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Sporting decisions? Promotion, relegation and writing the rules of the game

21 September 2012

Two recent rulings demonstrate the need for sports regulators such as the English and Welsh rugby unions to lay down clear and sufficiently comprehensive rules governing their sports that do not restrict competition.

In this respect, competition law does apply to the rules and regulations that govern how sporting competitions are run (although not to the sporting rules of the games themselves).

In London Welsh, an independent panel made up of three Queen’s Counsel found that the London Welsh rugby club should not have been refused promotion to the Premiership regardless of having failed to meet the pre-requisites to be promoted.  The rules applied to block the club’s ascent gave rise to an unjustified distortion of competition, contrary to EU and UK competition law, due to the extent of the barrier to promotion those rules placed on aspiring Championship clubs.

After winning the Championship Division of the English rugby union league, London Welsh was refused promotion by the Rugby Football Union (the “RFU”).  London Welsh appealed this decision to an independent panel, as provided for in the Professional Game Board Minimum Standards Criteria (the “MSC”).

London Welsh was denied promotion through its failure to meet the provisions for Primacy of Tenure (“PoT”) within the MSC, not having a legally binding agreement to occupy the Kassam stadium where it proposed to play its 2012/13 Premiership matches. Under the PoT rule, a club had to be able to schedule its home games at its nominated ground during the season between certain times on certain days, and be able to allow those games to be broadcast on request.   However, three clubs were permitted to compete in the Premiership without PoT under the MSC’s ‘three club exemption’, namely London Wasps, London Irish and Saracens.

London Welsh argued that the PoT rule taken together with the three club exemption was an unjustified restriction of competition under Articles 101 and 102 of the Treaty on the Functioning of the European Union, and UK competition law, and the relevant MSC provisions were therefore void and unenforceable.

The RFU’s PoT rule had already been the subject of a competition law investigation by the OFT in 2003 when three clubs could not meet the PoT requirement.  The OFT later approved the MSC after they were amended to include the three club exemption and provide for a play-off where neither the top Championship club nor the bottom Premiership club had PoT.

The RFU in London Welsh contended that nothing had changed in the intervening nine years.   It also did not dispute the OFT’s earlier finding that the RFU was an ‘association of undertakings’ (essentially a trade association), and itself an ‘undertaking’, that enjoys a position of ‘sole and joint dominance’ on the market for the organisation of Premiership rugby union matches in England.

While the appeal panel accepted that the PoT rule considered by the OFT in 2003 was, in substance and effect, the same as that at issue in London Welsh, the panel found that there had been changes to the justification for the three club exemption.

Internal RFU documents revealed that the RFU had, since 2011, been considering extending the exemption from three to five clubs and was awaiting board approval before incorporating any changes into the 2013/14 MSC rules.  Further evidence was adduced to show that the RFU had already used its margin of appreciation not to exclude another Premiership club who had lost PoT for a period of two seasons.

In light of these factors, the panel found that the PoT and three club exemption rules as applied to London Welsh were void, unjustified and to be severed from the remainder of the MSC since these rules gave rise to an unjustified restriction of competition, disproportionate to the objectives they were set to serve.

The outcome of the panel’s decision was that Newcastle Falcons were relegated to the Championship Division, and London Welsh gained their place in the Premiership.

In the related Welsh Rugby Union case of Park Promotion Limited t/a Pontypool Rugby Football Club, a High Court judge referred approvingly to the panel’s decision in the London Welsh case that:

  • the promotion and relegation of a club should be determined by its performance on the pitch wherever possible; and
  • the rules governing the game and its organisation should be respected and applied by everyone.

Nonetheless, the Court in Park Promotion was keen to stress in addition that:

  • the governing rules of the sport should be clear and ‘comprehensive’.

Rules will be comprehensive if they:

  • sufficiently cover the situations that may arise and how they are to be dealt with; and
  • strike a balance between overly technical drafting (seeking to address every possibility in a legalistic manner will only invite ‘unwelcome legalistic dissection’), and rules that are insufficient and unclear.

It is apparent from both of these rulings that a sporting regulatory body’s decision will not be interfered with on appeal, provided the rules upon which that decision is based do not restrict competition, are sufficiently comprehensive and clear, and are applied fairly, objectively and without discrimination.

Both the English and Welsh rugby unions will now be reviewing their practices, procedures and rules to ensure that they comply with these general principles and other sports regulators should also take heed.

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