Conflicting Sponsorship Agreements in Badminton
Court of Utrecht in Preliminary Relief Proceedings, 20 March
2010, LJN BL6880
Exclusive Sponsorship Agreement
Binding on the Players
The Dutch Badminton Association (NBB, currently named Badminton
Nederland) has concluded a sponsorship agreement with Yonex. As of
1 January 2010 the NBB has been performing this sponsorship
agreement. Players who wished to be included in the national
selection had to sign a player contract in which they undertook to
use exclusively Yonex materials and clothing. Players who do not
sign the player contract are no longer admitted to the national
selection, so that they cannot participate in the national team
tournaments either. The players can, however, participate in
individual international tournaments, but the NBB will no longer
reimburse the expenses these players incur by playing in these
tournaments.
Dunlop, a competitor of Yonex, and some badminton players who
had already concluded sponsorship agreements with other parties,
did not agree to this situation. In preliminary relief proceedings,
they claimed - in brief - that the players should be allowed to
perform their individually concluded sponsorship agreements and
that NBB should be prohibited from treating these players
differently from the badminton players who had signed the player
contract.
Dunlop and the players first argued that the sponsorship
agreement concluded between NBB and Yonex is at odds with
competition law. The Court in preliminary relief proceedings ruled
that it is not likely that the cartel ban had been breached. One of
the important factors in the ruling was that a factual
investigation is required in the form of a market analysis, which
is subject to high standards, in order to establish that an
agreement has consequences distorting competition. As often in
competition cases, it was not clear here what the relevant market
is: the market for sports articles, for badminton articles or for
badminton articles for top players? The players and Dunlop have not
made sufficient assertions in this respect.
Secondly, the players and Dunlop stated that the sponsorship
agreement (and its performance) was unacceptable vis-à-vis the
players by standards of reasonableness and fairness and should
therefore not be applicable. In its adjudication the Court in
preliminary relief proceedings weighed the interests of the players
and of the NBB.
The Badminton Association has as its objective to promote
badminton, and defends the interests of both professionals and
amateurs. The NBB has argued that, in order to realize this
objective and in connection with its budget deficit, it was in
urgent need of the monies from the sponsor Yonex. The court in
preliminary relief proceedings reached the opinion that the
disadvantages for the players (not being able to participate in the
country tournaments on average twice per year, and partly having to
pay the costs involved in the individual international tournaments)
are not such that it is unacceptable according to the standards of
reasonableness and fairness that the players are bound by the
decision of NBB.
Finally, the players took the position that NBB and Yonex acted
lawfully towards them because they incited them not to perform
their individual sponsorship agreements and to commit breach of
contract. However, the players do have the choice not to sign the
player contracts. Therefore the Court ruled that NBB had not acted
unlawfully.
The Court in preliminary relief proceedings denied the claims of
the players and Dunlop.
In Perspective
A discussion between players and a sports association on
conflicting sponsoring is not new. It is not unusual for sports
clubs and sports associations to conclude agreements with top
sportsmen, as was the issue in these proceedings. Since the sports
club or association cannot force the players to sign, they will
have to take other measures to ensure that the contracts are
signed. Exclusion from participation in certain matches and/or the
(national) selection is a usual means of putting pressure.
The players who have brought these preliminary relief
proceedings are affiliated with NBB by their membership. Under
their membership, the players are in principle bound by the
constitution, regulations and decisions of NBB, including the
decision to enter into the sponsorship agreement with Yonex.
However, the players are not bound by these if the application of
the decision would, given the circumstances, be unacceptable
according to standards of reasonableness and fairness.
In the adjudication a weighing of interests will have to take
place, one of the important aspects being that all players,
including the players playing at top level, may in principle be
required to make an effort aimed at realizing the objective of the
association, which is in this case the promotion of badminton in
whatever form. Furthermore, a Court will have to take into account
the question as to how far the means of putting pressure of the
sports club or association stretches. How many matches will the
player miss if he does not sign?
In the present case, the badminton players will only miss two
national team tournaments a year. Besides, these national team
tournaments are about 'the honor of the nation', as the Court has
considered. In the individual international tournaments, on the
other hand, money prizes can be won and points for placement on the
world ranking list can be obtained.
Incidentally, in the case of professional sportsmen the court
seems to be more inclined to rule that the decision of a sports
club or association is unacceptable according to the standards of
reasonableness and fairness, especially if the relevant
professional sportsman had concluded his sponsorship agreement
earlier. The court of Utrecht in preliminary relief proceedings had
given a ruling in 1977 about an amateur swimmer who had her own
clothing sponsor, but did not receive any money for wearing the
clothing. Partly in view of the fact that she had no financial
interest in her refusal to wear the clothing of the sponsor
contracted by the Dutch Royal Swimming Union (KNZB), the Court
considered that the interests of KNZB outweighed her interests. A
year earlier, this same court had ruled differently: the Royal
Dutch Football Union had acted unlawfully vis-à-vis a professional
football player by suddenly and without consultation terminating
the custom that players could conclude their own shoe sponsorship
agreements.
On the basis of this last judgment, sports clubs and
associations and top sportsmen and their sponsors have had frequent
consultations on the sponsorship agreements, also in the present
case. NBB could have made arrangements with another sponsor, by
which the sponsor would have released the players against payment
of a certain amount of money. At the hearing NBB declared that it
was also willing to enter into such an arrangement with Dunlop. It
is my guess that this too has played a part in the opinion of the
Court.
Furthermore, the preliminary relief court adjudicated the
question of whether the arrangements between NBB and Yonex are
contrary to competition law. In order to further the market forces,
Article 101 of the Treaty on the Functioning of the European Union
(the former Article 81 of the EC Treaty) provides that agreements
between undertakings resulting in a noticeable unpermitted
competition restriction are prohibited. A sports association like
NBB can also be regarded as an undertaking as far as it engages in
economic activities, so that NBB too will have to adhere to
competition law rules.
As happens more often, the Court did not go into competition law
aspects at length and ruled specifically that (thorough) research
is necessary to make an adjudication. If the players and Dunlop
wish to see a Court pronounce an opinion on this issue, they will
have to bring proceedings on the merits of the case. There are
reports in the media that they intend to do so indeed.