Chinese Football Under Scrutiny For Alleged Abuse Of Dominance.
Legal News & Analysis - Asia Pacific - China - Competition & Antitrust - Regulatory & Compliance
31 October, 2019
The Chinese Football Association is being investigated by China’s top antitrust regulator for suspected abuse of administrative power. One of the Association’s subsidiaries, the CFA Super League Co, is at the same time implicated in a separate civil litigation for damages caused by alleged abuse of market dominance. These closely related cases concern restrictions on the sale of images from football matches, and confirm that China, too, has caught up on the recent global trend of antitrust investigations and litigation focusing on sports governing and regulatory bodies.
The Chinese Football Association (CFA) is the governing body for football in China, responsible for the administration of national football affairs. The CFA, through CFA Super League Co (CSL), manages the China Super League, one of the country’s most popular sports events. In addition to its regulatory functions, the CFA is the sole exclusive holder of the China Super League’s marketing rights, which constitute a considerable proportion of its total revenues. The CFA and CSL have both, in separate actions, been accused of restricting competition in the market for professional league photographs.
At a hearing before the Shanghai Intellectual Property Court in April 2019, a Chinese supplier of sports images accused CSL and ImageChina of exclusive dealing of Super League photographs. The claimant contends that CSL and its exclusive trading photograph vendor, ImageChina, had abused their dominant position by requiring purchasers of sports photographs to trade exclusively with the latter.
This exclusivity arrangement is alleged to have impaired the claimant’s business prospects, for which the equivalent of €730,000 in damages is sought. The defendants have sought to rebut the allegation of dominance abuse by arguing for a wider relevant market. A similar allegation was brought to light in August by the country’s principal antitrust enforcer, the State Administration for Market Regulation (SAMR), this time against the CFA directly. The investigation concerns a suspected abuse of administrative power and the scope of SAMR’s investigation is broader; it targets the CFA’s policy as a whole instead of just the specific conduct of its subsidiaries. The controversial policy under scrutiny relates to CFA’s restriction imposed on authorised media channels, which are prohibited from selling photographs they’ve taken during matches organised by the CFA to third parties. The CFA suspended its controversial policy in response to SAMR opening its investigation. However, SAMR is yet to conclude whether the alleged abuse of administrative power is indeed established, and has not indicated that the CFA’s quick reaction has halted its probe. We’ll continue to watch for any developments with interest.
These cases constitute yet another example of the growing interest of competition authorities around the world in the sports industry. The sale of audio-visual content is a major revenue source for football in particular. In fact, the Chinese government has been pushing for the administrative reform of the CFA by various means and reducing the CFA’s regulatory powers is a prioritised goal. As detailed by the Mid and Long-Term Development Plan (2016-2050) issued by the Central Administration of Sport of China along with three other Ministries in 2016, China is paying increased attention to the importance of creating a fair and competitive environment in the football industry. Antitrust enforcement is one of several tools at the disposal of the government to achieve these goals, and we are likely to see more action by SAMR and regional regulators in the future.
From a global perspective, recent developments in India, Africa and the USA have focused on various issues within the sports industry’s economic model, including the joint-selling of broadcasting rights, exclusivity clauses in distribution contracts and the lack of fair and transparent tender procedures. By targeting its own sports associations, China is conveying the message that the world’s largest sports market is by no means exempt from antitrust scrutiny. The Chinese case also shows that sports governing bodies to which public powers have been delegated may fall foul of administrative law, and that such rules can be used to complement the traditional competition law prohibitions.
For further information, please contact:
John Xu, Partner, Linklaters