Two Wrongs Making Sporting Media Rights
It was big news that DG Comp officials, supported by their domestic counterparts, raided a number of sports broadcasters, including Fox in the UK, in relation to an investigation into a suspected cartel in relation to ‘media rights and related rights pertaining to various sports events’. As the investigation is ongoing there is relatively limited public information about the broadcasters who are targets of the investigation or the particular sports rights which are involved – of course there may be no cartel involved and the Commission may find nothing awry. However, as a great many dawn raids are triggered by a leniency application there may well be something afoot.
It is clearly too early to discuss the actuality, but it may be interesting to raise a, potentially heretical, question about one potential type of cartel in relation to sports media rights and ask some interesting questions.
I stress that this post is entirely hypothetical and should not be seen to indicate any suggestions about what might be going on in any particular sport!
Let us hypothesise that a highly popular and successful sport was organised into a league format. All the individual clubs in that wealthy and popular league, within an EU Member State, were permitted, through an agreement with the competition authorities, to pool their media rights in relation to that league competition. That joint selling of the media rights would in normal circumstances be seen as a cartel and would fall foul of the competition rules, but the joint selling is permitted because of the ‘specificity of sport’ and the need for sports leagues to organise for the benefit of all the participants and supporters. The joint selling of media rights has, because of the successful sporting product produced, generated a great deal of income for the league, and therefore the clubs. The high value in the past was generated following an intense bidding war for the most attractive packages of media rights between pay-to-view broadcasters.
Much of that income has been spent in attempts to gain relative competitive advantage in the league and improve each club’s competitive position – the means of ensuring competitive survival is by bringing in the best playing talent from around the world by paying significant transfer fees and very high salaries. Much of this is arguably a zero sum game, as all clubs are in competition to attract the best talent and all are paying very high salaries, there has been very limited change to those clubs at the top of league. The main beneficiaries of the increased club income are the players who command those high salaries. The supporters benefit from the sporting product improving over time, but they also have to pay for that improvement in higher match day ticket prices and much higher TV subscriptions to watch games they cannot attend.
Let’s further postulate that the broadcasters reacted to the potential for another round of media rights bidding by deciding that the rightsholder cartel was simply too powerful and was making their business model potentially unsustainable. Their reaction was to begin to coordinate secretly to try to dampen down some of the commercial pressure they faced. Essentially, you would have a lawful monopolistic media rights joint selling cartel, being faced by purchaser bid-rigging from broadcasters who were seeking to buy media rights. Now we have a cartelisation on both sides of this highly unusual market.
If we accept that hypothetical scenario what can we say about it …
Firstly, any such purchaser bid-rigging would clearly fall foul or Art 101 TFEU as an ‘object’ agreement and the broadcasters could be subject to potentially significant fines.
But more interestingly, if we look beyond the ‘object box’ where is the consumer harm from the purchaser bid-rigging? This question produces discussion that is more interesting. The traditional conception of the consumer in relation to a market like sports media rights would be the consumer of the media itself – the long-suffering fans. How are they harmed by the purchasers’ bid-rigging answering the power of the rightsholder cartel to push up media rights prices as far as their monopoly will bear? The fans may indirectly benefit from an increase in quality, but they pay directly for that through increased ticket and media prices. There is no obvious ‘theory of harm’ in relation to real ‘consumer’ harm downstream in the market. The ‘consumer’ harm, through increased prices downstream, is caused by the lawful joint selling cartel – the only reduction in prices stems from the countervailing power of bid-rigging!
The main market players who suffer harm through the purchasers’ bid-rigging are on the upstream side of the market – the monopoly rightholders who do not generate as much income as they would in a competitive bidding situation. That income is used to benefit ‘the game’ – as there surely must be a wider benefit to society from such an agreement otherwise it would not benefit from Art 101(3) TFEU. However, in reality, the money quickly goes not to benefit ‘the game’, in a wider sense, but rather the highly paid talent, mostly players, who have seen their wages rise as the media money came into the league. The upstream harm appears to be focused on the most talented players who may not being able to afford a new Ferrari for another month or two. Is this the sort of harm that antitrust enforcement should be focusing on?
It is clear that, in this this hypothetical scenario, bid-rigging would be unlawful, but it’s not so clear that ‘consumer welfare’ is reduced through this bid-rigging. In fact the bid-rigging is the only feature of the market which reduces the cost to the consumer of the monopoly rent charged because of the ‘specificity of sport’. Perhaps the answer to the problem is to better address the consumer harm caused by joint selling in the market, rather than ignore the bid-rigging, but it’s clear that a market such as this is failing in different ways, and that the traditional consumer is getting a raw deal in pretty much every version of this scenario.
I must be wrong in this analysis – as it doesn’t seem to make much sense – what have I missed?