternatives would satisfy popular demand just as well, and could potentially be cheaper to purchase. It is precisely because the Premier League is a scarce commodity that it lures broadcasters to pay exorbitant fees, as they will be virtually guaranteed large audiences. Therefore the market for Premier League rights does appear to be as narrow as that for Premier League games203. It is doubtful that exclusivity would be such a sought after device in the Premier League if other competitors had ready-made alternatives. It does appear that the Premier League


The Premier League was under investigation from the end of 2002 until March 2003. It seems doubtful at present that there are any other competing substitutes to Premier League


football. This then leads to the question as to whether at any time in the future a wider definition for Premier League games would be justified? It would seem that there would have to be some kind of breakaway League to vie for premier position, as Premier League football seems to have very few competitors. 10889848 v1 78

seems to occupy its own broadcasting market space, and because it is a scarce commodity, unique in its appeal, popularity and worth to potential broadcasters.

Fleming assesses that exclusivity is highly advantageous to a rights holder who is able to attain a high value for their product in exchange for an exclusive package. This occurs whilst broadcasters are happy to pay higher premiums if no one else is able to broadcast the live event204. The scarcity of the rights on the supply side of the programming (the upstream market) means broadcasters will use this artificial scarcity (exclusivity) to foster demand for a product, which has only one seller, For as long as an exclusive deal with a broadcaster is worth more than a collection of non-exclusive packages, the rights holder will inevitably maximise revenues. This situation however, is not always the case. Other considerations such as the total level of television dedicated to programmes, potential audience penetration levels, and the amount of exposure by any one broadcaster can provide alternative reasons why a rights holder may decide against accepting the largest bid in an auction205. This occurred in the bidding for the European rights for the Olympic Games up to 2008. Although Murdock's NewsCorp bid around 2 billion the games were sold to the European Broadcasting Union (EBU) for the sum of 1.6 billion. The rationale was that the lower price was on the basis of the widest possible exposure.206 As will be considered later in this chapter207, another very significant consideration is national restrictions for listed events. In Britain's case, the Olympics are a listed event so that in almost all scenarios only a terrestrial broadcaster would be able to televise it.
Exclusivity as a Producer Device

Exclusivity is an accepted commercial practice in the broadcasting sector.208 From this starting point, an immediate emphasis is placed on exclusivity as a producer/broadcaster tool. It is usually to the advantage of the company who pays a premium to have almost monopoly control over the use of the television rights purchased. In doing so, the


Hazel Fleming, Exclusive Rights to Broadcast Sporting Events in Europe, [1999] E.C.L.R. p144 Fleming, Exclusive, 145 Daily Telegraph January 31, 1996 And previously in Chapter 4 209 Fleming, Exclusive, 143 79





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resulting impact is a degree of control over part of the market, as consumers can either choose to buy the product, usually from a subscription or pay-per-view server, or simply forego it. For example, between 1988 and 1992, when top-flight English football was available on terrestrial television, an average of seven million viewers watched every Sunday afternoon. Since Sky purchased the rights from 1992 onwards, only average of only one million viewers watch the selection of live games209. Due to exclusivity, consumers are hemmed into a corner, to make an opportunity cost based on the value of the product. The effect of exclusivity has been to price six million fans out of the market, and although not all of them may be committed football fans, the ratio of six fans to one subscriber, illustrates the price to be paid (or not) by the consumer. Exclusivity has the effect of limiting supply in order to maximise subscription revenues. This also has the effect of entrenching the broadcaster's position of dominance. Many have berated the notions of collective selling210, but to many exclusivity is the problem211. Even if a collective deal remains intact, its anti-competitive features will be mitigated if exclusivity is deemed illegal. A number of broadcasts if packaged on a non-exclusive basis could be sold to competing broadcasters212. Therefore football could much more readily transform from the broad exclusivity that the Director General felt was unnecessary in the RPC case, to smaller, more numerous packaged forms of narrow exclusivity. Ironically, as will be illustrated later, it may be the case that numerous packages of non-exclusive rights will become the norm for the Premier League, and the wishes of the Director General, although not upheld in the RPC case will eventually be followed through. The Commission and the ECJ has become more entangled in the debate surrounding exclusivity. In the Football Association Case213 it held that the FA was in breach of Article 85(1) (now 81(1)). Even in 1993, the Court was of the opinion that exclusivity should be limited to a maximum of one year in most situations. The challenge was made one year into British Satellite Broadcasting


Szymanski, Negative, 8 e.g. Stefan Szymanski or Jens Pelle van den Brink e.g. Hazel Fleming or Jonathan Rush If the collective agreement was ousted and exclusivity remained, the Premier League as a whole




would potentially suffer as there would no longer be a structured television revenue sharing deal, coupled with the other problems associated with individual selling and the likelihood of wealth distribution being nullified. It may even be possible to speculate that exclusivity would not be able to occur on a League wide basis, as clubs could only negotiate on an individual platform, and not as a collective entity.

IV/33 245 BBC, BSB and FA [1993] O.J C94/06 80

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(BSB) first five-year contract with the Premier League. An exception under Article 85(3) (now 81(3)) was granted for the entire period of the contract because it was acknowledged that BSB (who were about to merge to become BSkyB) only began to broadcast in 1990 and needed the certainty of a longer term contract in order to develop within the British broadcasting industry. This was the exception to the general competition rule. Yet since the ruling, BSkyB has signed a subsequent four-year deal in 1996 and three-year deal in 2000 with the Premier League. The Court's rationale for the ruling was understandable in 1993, with an infant broadcasting group, but there seems little need for this type of exclusive protectionism to continue. If the device of exclusivity is used for the benefit of new entrants, as was the reason for the exception, it should not have the undesirable consequence of foreclosing markets. Far from encouraging new entrants, the exclusivity conferred to BSB in 1993, should be a guiding light enabling the same concessions to be made to embryonic broadcasting companies. They are unlikely to purchase exclusive rights when faced with huge exclusivity premiums and broadcasting companies with dominant and entrenched positions, as well as a huge cost base over which to spread its rights expenditure. Karel Van Miert, the previous Competition Commissioner, was of the opinion that exclusive rights were permissible but attention had to be drawn to the scope and duration of the contract214. In the Sport7215 case the Dutch Football Association (KNVB) had granted Sport7 exclusive rights to the League for seven years. Although Sport7 did not last into its second year of broadcasting, according to Van Miert seven years is an excessively long period of time.216 As a young broadcaster, it would have been interesting to see had Sport7 survived, what type of exemption if any, the courts would have granted. As in the BSB case, where exemption was afforded for up to five years, would the courts have extended any such exclusive agreement for a further two years? Indeed, the reason why the company needed the seven-year guaranteed contract was to secure its financial future. In the end, not even this protection prevented the broadcaster from going bankrupt. Intriguingly, Van Miert, (just as the RPC had done,) championed the ability of exclusive rights to enhance competition when a new entrant could enter the market. This still however underestimates the major hurdle created by larger rivals who would simply outbid the infant company, as only one potential package would be available. Mario Monti, the current Competition Commissioner continued the Commission's theoretical defensive approach to exclusivity by stating that exclusive contracts over a year would usually be rendered illegal. Yet in Britains case with BSkyB, since 1992, and with the exception of the initial contract, which expired in 1997, two deals have extended over the one-year threshold, and


Fleming, Exclusive, 148 Case IV/36 033 KNVB/Sport7 [1996] O.J C2228/4 Fleming, Exclusive, 149 81



10889848 v1

only in the last weeks of 2002 has the Commission finally decided to open an investigation into how the rights are sold in Britain. Peter Scudamore, the current Premier League chief executive has expressed the Leagues intention to take account of the past and current concerns of the Commission. [We] took a great deal of notice of the EC's views...for example by doing a television deal for three rather than four or five years.217 Even more disconcerting is the apparent change of heart that is occurring within the Commission. This is alarmingly coming at the time when the British and German investigations are drawing to a conclusion. Monti in a relatively recent speech assessed that exclusive contracts for season in a given championship do not normally pose any competition problems. However, exclusivity of a longer duration and for a wide range of rights is unacceptable because it is likely to lead to market foreclosure.218 This speech was given in 2001. It is interesting to contrast this view with a talk given by Toben Toft, the principal administrator for the European Commission's DG IV, on the same subject. exclusive contracts for one season in a given championship would not normally pose any competition problem. A three year period would often seem acceptable. However, exclusivity of a longer duration and for a wider range of rights can restrict competition, as it is likely to lead to market foreclosure.219 Not only could they be charged with plagiarism but it also seems that the Competition Commission has changed its mind over at least the duration, if not the scope of exclusive contracts. For sports authorities that may have relied on statements that have been made by various members of the Commission, uncertainty prevails. As the Commission's apparent stance on the nature of exclusivity weakens and more latitude is allowed, one must question why this has happened now? One possible answer is that as their investigations into the selling of rights in Germany and England come to a conclusion, it is easier


Denis Campbell Adjust you set. New ways for falls to view matches may come to their rescue,'

The Guardian, December 14 2002


Mario Monti, Competition and Sport: The Rules of the Game, Conference on Governance in Sport,

Swissotel Brussels 26 February 2001


Torben Toff, TV Rights of Sports Events, European Commission Competition DG, Broadcasting

Competition Law, Brussels, 15 January 2003 10889848 v1 82

for the Commission to strike a balance with the relevant national football federations, rather than rule the exclusive agreements illegal because they fall beyond the scope of the one year exclusivity threshold. If the rationale for the investigation was to strike out exclusive agreements over one year, the retraction of their position sets a worrying precedent. Even more frustratingly, if exclusivity is subsequently endorsed, it seems more likely that the collective marketing of the rights package will be questioned, and as expanded on previously, the restrictions that exclusivity places on broadcasters and consumers alike, are more severe than that of any negative collective agreement side-effects. Taylor perceptively indicates that, There are too many drafts, speeches, memoranda and not enough decisions by the court in Europe. There needs to be decisions to clarify but more importantly to inject grater certainty into the system.220 Therefore duration is a powerful consideration when deciding whether exclusive rights are permissible or disproportionate. In German Film Producers221, a 15-year-old exclusive access contract was granted exception to MGM films after provision of short periods of access by other broadcasters was permitted. This however does seem to be a small exception to the general rule. In the light of the case, the cost to the broadcaster bearing the risk must be noted. Investment in translation, distribution and revamping the films was necessary, and therefore such a long contract was necessary to ensure the venture could be a viable commercial proposition. To the same extent extensive exclusive rights may be appropriate to justify initial outlay required by the broadcaster.222 In the same vein, Taylor similarly defends long term exclusivity contracts on the grounds that, exclusivity is a mechanism for media companies to cover investment and cover risk. It is in the public interest to make investment in technology.223 Some have gone so far as to criticise the Commission's initial approach to a one year maximum on exclusive contracts, which has been branded,


Appendix: Interview Taylor C O.J C284 3/10/89 Fleming, Exclusive, 147 Appendix: Interview Taylor C 83




10889848 v1

unrealistic in that it gives little chance to the broadcaster to promote its coverage of the event. It also gives to the seller little chance to make future financial plans and requires him effectively to live from hand to mouth.224 These concerns range from the initial one-year framework, to the extension of the duration of exclusive contracts. Whilst such an extension may be more sensible and proportionate, there must have been good reason to conclude that a one-year period was sufficient. This change of approach can be illustrated by three recent negotiations in which the Commission has been involved. The Champions League package renegotiations along with Formula One (F1) restructuring are examples of a consensus building approach, but also of a lessening of the past restrictions over exclusivity agreements. A settlement was reached after a Statement of Objections was sent to F1, with the Commission especially concerned about abuses of dominant positions, restrictive broadcasting contracts and potential barriers to entry, which initially were found to be contrary to Articles 81 and 82, One important stipulation was a reduction in the periods of exclusivity from the unreasonable level of up to eleven years to a maximum of five years, the normal level being three years. Interestingly, the Commission found that unlike the Champions League investigation, the collective selling of the rights was legitimate as drivers, manufacturers and promoters all had interests in the event, and collective selling was inherently necessary225. In the Champions League example226, only one broadcaster had the exclusive rights to televise the European club showpiece event. As a result of Commission renegotiation, 14 packages of bundled rights on a nonexclusive basis were auctioned off, which gave clubs the potential opportunity to sell certain matches on an individual basis. Most importantly, rights contracts did not now exceed three years. Similarly in November 2000, Audiovisual, a Spanish broadcaster was faced with the prospect of incurring large fines from the Commission, a threat which was later dropped, after the parties had initially been granted an eleven year exclusivity period which would have inherently


Griffiths-Jones, Law and the Business of Sport, (Butterworth:London 2000) p88

A supplementary point may concern consumers who are contracted to a subscription-based server for a minimum of twelve months. If a consumer then wished to terminate the contract because the Premier League (for example) had been bought for one season by another pay-TV operator, it could leave the consumer having to pay two subscriptions in order to watch one Premier League product without having much redress.

Ratliff, Major, 66 Commission welcomes UEFA's new policy for selling the media rights to the Champions League


IP/02/806 Brussels 3 June 2002 10889848 v1 84

stifled competition for too long227. All parties provisionally agreed a compromise position of three years228. These three examples illustrate the shifting position of the Commission to a more realistic, yet in relation to exclusivity uncertain position. Until the ECJ rules on the legality of exclusive sporting contracts, this uncertainty will remain. In the RPC case, Ferris J rejected the argument that the effect of broad exclusivity constitutes a barrier to entry for new broadcasters. It seems that the Court is in the minority in relation to the weight of Commission and ECJ dicta, which broadly agree that exclusive contracts (currently) for exceeding three years foreclose the market. As set out earlier229, this may be more to do with the insufficiency of the RPTA 1976 rather than the benefits of exclusivity, and in the absence of any reasonably contrived intermediate solution, exclusivity was the least undesirable alternative. Rush is quick to assess that the RPC's finding seems to bear little relation to current commercial reality, which is that any broadcaster seeking to compete with Sky's pay television channel will struggle to get enough subscribers if it cannot offer any coverage of Premier League football whatsoever.230 The more contemporary examples illustrated above depict ways in which the Commission is trying to reduce the effects of market foreclosure by reducing the potential anti-competitive effects of long-term exclusivity deals. Monti was recently quoted by John Vickers, Director General of the OFT in a speech concerning the future of television broadcasting rights, that competition is ultimately about consumers benefiting and not about the rise and fall of individual companies.231


Jean-Francois Poins, Sport and European Competition Policy, Fordham Corporate Law Institute on

International Antitrust Law and Policy, New York, 14-15 October 1999, p15

Ratliff, Major, 1 In Chapter 3 and in this present chapter under Collectivity and Redistribution. Jonathan Rush, Broadcasting and Football: Premier League Broadcasting, Ent. L.R. 1999, 10(8),




John Vickers, Competition policy and broadcasting, A speech at the lEA conference on The Future

of Broadcasting, 24 June 2002 10889848 v1 85

If this is the premise that Monti and Vickers adhere to when determining competition issues, then there seems little basis for long-term exclusivity232. They seem to suggest that consumers should take a privileged position. At present however, with Sky's past and present four and three year deals respectively, Spain's three year deal, along side the Formula One compromise of three years, illustrate how the consumer is being dominated by fewer broadcasters233. Without companies competing on price, and only intermittent exclusive auctions, consumers are left somewhat stranded234. This however did not stop the judges in the RPC case from perversely determining that, [i]f the exclusivity clauses were struck down, competition between broadcasters would be significantly diminished. It is to the benefit of the public that such competition should be vigorous. Its diminution would therefore deprive the public of a specific and substantial benefit.235 There needs to be an answer to explain why exclusivity still holds so much force. It seems unlikely that it is ultimately for consumer protection and advancement, and if the sentiments that Monti, Vickers and others at the Commission have expressed are legitimate, why particularly in the past has exclusivity not been treated more critically? It seems apparent that exclusivity does hinder competition for producers and consumers. It is to the detriment of consumers as they are constrained by what they can watch and who is broadcasting it, whilst a monopoly supplier dictates how much people have to pay. Smaller broadcasters can only see exclusivity as a barrier to entry.


Bar the exceptions noted previously. e.g. In Italy subject to competition concerns Telepui is to be purchased by News Corp and


Telecom Italia to create a new broadcaster called Sky Italia with around 2.2 million subscribers. (February 13 2003)

It could be argued that the interests of the consumer have never been paramount in rights holders

and pay-TV broadcasters minds. Therefore consumers keep purchasing season tickets, replica kits, and the latest memorabilia, and this is even before one considers the cost of watching football on television. As several companies are now able to bid for the next Premier League contract commencing in 2004/5, it will mean fans may have to subscribe to BSkyB, NTL, various pay-per-view platforms, digital television in order to receive ITV2, should ITV gain one of the packages, and that still may not guarantee a fan to watch his team every week, if they are a less popular team than the top four or five clubs.

Re: F.A. Premier League Ltd. Agreement Relating to the Supply of Services Facilitating the

Broadcast of Premier League Football Matches (Restrictive Practices Court, 28th July, 1999) p162 10889848 v1 86

We need to move away from big television rights packages and the allocation of rights to single bidders.236 Unlike the BSB scenario in 1993, the general trend has been for larger, more established companies buying exclusive rights, and consolidating their dominance in the market. To accentuate this problem, the next time exclusive rights become available; the larger firm who had the benefits of exclusivity over the previous period will have probably become more profitable, making it even harder for emerging entrants to purchase the chosen premium rights. This zerosum approach manifests itself in there being only one seller at a time. Broadcasters and rights holders may maximise value, but consumers are left with much less choice in the longer term.
MMC and Toeholds

The MMC's decision to block BSkyB's proposed takeover of Manchester United came as a shock to many in the stock market. As the decision was made public, 15% of Manchester United's share value was wiped off. The loss of value totalled almost 85 million237. The MMC case dealt with an alternative facet of anti-competitive behaviour, to exclusive or collective agreements. The proposed takeover by Sky was struck down because the competition authorities became extremely wary of the benefits that would accrue to both parties. It could be argued that the Sky takeover was the catalyst for the subsequent minority stakes in many of the Premier Leagues top clubs. These so called toeholds are subject of much debate and consternation. As NTL were considering purchasing for Newcastle in 1999, or at least gaining influence from within the boardroom, NTL saw this step as a necessary counter-balance to Sky's increasingly dominant position. Sky in buying United was of the opinion that it wished to branch out into content ownership238. Therefore even at this initial stage, Sky did not view United as an investment per se, but rather as a means of exploiting the club and its property rights. Since the takeover was struck down, Sky along with other broadcasters have circumvented any regulations, and their strategic plan to own content has been reinvented, repackaged and introduced in another form: toeholds239.


News from Labour at BBC Online, Man Utd bid ended offside, Friday, 9 April, 1999 2.75 of MMC Report see Daniel Geey, Where broadcasting and football collide: conflicting approaches to football club




ownership, Entertainment Law Review Ent LR (2004) Vol.15 No.2 Pages 42-46 10889848 v1 87

It must be stressed that the MMC when deliberating over the strengths of the argument, came to the conclusion that standing alone, the toehold theory would not give Sky the major additional benefits over its broadcasting competitors. However when combined with the other features such as additional access to information and Sky's fall back options, the combination of all of these factors was enough to give the company a serious competitive advantage. It was felt that United would be in a more advantageous situation due to the process whereby some of its bid would return to United because of it ownership stake. It is important to recount the competition reasons underlying the failure of the bid. Primarily, Sky would have had an unassailable position in the hunt for Premier League rights because it would own the Premier League's most prized asset, and thus be in a greater bargaining position when the current television contract was being renewed. As a result, Sky would have the added benefit of information advantages, and would have a seat on both sides of the negotiating table. Sensitive information that only United would be able to receive about competing bids could be used to Sky's advantage. It was also argued that Sky in the long run would rather exploit United's dominant position as a bargaining tool, which may not have been in the wider interests of the national game (i.e. from resigning from the League or initiating the individual selling of rights). As an additional public interest defence, the Commission was at pains to stress an increasing wealth polarization, with the top clubs receiving more of football's income as television viewing figures grew as a result of football's expanding popularity. The disturbing fact is that whilst these decisions were agreed with and accepted by the Secretary of State for Trade and Industry, broadcasters use of toeholds to stealthily exert similar levels of influence are undermining all of these anti-competitive reasons. Whilst takeover interest died after the Monopolies and Mergers decision, something potentially as damaging has been quietly gnawing away at football. In linking the RPC case with the MMC, some commentators have viewed them as the maintenance of the status quo, and the biggest winner since 1992 is undoubtedly Sky. So worried that they were to lose the exclusive Premier League package which was of such value to the company, that a pre-emptive strike was ordered to try and secure United as a fall back option should the RPC have ruled in favour of the OFT. Sky was banking on at least one of the decisions going in its favour. If the Director General won the argument in the RPC, yet the takeover was approved, they would at least own the most popular Premier League club. If theoretically the RPC had sided with the OFT, Sky would have been left in a position without a collective and exclusive deal and without ownership of the largest Premier League club. Fortunately for Sky this doomsday situation did not occur. For Sky it was important to maintain premium television football content, and when this was safeguarded by the MMC decision, their disappointment with the decision concerning United was far from the set back it could potentially have been. Sky did not have to pay the 623 million for United, yet arguably with 9.9% ownership in the club, Sky can still exert the same type of influence, yet at a more reasonable price.

10889848 v1


Harbard and Binmore explain, why no conditions on United's participation in the selling of the Premier League rights would have alleviated the Monopolies and Mergers Commission concerns.240 As indicated above, a part of the bid coming back to Sky as part of its ownership stake gives it its initial advantage, and this subsequently coupled with the added concern of the winner's curse, (i.e. how potential winners of an auction who do not own a toehold in the company will have usually paid in excess of the competitive amount) illustrate the overriding concerns of the Commission. The analysis of almost 1500 tender offers in the US found that toeholds increase the likelihood of a single bidder contest and those without the toehold are unlikely to revise their bid upwards after the initial bidding.241 The best type of example that can be given within the current Premier League financial relationships is with Sky and Leeds United. Sky own 9.2% of Leeds United's holding company acquired for 13.8 million in October 1999242.. As part of the agreement, Sky were contracted to be Leeds' official media consultants whilst also taking a 30% commission on every increase in revenue that Sky negotiated for Leeds243. With Sky potentially taking 30% from every deal as its exclusive commercial partner, the broadcaster, in any collective or theoretical individual deal could bid well above the market price for Leeds' rights because they would recoup up to 30% of their costs back due to their marketing arrangement. It could therefore bid up to 29% more to secure these rights. Even more strategically, it may also be worthwhile if another broadcaster bids a similar amount to Sky for it to accept the rival bid, which would accentuate the winner's curse to an even greater extent. Either way, Sky would be in a position of great power. If Sky could make a bigger profit on the 30% commission than on screening the matches themselves, then it becomes a viable option. The irony is that in this and other situations the


Binmore, Toeholds, 142 Binmore, Toeholds, 143 Banks, Going Down, 50 Patrick Harverson. OFT not to refer BSkyB's stake in Leeds Sporting ,' The Financial Times, Feb




4, 2000 p24 10889848 v1 89

...leading broadcaster will effectively be negotiating with itself and extraordinarily be paying itself commission.244 In relation to the previously discussed issue of exclusivity, one reason for the Commission's opposition to the takeover was Sky's dominance in the sports premium television market, and that there would be insufficient rights available for other infant broadcasters to enter the market245 . Therefore the restrictive effects of exclusivity mean a certain type of market foreclosure. Interestingly, Sky's potential abuse of its dominant position was not the basis of the Commissions enquiry. Only Sky's monopoly dominance was investigated. It may be speculated that in the present toehold climate coupled with Sky's exclusive monopoly of Premier League rights, it might be abusing its position by buying ownership stakes at clubs, thereby cementing its dominance in the football television market. The presumption made by Szymansk246 and Binmore particularly is that toeholds will allow broadcasters, especially Sky (due in part to NTL's current debt problem) to gain rights at lower price, than in a truly competitive bidding process. In the longer term this is also true, because once the broadcaster has gained those valued rights it will be in an even stronger position in the broadcasting market with fewer competitors/suppliers and thus less choice for fan/consumers. The frustrating aspect of the Commission's decision is that it seemed to be based on competition issues, not simply the public interest surrounding the emotive nature of football, yet these very anti-competitive issues are not being raised in the debate over toeholds; their effect in comparison to complete ownership however is extremely similar247


Adam, Brown, Sneaking through the back door? Media company interests and dual ownership of

clubs,' in Sean Hamil, Christine Oughton and Steven Warby Football in the Digital Age, Who's Game is it Anyway, eds., (London: Mainstream, 2000) p 86

Van Brink, Football, 363 Szymanski January 14th 200 Financial Times This does not however seem to be the view of the Office of Fair Trading in recent investigations



into NTL and Sky's investment in numerous Premier League clubs. For example an interim enquiry into Sky's position at Leeds concluded that the 9.08% buy into Leeds could not be considered a merger and thus could not be referred to the Competition Commission for a merger investigation. John Brightman, the Director General of Fair Trading felt Sky's investment did not add up to material influence. Reference: PN 08/00 3 February 2000 10889848 v1 90

The theory draws no distinction between full ownership and 5% of all 20 clubs; the toehold effect is still the same. If buying United was against the public interest, so is the collection of under 10% stakes.248. Sky seems ideally placed as the incumbent broadcaster and significant shareholder in five Premier League clubs to advocate the advantages of Sky's future television bids. It would only require two more clubs to potentially veto any deal that was not in Sky's best interests according to Premier League voting rules. Sky, after Manchester City were promoted was assessed as owning over 7% of the quoted Premier League. As a side issue, Football Association (FA) Premier League rules state that the FA may deem ownership in a club under 10% threshold legitimate only if the shares are held for purely investment purposes only. Brown249 questions the policy of Manchester City and Leeds examples to appoint of a Sky official to the board and the appointing of Sky to act as a media partner whilst taking a hefty commission. It seems that strategic decisions and not merely `investment decisions' are being taken by broadcasters to get greater influence, mitigating in Sky's case, the loss of not buying United. The ENIC case250, signalled to authorities such problems where by one company had part ownership in several clubs competing in the UEFA Cup in a single season. It signalled the intention of the football authorities to instigate measures to ensure that conflicts of interest do not occur between clubs251. This illustrates that on a European level, steps have been taken to defend against such situations that are occurring in the English Premier League. It remains to be seen whether English Courts would take such issues as seriously. There seems to be little support for such regulation, in the face of broadcasters multiple ownership of football clubs in the same Premier League competition. Unlike in Britain, on mainland Europe media companies control many clubs. Fininvest are major shareholders in AC Milan, whilst Cechi Gori Group (until its recent bankruptcy) owned


Stefan, Szymanski, An uneven playing field: BSkyB's accumulation of stakes in Premiership

football clubs may be anti-competitive, The Financial Times, January 14th 2000

Brown, Toeholds, 88 Ian Ross, Granada buys into Liverpool: Clubs await TV invasion after media group takes Pounds


22m stake in Red,'. The Guardian, 14th July, 1999 p30


This was the situation where the English National Investment Company plc (ENIC) owned AEK

Athens FC and SK Slavia Prague, who were competing in the same UEFA Cup competition in the same season. 10889848 v1 91

Fiorentina252. A consortium of Lazio, Parma and Roma allied with News Corp acquired 40% of one of Italy's major digital operators, which is of interest because it is in polar opposition to United takeover. This is an instance of reverse vertical integration, with clubs buying the broadcaster253. In France, Canal+ has a controlling interest in Paris Saint Germain and Serville Geneva, M6 Bordeaux and Pathe has a large minority share in Olympique Lyonnais. In Greece, Netmed controls AEK Athens and UFA has interests in Hamburg and Hertha Berlin254 One of the numerous reasons why Sky wished to acquire United was because unlike the 2001 auction, there was less chance that Sky was to be successful. This was because in 1992, Alan Sugar tipped off Sky when the Premier League chairman were deliberating upon which bid to accept. (The sales of Sugar's Amstrad decoder were the model used by BSkyB) This inside help enabled Sky to up their bid against ITV, whilst in 1996, a clause was inserted into the broadcasting contract which (later found to be illegal on competition grounds,) gave Sky a `meet the competition' option, and allowed Sky once again to match any competing offer255. In 2001, whilst there was great uncertainty over whether the rights were going to be sold collectively and exclusively due to the RPC case, there was no stipulation in the second contract signed in 1996, which meant that other broadcasters had a potentially more realistic chance of gaining the rights from Sky. In this respect Sky, even without the toeholds in 1992 and 1996 has been able to benefit enormously from informal and formal information advantages. Binmore questions why one should expect this ability to be diminished once it owned the Premier Leagues most valuable club?256


Van Brink, Football, 362-3 Spink, Paul and Morris, Phillip, The Battle for TV Rights in Professional Football' in Caiger,


Andrew, and Gardiner, Simon (eds) Professional Sport in the EU: Regulation and Re-Regulation, (The Hague: Asser Press 2000) p187

Spink, TV Rights, 192 Binmore, Toeholds, 142 Binmore, Toeholds,140 92



10889848 v1

Table 3: List of Toeholds Throughout Great Britain Broadcaster Granada % stake 10 Club Liverpool257 Amount paid Date of Other ( millions) Purchase Arrangements 22 July 1999 Media agents and website coordinators Media agents Shares for convertible interest free loan Shares for convertible interest free loan -

Granada NTL

5 6

Arsenal Newcastle258

47 14

November 2000 February 1999



Aston Villa

26 (partial January loan) 2000


9.9 6 9.9

Glasgow Rangers259


June 2000 March 2000 June 2000

Middlesborough260 Undisclosed sum Leicester 12.5

Shares for convertible interest free loan + agent for media and sponsorship rights261


9.9 previously

Manchester United

October 1999


Matthew Garrahan; Cathy Newman. `Granada nets stake in Liverpool,' The Financial Times, July

14, 1999 p19


Ashling O'Connor. `Paying the price for football frenzy?: the long game strategy being played out

by UK media group,'. The Financial Times, Oct 8, 2001 p31


Geoffrey Spiteri. `NTL investment scores an own goal with top-flight teams,' The Independent

Sunday (London, England), July 22, 2001 p3


NTL teams up with Middlesbrough,' The Independent (London, England), March 29, 2000 p18 `NTL takes Leicester stake; Leicester City,' The Times (London, England), June 9, 2000 p32 93


10889848 v1

(11.1) Sky 9.2 Leeds 13.8 October 1999 Media consultants with commission based arrangements Media consultants with commission based arrangements Media consultants with commission based arrangements265

Sky Sky

9.9 9.9

Chelsea262 Manchester City263

40 7.5

February 2000 November 1999




December 1999

As the table shows, these developments in 1999 and 2000 illustrate the extent to which broadcasters were purposely tying themselves down to clubs. However, far from wanting an active role in the running of the club, their aim was to achieve an active and influential role in the process by which future highly valuable rights were to be sold. A media company with close links with a club would be more likely to advance the case for a closer, mutually beneficial association. A Premier League full of broadcasters with competing and conflicting interests is surely to the detriment of football, and from the stance of the Office of Fair Trading, would appear to threaten efficient competition. Granada's media agency agreements with Liverpool and Arsenal and Sky's media consultancy roles with Manchester City and Leeds, give these broadcasters precisely what the Monopolies and Mergers Commission tried to outlaw; a seat on both sides of the negotiating table as well as being privy to privileged information thereby gaining a strategic competitive advantage. The Commission's decision was to prevent competition distortion, but plainly this still


James Harding, Murdoch tactics reveal new strategy,' The Financial Times, March 4, 2000 p3 `Blues fans reach for the Sky,' The Independent Sunday (London, England), Nov 7, 1999 p8 `Stadium of Light joins Sky TV's expanding empire,' The Independent (London, England), Dec 18,



1999 p29

'Football's cash and carry,' The Guardian (London, England), March 31, 2000 p36 94

10889848 v1

persists. Toeholds have the added effect of familiarizing clubs with broadcasting companies. Just as the Premier League is synonymous with Sky, if individual rights sales become a reality, the incumbent broadcasters with toeholds will become the natural choice for individual broadcasting contracts as the link grows and relationships mature. The more clubs owned, the bigger the section of the market they [the broadcasters] could secure through ownership rather than through fair competition in the sale of rights.266 Almost the entire rationale for the Monopolies and Mergers Commission Report was the focus on the advantages a broadcaster would gain by owning a football club. Sky's takeover failure has resulted in a new means by which broadcasters gain influence. Toeholds have been acquired with consequent ease, and have bestowed upon Sky especially almost all the benefits that were deemed anti-competitive by the Commission. Broadcasters have been able to buy such investments that ostensibly are strategic in nature and further their aims, but not necessarily football clubs objectives. This is achieved without any kind of regulatory approval and, in the United takeover example, without any significant capital outlay.
Listing of Events

The TVDanmark (TVD) case signalled an important wake up call to broadcasters and rights holders alike. No longer could they be assured of the ability to market some of Europe's most popular sporting events. In Denmark (before the list system was revoked) if a major event was of such significance the decision that the public as a right should have the ability to watch for free, emphasised the dominance of the consumer, due to the positive externalities that may result. However this was only the case because of European statutory intervention. The TVD case brings into focus the dilemma surrounding a government's duty to safeguard certain sporting and cultural occasions whilst also having concern for business enterprise and the need for a competitive market in the sale of sports rights. Just as the MMC thought the takeover would distort the rights market, as too much market power would be surrendered to one company, the effect of the Television Without Frontiers Directive (TWFD) was to maintain a better level of equal competition by restricting competition, The RPC was of the opinion that exclusivity restrictions were beneficial to the public interest, and in the same way, the restrictions placed on certain non-qualifying broadcasters such as TVD, were aimed to protect the consumer's ability to watch an event of national significance267. Nonetheless, other organisations have felt aggrieved


Brown, Digital, 87 per Lord Hoffman in Regina v Independent Television Commission, Ex parte TVDanmark 1 Ltd


[2001] UKHL 51 10889848 v1 95

that this constrains many broadcasters, mainly subscription based operators, who need these highly popular events to make their stations profitable. Indeed the choice is whether ...such market intervention unduly interferes with property rights...or instead constitutes an important recognition of the cultural and social rights which stem from citizenship.268 Szymanski draws parallels with the situation pertaining in the 1980's, identifying that only with the advent of pay television in the early 1990's did rights holders attain the market price for their product. This was because the monopoly position of sporting organizations (the sellers of the rights) was effectively countered by the monopsony269 buying power of public broadcasters in the form of legal cartels270. As a result of years of collusion, especially in Britain between ITV and the BBC, the rights to popular television events were kept artificially low, as there were no viable alternative broadcasters. Indeed in 1978, the OFT ruled as legal the ability of ITV and BBC collectively to negotiate with the Football League, which had the consequence of eliminating competition. When this broadcasting duopoly in England was eventually broken up, the broadcasting market became more deregulated, and the emergence of satellite television meant that rights holders suddenly had the option of alternative broadcasters willing to pay large sums to attract audiences to their subscription channels. A major swing took place away from terrestrial sports consumption. Recently in Britain, terrestrial broadcasters since the early 1990's have lost prime live sporting events like the Premier League, the FA Cup, Football League, Ryder Cup, Cricket World Cup, test cricket, and until recently the Six nations, to pay television and primarily Sky. In the US, commentators state the simple fact that cable companies can easily outbid free television stations271. The National Hockey League is shown entirely on cable television and the majority of the National Basketball Association games are tied to different cable company deals272. Now that many events are only available on subscription services, Member States when given the option through the TWFD decided to safeguard a select few events. While the virtues of


Smith, R. and Bottcher, B, Football and Fundamental Rights: Regulating Access to Major Sporting

Evens on Television,' European Public Law p 106


Just as one seller in an individual market is called a monopoly seller, one buyer in a single market

is called a rnonopsony buyer.


Szymanski, Collective, 4 It must be remembered that most US households have access to cable television/ Adams, Walter, and Brock, James, Monopoly, monopsony, and vertical collusion: antitrust policy



and professional sports,' The Anti-Trust Bulletin/Fall 1997 p272 10889848 v1 96

free television come in the form of high television audiences,273 rights holders, except in certain situations, will accept the larger bid, which usually comes in the form of subscription services that can afford to bankroll such events. One of the main differences in the TWFD, according to the House of Lords in TVD, was the consequence of dwindling income flowing back to rights holders because of the effect of the legislation. The flip side is that if the allocation of sporting and socially integrating programmes is auctioned off to the highest bidder and left to the whim of the market, public access would be severely diminished. Attaching a value to product or service is a way of pricing its importance, but as is the case with other public goods such as clean air or street lighting, they benefit the collective interest and confer beneficial externalities on the wider community. Although less tangible than the economic rationale advocated by many, these benefits have obviously been sacrosanct enough to be protected and enshrined by Article 3a of the TWFD. Many commentators however are keen to stress that the ITC code (and the Broadcasting Act which was amended in order to update it into the TWFD) does not necessarily guarantee access to free-to-air broadcasters of any listed event274. The political argument is that it is not impossible for a non-qualifying broadcaster to gain exclusive rights to a listed event, if a qualifying broadcaster does not show interest in purchasing the rights. However this eventuality is remote due to the popularity of events in the listed section because, as illustrated by TVD, the listed event will almost certainly hold popular appeal, because by the government's own opinion it is special and unique enough to warrant protection275. It would almost be certain that BBC, ITV or Channel 4 in Britain (as the qualifying broadcasters) would be extremely interested in any premium listed sporting event. The effect of the TVD case was also to give greater power to public qualifying broadcasters. As the Court of Appeal was keen to emphasise, the auction process is rendered completely defunct. If broadcasters who have bid and lost still have the opportunity to negotiate with the winner of the auction, and remain armed with the power that so long as they are interested in gaining some rights, the non-qualifying broadcaster may have to acquiesce in order to broadcast at all. For example, if BSkyB bid sufficiently for an `A' listed event, in a competitive auction against the


i.e. England v Romania in Euro 2000 was watched by almost 15 million viewers (BBC Annual

Report 2000 p80)


Flynn, Angela, and Searle, Jonny, `Listed Events Legislation in the United Kingdom,' [2001]

Ent.L.R p169

The two Danish broadcasters in the TVD case, TV2 and DR, were still interested in broadcasting

the match even after the auction, and so long as a public broadcaster is interested, a non-qualifying broadcaster will not be able to monopolise the rights, in any scenario. 10889848 v1 97

BBC and ITV, because of its status as a non-qualifying broadcaster, unless it shared the rights with at least one of the two competing terrestrial qualifying broadcasters, it would be highly unlikely that BSkyB would retain the rights to broadcast. As in the case of TVD, the public broadcasters were able to have an additional opportunity. It brings into question the viability and worth of an auction, if the winner cannot exploit such rights to their full extent. The Court of Appeal felt that a balance needed to be brokered between the two conflicting notions of free competition and the need to safeguard the Directive. All commercial thinking could not be discounted, yet in allowing the TVD's argument to prevail the Court of Appeal was expressly circumventing the direct wishes of the TWFD. The House of Lords confirmed that collective selling and exclusivity were restrictive in the RPC, and that the restrictive nature of the TWFD was indeed a sounder rationale for the protection of the public interest. In many instances, restrictions aimed at promoting competition can be justified, if their objective is to maintain competitive balance or wealth distribution within a league. In this instance, the restrictions could be justified by the public value inherent in sport, and state intervention to safeguard its social, cultural and integrationist characteristics. The only criticism of the judgement was that this perhaps was not made clear enough. As stated in the case study, the policy reasons for the decision would have probably received widespread public approval, as they safeguard highly important cultural events. Instead of using these legitimate public policy defences, the High Court and the House of Lords' tried to use legal methodology and rationale to justify a political decision. For the sake of clarity and greater legal certainty perhaps, they may have been better advised to follow the statute exactly and make that clear at the outset. This would have alleviated to some degree the intricacies of trying to justify an inherently restrictive statue. It is also apparent that, restrictions on the time periods within which television companies can broadcast live games have caused much consternation among broadcasting companies. These restrictions fall under the remit of UEFA Article 14 (old 44). Various broadcasters including TESN, SKY and ITVA have challenged the restrictive nature of the Article, which has been modified to a degree276. As recently as June 2001, the European Commission came to the conclusion that the UEFA statute fell outside the scope of Article 81 and did not constitute an appreciable restriction in the circumstances.277 Therefore it followed that the two and a half hour time window permitted by Statute, and which prevents broadcasters from televising, was not considered to be a substantial impediment. Three specific examples of the operation of the list system in different Member State countries, illustrate the potential for conflict. In Britain, before the 2002 World Cup, KirschMedia, the now bankrupt German media group, sought to clarify and ultimately overturn the European Commission's decision to validate the UK's listed events, and brought an action against the


Ratliff, John, 'Major Events and Policy Issues in E. Competition Law,' I.C.C.L.R. 2002, 13(2) 62 Ratliff, Competition, 65 98


10889848 v1

validity of the listing process278. Kirsch had paid FIFA an estimated 1.37 billion for worldwide rights coverage for the next three World Cup tournaments. This can be notably contrasted with the 215 million the European Broadcasting Union (EBU) paid in 1987 for three World Cup competitions, for coverage up to 1998. As a further illustration; Spain acquired the 2002 rights at a price, which equalled that sum paid by the EBU for all the European rights for the 1998 tournament279. Their contention was two-fold: namely were the criteria used by the UK to determine if an event was of major national significance legal280, and further they accused the BBC and ITV of acting in collusion to market jointly the 2002 World Cup which was contrary to the Competition Act 1998. The two television stations in response argued that the rights were too expensive to purchase by either station individually and that the only way the viewing public would be able to watch the event would be for the companies to pool their money and resources281, The motivation behind Kirsch's challenge was to enable them to negotiate with any British broadcaster interested in buying the rights, so as not to limit themselves only to the qualifying broadcasters stipulated by virtue of the TWFD. If they were able to market the World Cup rights to pay television broadcasters, they were more likely to realise a higher price for their product. The artificial restriction, which prevented them from canvassing the widest possible commercial alternatives for the rights, unduly restricted their ability to maximize the inherent value of their product. Hoffman LJ however in the TVD case considered that the resulting effect of the TWFD could be to deflate certain rights282. However, these were points which the legislators at the time of document being drawing up must have envisaged, and must have attached less significance and importance to these rights, in order to safeguard the public's right to access. Kirsch paid 249 million for the European rights for the 2002 Word Cup283. Exclusivity was the preferable avenue, which offered most value to Kirsch, yet such exclusivity is virtually


OJ 2001 C134/25 Harry Arne Solberg, `Will the Listed Events solve the market for sports rights problems?'


Kirsch's complaint was to do with the extent of the UK list, which covered all 64 world cup final

games. Germany and Denmark for example listed only national team games, along with the semifinals and final. Thus Kirsch's contention was that the British list was too expansive in nature.

Smith, Listed, 108 per Lord Hoffman in Regina v Independent Television Commission, Ex parte TVDanmark 1 Ltd


[2001] UKHOL 45

Smith, Listed, 126 99

10889848 v1

impossible to non-qualifying broadcasters. In Britain, the need to recoup these vast sums through exclusive agreements which yield large sums, is highly unlikely, and in any event would most probably be void pursuant to s99 of the Broadcasting Act 1996. As Lord Hoffman concluded in the House of Lords, different broadcasters in different markets should not be liable to pay a universally similar price. A fair price for pay television would vary quite considerably compared to sums paid by ITV or BBC channels. This demonstrates the practical consequences of a statute, which aims to protect consumer access irrespective of the very real detriment and subsequent (probably indirect) bankruptcy of, a media company. ...because it is (the TVD case) a political decision it is very difficult to justify the restraint that this listing places on the marketing of the broadcasting rights of these events ....if only public broadcasters are able to bid and they act in concert in buying these rights (as the BBC and ITV did for the World Cup) they can very much dictate how much they want to pay for the rights.284 The effect was to substantially depress the 170 million figure which KirschMedia were seeking. This uncertainty stems from the balance companies have to make between the opportunity to exploit the full value of their exclusively acquired rights, or whether a pay television broadcaster, and in addition, would have to work in partnership with a public broadcaster, on a non-exclusive basis, to pass the combined TWFD and ITC code test. It is thought that the BBC and ITV secured the rights to both the 2002 and 2006 World Cup for a fee in the region 120-150 million after much negotiation285. The inherent dilemma is a debate surrounding the lesser of two evils and that there is, conflict between rights holders, who want to maximize revenues, and the public who claim the right to watch for free. The legislative change was prompted by the threat that large media companies would buy up exclusive rights to popular events and sell them on pay television.286 Table 3: The British List Group A The Olympic Games The FIFA World Cup Finals Group B Cricket Test Matches played in England Non-finals play Tournament in the Wimbledon


Appendix: Interview Marcellio E `World Cup TV deal agreed', 18 October, 2001


http: /

Searle, Listed, 170 100

10889848 v1

FA Cup Final Scottish FA Cup Final The Grand National The Derby Wimbledon Tennis Finals

All other matches in the Rugby World Cup Finals Tournament Six Nations Rugby World Cup Finals Tournament The Commonwealth Games The World Athletics Championships The Cricket World Cup the final, semifinals and matches involving home nations; teams The Ryder Cup The Open Championship

European Football Championship Finals Rugby League Challenge Cup Final Rugby World Cup Final

Source: ITC (Independent Television Commission) The difference between Group A and Group B listed events is that A events will usually never be able to be broadcast on an exclusive basis by a non-qualifying broadcaster. B listed events can be screened exclusively by non-qualifying pay broadcasters as long as access is still available on terrestrial channels usually through deferred highlights programmes. There must be a reason why at present only Italy, Germany, the UK and Spain287 have drawn up lists which have been verified by the Commission.288 Denmark has had its list struck off as a result of the TVD case, and Austria and Norway have not received full authorisation for their list. Of all the Member State countries it seems quite strange that there are only four lists. Jean-Paul de la Fuente, in an article before his company ISL was deemed bankrupt, was quite unsurprisingly of the opinion that,


Italy (OJC 277, 30.9.1999, p.3, corrected by current publication); Germany (OJC 277, 29.9.2000,

p. 4); The United Kingdom (OJC 328, 18.11.2000, p.2).


What changes will be made to the Community's audiovisual policy? Work programme for reviewing

the "Television without frontiers" Directive http.// &lg=EN&display= 10889848 v1 101

... the market should decide, without restriction, what succeeds and what fails [and that] cryogenically preserving the `glorious olden days' of TV sports distribution won't work, however attractive it is to vote-seekers.289 It could be speculated that some states value the virtues of free competition above the protection of significant sporting events, yet it is worthy of note the way Spain is dealing with a troublesome position in relation to its listed events290. Spanish authorities, in accordance with the TWFD passed law 21/97, which Lange contends goes much further than any list system in operation, and that it is being used as a political tool by the government to punish a pay-per-view broadcaster who decided not to join the governments favoured Digital platform service. He takes the view that authorities, acting with ulterior motives, and so as not to ensure access to the wider public, have declared that two entire Spanish football competitions be listed and have barred the broadcasting on Pay-per-view of the most popular game of the Spanish football league weekend291. The conjecture is that CSD (Canal Satellite Digital) is a competing platform against the government's preferred national Digital supplier. The Spanish government is using the listing of events to prevent CSD exploiting the exclusive rights that they have purchased for pay-perview broadcasts of League and cup games. They are now less attractive primarily because they cannot screen the top game each weekend and then further, exclusivity cannot be guaranteed if they were a potentially non-qualifying broadcaster under the terms of the TWFD. In effect, the government is ensuring that competition issues are being rectified through the legitimate pathway of listing events, to protect against and prevent broadcaster dominance. Unlike the British example, using the TWFD as a competition tool and not as a public interest defence could potentially damage the legitimacy of such legislation. The third example is seen by highlighting the consequences of the TVD case for Denmark. The irony of the Court case was that TVD had actually broadcast four out of the five games in question. In fact the Bulgaria v Denmark match, which was to be played on the 5th of September 2001 was the only remaining match. Interestingly, TV2, one of the public broadcasters who in the


Jean-Paul de la Fuente, `Let's call time on the TV protection racket,' The Financial Times, August

22, 1997, page 11


Lage, S, and Alonso, J, The Law on Sports Broadcasts: One More Battle in the Spanish Television

War, Ent. L.R. 1998, 9(3) 117


A regional game is made available on terrestrial television on a Saturday, a single game on pay

television on a Sunday and the remainder on pay-per-view. 10889848 v1 102

TVD case wished to buy some of the rights even after losing the auction, bought the live rights for that remaining match from TvDanmark292. ...the TvDanmark case and the subsequent cancellation of the list in Denmark prove that in many cases these lists do indeed create more problems than they solve.293 In the context of the Monopolies and Mergers Report and the RPC case, an interesting comparison is established between the two decisions effectively endorsing exclusivity. A British Court however did not allow exclusivity for TVD, because the pay television station was under the stipulated 90% penetration rate for the population viewing numbers. Whilst British regulatory and legal institutions have promoted exclusivity in two major football cases, the House of Lords saw the exclusive clauses as detrimental to other broadcasters when viewed in the light of the TWFD. Although the Commission gave Sky a five-year exemption from competition rules because of its infant status in the industry, the same protection was not afforded to TVD because they did not meet the requisite 90% threshold. As a barrier to entry, the statute is an effective inhibitor, whilst virtually foreclosing a market to broadcasters that do not have the economic resources to broadcast to at least 90% of the population294. The first two case studies, which extol the virtues of exclusivity as beneficial and in the public interest, look strangely out of place when compared with a decision that stresses the importance of public access while at the same time effectively denouncing the virtues of exclusivity to consumers. There can be no doubt that public broadcasters are in a protected position, but the debate whether public access should be the primary issue remains extant. Many see it as quite refreshing that commentators and supporters alike are surprised by a decision that goes in favour of the consumer. In an increasingly producer orientated broadcasting industry, where exclusivity is the mainstay of producer/broadcaster dominance, such a decision should be welcomed as much as it is denigrated.


Appendix: Interview Morcillo E Appendix: Interview Morcillo E At 95%, in Britain the figure is even higher. In Italy it is 90%, while Germany only requires 67%



coverage. 10889848 v1 103

Chapter 6: Conclusion

The interweaving notions of collectivity, exclusivity, market definition, toeholds and listing of events are the key issues that have flowed out of the three case studies and subsequent analysis. The aim of this has been to try and find a balance between liberalisation and protectionism. It would seem that all three instances illustrate how protectionism in the sphere of football broadcasting has evolved to deal with potentially conflicting scenarios. Interestingly, all three maintain the status quo. In the TVD case somewhat controversially, the TWFD was upheld whilst in the RPC case, the exclusivity clauses were deemed legal. The MMC stood up to large corporate dominance in the shape of NewsCorp/BskyB and sided with the consumer, yet ironically the TVD case could be viewed as taking the MMC case one step too far, in safeguarding the public to an unnecessary degree. There seem to be three key chronological stages in the case studies, In stage one, the MMC ruling decided that for competition and public interest reasons, the economic justification for the takeover by Sky was not adequate enough. In stage two, in the RPC case, the now defunct RTPA 1976, caused consternation because its scope and powers appeared somewhat inadequate for the correct ruling to prevail. Nonetheless, it had the effect of safeguarding producer (i.e. Sky, BBC and Premier League) rights over exclusivity clauses. Finally in stage three, the TVD case demonstrated the Court's willingness to follow the TWFD, although some argue that this was an unjustifiable course of action.
Broadcaster or Consumer Protection?

The regulatory pendulum has swung its both ways benefiting diverse groups in different settings throughout the last few years as set out in the diagram below. There is a curious symmetrical link between the three investigations, in that all groups benefited albeit in different ways. Whilst the decision of the RPC was undeniably weighted towards the broadcasters, this balance was tilted back in line with the MMC, which favoured the fans and other potential broadcasters (bar Sky) and finally TVD, which completed the swing from producer to consumer-aligned protection/regulation. Table 4: Contrasting Case Decisions RPC Producer orientated Protectionist Anti-competitive consumer) (for MMC TVD consumer orientated Protectionist Anti-competitive (for producer)

10889848 v1


Producer/consumer decision Still maintains status quo


Blocking merger anti-competitive (for Sky), pro-competitive for consumers Football authorities have been at pains to defend and advance their broadcasting capabilities. The overall effect has been to create a number of decisions, which whilst strengthening the position of the authorities in some jurisdictions, have also subverted and undermined the autonomy of rights holders in other Member State countries. These are the consequences of the maintenance of exclusivity clauses, and may be compared to the inhibiting effects on rights holders of the TWFD.
The Current Debate

As previously indicated, many of these issues; collectivity, exclusivity, and the listing of events, all become pertinent in the current climate, particularly when one considers the choice that faces the European Commission who are currently deciding on the legality of the Premier League broadcasting set-up. Their `Statement of Objections' was disseminated late in December 2002 and it signalled the growing concerns of the competition authorities over the Premier League's anticompetitive arrangements.295 The common misconception shared by many in the media and among football supporters groups is akin to the furore that occurred during the RPC case296. This concerned the scare mongering; caused by the notion that individual selling was to become the norm in football297. The EC has demanded that the practice of wholesale distribution of games through a central body should end because it deems it anti-competitive on the basis that companies not successful in the tender process are excluded from showing matches...The EC believes that individual clubs should be allowed to sell the rights to their own home games.298 (emphasis added)


IP/021951 e.g. Paul Waugh, Collective TV deal vital to game, say MP's, ' The Independent, 3 April 2003 e.g. Nick Harris, Commons to debate TV issues, The Independent, 3 April 2003 Simon Stone, `League warns of disastrous effect of United TV proposal,' The Independent, 3 April




2003 10889848 v1 105

There seem to be two very different issues that are haphazardly being amalgamated. As assessed previously299, a central league organising body is far less anti-competitive for broadcasters and consumers alike as compared to the effect of exclusivity clauses300` . The main disadvantages of collective agreements are supposed to be the price fixing of the overall package and the charge that the League/cartel limits output (i.e. amount of games televised) by the clubs' continual collusion. Therefore, the effects of collectivity do not necessarily foreclose markets301. Yet the argument in the above extract seems to suggest otherwise. Exclusivity's main and most potent side effect is that it does foreclose broadcasting markets. By deregulating exclusivity and restricting output, a side effect of collectivity can be alleviated, as it is possible to create more than one packaged live programme. the aim is to introduce more competition to Sky, not between clubs, and make games more widely available.302 It is therefore the supply side of the broadcasting deal that the Commission is working to abrogate, in order to create greater competition for Sky, rather than seeking to break up any collective package. It is hoped that the Commission will arrive at some kind of intermediate position as outlined above. Even Professor Szymanski, who seems to be a staunch advocate of complete deregulation of the broadcasting and football markets, thereby enabling individual sales by clubs, was undecided whether,


See the Introduction, Chapter 3 on the RPC case and Chapter 5 subsection Collectivity and


Some have even argued that collective selling is pro-competitive. In German and American

legislatures they have found it necessary to recognise the weight of certain arguments by using types of statutory exemptions to circumvent potential legal conflict. E.g. The Sports Broadcasting Act, 15 USCA ss 1291-1294 (2000) (America), and Section 31 GWB, BR-Dr, 852/2/97 (Germany)

In a Background Note in re of the Champions League Statement of Objections, the Commission

was careful not to label collective selling as illegal per se. joint selling may be an efficient way to organise the selling of TV rights. However, the manner in which the TV rights are sold may not be so restrictive as to outweigh the benefits provided. Although not entirely conclusive in their assessment of collective selling, it perhaps demonstrates a slight veiled criticism of exclusive agreements, by way of the manner they are sold. It does lend more weight to the argument that perhaps the Commission is more concerned with the detrimental effects of exclusivity than collectivity. The UEFA Champions League Background Note, European Commission, MEMO/01/271 (20July 2001)

John Cassy, `A Level Playing Field?' The Guardian, April 7th 2003 106

10889848 v1

a ban on exclusivity coupled with an obligation to make all matches available [would] be better than individual selling?303 If an advocate of total deregulation can accept the possibility that abrogating exclusivity would alleviate some of the most severe anti-competitive features of the Premier League deal, then it would seem even more likely that the European Competition Commission may deem it unnecessary to take the potentially large step towards individual selling which may, in turn cause harm to the wider British football industry. From the 20th of December 2002, the Premier League had ten weeks to respond to the Commissions objections. It seemed somewhat inevitable that the League would be forced to realign its rights package auction process, to conform to the recently reformed Champions League deal304This should have meant an end to exclusivity for Sky and the Premier League305. It may even be the case that there would be a condition stipulating that one of the winning live broadcasters should be a terrestrial broadcaster although such a clause seems somewhat unlikely306. However as is now the case, if more than one live package is produced, the prospect of ITV or BBC gaining access to live games does become a very real possibility. The Champions League broadcasting reform ended the limit on exclusive broadcasters and enabled every Champions League game to be viewed on British television from next season. The logical extension in the British context would see Sky's monopoly on exclusive rights vanish and all 360 Premier League games screened live307. A very different rights approach to broadcasting live Premier League games could well be the outcome. Interestingly, the view of many inside the Premier League including David Kogan, the Premier Leagues chief media rights advisor, is that the League should sell up to 16 packages of live and delayed rights in numerous forms in order to maximise the rights value. The fear has been that


Interview with Prof Szymanski IP/02/806 This process may take quite a considerable amount of time. The investigation to conclusion time



scale for the Champions League negotiations between the Commission and UEFA took over a year.

This would almost be akin to the TWFD in relations to the issue of listed events. As opposed to the 66 games broadcast by Sky per season and the 40 pay per view games at


present. 10889848 v1 107

due to the OnDigital fiasco and the current football financial crises,308 Sky will not pay the huge sums for their current exclusive premium. Rupert Murdock has publicly berated the amount that Sky had to pay for the last deal309, whilst as can be evidenced by the table below, in the last decade the price per match that Sky has paid has jumped to astronomical levels. 1986 Price to broadcasters per match ( millions) 0.22 1988 0.61 1992 0.64 1997 2.7 2001 5.54 2004 2.46

Source: Newspapers and own calculations It is interesting to note the price per match decrease on the most recent Premier League contract. It was always more likely be the case that the price any broadcaster would be willing to pay per match would fall because of the different packages available for various clubs, at different times, depending on the number of games included in any one packaged deal. The 1997 deal involved 60 live games; the 2001 included 66 live games whilst the newly negotiated package allows 138 live games per season. One senior club executive was quoted as saying There are only two ways we're going to get more money next time. Either the main domestic deal yields more, which is unlikely, or there's more fragmentation of our rights, and we get the same money or more by making up any gap in the cash for our main packages by selling more packages.310 What seems particularly curious is that this rationale may be contrasted with the RPC's conclusions that the exclusivity premium (i.e. the amount over and above the value of the rights a broadcaster is willing to pay, to become the sole proprietors to the rights) be not set aside. The Court was in favour of maintaining exclusivity as a way of maximising Premier League revenue. Premier League football's...value on a non-exclusive basis...would be substantially less [because] diluting exclusivity for live matches would devalue the rights very significantly. It was


at Leeds, Notts County or Huddersfield for example Denis Campbell Adjust you set. New ways for fans to view matches may come to their rescue,'


The Guardian, December 14 2002


Denis Campbell Adjust you set. New ways for fans to view matches may come to their rescue,'

The Guardian, December 14 2002 10889848 v1 108

contended for the Director General that this loss of value might be recouped if significantly more matches were sold. This is possible, but we think unlikely.311 Early indications in mid 2003 emanating from the Premier League suggested their best chance of increasing the 1.3 billion they received in 2001, would be by doing precisely the opposite of what the RPC thought would be best to maximise revenues namely; fragmenting their product, which would conveniently appeal to the Commission and allow a form of semi-deregulation of the Premier League television rights market. The evidence currently available suggests that, on a much smaller scale, the packaged tactic may be a success. Aimed with the new rights packages negotiated in conjunction with the Commission, UEFA received more money through a nonexclusive contract with ITV and Sky than it had done by solely and exclusively contracting with ITV. The deal was worth 83 million to UEFA312. This example was further cemented with the advice by the Premier League's legal team against (at the time) informal negotiations with Sky about an additional exclusive two-year extension to Sky's current deal. This was due to potential conflict with the Commission, which meant that the next Premier League deal would include a more disparate package of rights313. Exclusivity was thought to be on its last legs. On the 19thof June 2003, the Premier League following in-depth consultations with the European Commission, decided to revamp their entire tender process for future Premier League television deals314. Instead of accepting the previous exclusive deal with a single broadcaster, (particularly in view of the Commission's warnings that exclusivity is anti-competitive in the current setting,) the Premier League had to formulate a new tendering procedure. It came as no surprise when it was announced that three packages would be available to screen live Premier League football on multiple broadcasting platforms. The re-regulation of the Champions League broadcasting settlement, between UEFA and the Commission seems to be mirrored in the current context.
Premier League Reorganisation

From the 2004/5 season, up to three broadcasters will have the opportunity to bid for screening live Premier League football, The three packaged rights available are illustrated below.


RPC judgement p124-5 Owen Gibson, 'BBC eyes live Premiership Rights,' The Guardian December 13th 2002 Campbell, Adjust, Guardian Owen Gibson, 'Premier League's pounds,' The Guardian June 20 2003 p19 109




10889848 v1

New Packages

Amount of games

Potential revenue Actual revenue worth per received per season315 (m) season316 (m) 150 110 140 400 119.3 94 128 341.3

Gold Silver Bronze Totals

38 38 62 138

Speculation was that BSkyB would ensure that they outbid their competitors for at least the gold package which would give BSkyB first pick from each complete fixture list. The silver package would give another broadcaster second choice, and accordingly, the bronze package third pick. But as of the 10thof August 2003, BSkyB won the rights to all three packages. It would seem that the League in trying to increase and safeguard the value of their product, and to make the bronze package more attractive, have used the incentive of making more live games available for purchase. A broadcaster will therefore obtain better value per game. Inside opinion suggested that a combined ITV and BBC bid for either the silver or bronze packages would be the best ploy by the free-to-air broadcasters, to attract Premier League football back to terrestrial screen, at a reasonable price. However this has not materialised as BSkyB bid for, and won, all three packages317. It is interesting to note two contrasting figures from the new 2004/5 Premier League tender document. The Commission was concerned about the number of games that were previously being screened on British television. As previously assessed,318BSkyB was only able to screen 66 live games up until 2004, which was seen by the Commission as an unacceptable restriction of


Estimates from financial consultants UBS Warburg in Owen Gibson, `Shifting the goalposts of TV

soccer,' The Guardian, June 200' 2003


Grant Clark, BSkyB scores UK soccer rights,' Financial Review 11th August 2003 This would be an extremely controversial plan by BSkyB because this would not alleviate the


Commission's concerns over one broadcaster retaining the exclusive rights to the whole competition. It was even be that the Premier League stipulates that one broadcaster cannot bid for all three packages or at least cannot purchase all three.

See Chapter 5 Table 1 which contrasts the amount of live League matches broadcast by other

European broadcasters against the amount of live games screened in England. 10889848 v1 110

output by the Premier League. As a result, over double the number of games will be screened from 2004, giving consumers greater choice319. On the charge that the value of the Premier League product would fall dramatically, UBS Warburg estimated that the new differentiated packaged deal would be worth up to 400m per season, which would equate to 1.2billion over the three-year contract. Interestingly, this figure does not include revenue for any of the highlights packages, 3G licences, and full match, delayed highlights on individual club stations, plus the increasingly lucrative foreign contract to screen Premier League football around the world. Although UBS Warburg was not too far from correctly predicting the estimated price ultimately paid by Sky, the packaged model for tendering broadcasting rights could be viewed as a successful strategy, especially in the light of depressed advertising revenues, and an increased unwillingness on the part of broadcasters to pay exorbitant fees even for large sporting competitions and events320.
Exclusivity Still Standing?

The Commission, as analysed in this dissertation, has now potentially rendered exclusivity obsolete. One could now point to the RPC's decision that exclusivity was pro-competitive, as a complete fallacy, as was their assumption that rights holders could only maximise their revenue potential by maintaining exclusivity, thereby ruling out the packaged model of rights dissemination. Before the recent Premier League auction in August 2003, exclusivity in the Premier League contract was viewed by many as a distant memory, giving market access to new broadcasting companies whilst also providing real competition in the public tendering process. There is no longer the model of a zero-sum auction so that the company with the most money is able to bully other broadcasters out of the bidding. With three live packages available for tender, BSkyB, for the first time in a decade, faces real competition when its current exclusive rights package expires321. BSkyB's reaction to this increase in competition has been emphatic. Whilst the European Commission wished that the different packaged rights should not be auctioned off solely to BSkyB, the Premier League duly accepted the three highest bids from BSkyB.


Many supporters groups are unhappy that more live television will eat into the lower league

attendances, and that the amount of live games should indeed decrease. See Nick Harris, 'TV deal to cause kick-off turmoil,' Independent June 20th 2003

The actual figure to be received by the Premier League from the start of the 2004 season is

1.02bn from BSkyB.


See Matthew Garrahan, 'BSkyB risks losing grip on live football,' The Financial Times, June 20th

2003 p1 10889848 v1 111

Consequently, the Premier League and BSkyB may indeed face the wrath of the European Commission for fragrantly ignoring their wishes. This is because BSkyB has maintained its exclusive hold on the Premier League, which was precisely the reason why the Commission insisted that the Premier League product should be split into more affordable packages, thereby allowing greater broadcaster access to the Premier League. The Commission can only view this latest development with great unease and as Mario Monti's spokesman stated, If we find that there was little competition then we will go back [to the Premier League] and ask them to restructure the packages differently-to hold the auction again.322 Far from the BSkyB deal bringing to a conclusion to the latest round of negotiations, it may only be the beginning of a drawn out process that could even spell danger for football viewers for the start of next season's television viewing, if indeed, the European Commission challenge the latest deal323.
European Regulation

It is possible to broaden the debate towards potential models of regulation on a UK and Europeanwide basis324, to discover the interventionist role of the British courts in the past, and speculate about the potential avenues for European court action in the future. There have been various competition issues emanating from Member State decisions, concerning football and broadcasting as elucidated in the previous chapter. At present the ECJ case law on sports broadcasting is quite scarce and devoid of any potentially instructive court rulings. It may be that the DG IV has called time on national Courts and legislatures. For example, there could be trouble for the recent German Statute, which seek to exempt collective television deals from European Competition Law. Problems could surface, particularly if the restrictions are not transparent, proportional and indispensable to the continuance of the league. It remains to be seen who retains the position of chief regulator in the face of continued legal challenges on both national and European levels, From the three British case studies, save for part of the TVDanmark case, it has been apparent that Europe has had very little to do with entirely British concerns. By beginning to enquire into


Clayton Hirst, BSkyB nets TV rights but the referee could rule it out,' The Independent, 10th

August 2003

Indeed Dermot Desmond shareholder in Celtic and Manchester United has signalled his intention

to lodge a formal complaint with the Office of Fair Trading and the European Commission.

Ken Foster, How can Sport be Regulated?' In Steve Greenfield and Guy Osborne, Law and Sport

in Contemporary Society (Frank Class: London, 2000) 10889848 v1 112

the Competition framework in Britain,325 it may be the case that Europe feels it has given certain Member States enough time to get their houses in order, and that it is now time for Europe to carry out some regulatory renovation of its own. At this juncture, one point that perhaps needs to be stressed is that regulatory intervention into key aspects of sports practice is commonplace in the post-Bosman era. There seems little emphasis attached to idealistic notions of sporting exemptions,326 whilst others have even stressed that, thus far, the business of sport has failed to provide an intellectually convincing account of why it should be allowed a partial or total immunity from the application of legal rules to which normal industries are subject.327 Instead, sport should (and does) use its position as a socio-cultural unifier, and a mechanism to promote youth development, whilst maintaining equality via a relatively even distribution of wealth. In the legal sense, these can be potentially adequate defences to particularly restrictive practices328. Contrary to calls for an exception sportif,329one of the consequences of the three case studies has been to conclusively reveal that sport, football and broadcasting in their different guises have been afforded quite strong protection from courts and commissions. The challenges have been all but rebuffed; yet have taken shape in more contemporary issues330. Whilst the scare mongering has taken the new shape of Bundesliga and Premier League re-regulation, it seems certain that the


Which is now ironically almost identical since the introduction of the Competition Act 1998 in British


Bar perhaps UEFA who still seem intent eight years on from the Bosman decision, to think up new

ways to reintroduce nationality quota's into League rules. E.g. see Matt Dickinson, Blatter's quota plan 'doomed,' The Times, Oct 25, 2002 p48

Weatherill, Resisting, 158 For example an exemption under Article 81(3) may be possible if the socio-cultural characteristics


of sport and redistributive effects of certain television contracts are taken into account by the ECJ.

Ken Foster, 'Can Sport Be Regulated?' in Caiger, A and Gardiner, S, Professional Sport in the EU:

Regulation and Re-regulation, (The Hague: Asser, 2000) p60


i.e. Toeholds have replaced the concern over broadcasters owning football clubs and the RPC

decision has now been superseded by the Commission's enquiry into the Premier League. 10889848 v1 113

Commission will take a benevolent approach to any television rights realignment. They are fully aware of the beneficial knock-on effects that are unique to sport. Such ideals have been enshrined in official European Treaties331, and special recognition has been given in order to take account of the specific characteristics of sport and its cultural and social function in Europe.332 Far from the European Commission suffering a rush of blood to the head,333 (according to Kim Howells, the British broadcasting minister), when it decided to deal with the Premier League's current selling arrangements, the Commission is banking on British consumer support. Unfortunately, the same premise was found to be lacking in the RPC case, in that instance, with the Office of Fair Trading. What seems paramount this time is public backing for the Commission's regulatory intervention. If nothing else, there needs to be more public engagement, and further explanation for their defence of the British public's interest334. Instead, many groups opposed to widespread change, engage in the football doomsday scenario debate, which is probably not the aim of the Commission335. At present, the Commission seems to be buttressing a scheme without consumer backing. The concern may be that the consumers do not seem to realise or recognise that a problem exists and until that is recognised, the Commission, far from being the defenders of the public interest; may in fact be threatening the very basis of what the public wish to maintain.

Banks, Simon, Going Down Football In Crisis,: How the game went from boom to bust, (London: Mainstream, 2002)


E.g. The Declaration on Sport in the Treaty Of Amsterdam and other official documents like The

European Model of Sport,' Commission of the European Communities Consultation Document (1998) Directorate General X, Brussels

IP/01/583 Paul Waugh, Collective TV deal vital to game, say MP's,' The Independent, 3 April 2003 For example, a six month enquiry is beginning in Britain culminating in a Parliamentary football



group which will be convening to debate the future pathway for English football. in Mark Davis, 'Playing a part in football's future,' BBC News Online, 12th April 2003

i.e. that the Premier League is believed to have said changes to the structure would decimate

revenues and plunge smaller clubs into financial crisis." in Julia Day and Owen Gibson League hits back at EC over changes to TV deal,' The Guardian, April 14th 2003 10889848 v1 114

Bell, Alisdair, Lewis, Adam and Taylor, Jonathan, EC and UK Competition Rules and Sport, in Adam, Lewis and Jonathan Taylor, Sport: Law and Practice, (Butterworths: London 2003) Beloff, Michael, Kerr, Tim and Demetriou, Marie, Sports Law, (Hart Publishing: London, 1999) Brown, Adam and Walsh, Andy, Not for Sale, Manchester United, Murdock and the Defeat of BSkyB, (London: Mainstream 1999) Brown, Adam, `Sneaking through the back door? Media company interests and dual ownership of clubs,' in Sean Hamil, Christine Oughton and Steven Warby Football in the Digital Age, Who's Game is it Anyway, eds, (London: Mainstream, 2000) Cave, Martin, `Football rights and competition in broadcasting' in Sean Hamil, Christine Oughton and Steven Warby Football in the Digital Age, Who's Game is it Anyway, eds., (London: Mainstream 2000) Conn, David, The Football Business, (London: Mainstream, 2001) Dempsey, Paul, and Reilly, K, Big Money, Beautiful Game, (London: Nicholas Brealey Publishing, 1998) Eccles, Matthew, Broadcasting and New Media, in Adam, Lewis and Jonathan Taylor, Sport: Law and Practice, (Butterworths: London 2003) Finney, Nicholas, The MMC's inquiry into BSkyB's merger with Manchester United Plc, in Football in the Digital Age, Who's Game is it Anyway, eds., Sean Hamil, Christine Oughton and Steven Warby (London: Mainstream 2000) Foster, Ken, Can sport be Regulated by Europe? An analysis of Alternative Models in Caiger, Andrew, and Gardiner, Simon (eds) Professional Sport in the EU: Regulation and Re-Regulation, (The Hague: Asser Press, 2000) Foster, Ken, `How can Sport be Regulated?' in Steve Greenfield and Guy Osborne, Law and Sport in Contemporary Society (Frank Class: London, 2000) Griffiths-Jones, Law and the Business of Sport, (Butterworths: London, 2000) Gardiner, Simon, Sports Law, (Cavendish Publishing: London 2001) Parry, Rick Liverpool FC in the Global Football Age in Williams, John, Hopkins, Stephen, and Long, Cathy, Passing Rhythms: Liverpool FC and the Transformation of Football, (Oxford: Berg, 2001) Sloane, Peter `The Restrictive Practices Court case, broadcasting revenues and league balance,' in Sean Hamil, Christine Oughton and Steven Warby Football, in the Digital Age, Who's Game is it Anyway, eds., (London: Mainstream 2000)

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Spink, Paul and Philip Morris, The Battle for TV Rights in Professional Football in Caiger, A and Gardiner, S, Professional Sport in the EU: Regulation and Re-regulation, (The Hague: Asser, 2000) Szymanski, Stefan, and Kuypers, Tim Winners and Losers: The Business Strategy of Football (London: Viking 1999) Szymanski, Stefan, `Hearts, minds and the Restrictive Practices Court case,' in Sean Hamil, Christine Oughton and Steven Warby Football in the Digital Age, Who's Game is it Anyway, eds., (London: Mainstream 2000) Taylor, Jonathan and Chilvers, Caroline, Regulation of the Sport Sector, in Adam, Lewis and Jonathan Taylor, Sport: Law and Practice, (Butterworths: London 2003)

Binmore and Harabard, Toeholds, Takeovers and Football: [2000] ECLR 142 Bishop and Oldale, Sports Rights: The Premier League Football Case, [2000] E.C.L.R. 185 Brinkman and Vollebryt: The Marketing of Sport and its Relation to E.C Competition Law: [2000] E.C.ER. Bottcher, B, and, Smith, R. `Football and Fundamental Rights: Regulating Access to Major Sporting Events on Television,' European Public Law 'Berlusconi caught up in conflict of interests controversy,' Sport and the Law Journal Volume 11 Issue 1 Fleming, Hazel, Exclusive Rights to Broadcast Sporting Events in Europe, [1999] E.C.L.R. 144 Flynn, Angela, and Searle, Jonny, `Listed Events Legislation in the United Kingdom' [2001] Ent.L.R Fort, R, and Quirk, J., Cross-subsidisation, Incentives and Outcomes in Professional Team Sports Leagues Journal of Economic Literature, Volume 33, September 1995, Geey, Daniel, Where broadcasting and football collide: conflicting approaches to football club ownership, Ent LR (2004) Vol.15, 42-46 Geey, Daniel, Collectivity v exclusivity: conflict in the broadcasting arena, Ent LR (2004) Vol.15 No.1 7-11 Harbord and Ottaviani, Anti-Competitive Markets in the UK pay television market, [2002] E.C.L.R. 125 Lage, S, and Alonso, J, The Law on Sports Broadcasts: One More Battle in the Spanish Television War, Ent. L.R. 1998, 9(3)
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Nitsche, Collective Marketing of Broadcasting Rights: [2000] E.C.L.R. 209 Ratliff, John, Major Events and Policy Issues in the European Community Competition Law I.C.C.L.R. 2002,13(2), Rush, Jonathan, Broadcasting and Football: Premier League Broadcasting, Ent. L.R. 1999, 10(8), Solberg, Harry Arne, Will the Listed Events solve the market for sports rights problems?' rg.doc Szymanski, S and Parlasca, S, When the whole is less than the sum of the parts: The negative effects of central marketing of football television rights on fans, media concentration and small clubs [2000] Szymanski, S, Collective selling of broadcast rights to sporting events, A paper presented at a Hearing of the European Parliament on Collective Selling of Broadcast Rights, Brussels, 31st May 2001 Van den Brink: E.C Competition Law and the Regulation of Football: Part 1: [2000] ECLR Walter, Adams, and James, Brock, `Monopoly, monopsony, and vertical collusion: antitrust policy and professional sports,' The Anti-Trust Bulletin/Fall 1997

Betts Paul, `Italian Fans Mourn Football Season Delay,' The Financial Times 21st August 2002 Bayern warn FA over TV punishments,' S. Staff, 10th April 2003, BBC Online, Man Utd bid ruled offside, Friday, 9 April 1999 Came, Simon, `The FA is not offside over TV rights,' The Times Newspaper, February 9th, 1999 Campbell, Denis, Adjust you set. New ways for .fans to view matches may come to their rescue,' The Guardian, December 14 2002 Cassy, John, A Level Playing Field?' The Guardian, April 7th 2003 Mark Davis, `Playing a part in football's Attire, ' BBC News Online, 12th April 2003 de la Fuente, Jean-Paul, Let's call time on the TV protection racket,' The Financial Times, August 22, 1997, Day, Julia, and Gibson, Owen, League hits back at EC over changes to TV deal ' The Guardian, April 14th 2003

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Dickinson, Matt, Blatter's quota plan 'doomed, The Times, Oct 25, 2002 'French soccer TV contract extended after rights row, April 11th 2003 Gibson, Owen, 'BBC eyes live Premiership Rights,' The Guardian December 13th 2002 Harris, Nick, Commons to debate TV issues,' The Independent, 3 April 2003 Harveson, Patrick and Newman, Cathy, Sky may see no limits in TV football coverage,' Financial Times, July 29th 1999, Halverson, Patrick, `OFT not to refer BSkyB's stake in Leeds Sporting,' The Financial Times, February 4, 2000 Marseille to sue French soccer federation over TV fees,' 13 March 2003 Newman, Cathy, `Granada nets stake in Liverpool,' The Financial Times, July 14, 1999 Stone, Simon, `League warns of disastrous effect of United TV proposal,' The Independent, 3 April 2003 Szymanski, Stefan, 'Toeholds,' The Financial Times, January 14th 2000 Spiteri, Geoffrey, `NTL investment scores an own goal with top-flight teams, ' The Independent Sunday (London, England), July 22, 2001 Waugh, Paul, `Collective TV deal vital to game, say MP's,' The Independent, 3 April 2003 Paying the price for football, frenzy?: the long game strategy being played out by UK media group,. The Financial Times, Oct 8, 2001 NTL teams up with Middlesborough' The Independent (London, England), March 29, 2000 NTL takes Leicester stake; Leicester City,' The Times World Cup TV deal agreed, 18 October, 2001 cup_2002/1606424.stm

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European Documents

Television Without Frontiers Directive 89/552/EEC Article 3a 1. `Commission opens proceedings into joint selling of media rights to the English Premier League,' IP/02/1951, 20/12/2002
Commission welcomes UEFA 's new policy for selling the media rights to the Champions League IP/02/806 Brussels 3 June 2002

What changes will be made to the Community's audiovisual policy? Work programme for reviewing the Television without frontiers Directive http://www.europa, =IP/03/6|0|RAPID&1g-EN&display= The European Model of Sport, Commission of the European Communities Consultation Document (1998) Directorate General X, Brussels The UEFA Champions League Background Note, European Commission, MEMO/01/271 (20 July 2001)

Monopolies and Mergers Commission Report into the Proposed Merger between BSkyB Group plc and Manchester United Football Club plc (Cm 4305, 1999) Re: F,A. Premier League Ltd. Agreement Relating to the Supply of Services Facilitating the Broadcast of Premier League Football Matches (Restrictive Practices Court, 28th July, 1999) Regina v Independent Television Commission, Ex parte TVDanmark 1 Ltd [2001] W.L,R. 1604 [2001] UKHL 42 Case IV/36 033 KNVB/Sport7 [1996] O.J C2228/4

Torben Toft, TV Rights of Sports Events, European Commission Competition DG, Broadcasting Competition Law, Brussels, 15 January 2003 Jean-Francois Poins, Sport and European Competition Policy, Fordham Corporate Law Institute on International Antitrust Law and Policy, New York, 14-15 October 1999, Mario Monti, Competition and Sport: The Rules of the Game, Conference on Governance in Sport, Swissotel Brussels 26 February 2001

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John Vickers, Competition policy and broadcasting, a speech at the TEA conference on The Future of Broadcasting, 24 June 2002

The Sports Broadcasting Act, 15 USCA ss 1291-1294 (2000) (America), Section 31 GWB, BRDr, 852/2/97 (Germany) Broadcasting Act 1996 Article 81 and 82 of the European Treaty Restrictive Trade Practices Act 1976 Fair Trading Act 1973

Adam Brown of the Manchester Metropolitan University and Member of the Football Taskforce Interview Brown A (December 5th 2002) Professor Stefan Szymanski of the Imperial Collage London, co-writer of `Winners and Losers, The Business Strategy of Football' and writer of various articles on football and economics Interview Szymanski B (2nd December 2002 and January 16th 2003) Jonathan Taylor, Partner at Hammonds Suddards Edge, Head of the Sports Department, Sports Law Course Leader at Queens College London, and co-writer and editor of Sports Law Interview Taylor C (21st December 2002) Torben Taft, Chief Administrator of the European Competition Commission Directorate DG IV Interview Taft D (February 21st 2003) Luis Marcellio, Corporate Lawyer at Ashurst Morris Crisp Interview Marcellio E (February 5th 2003) David Conn, writer of the Football Business and journalist Interview Conn F (15th November 2002)
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