Competition law achieves fair play

The London Welsh decision provides a rare but telling example of competition law marching its way onto the field of professional sport.

London Welsh won rugby union’s Championship in the 2011-12 season.  This would, in ordinary circumstances, have entitled them to be promoted to the Premiership, which is club rugby’s highest division.  The RFU, however, operates “minimum standards criteria” for the Premiership, which require any club eligible for promotion from the Championship to have “primacy of tenure” over their home ground.  London Welsh did not have primacy of tenure and so their bid for promotion was refused by the RFU.

All, so far, the stuff of an unexceptionable sporting decision.  There was, however, a small complication: there were three clubs already in the Premiership which also did not have primacy of tenure (London Wasps, Saracens and London Irish).  A special three-club exemption operated for those clubs.  The exemption was not, however, open to London Welsh, or to any other club which might qualify for promotion from the Championship.

In an appeal against the RFU’s decision, London Welsh argued that the RFU’s rules were an unjustified restriction of competition and were thereby void pursuant to Articles 101 and 102 TFEU.

The decision of the Appeal Tribunal, which was composed of three eminent QCs, provides a rare example of a competition case in which there was no dispute about market definition, dominance or prima facie restriction of competition.  The debate turned, instead, solely on whether the RFU could justify the prima facie restrictive effects of the rule which excluded London Welsh as being “inherent in the pursuit” of legitimate sporting objectives and proportionate to them, as required by the Meca-Medina case in the ECJ.

The RFU’s case had a promising starting point, in that the three-club exemption had been specifically approved by the OFT as part of an investigation in 2003.  The Appeal Tribunal nevertheless decided that the RFU could not establish that the primacy of tenure rule was objectively justified.

Why not?  Because the OFT had never said, as the Tribunal observed, that the exemption had to be limited to three clubs.  On the contrary, it needed to be for “at the very least three clubs”.  Between 2003 and 2011, it had become clear that the three-club exemption was too narrow.  In particular, by the Spring of 2011 at the latest, it was clear that “…the rules could safely be relaxed, without imperilling either the fixture list or the value of … broadcasting contracts”.  The RFU should therefore have realised that “…there would have been no difficulty in accommodating at least five non-PoT clubs at an earlier point”.

On that basis, the Tribunal held, the whole primacy of tenure rule was now void and unenforceable by the RFU.  In essence, therefore, the RFU’s rule fell because the exemption from it was not wide enough.

This constitutes an interesting and demanding precedent for sports governing bodies.  The essence of the decision is that if a sports governing body imposes a rule which involves a prima facie distortion of competition (e.g. the primacy of tenure rule), but then allows for exemptions from that rule (e.g. the three-club exemption), it is under a duty to make the exemption as wide as possible, lest the entire scheme be deemed void.