Heavy Fines for Sportfive and the FFF for Restraint of Trade on the Commercialization of Sports rights market

Sportfive and the Fédération Française de Football (FFF or French Football Association) had entered into certain contracts granting exclusivity over the management of certain sports rights regrouping television rights and marketing rights for the period 1985 / 2002. The practices criticized related to certain long-term exclusive rights and to the organization of certain invitations to tender for cover.

With regard to the long-term exclusivity agreements:
Exclusivity agreements are not found by the Autorité de la Concurrence (Competition Authority) to constitute a prohibited practice under competition law. Nevertheless, where such exclusivity agreements are accompanied by certain other specific elements, they may be punished on the grounds of a restraint of trade.

In the case in point, the Autorité de la Concurrence took into account the effective term of the exclusivity contracts. Such contracts, entered into for relatively lengthy initial terms and containing renewal by tacit agreement clauses, had been the subject of certain addendums entered into well before the expiry of the contracts and aimed at extending the initial term. The French football team's sponsoring contract had thus lasted for 10 years by virtue of addendums and tacit renewals.

Moreover, the effect of such long-term exclusivity contracts has been magnified by the systematic choice of the same trading partner, Sportfive, for all the contracts commercializing the FFF's sports rights and by the fact that any and all new rights acquired by the FFF were automatically acquired by the sole partner, Sportfive.

Lastly, the Authority took into account the impact of the escape clauses (clauses de sortie) which provided for heavy penalties in the event of early termination thus creating high costs of entry to the market for potential competitors.

The combination of all such elements had the effect of ousting potential competitors from the market on a long-term basis.

With regard to the organization of certain invitations to tender for the granting of contracts:
After a warning from the Cour des Comptes (the French public finance court) with regard to the lack of invitations to tender for the granting of contracts by the FFF, the latter decided to organize, in 2001, an invitation to tender for the granting of the FFF's marketing rights. The Autorité de la Concurrence noted nevertheless that the organization of such invitation to tender did not stop the restrictive trade practices.

In such respect, the FFF is accused of having intentionally limited the publicity for the invitation to tender whilst simultaneously acting in conjunction with Sportfive to prevent the latter's competitor, Havas, from obtaining the information necessary for it to prepare its bid. Furthermore, after the granting of the contract to Sportfive, the two partners negotiated certain substantial amendments to the initial contract notably concerning the guaranteed minimum amounts by which the FFF was certain of receiving a minimum level of remuneration irrespective of the level of income collected by Sportfive, the exceptional additional payment of a sum of money or even the automatic extension of the rights to cover teams other than the French men's football team. Finally, the parties are accused of having removed by way of an addendum the guaranteed minimum amount, which was nevertheless a term of essence under the contract.

The Authority has characterized the above two conducts as concerted practices within the meaning of Articles L.420-1 of the Code de Commerce (French Commercial Code) and 81(1) of the EEC Treaty having as object and effect to oust all forms of potential outside competition and foreclosing the market.

Sanctions:
Owing to the gravity of the concerted practices, the harm caused to the economy and the particular circumstances of the business undertakings concerned, the fines are particularly substantial: the FFF which, according to the Authority has set a "bad example" for other sports associations, was fined an amount of 900,000 euro, reduced by 40% for not having contested the objections and for having undertaken to amend its contracts. Sportfive was fined 6 million euros.