by Benoît Keane, Solicitor Advocate, Brussels, Belgium
“Context always matters”
These words rang through the Opinion of Advocate General Emiliou in the CD Tondela/LPFP case.[1] The context was certainly striking.
On 11 March 2020, the World Health Organisation declared that the COVID19 outbreak had become a global pandemic. Governments around the world took extraordinary measures to contain the virus. In Portugal, the government imposed a lockdown and closed public establishments. On 12 March 2020, the Portuguese Professional Football League (LPFP) ordered the suspension of the 2019/2020 season. On that date, 10 fixtures remained still to play in the two LPFP divisions.
At a meeting shortly afterwards, the LPFP and its football clubs agreed not to recruit any players who unilaterally terminated their employment on the basis of difficulties caused by the COVID19 pandemic for the remainder of the season. However, the Portuguese competition authority[2] considered this decision to be a ‘no-poach’ agreement that by its very object restricted competition. It fined the LPFP and clubs a total of €11.3 million.[3] Following an appeal, the case was referred to the Court of Justice of the European Union (CJEU) to determine whether the agreement constituted a by object restriction of competition or was justified.
Whilst some form of collusion, such as price fixing cartels, usually restrict competition by object, the CJEU recalled that other conduct may also be harmful to competition such that there is no need to examine its effects.
The test for establishing a by object restriction involves an assessment of:
(i) the content of the agreement, decision or practice in question;
(ii) the economic and legal context of which it forms a part; and
(iii) its objectives.[4]
From the content, the CJEU accepted that the LPFP decision was “equivalent to a no-poach agreement” as it restricts competition amongst clubs for the recruitment of players.[5] Such no-poach agreements are ordinarily by object restrictions of competitions as they “lead to the artificial partitioning of the ‘resources’ which are the players amongst the participating undertakings.”[6]
However, content is just one metric.
Regard must also be had to the economic and legal context. The CJEU highlighted, as of particular relevance, the specific characteristics of sport, and football in particular, to this assessment.[7]
The CJEU considered that the “proper functioning, sustainability and success of those [football] competitions depend on maintaining a certain sporting and financial balance and on preserving a certain equality of opportunity as between the participating professional football clubs, given the interdependence that binds them together.”[8]
Simply, there must be a sufficient number of clubs to hold such competitions.[9]
It is legitimate, therefore, for sports associations to put in place rules on the participation of clubs and players in such competitions to guarantee the homogeneity and coordination of competitions within an overall calendar.[10]
According to the CJEU, “it may be legitimate for a sporting association to seek to ensure, to a certain extent, the stability of the composition of the player rosters that serve as a pool for the teams which are put together by those clubs during a given season – for example by proscribing the unilateral termination of employment contracts during the season – or during a given year.”[11]
Turning to the specific circumstances leading to the LFPF decision, the CJEU recalled the extraordinary circumstances surrounding the COVID19 pandemic. Notably, the league had to be suspended – with resumption and its conclusion at a later date being uncertain. If players could unilaterally terminate their contracts before the end of the season, then this “inevitably and significantly altered the composition of the various teams involved, thereby undermining the integrity of competition.”[12]
The problem would have been exacerbated if clubs could not sign new players to replace those who had departed due to a lack of funds. Such circumstances must be taken into account in assessing the legal and economic context for the LPFP decision.
Turning to the objectives, the CJEU recalled that football competitions are based on sporting merit “which presupposes that the results achieved by all of the clubs involved in the different phases of a given competition may be validly compared.”[13]
Citing its long-standing judgment in Lehtonen[14], the CJEU stated that the organisation of an interclub competition “necessarily presupposes the maintenance of the integrity of the competition and the stability of the composition of the player rosters that serve as a pool for the teams which are put together by those clubs during a given competition or season, which entails, in practice, … proscribing the unilateral termination of employment contracts during the season.”[15]
Indeed, the CJEU considered that there may be “an objectively pro-competition aim, consisting in ensuring the stability of player rosters playing in the First and Second Divisions.”[16]
On this basis, the CJEU concluded that the LPFP decision on player recruitment should not restrict competition by object and, for similar reasons, may be justified even if it gives rise to other restrictive effects in view of the legitimate objectives being pursued to ensure the completion of the season.[17]
Commentary
It may be tempting to dismiss the case as being limited to the extraordinary circumstances relating to the COVID19 pandemic. But, arguably, it has broader implications in practice.
The recent Diarra judgment[18] led some to conclude that transfer regulations were no longer acceptable, except in the narrowest of circumstances.
The ruling in CD Tondela shows that there remains, in fact, a clear understanding of the necessity of such rules to ensure that clubs have a stable roster of players.
Whilst this may be most keenly felt during a season, player stability is also of importance for clubs to compete and competitions to take place from one season to the next.
Whilst the COVID19 context is certainly of relevance, the sporting context always matters.
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[1] Opinion of Advocate General Emiliou, paragraph 66.
[2] Autoridade da Concorrência (AdC).
[3] AdC Press Release 06/2022.
[4] See: Case C-333/21, European Superleague Company, EU:C:2023:1011, paragraph 165 and Case C-298/22 Banco BPN, EU:C:2024:638, paragraph 44.
[5] CD Tondela, paragraph 53.
[6] CD Tondela, paragraph 54.
[7] CD Tondela, paragraph 57: “As regards … the economic and legal context of which the conduct in question forms part, it should, first, be borne in mind that the specific examination of the actual context of which the economic activities relating to the pursuit of a sport form part may involve taking account, among other elements and provided that those specific characteristics are relevant, of the nature, organisation or functioning of the sport concerned, the manner in which it is practised, the manner of interaction between the various participating stakeholders and the role played by the structures and bodies responsible for it at all levels, with which the Union is to foster cooperation, in accordance with Article 165(3) TFEU.”
[8] CD Tondela, paragraph 60.
[9] CD Tondela, paragraph 61.
[10] CD Tondela, paragraphs 62 and 63.
[11] CD Tondela, paragraph 64.
[12] CD Tondela, paragraph 73.
[13] CD Tondela, paragraph 84.
[14] Case C‑176/96, Lehtonen EU:C:2000:201. In the judgment, the EU Court of Justice recognised that transfer windows are necessary to ensure the regularity of sporting competitions. The EU Court of Justice stated at paragraph 54 that “Late transfers might be liable to change substantially the sporting strength of one or other team in the course of the championship, thus calling into question the comparability of results between the teams taking part in that championship, and consequently the proper functioning of the championship as a whole.”
[15] CD Tondela, paragraph 85.
[16] CD Tondela, paragraph 88.
[17] CD Tondela, paragraphs 96 – 100.
[18] Case C-650/22, FIFA v. BZ, EU:C:2024:845 (“Diarra”).