What does the European Super League tell us about competition policy?

The would-be founders of the European Super League are challenging the governing body of European football in the European Court of Justice. UEFA is accused of abusing its dominant position by threatening to sanction clubs and players for participating in the breakaway league.

The creation and instantaneous collapse of the European Super League (ESL) in April 2021 revealed the remarkable power of football fan protest. But now, an important legal case rumbling through the European Court of Justice (ECJ) threatens to re-open the issue.

At stake in the case is the power of two governing bodies – FIFA and UEFA – to regulate football competition. The challenge, posed by a Spanish court, is that those bodies’ oversight rules represent a violation of European competition law.

Without the official approval of the governing bodies, players and clubs are effectively outlawed from the sport. The plaintiffs argue that the governing bodies are using this restraint to protect the profitable sporting championships that they control, including the UEFA Champions League.

The problem in competition law is that sporting rules, which are essential for sporting competition, frequently have an economic dimension. This case is the latest in a long line involving questions about the extent to which sporting rules can validly restrain economic competition.

A quick recap

The ESL, backed by the largest clubs in England, Italy and Spain, proposed a new 20-team competition with perpetual membership for the founding clubs. The proposal was underpinned by the financial muscle of the investment bank JP Morgan and numerous billionaire owners among the organising clubs.

Talk of a super league has been around since the 1960s and was considered a serious possibility in the early 2000s. In recent years, as the financial dominance of the English Premier League (EPL) has grown, the attractiveness of the ESL seemed to diminish.

It was revived as a result of the significant loss of income brought about by the Covid-19 pandemic, during which games had to be played without fans in the stadium.

According to UEFA, the financial losses of European clubs could be as large as €8 billion. The larger clubs had the financial muscle to ride this out, but many smaller clubs faced bankruptcy.

The big clubs saw an opportunity – offering bailouts for the smaller clubs in exchange for permanent membership of the ESL. The plan was foreshadowed by Project Big Picture, which was proposed by Liverpool and Manchester United in October 2020.

That plan promised financial subsidies for the lower English leagues in exchange for exemption from relegation for the top EPL clubs. In effect, the ESL promised something similar.

Project Big Picture was nixed by the other clubs, although it was said at the time that this was only because of the clear opposition of fans. The extensive fan protests against the ESL were all the more remarkable since they came not from the excluded clubs, but instead from would-be members such as Chelsea and Manchester United.

It turned out that the fans were not just supporters of the clubs, but of the system of competition itself, including the institution of promotion and relegation that the big club owners were trying to bypass.

It is hard to recall any other example of a business restructuring proposed by powerful commercial interests that has been so quickly and so completely overturned by public protests. This is precisely because fans do not see their clubs first and foremost as businesses. Football in Europe is a manifestation of community, and therefore demands special treatment. This is where the ECJ comes in.

For all its special characteristics, football is still made up of undertakings (clubs), that are regulated by a single hierarchy of authorities – national associations (such as the Football Association in England), a European association (UEFA) and a global governing body (FIFA). These organisations operate competitions, such as the UEFA Champions League, which generate huge profits from the sale of broadcast rights and sponsorships.

How does this relate to competition policy?

From the perspective of competition law, this sounds like a ‘cartelised’ market – one in which restraints on economic competition are imposed by agreement among members of the organisations.

UEFA’s threats to impose punitive sanctions on the ESL (before it collapsed) looked, on the face of it, like a cartel organiser defending its turf – the Champions League – against a competitive threat. This is what the ESL claims in its lawsuit.

Competition law prohibits cartel agreements and the abuse of a dominant position in a market. Of greatest importance in this case is the ‘get out’ clause for cartels. The language of the law is a little difficult to parse, but in essence it says that if the agreement does something useful, such as contribute to economic progress or reduce costs and these outcomes could not be secured by a less restrictive agreement and the agreement does not simply eliminate the possibility of competition, then it may be found legally acceptable.

The heart of governing bodies’ defence will be that by preserving the principle of competition on sporting merit (for example, promotion and relegation), the cartel passes the test. This is because it both enhances ‘the product’ – that is, professional football as an entertainment – and promotes, rather than restricts, competition among clubs.

This is clearly in line with the expressed position of fans, and governments within the European Union. UEFA and FIFA can also point to some redistribution of financial resources. But they will face the charge that the financial disparities have grown over time, not least because of the way that UEFA distributes Champions League prize money, which has mostly gone into the pockets of the large, established clubs.

The plaintiffs (the ESL) will have a lot to aim for in court. They will portray UEFA as an inefficient organisation that has held back the big clubs without achieving anything for the smaller clubs. Their strongest argument will be that the financial potential of the ESL reflects unmet consumer demand – the opportunity for the biggest clubs to play against each other more often.

For example, since the Champions League was restructured in 1992, Liverpool and Real Madrid have met just eight times in UEFA competition. The ESL would be likely to enable them to play every season. Some diehards like to argue that scarcity makes the games more attractive – but the evidence of the last 30 years is that more football, especially on TV, brings more interest.

FIFA and UEFA will not be helped in court by the history of scandal and corruption in the game. The defence lawyers will argue that the ESL itself is just an attempt to form a cartel. But whatever the merits of this argument, it will carry little weight since the ESL is not on trial.

What might happen next?

The judges are in an awkward position. This will be the biggest legal decision in European football since the Bosman ruling in 1995, which affirmed the right of players to move to another club once their contract ended. UEFA lost that case because its claim that restricting players’ freedoms was necessary to promote competitive balance in European football was implausible and unsupported by credible evidence.

The easiest option here would be for the judges to side with the governing bodies as governments and fan groups have made it clear that they want to preserve the status quo. But this would reinforce the monopoly power of the governing bodies, which might not be a good look for a court that wants to uphold the principle of competition.

If the court were to side with the ESL, there could be a major upheaval of European football. The ESL would offer an attractive expansion of competition among the top clubs and, more importantly, the top players.

But if the big clubs only play in their own, exclusive league, then opportunities to redistribute resources to smaller clubs would be likely to diminish. Denied the dream of promotion to the top table, fans of smaller clubs may lose interest, to the point where many of these clubs could disappear completely.