An introduction to the little known world of sports law
Let’s be honest — the only reason you’re on Legal Cheek is because you’re trying to improve your “commercial awareness”. You don’t really know what that means but law firms bring it up more often than not, and you’re hoping your reluctant reading helps you get to 250 words on the “what recent article has been of interest to you and how is it relevant to this firm?” question that all training contract applications have in common.
Sorry, but this piece isn’t going to help you understand how the Finance Act 2015 affects the legal market.
With the Euro 2016 in France and the Olympics 2016 in Rio de Janeiro just months away, I thought it might be a good idea to write something on sports, especially since it is an area of law that I am genuinely interested in — and because it’s about time I fill up the “achievements” section on my CV.
The Olympics is the biggest and most special sporting event. It has the unique ability to bring together people of all races and ethnicities, and inspire an entire nation to unite. But what role does the law play in all this?
Quite a bit actually.
The International Olympic Committee (IOC) owns the Olympic Games. The city that wins the bid to host either a summer or a winter Olympic enters with the IOC into what is known as the Host City Contract. This leads to the formation of the Olympic Games Organising Committee (OCOG) and the OCOG is responsible for the development and designing of all logos, mascots and policies of a particular Olympics.
The Paralympics is hosted in the same city a short while after the closing ceremony of the Olympics but the Paralympics has separate commercial rights owned by the International Paralympic Committee.
With many participating nations unable to fund their own training and development programmes, and with the IOC’s broader goal of providing a platform for the next generation, cash flow is vital. In fact, it is estimated that only 10% of Olympic marketing revenue is retained by the IOC for operational and administrative costs, with the remaining 90% being distributed to organisations to promote the development of sport worldwide.
The IOC realised that it had an unprecedented number of viewers worldwide (3.6 billion people from 220 countries watched the London 2012 Games) and used this fact to pull in multinational companies seeking to reach unfamiliar consumer bases and increase brand awareness.
The IOC now generates billions of pounds through broadcasting rights, global sponsorship, licensing programs, ticketing and merchandise.
The reason brands are willing to pay incredible sums to become official sponsors of the Olympic Games is because associating yourself with the Olympics is one of the most effective modern marketing strategies. Not only is the Olympic logo of interlocking rings the world’s most recognisable symbol, it is also synonymous with humanity, world peace, goodwill and inspiration.
Lawyers have a significant role to play when it comes to sponsorship contracts. These agreements need to be drafted very precisely to ensure there is no room for ambiguity in the future, including benefits to the sponsor, payments due under the agreement, circumstances in which the sponsor may use the event’s intellectual property, and termination rights.
An example of a termination right is “morality clauses” which are vital to a sponsorship agreement as they allow termination of the agreement where a sponsor conducts itself in a way which will damage the image of the event.
Although this example is a reverse situation, the practicality of the morality clause can be seen in Adidas’ decision to end its sponsorship deal with the International Association of Athletics Federations (IAAF) in the wake of the doping allegations against it.
Morality clauses have actually been in the headlines in the last couple of weeks. Former world number one tennis star and highest paid female athlete Maria Sharapova announced in early March that she tested positive for a banned substance. This announcement led to Nike, Porsche and TAG Heuer immediately cutting ties with her.
Nike also had to drop Manny Pacquiao, the Filipino boxer, after his homophobic remarks in February this year.
These endorsements are worth millions and were it not for termination rights, sponsors would struggle to protect themselves from being associated with the negative press that comes with these calamities.
It’s not that money is the root of all evil, it’s just that unethical practices are inevitable where money is involved.
Ambush marketing is a major issue in world sport and risks the organiser’s ability to fund the event. It is where a competitor of an official sponsor associates itself with an event without paying the requisite fee to the event owner. Counterfeit jerseys are an example of ambush marketing.
The most significant reason for ambush marketing is that the official sponsor is a competitor of the ambush marketer and has a long-standing relationship with the organisation; a high-profile example being that of Coca-Cola’s partnership with the Olympic Games since 1928 meaning that Pepsi will almost certainly never be a sponsor.
Ambush marketing is prevalent in major sporting events. During a game between the Netherlands and Denmark in the 2010 FIFA World Cup in South Africa, 36 Dutch women were asked to leave the stadium for wearing outfits that effectively advertised for an unofficial beer company. Vacating the women did not make a difference as the damage had already been done — the beer company was in the spotlight.
Tackling it is not as straightforward as it may seem. In the UK, the only way ambush marketing can be dealt with is by bringing an action for trademark infringement, but the claimant would need to show that consumers get confused and that the claimant suffered damage because of the ambush marketers.
The Rugby World Cup 2015 in England tried a new approach to counteract this issue. Heineken, the official alcohol sponsor, secured a marketing exclusion zone within a 500 metre radius around venues that meant its lager was the only brand sold in the stadium and within 500 metres of it.
With that said, the Olympics has special legislation which protects its intellectual property and also requires host cities to introduce special legislation to ensure Olympic properties and its official partners are protected. The London Olympic Games and Paralympic Games Act 2006 was introduced in preparing for the London 2012 Olympics.
Licensing is where an event owner grants a manufacturer a licence to use the trademarks on its products and sell them as merchandise in return for royalty. It is another method of raising commercial revenue, not least because shirts, hats, key rings, mugs and even towels can be sold as merchandise.
The Organising Committee for London’s 2012 Olympics reportedly raised around £100m from merchandise sales but this figure only represents the Organising Committee’s share — not the total value of merchandise sales.
Adidas, kit sponsor of Team GB, invested £100m to sponsor the 2012 Games and reached its target for sales of merchandise by the end of the event’s first week.
Ticketing also makes a significant contribution to the overall revenue generated by the Olympics, but a significant issue in most jurisdictions is that re-selling tickets for higher than purchase price is not unlawful.
Contract law is very relevant here as all ticket agreements must contain clauses detailing the cancellation policy due to adverse weather conditions, as well as a disclaimer in relation to safety at the venue. However, unusually wide disclaimers are invalid in the UK as the Unfair Contract Terms Act 1977 holds void and unenforceable a provision excluding liability for death or personal injury resulting from negligence.
Intellectual property rights
The commercial success of the Olympics due to merchandise, ticketing and sponsorship would be near impossible were it not for intellectual property (IP) rights. IP laws enacted by the IOC and the World Intellectual Property Organisation protect the Olympic symbols and logos. The Olympic five-ring symbol, the Paralympic Symbol and the motto “Citius, Altius, Fortius” (Faster, Higher, Stronger) are all also protected by special domestic legislation.
Sporting bodies here in the UK rely on the Trade Marks Act 1994 to register a trademark but if a mark is not registered (i.e. it is a common law mark), the bodies can rely on the tort of “passing off”. Team names and logos can be registered as long as it satisfies the requirement of distinctiveness. “Tottenham” FC was able to be registered successfully as the word was proved to be associated with the club and not that geographical area of London.
Additionally, the Copyright Designs and Patents Act 1988 (as amended) can protect musical works, literary works and broadcasts. In the context of the Olympic Games, the theme song and music of the opening and closing ceremony of all Olympics are copyrighted. Even the Olympic anthem is copyrighted.
To ensure that official sponsors are protected, the Games are not overly-commercialised. To encourage “Olympic spirit”, the IOC has developed a clean venue policy. The clean venue policy makes use of numbered zones to allow proper application of this policy.
An interesting incident involved Michael Jordan and his USA Dream Team in Barcelona 1992. Zone 1 — the competition and spectator area — prohibits advertising other than logos and symbols that identify manufacturers of sporting equipment and uniforms. Michael Jordan was sponsored by Nike in his personal capacity and so wore his Nike clothing to the medal ceremony. The only problem was that as official sponsor, Reebok was to be given exclusive rights of the event. Had the officials not convinced Jordan to wrap himself in a USA flag so as to cover the Nike logo, the IOC would have suffered from considerable embarrassment for allowing its official sponsor’s rival to share the spotlight.
Sports law: the future
Sports law is a relatively new concept, and compared to traditional areas of law like criminal and tort, it is still finding its feet. The law has had to develop itself to meet the demands of modern society, and one such demand was to use the law to protect any product worth commercialising.
Sport is now a billion dollar industry in its own right which makes it easy to understand why event owners have gone to such great lengths to protect themselves and their commercial partners.
No doubt the marketing industry is responsible for the commercialisation of and unprecedented investment in the Olympic movement but had it not been for the law, governing bodies would struggle to sustain this progression.
What is certain, for now, is that the law can and will only grow to become more relevant in the Olympic movement and in sports more widely.
Ali Farooq is a law student at Leeds Beckett University.
Gardiner S, O’Leary J, Welch R, Boyes S and Naidoo U, Sports Law (4th edn, Routledge, 2012)
International Olympic Committee, Marketing Report (London, 2012)