Indian Competition Law in Sports

A case study on the Indian Volleyball Federation

In the era of globalisation, the similarities between sports and businesses are ever increasing. The monopolistic nature of sports organisations and the inherent need for maintaining competitive balance between teams have resulted in the introduction of many forms of economic restraints like revenue-sharing, spending caps, drafts, non-tampering clauses.[1] With the emergence of such forms of economic restraint, the applicability of competition laws towards anti-competitive practice in sports comes into the picture.

On 7 August 2019, the Competition Commission passed an order, requiring further investigation into the actions of the Volleyball Federation of India (“VFI”).  This order stemmed from the case of Mr. Shravan Yadav & Others Vs. Volleyball Federation of India (VFI) & Other[2] for abusing the dominant position it holds. It has been alleged that the VFI (in its agreement with Baseline Ventures (India) Private Limited (“Baseline”)) has engaged in anti-competitive practices and acted in contravention to the Competition Act 2002 (“CA 2002”). It is argued that the agreement grants exclusive rights to Baseline for organising a volleyball league in India for the next 10 years, for both men and women, and no other enterprise can organise a volleyball league in the country. Moreover, the agreement states that the VFI will ensure that the players participate in the leagues organised by Baseline, and not allow the players to participate in any other volleyball league, organised in India or abroad. The agreement also prevents the players from representing their country in tournaments like the Asian Games or the Olympics, if the dates clash with the dates of Baseline tournaments. Therefore, it has been argued that clauses of the agreement infringe Section 3 and 4 of the CA 2002.

Current trends

Since the VFI is the sole authority in the country to regulate and govern the sport of volleyball, the allegation of anti-competitive practices becomes even more complex. If a body which regulates a sport, also possesses the power to organise tournaments and events, it is said to have a distinct advantage, which cannot be deemed anti-competitive. The Competition Commission of India (“CCI”) in the famous IPL Case[3] held that sports federations engaged in the organisation of tournaments/leagues are advantaged if they can grant approval for the organisation of similar events by others and set their conditions.[4] Therefore, in cases where the governing body of sport also organises tournaments, as in the case of the VFI, the monopolistic governing bodies are not considered inherently anti-competitive. However, the decisions of the CCI in the famous cases of the AICF[5] (“Chess case”), AFI[6] (“Athletics Case”) and IPL reflect a tendency to recognise that competition law principles apply to governing bodies. So what does this mean for the agreement between the VFI and Baseline?

Can the VFI be considered an enterprise?

The CCI in the Chess case recognised the All India Chess Federation (“AICF”) as an enterprise under section 2(h) because it charges an entrance fee. The CCI in the Sh. Dhanraj Pillay and Ors v M/s Hockey India[7] case, considered the governing body as an enterprise as it engaged in organising tournaments and selling tickets which generates revenue. Therefore, sports governing bodies, like the VFI, on principle can be considered as commercial enterprises regulated by the CA 2002.

Abuse of Dominant Position

It has been argued that VFI has abused its position of dominance violating section 4 of the Act. To analyse this we first need to establish that the VFI was in a position of dominance. Article 4 of the Act defines a ‘dominant position’ as one which enables the enterprise to function independently of other competitive forces in the market.

In the Chess case the CCI dealt with the question of a governing body in a dominant position. It held that the AICF has the duty to perform functions including selection of Indian chess players, conducting national, open and international tournaments, approving tournaments, placing restrictions on participation of players,[8] which were held grounds enough to categorise it as having a dominant position. Similarities can be drawn between these functions and those performed by the VFI. Furthermore Article 3(2) of the federation’s constitution states that the objective of the VFI is to promote, regulate, organise and control the game of Volleyball. Article 3(4) provides the VFI with the power to hold National Championship for men, women, boys and girls. These provisions among others mentioned in the constitution and bye-laws of the federation reflect the dominant position of the VFI in the market.

The next step is to determine whether the VFI abused their dominant position and whether the agreement between the VFI and Baseline be considered as a violation of Section 4 of the Act. The CCI in the Chess case[9] evolved a test to determine whether the activities of an enterprise amounts to abuse of dominance. The test is “if the restraint on competition is a necessary requirement to serve the development of sport or preserve its integrity.”[10] It is argued that the agreement between the VFI and Baseline (and the clauses it entails) are not a necessary requirement to serve the development of sport or to preserve its integrity. The restriction of players to participate in any other league not organised by Baseline does not develop the sport. Restricting the opportunities available to the players, reduces the quality of the sport. In fact the clause preventing players from representing their country at the Asian Games or the Olympics is in direct contravention of preserving the integrity of the sport and the players. Furthermore, the agreement is in contravention of section 4(2)(b)(i) of the Act which states that an abuse of dominant position is established if services are restricted or limited.

The CCI in the Chess case held the restrictions on participating in authorised/ un-authorised tournaments/ championships of the AICF as being in contravention of the provisions in Section 4(2)(b)(i).[11] Additionally Section 4(2)(c) of the act states that a practice which leads to denial of market access constitutes abuse of a dominant position. The clause which grants exclusive rights to Baseline to organise volleyball events for the next 10 years, denies market access to competitors organising similar Volleyball events. The CCI also held a similar precedent in the IPL case and held that the representation given by the BCCI that “it shall not organise, sanction, recognise, or support during the Rights period another professional domestic Indian T20 competition that is competitive to the league [IPL]”, is in contravention of Section 4(2)(c) of the Act.[12] Therefore, in accordance with precedents of the CCI, the clauses of the agreement between the VFI and Baseline violate Section 4 of the CA 2002.

Conclusion

Over the years, the sport’s governing bodies have come under the purview of the competition act, owing to the dual role of these organisations as regulators but also as businesses. On 7 August the CCI called for a probe into the agreement between the VFI and Baseline to determine whether it violates competition law principles and we are expecting this to come back reporting that the VFI has abused its dominant position and violated section 4 of the CA 2002, but we’ll have to wait and see. Whatever the result, cases like these highlight the developing nature of sports bodies into businesses and how competition law principles will apply as they develop.

Amogh Mittal

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References

  • [1] Leah Farzin, ‘On the Antitrust Exemption for Professional Sports in the United States and Europe’, Jeffrey S. Moorad Sports Law Journal, Vol. 22, 2015, p. 75
  • [2] Mr. Shravan Yadav & Others Vs. Volleyball Federation of India (VFI) & Other, Case No. 01 of 2019.
  • [3] Surinder Singh Barmi and Board of Control for Cricket in India, Case No. 61/2010
  • [4] See also, Board of Control for Cricket in India (BCCI) v. Competition Commission of India 2015 SCC OnLine Comp AT 238
  • [5]  Hemant Sharma and All India Chess Federation, Case No. 79 of 2011
  • [6]  Department of Sports, MYAS and Athletics Federation of India, Reference Case No. 01 of 2015
  • [7] Sh. Dhanraj Pillay and Ors v M/s Hockey India, Case No. 73 of 2011
  • [8] Supra 5, para 41.
  • [9] Supra 5, para 53.
  • [10] See also, Supra 3, para 42.
  • [11] Supra 5, para 8.4(a).
  • [12] Supra 3, para 41.

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