Sports associations and sports managers as competitors?

Sports associations are predestined for arbitrary conduct due to the prevailing single-entity principle. Such conduct is regularly found in athlete agreements and can bring about considerable legal and practical obstacles for the athlete and his advisers, in particular those advisers who depend on the marketing of the athlete and his or her personality for their livelihood. The question regularly arises as to how a balance can be achieved between the athlete and his advisers on the one hand and the association on the other, without subjecting the athlete to disciplinary measures by his association, upon which he ultimately depends.

A final enumeration of all conceivable restrictions practised in practice is neither possible nor intended here. As examples, the blanket transfer of all marketing and personality rights to the association, the obligation of the athlete to conclude sponsorship contracts not independently but exclusively with the involvement of the association, or the financial participation of the association in all marketing activities of the athlete shall serve.

The single-entity principle in association matters

Associations succeed in concluding such conditions with their cadre athletes primarily on account of a special feature in association matters: the single-entity principle. Under this principle, as emanating from the international umbrella association, there may only be one regional association per regional unit. As a consequence, every athlete who wishes to pursue his sport professionally is forced to join his regional association and accept its conditions. These are reflected in the athlete or licence agreement or the association's regulations incorporated thereby. If, for example, an athlete in Austria wishes to compete internationally for medals in alpine skiing, he must have a licence from the ÖSV, which in turn requires a corresponding prescribed licence or athlete agreement. Without this, there is no World Cup starting place for the athlete and without this, no fame, no honour and no income.

The factual association monopoly leads in some cases to far-reaching arbitrariness outside the applicable law in the design of athlete agreements. From the association's perspective, there is hardly any expectation of resistance, because the critical athlete must always fear being subjected to a factual professional ban or other disciplinary measures. If the association does not engage in individually negotiated agreements, the athlete ultimately has no choice but to sign the licence agreement as it is and to abide by it – however questionable it may be. For the athlete, this is not infrequently a freedom of rights and/or economic dilemma if he is thereby excessively impaired in the appropriate marketing of his person and loses vital sources of income.

Third-party effects of athlete agreements

What is usually not considered on the association's side is that ineffective athlete agreements not only affect the relationship between athlete and association, but can also have repercussions on the (business) activities of third parties. In this situation, the issue is no longer about the validity of individual contracts, but about the usability of the provisions as such. It need not be the athlete himself who resists his agreement. Just as well or better, this could be done, for example, by (his) sports manager, player agent, agent or other adviser – and indeed with general binding effect and thus possibly with devastating consequences for the association's business model.

As a basis for action by third parties against unlawful conditions in athlete agreements, competition law behavioural norms come into question above all. A prerequisite for this is, on the one hand, a competitive relationship between the association and the third party and, on the other hand, the existence of (negative) competitive effects of the agreement on these third parties.

The required competitive relationship between association and sports manager arises almost of its own accord due to the peculiarities of sports association matters. Sports associations finance themselves to a considerable extent through the 'purchase' of marketing rights and their subsequent sale to association sponsors. However, this places sports associations in direct competition with the external adviser as a broker of such marketing rights, albeit at different distribution levels. Both ultimately endeavour to generate income through the sale of the same rights.

The competitive relevance of certain conditions in licence agreements can also often be affirmed. Insofar as the association provides itself with a share of all the athlete's income or deprives him entirely or in part of the freedom to market himself appropriately, there can be hardly any dispute about the invalidity of such clauses. Furthermore, the disadvantages associated therewith for the athlete regularly go beyond invalidity and are accompanied by obstacles for sports managers and agents, who are consequently unable to put their services to adequate use or offer them on the market. Under such circumstances, which athlete would still bear the commission for an independent adviser, or what would a broker of marketing rights mediate if the association has already secured these rights essentially for itself and thereby removed them from the market?

Conclusion

As a result, from these perspectives, there are excellent opportunities for rights marketers and brokers to take action against unlawful and restrictive agreements and measures by sports associations – and this independently of the individual athlete, who is thereby out of the line of fire. A further advantage is that a court prohibition on the use of the disputed contract clause has the effect of being generally binding. This can then no longer be used at all.

The available opportunities can indeed be an effective lever for forcing individual contract negotiations. Conversely, sports associations are advised not to close themselves off from individual agreements from the outset or at least to subject their own contractual system to a thorough review for competition law, cartel law and personality rights pitfalls that could potentially prove to be a boomerang.