Anti-Competitive Practice in the Sporting Arena: Commercial Watchdogs Adapt Their Game

Article excerpt

I INTRODUCTION

Gas, electricity, telecommunications, futures trading and air travel all feature significantly in applications to the New Zealand Commerce Commission for authorisations to implement anti-competitive practices. (1) In each application, the Commerce Commission, charged with promoting healthy competition in the marketplace, applies the well-worn criteria set out in Part II of the Commerce Act 1986 (NZ) ('the 1986 Act') under which collective and unilateral anti-competitive behaviour is forbidden. Faced with a proposal that may substantially lessen competition, exclude competitors in the relevant market or markets, and/or create a price fixing scenario, the Commission must undertake a balancing exercise. It has power to authorise a scheme that breaches these restrictive trade practice provisions if it can be satisfied that the public benefits of the practice outweigh the detriments arising from the loss of competition. (2)

In the 1990s, the Commission entered the foray of New Zealand sport, dispelling any myths that sport was never in the business of making a profit. Top rugby players were becoming professional. The game was engaging in trade and commerce, thus subjecting itself to all relevant commercial laws. The Commerce Commission has become a new actor in New Zealand's sporting industry. Both parties have had to adapt. The sporting industry must abide by legal regulations and the Commerce Commission must adapt its traditional templates to meet this specialist environment. What happens when a sport seeks authorisation to restrict competition--especially if it wishes to impose a salary cap?

This paper explores the Commerce Commission Determination Decision 580, released on 2 June 2006, and highlights the pioneering spirit of the Commission as it grapples with the intricacies of a salary cap imposition. The unique nature of the legal regulation of sport, irrespective of the path from which it derives, already has drawn comment from academics in the field: (3)

   Pure competition between rivals is the objective in sport. The
   spoils of victory go to the contestant who displays the greater
   merit. Collusion in fixing results is anathema and disgraceful.
   Flow neatly this fits with the philosophy of the market economy.
   Yet unlike the capitalist firms, the athlete or team cannot afford
   to put rivals 'out of business' because the contest necessitates
   cooperation with opponents.

The Commission is not presented with an anti-competitive proposal that might create a monopoly on the marketplace. On the contrary, it is being asked to authorise an arrangement that keeps the sporting competition in balance: (4)

   ... professional teams must not compete too well. On the playing
   field they must do so. But in a business sense, the stronger team
   must not drive out the weaker for, if they do so, the whole League,
   including both the stronger and the weaker, will be worse off and
   no team will survive profitably.

A challenge indeed! With its 1996 precedent as a useful guide (5) it forges new ground on Australasian shores: a green light is given for a salary cap arrangement. The New Zealand Commerce Commission plays a careful and well-planned game!

II THE ADVENT OF COMMERCIALISM IN NEW ZEALAND SPORT

Broad restraint of trade issues in relation to sport have been well-aired in New Zealand courts. In Blackler v New Zealand Rugby Football League (Inc) (6) four essential principles regarding restraint of trade were established, (7) and these were duly tested in subsequent cases. (8)

A key development emerged in 1990. In Re Speedway Control Board of New Zealand (Inc) (9) New Zealand first embraced the principles of the Commerce Act 1986 (NZ) with respect to anti-competitive agreements in the realm of sport. Under the spotlight were two contractual agreements: a 'promoter's agreement' between the Board and various speedway clubs; and a 'competitor's agreement' between the clubs and the competitors. …