Lega Serie A Breakaway Issues

THE NEWSLETTER EOR THE SPORTS BUSINESS VOLUME 07 ISSUE 07 JULY 2009 WWW.E-COMLAW.COM

Chelsea players in breach of UEFA regulations UEFAs Control and Disciplinary Board suspended two Chelsea FC players on 17 June, for insulting the referee by making offensive comments, an act which is illegal under Article 10 of UEFA's Disciplinary Regulations, which allows for players to be suspended for a 'specified period for pestering or insulting any match official'. ; Didier Drogba and Jose Bosingwa have been suspended for six and four UEFA club competition matches respectively following the incident at the Champions League semifinal second leg match against Barcelona, on 6 May, Chelsea FC was also fined €100,000 under Article 11 of the Regulations for the improper conduct of its players and for the inappropriate behaviour of its supporters. 'Disciplinary measures may be taken against member associations or clubs in case of inappropriate behaviour on the part of their supporters, including:,..the throwing of objects', reads the Regulations. "We've received the UEFA verdict and we'll now take time to assess it in full and consider our response", said a spokesperson for Chelsea FC. The club and/or the players have until 20 June to appeal.

Player contracts Matuzalem case 03 Comment Parliament football report 08 Italy Serie A breakaway challenges 08 Broadcasting Australian inquiry 10" ^ Dispute resolution FIBA Arbitral Tribunal 14

The European Commission has said that it supports the principle of sporting organisations selling a 'right to bet' to betting operators. "In principle, we take a positive view of the French idea of creating exploitation rights of sport event organisers from the sports betting operators", said Michal Krejza, Head of the Sport Unit, Directorate General for Education and Culture at a meeting organised ahead of the UK Central Council for Physical Recreation's European Sport Summit on 16 June. "The draft French law says that if a sports organisation concludes an agreement with a sports betting operator, then it has a legal obligation to offer similar conditions to other betting operators. What sports organisations expect is that a number of other Member States will probably take the French law as a model for themselves." Krejza also said that the

Commission could examine the situation if BSkyB buys Setanta's two packages of TV rights to football's Premier League - the Football Association Premier League (FAPL) said, on 15 June, that it would put all 46 of Setanta's live matches for the 2009/10 season up for auction, if Setanta does not meet certain contractual requirements of the Premier League on or before Friday 19 June 2009' "The decision, of course, remains valid", said Krejza, referring to the Commission's decision to not allow the FAPL to sell all its TV rights packages to one broadcaster (IP/05/1441). "The Directorate General for Competition would perhaps have to look again at certain aspects in case there is a situation where only one broadcaster would be willing to be in this particular market". Setanta secured two FAPL TV rights packages for 2007-2010, while

The Comniission will make public its study on the role of Players' Agents, said Krejza, towards the end of this year, however emphasised that the Directorate General is not yet convinced that regulation of agents is necessary. A conference on licensing systems within sport is planned for September, and tenders for the Commission's study on the financing of sport in Europe are being evaluated, with results planned for November or December next year.

England's Rugby Football Union (RFU) has told four former Bath players to appear before an RFU disciplinary panel, where they will be charged with conduct prejudicial to the interests of the game' under Rule 5.12(f) of the RFU's Membership rules, following allegations that they have taken prohibited substances and refused to take drug tests.

that the allegations - following an investigation and tests by Bath Rugby under their employment contracts - were 'scurrilous and unsubstantiated' and were 'damaging' to not only their own careers, but also to rugby union. They are considering legal action. Rule 5.12(f) allows the RFU to discipline clubs and players 'for any conduct which is prejudicial to the interests of the Union or the Game. The Union may terminate or suspend membership of the Union or impose

any other appropriate punishment for any such offence.' A hearing date has yet to be set. "WADA understands that the testing was initiated by the club under its employment terms, and not by an anti-doping organisation under the rules of the World Anti-Doping Code", said a spokesperson for World Anti-Doping Agency. "This is therefore an internal conduct issue for the club, and WADA has no jurisdiction over this situation in terms of antidoping rules".

Justin Harrison, Michael Lipman, Alex Crockett and Andrew Higgins resigned from Bath Rugby on 1 June, stating

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BSkyB secured the other four. Krejza also reiterated that while the Commission "recognises the validity of some of the underlying ideas behind the rule", it remains opposed to FIFA's '6+5' proposal to require clubs to field six players eligible for the national team of the nation in which that club is based, as a "rule based on direct discrimination on the basis of nationality".

ITALY

Lega Serie A breakaway issues and challenges The Serie A clubs of the Lega Nazionale Professionisti (LNP) recently decided to break away from the LNP to form its own • independent league, the Lega Serie A, Luca Ferrari, a Partner at CBA Studio Legale e Tributario, explains the plans, potential issues with them and Serie B's planned opposition. The Italian football system has recently been shaken by a unilateral decision taken by almost all (19 out of 20) Serie A clubs of the Lega Nazionale Professionisti, (the authority which currently manages the top two Italian football divisions - Serie A and Serie B - hereinafter the LNP') to break away from the LNP. Under the chairmanship of Maurizio Beretta, former Director of the Italian Employers Association, a new association has been formed recently among all Serie A clubs (the 'Lega Serie A). The new entity will apply to the Italian Football Federation (FIGC) to be appointed as the new organiser of the top national football championship, starting with the 2010/2011 season. C

This startling event brings to mind the 1991 breakaway of the English First Division clubs from the Football League. In that case, the English High Court ruled hi favour of the First Division's decision to form the new League, currently the FA Premier League. In the case at hand, the legitimacy of the Serie A clubs' decision has yet to be challenged. However, the creation of a new Serie A League entails significant consequences. As in the English case, the problem involves the economic and competitive integration between the two 'Series'. Unless new solidarity mechanisms are put in place between the two new professional Leagues, the rupture of the tenuous financial

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equilibrium which has been held so far within a unique League could cause a wave of bankruptcies among the Serie B clubs. One key, preliminary issue concerns the economic context: is there a common market involving all professional clubs and in particular, the top two professional 'Series', or can we consider the Serie A and the Serie B as two separate markets? If one considers the pyramidal structure of football and how promotion and relegation links the different categories, there certainly is an argument to sustain the thesis of an integral market. The allocation of market income poses a major dispute with this split of the League. Pursuant to the newly enacted TV rights collective ownership and commercialisation law (Law no. 106 dated 19 July 2007, and the subsequent Legislative Decree no. 9 dated 9 January 2008, hereafter the 'Legge Melandri' or 'Melandri Law'), the LNP - collectively the marketing agent of the top championships' audiovisual rights - must reserve a percentage of TV rights revenue for the lower division clubs. This 'solidarity contribution' by statute in favour of Serie B and the remaining two lower pro-leagues, assures the sharing of income between the 'Series', which is considered necessary for the sustainability of the professional football system as a whole and to the ultimate benefit of Serie A. However, is this financial contribution afforded by the Melandri Law sufficient to maintain a reasonable and fair balance between the top two Series? With a degree of simplification, such mandatory mutuality would count overall 10% of the total revenue generated from the sale of Serie A rights. Under current estimates and the redistribution mechanism put in place by the Legge Melandri, Serie

B would end up receiving substantially less than what is currently being afforded under the LNP's collective resources and mutuality agreements. Hence the split between Serie A and Serie B, insofar as it would put an end to current LNP's 2005/2014 mutuality agreements, would cause significant financial damage to the lower division clubs. Would the Serie A clubs be liable for such damage? The LNP organises: the Serie A and B championships, Coppa Italia and Supercoppa (the match between the championship and cup winners). In addition, the LNP, on behalf of its Serie A and B football club members, negotiates and enters into the Collective Agreements with the Football Players Association (AIC), the Football Trainers Association (AIAC) and the Football Directors Association (ADISE). The LNP is also a party to all contracts concerning the licensing of relevant collective brands and properties, as well as various collective services agreements. Whereas before, the Legge Melandri clubs would seE their live broadcasting rights individually and leave the championship's highlights and Coppa Italia to the LNP's collective selling, currentiy the LNP - as already mentioned has been designated by Legge Melandri as the co-owner and exclusive marketing agent of all audiovisual rights, to be later allocated among clubs according to statutory guidelines, ensuring a certain degree of pro-competitive redistribution within each Serie. In addition, the Melandri Law assigns to the LNP the duty to define a percentage of all TV rights licensing fees - no less than 10% to be divided among Serie B, the two lower professional divisions and a special 'foundation for the mutuality in sports', for uses of world sports law report July 2009

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general interest (stadia development, to name one). This 'mutuality' obligation and the LNP's role in defining its percentage value, as well as its distribution among professional clubs below Serie A, ignited the Serie A rebellion. Indeed, the crisis erupted in relation to the amendment of the LNP's byelaws, which were made necessary by the new regulatory context. Serie A's 20 clubs - the generators of almost all resources deriving from the licensing of TV rights - were keen on taking over the LNP's governance, whereas the Serie B's 22 clubs - while accepting a minority position - were not willing to be totally excluded from key decisions affecting both categories, namely the definition of mutuality percentages and the management of collective (A+B) resources, such as the Coppa Italia and League sponsorships. It is clear that the Melandri Law is going to reduce significantly the income that top Serie A clubs were accustomed to receiving from the individual licensing of their own rights. Not surprisingly, the top Serie A clubs are the driving force behind the newly established elite League, whose Byelaws, Memorandum of Association, and Regulations were signed before a notary public on 14 May. Serie B clubs have decided to retaliate and oppose such a move. While diplomacy may be at work at the higher football federation and government level, Serie B has identified the legal reasons standing against the LNP's breakup in a letter that was sent to all top division clubs on 1 June. The main legal issues raised are:

The split will meet its first obstacle in the statutory provisions, and particularly in the Melandri Law, world sports law report July 2009

which is written on the assumption that Serie A and B championships are both organised by the LNP. A legislative adjustment would therefore be necessary.

Contractually, the separation would require a collective withdrawal of the Serie A clubs from the LNP. However, at time of writing, the LNP has received no notice of resignation. In fact, such a withdrawal could not be effective until the end of the upcoming 2009/2010 Serie A and B championships, the last ones to be organised by the LNP. Accordingly, the association structure and the related contractual relations still in force between the two major 'Series' augurs serious conflict between the LNP and the new 'Lega Serie A, as the latter will solicit the attention of sporting and political institutions for its programs and priorities, or will seek to manage its affairs in relation to the marketing of audiovisual rights. Moreover, longlasting agreements on distribution of financial resources have been struck between the two 'Series* within the LNP.

task to its own President, Giancarlo Abete) to manage the day-by-day activities of the LNP.

It can be cogently argued that Serie A's decision constitutes a breach of the rules on competition (Articles 81 and 82 of the EC Treaty). According to well-established jurisprudence, football clubs can be qualified as 'undertakings' and, as such, they fall within the scope of Art. 81 of the EC Treaty. Thus, Serie A's decision to create its own 'Lega' and, consequently, to commandeer the exclusive right to determine the amount and allocation of the mutuality contributions imposed by the Law, constitutes not only a breach of the Melandri Decree, as seen above, but also an (illicit) agreement in restraint of competition (namely on the audiovisual rights market) pursuant to Art. 81 of the EC Treaty. Moreover, Serie A controls a substantial share of the audiovisual rights market. Therefore, it is arguable that Serie A clubs have a collective dominant position. In this respect, the ECJ stated that in order to assess an abuse of a collective dominant position the actual economic power shall be considered, regardless of the existence of an express arrangement between the undertakings for this scope . In light of diis jurisprudence, the secession of Serie A clubs may constitute an abuse of a collective dominant position as per Art. 82 of the EC Treaty, in so far as it effects trade and fair competition within the relevant market or the competitive development thereof. 1

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paralysing the LNP As a consequence of the Serie B clubs' refusal to approve the new LNP regulations proposed by Serie A, not only did the Serie A clubs decide to establish the new League, but they also left the general assembly of the LNP, which was summoned not only to adopt the new byelaws, but also to elect the new President and council. The resulting impasse forced the federation to appoint a Commissioner {FIGC assigned the

Luca Ferrari Partner C8A Studio Legale e Tributaiio luca.ferrari@cbalex. it 1 .ECJ C-395-96, P Compagnie Maritime Beige cfes Transports SA v. Commission.

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