By Steve Nwabueze
Avid football lovers have watched on for the last decade or more as a country once heralded for its football artistry continues to languish in abject neglect. From the challenges of decrepit structures, poor funding, hooliganism, and riotous regulatory structures, the league that once produced football greats like Rashidi Yekini, Muda Lawal, Segun Odegbami and even the late Stephen Keshi now struggles to compete favourably with its counterparts in Africa. Given its weak regulatory structure, a lot of people have questioned the commercial disposition of the League Management Company, LMC to run an enduring commercially-driven professional football league shorn of the lethargic, almost half-hearted political will to enforce its own rules. With a 20-team structure, the Nigerian Professional Football League can only boast of two private-owned clubs with the rest owned by the government. This development has, as expected, alienated the private owners who appear to be more commercially inclined to drive the economic expediency of running a football league. Unfortunately, they appear not to have the voting power to drive initiatives.
With these fundamental challenges, feelers from stakeholders in the domestic league indicate that no fewer than 10 Nigerian private-owned clubs have concluded plans to start a separate private league to be known as the “Nigeria Private Investors Football League” (NPIFL). The NPIFL, which will consist of only private-owned football clubs announced an award fee in the sum of =N=200, 000, 000.00 (Two Hundred Million Naira) The proposed league organizing body on Monday, 1st day of June 2020 also set up a 5-man committee whose primary duty is to register the league and get approval ahead of the kick-off scheduled for later this year”[1]. This article analyses the pertinent legal issues arising from this initiative particularly issues on contract, competition, and intellectual property law. The first part of the article takes a look at the existing league structure in Nigeria, the relationship of the LMC with the member clubs, and the extent of the obligation owed to one another. The second part of the article examines the germane legal issues arising from establishing a parallel football league. The third part reviews the Australian Case of News Ltd v Australian Rugby League Ltd and the existing jurisprudence on the establishment of a parallel sports league. The final and concluding part dwells on the competition law issues arising from the initiative. The article would be concluded with recommendations for the different parties. The writer hastens to point out that this article is not interested in examining the rationale, propriety, success, and/or failure of this initiative.
The league structural model in Nigeria
The concept of a structural model refers to the legal form of the league, the level of Association involvement from a management perspective, and the nature of the financial relationships between the league and the Association. From this perspective, two models with different variants emerge. The legal form of a league consists of its legal designation. With FIFA’s Football governing body pyramid structure in mind, each Member Association of FIFA has adapted its peculiar legal form. However, with respect to football leagues, these legal forms are often similar. Generally speaking, two categories may be distinguished: the Association Model and the separate entity model. In the Association model[2], leagues are more or less fused with the national Federation to which they belong. With regard to football leagues or Associations, Associations are characterized by membership, written rules and/or statutes, and the yearly organization of a General Assembly to which all entitled members may participate and vote. Any Association can also be affiliated with another Association. In such a case, the affiliated Association must follow the rules of the parent association.
“In the second category, the separate entity model refers to leagues for which the legal form is that of a company with an independent ownership structure”. [3]The decision making power is vested in the shareholders determined by means of a vote. A ready example is the English Premier League which operates a separate entity model. The LMC as an independent corporate structure mirrors the English model by adopting this structure. Consequently, in the separate entity model, the Association, in this case, the Nigeria Football Federation is less involved in the running of the league. The league body nonetheless, must abide by the statutes and rules of the Football Federation as the recognized Member Association in the country. Most of the time, clubs are the main shareholders of the league. However, the Association can also be one of them, if not the only one. The Association can thus maintain a strong influence in decision-making.
Beyond the ownership structure, leagues and associations in the separate entity model retain some sort of close relationship with regard to some specific competencies usually managed by the Associations such as the appointment of referees, disciplinary processes, and the rules of the game. This relationship can also be rationalized because the league needs a voice in the Federation’s board room to further its interests. In this structure, the LMC is saddled with the provision of an administrative and organizational structure for the league. In terms of administrative structure, the LMC is the regulator of the league with the 20 clubs as nominative shareholders in a relationship akin to a joint venture. Within the broad classification, we have identified above, there are still sub-divisions which are not the immediate concern of the present article.
The relationship between the LMC and the 20 NPFL Clubs
To determine the liability of the league and the clubs to each other, it is important to examine the exact relationship between the league and 20 clubs As stated above, the relationship between the LMC and the 20 clubs is akin to a joint venture. This is discernible from the first limb of the preamble to the LMC Rules which obliges the LMC to regulate and administer the league and develop initiatives for the running of the league. As the regulator of the league, the LMC is charged with the task of maximizing income for the league and sharing the profits with the clubs. Indubitably, therefore, the relationship between the league and the clubs is a hybrid of a contract and a joint venture.
The Superleague Case and the question of competition law
The clamour for, and present initiative to establish a football league exclusively owned and run by private-owned football clubs has generated interesting debates on the propriety of such initiative. Some pundits are concerned that this initiative would not only distort the existing structure but potentially raise administrative and legal issues beyond the propriety of running a parallel domestic football league. One of the notable issues raised is the recognition from FIFA and CAF and implications for major continental championships like the CAF Champions League, CAF Confederations Cup, and FIFA Club World Cup for which Nigeria sends representatives on the basis of final league standings in the LMC-organized domestic league. The argument is that with the LMC as the recognized league body, this private initiative would fail. This argument has been quickly batted away by the proponents of this initiative on the grounds that the club owners are not interested in continental championships. What then happens where the commercial allure and success of this initiative ultimately impacts on the existing structure and weakens the playing staff of the LMC organized league? The author imagines that this would intensify calls to check the initiative. Interestingly, the clamour for a breakaway by teams in a sports league is not new. One of the most notable and reported cases in the history of Australian sport happens to be the case of News Limited v Australian Rugby League Limited (“the Superleague case”)[4], a decision by Justice Burchett in the Federal Court of Australia in the first instance which was later overturned on appeal. This decision is germane to this debate and central to the determination of the competition law issues arising from this initiative.
Background to Superleague[5]
The case is pertinent for it deals with one of the issues that make reconciling sports with competition law so difficult – namely that sports leagues and clubs require or claim they require cooperation and restrictions between them that are inherently anti-competitive[6]. The case is also illustrative (albeit indirectly) of the commercial considerations (especially regarding broadcasting rights) that lend so much importance to the role of competition law in sports. Essentially, the case revolved around News Ltd’s proposal to establish a ‘Superleague’ to replace the National Rugby League competition, which is run by the Australian Rugby League and the New South Wales Rugby League (‘the League’). The Superleague competition was to be shown on Pay TV in Australia and overseas[7]. The case arose from the rivalry between pay-TV operators: Rupert Murdoch’s News Ltd which is affiliated to the Foxtel consortium that would have the Pay TV rights to the proposed Superleague competition, and the owner of the rights to the League competition, Optus Vision (partly owned by Kerry Packer’s Publishing and Broadcasting Ltd)[8]. News Ltd had originally contended in negotiations with the League that it was interested in “only seeking a slice of the television cake”. While News Ltd had proposed to establish a Superleague to replace the national competition, the League had offered 20 clubs admission to the national competition for five seasons on the condition that they commit themselves to the League’s competition. The League sought Commitment Agreements and Loyalty Agreements to this effect. News Ltd nonetheless began signing players and staff playing in the league. Following the steps taken by News Ltd to float the “Superleague”, and the refusal by the league to sanction the move, News Ltd filed a lawsuit to challenge the decision on the grounds that the loyalty and commitment agreements signed by the 20 clubs contained exclusionary provisions and breached sections 45 & 46 of the Trade Practices Act of Australia. The league, on the other hand, cross-claimed against the ‘rebel clubs’ for breach of contract, breach of fiduciary obligations, infringement of intellectual property rights, and passing off. Against News Ltd, it cross-claimed for inducement of breach of contract.
The decision
The arguments by News Ltd were rejected by Justice Burchett, while the League’s cross-claims were upheld. His Honour did not accept News Ltd’s claim that the Commitment and Loyalty Agreements were given pursuant to an exclusionary provision. With regard to the cross-claims, Justice Burchett held that the League had been successful in proving a breach of contract against the clubs and that the League had rights with regard to club colours, logos, etc. Justice Burchett found all the elements of inducing breach of contract proven so that the League could succeed on this cross-claim against News Ltd. He also held that the Superleague Clubs had not been forced under duress to sign the Loyalty Agreements. As expected, News Ltd was dissatisfied with the decision and appealed to the Full Court of Australia.
The Superleague Appeal
In a judgment spanning over 200 pages, Lockhart, Von Doussa, and Sackville JJ allowed the appeal and ordered that all orders made by the trial judge be set aside. On many issues, the Court differed from the trial Judge on the inferences drawn from the primary facts. The Court addressed claims by the League that the rebel clubs had breached contractual obligations. The Court rejected some of the claims but found that the clubs breached an implied obligation arising under the contract constituted by their admission to the 1995 competition. The obligation required them to do everything reasonably necessary to enable the 1995 competition to be carried on in a manner that allowed the League to receive the benefit of that competition. The Court held, however, that the remedies available to the League should be confined to an award for damages, and referred the matter back to the trial Judge for assessment. With regard to certain other claims, the Court referred back to the trial Judge for further including those based on misleading or deceptive conduct, passing off and infringement of intellectual property rights. On whether the Loyalty and Commitment Agreements contained exclusionary provisions and breached the provisions of Sections 45 and 46 of the Trade Practices Act, the court held that the Agreements were exclusionary and accordingly, void and unenforceable. Consequently, the order of the lower court preventing the participation of the ‘rebel clubs’ in the ‘Superleague’ and the establishment of the ‘Superleague’ itself were set aside. The league immediately indicated an interest in challenging the appeal decision by seeking leave of court to appeal to the High Court of Australia. Before any steps could be taken, however, the ‘Superleague’ operated for the 1996/1997 season. The parties surprisingly sheathed their swords and merged. This merger birthed the present-day National Rugby League in Australia.
Competition law considerations in Nigeria
Nigeria passed the Federal Competition and Consumer Protection Act in January 2019. The Act aims at promoting a competitive market and protecting consumer rights in Nigeria. Before the enactment of the Act, there was no single piece of legislation regulating competition in Nigeria. Thus, provisions of laws regulating competition were found in various legislation such as the ISA; the Nigerian Communications Act 2003; the Electric Power Sector Reform Act 2005 amongst other laws. However, the new Act applies to all businesses in Nigeria and supersedes all laws on competition and consumer protection[9].
The Act prohibits unfair business practices or abuse of dominant market position by any company, as well as an agreement to restrain competition such as agreements for price-fixing, price rigging, collusive tendering, etc. Chapter VIII of the Act, specifically in “Section 59, prohibits the creation of Restrictive Agreements i.e. agreements whose purpose is to restrict, prevent or distort competition”[10]. Section 59(2) (b) & (c) are very instructive. They frown at the “division of any market to allocate goods, services or customers”[11] and “limiting or controlling the production of goods, services, and markets”[12]. Besides, Section 70 of the Act prohibits the abuse of a dominant market position by any undertaking. According to the Act, “a dominant market position exists where an undertaking enjoys a position of economic strength which enables it to prevent competition”[13]. “For the purpose of assessing market power, regard shall be had to a number of factors which include”[14]
- the financial power of the undertaking;
- it’s or their access to supplies or markets; and
- structural or legal barriers to entry into the market among others.
The Nigerian Professional league as a market within the FCCPA
As we have already seen, agreements containing restrictive provisions are per se contraventions of the FCCPA and are void and unenforceable. Consequently, an arrangement or understanding between the LMC and the 20 Premier League clubs which has the purpose of preventing, restricting, or limiting the supply or acquisition of goods or services by persons in competition with the LMC in this case, the proposed NPIFL shall be void ab initio. Questions however remain on the true nature of the relationship between the LMC and the clubs. The author hastens to add that from a preliminary perusal of the NPFL Rules and the Deed of Adherence executed between the clubs and the LMC there is nothing to suggest any inference of a restrictive agreement between the parties. Much would, however, depend on the provisions of the Memorandum and Articles of Association executed between the parties. The writer confirms that he is not privy to this document and would refrain from making any further comments thereon.
First, the author makes bold to say that clubs in the NPFL are in competition with each other and by extension, the NPIFL, either in relation to the supply of the constituent league teams or in relation to the acquisition of the services of a competition organizer. The clubs are set up to compete as commercial entities even if arguments remain as to how exactly the clubs and the NPFL have fared in this, to supply their teams or to acquire the services of a competition organizer. This is more so given the fact that each year the clubs are required to apply to the League to enter the league competition for that year and in support of this application, each club is required to meet certain financial requirements the satisfaction of which required clubs to attract spectators, sponsorship and television viewers. These are discernible from the administrative and commercial framework of the league as well as the preamble to which the writer alluded earlier.
While the writer resists the temptation to conclude that there are any restrictive agreements between the league and the 20 clubs, any inference of the existence of such agreement whose purpose is to shackle the choices of the NPFL clubs and prevent a switch to the private initiative would be wrong. Any agreements which are designed, in large measure, to prevent any of the clubs from choosing to participate in any rival competition, is not only void but unenforceable as it runs counter to the provisions of the FCCPA. The clubs are also likely to be in competition with each other for the “services” of LMC-organized league players at the time any such agreements were or will be executed.
The author anticipates that questions might be raised regarding the true commercial antecedents of the league i.e. whether the football league constituted a commercial activity within the meaning of the Act. It is safe to say that the League and the clubs are engaged in trade or commerce – they derive money from sponsorships, merchandising rights, television rights, game entry fees, they hire grounds and organize competitions. The football market also comprises the demand and supply components within the league, the organizers, the teams, and the players on the supply side and the fans, media, and sponsors on the demand component. Even though the commercial scope of the activities of the LMC and its clubs are not as elaborate as in the Superleague case, the activities sufficiently qualify to fall within the contemplation of the FCCPA, 2019.
On a possible argument on the breach of the common law duty of trust and confidence, the writer disagrees that this claim would be of any beneficial use to the LMC should it decide to challenge the proposed break-away of the private-owned clubs in its ranks. This is because the common law mutual duty of trust and confidence is normally applied in employment relationships between the clubs and playing staff and would avail an LMC/NPFL club seeking to challenge any breach of employment contract by members of its playing staff. As already stated, the relationship between the LMC and the clubs is a hybrid between a contract and a joint venture and therefore, an action on the pretext of the breach of the common law duty of trust and confidence would not avail the LMC. The LMC can, however, seek to enforce certain intellectual property rights in the merchandise, logos, and crests of the NPFL clubs since the NPFL rules expressly provide that the intellectual property rights in the logos and NPFL merchandise belong to the LMC. The teams in the NPFL interested in the private initiative should ensure that there is no outstanding contractual/partnership obligation on its part before joining the NPIFL. This would also include returning all the NPFL merchandise and logos belonging to the LMC to avoid needless trademark squabbles. The writer notes that the proposed NPIFL bears an uncanny resemblance to the NPFL. It would, therefore, most likely not be registered for trademark purposes. In the likely event, it is approved for trademark registration it would most likely face an action for the common law tort of passing off for infringing the existing trademark of the NPFL and by extension, the LMC. It is adviced that the organizers consider a unique name embodying their philosophy to avoid needless distractions.
Finally, the remaining 18 clubs in the league would be the object of Manager and player poaching by the private-owned clubs. To prevent an avoidable exodus of players in their ranks, the clubs need to scrutinize the existing employment contracts with the coaching and playing staff and ensure the necessary covenants are inserted. Restrictive covenants such as anti-poaching and anti-competition covenants would ensure their coaching and playing staff are not lost to their rivals in this private initiative. While an anti-competition covenant ensures a coaching staff does not go to its rivals, an anti-poaching covenant in the employment contract of the playing staff will ensure that their star players are not ensnared by attractive contract offers from their rivals.
As a postscript, the coming months in Nigeria would be interesting particularly if the private owners can pull off this major initiative. While posterity would judge what eventually becomes of this initiative, the greatest arbiter, the courts would be there to check needless infractions by any of the major characters in this development.
[1] See http://exclusivenews.com.ng/nigeria-private-investors-football-league-gets-n200m-sponsorship-deal/ (last accessed at 4:33 PM)
[2] In legal terms, an association is the grouping of persons or other entities (for example football clubs) with a common purpose
[3] In Germany, Ligaverband (German top tier league) is an association composed of the thirty-six clubs of the two top tier divisions (Bundesliga and 2. Bundesliga). Ligaverband owns a subsidiary called Deutsche Fussball Liga (DFL). The DFL is a GmbH (Gesellschaft mit beschränkter Haftung), a kind of limited liability company that can be found in Germany, Austria, Switzerland and Liechtenstein. The DFL is responsible for the ‘strategic actions of the German League’
[4] (1996) ATPR 41-466
[5] Veljanovski C, ‘Sports Leagues Do Not Have Market Power? Murdoch’s Super League Setback in an Australian Court’, [1996] 4 ECLR 268.
[6] It has been estimated that News Ltd had committed well over $100 million in its attempt to launch Superleague: see Pengilley W., ‘Rugby League on Trial’, Aust. & NZ Trade Pracs. Law Bulletin, 11(9) March 1996.
[7] In Australia, the case was argued in Parish v World Series Cricket (Unreported, Supreme Court of N.S.W., Kearney J., 17 Nov. 1978), where the governing body of Australian cricket, the Australian Cricket Board, brought proceedings against World Series Cricket. This case was argued on a different basis, namely breach of contract, as the Board claimed to have contracts pre-dating the agreement with World Series Cricket: Kelly, op cit, at p.278. The establishment of World Series Cricket also raised sports advertising issues.
[8] Veljanovski, ibid, at p.269.
[9]http://www.mondaq.com/Nigeria/x/791502/Securities/The+Federal+Competition+And+Consumer+Protection+Act+2019+Regulatory+Implications+For+Merger+Transactions+In+Nigeria
[10] The Section prohibits agreements by undertakings or a decision of Association of undertakings in any market whose actual or likely effect is to prevent, reduce or distort competition.
[11] See Section 59 (2) (b) of the FCCPA 2019
[12] See Section 59 (2) (c ) of the FCCPA 2019
[13] Section 70(2)
[14] Section 70 (3)
Credits: Post was first published on stephenlegal.ng by Stephen Azubike, legal practitioner, consultant and social entrepreneur.
