The Polish Competition Authority fines 16 basketball clubs and the national league for exchanging commercially sensitive information and colluding to terminate player contracts during the COVID-19 pandemic (BM Slam Stal / Gdyński Klub / Gliwickie /...)

In December 2022, the Polish Competition Authority (Polish: Prezes Urzędu Ochrony Konkurencji i Konsumentów (“UOKiK”)) (the “PCA”) published the non-confidential version of its decision imposing fines on 16 basketball clubs (the “Clubs”) and the national basketball league (the “League”) for alleged wage-fixing arrangements in the context of the earlier termination of the 2019/2020 season due to the COVID-19 pandemic (the “Decision”). This is the first decision where the PCA applied Art. 101(1) TFEU and the national equivalent (Art. 6(1) of the Competition Act) [1] to the labour market.

Background

The infringement declared in the Decision originated from the COVID-19 outbreak in March 2020. The pandemic and resulting restrictions forced suspension of sporting activities and earlier termination of the 2019/2020 season. The resulting lack of expected profits from ticket sales and sponsorship agreements jeopardised the Clubs’ liquidity and worsened their financial situation. Hence, according to the PCA’s findings, the Clubs mutually agreed to terminate existing contracts with basketball players to avoid paying them remuneration for the rest of the season. The Clubs also allegedly illegally exchanged sensitive information affecting competition between them for the best players. Pursuant to the Decision, the League was also involved in such arrangements and supported the Clubs in this respect. Consequently, on 19 March 2020 all Clubs published an agreed common statement on their inability to pay full wages to players.

Who was targeted by the PCA?

All 16 Clubs were fined by the PCA since all of them participated in the questioned discussions, whose aim was to work out common pan-league policy towards players and agents. The passive role of some of the Clubs did not convince the PCA to exclude them from the scope of the declared infringement.

Apart from the Clubs, the League was also found liable for the infringement. According to the Decision, although the concerted action was the Clubs’ bottom-up initiative, the League actively supported the Clubs in early termination of contracts. In particular, the League offered free legal aid to the Clubs and accepted the common statement released by the Clubs on 19 March 2020.

The PCA rejected the League’s claims that it cannot be considered as a participant to the infringement as it is not active in the same relevant market as the Clubs (i.e. purchasing of players’ labour). The PCA responded by invoking cartel facilitator doctrine enshrined by the EU Court of Justice in AC Treuhand. [2] Hence, despite being active in the market for organising professional basketball, and not employing players, the League was found liable for the infringement as it actively participated in the arrangements between the Clubs.

Legal qualification

Interestingly, the Polish Basketball Association (the “PBA”) was not targeted by the investigation as the allegedly unlawful arrangements were made between the Clubs under the League’s “umbrella”. Undeniably, the fine imposed on the League had some indirect impact on the PBA’s financial interests as the League operates as a joint-stock company, with 70% of shares owned by the PBA. However, the PBA was not a party to the Decision as it did not participate in the problematic discussions.

Lack of the PBA’s involvement determined the legal qualification of the questioned conduct. The PCA declared that the Clubs and the League entered into an anticompetitive agreement (also elements of exchange of commercially sensitive information were found in the Decision). Given that the PBA was not involved in the investigated conduct, it could not have been assessed as the decision of association of undertakings which is frequently the case in professional sport antitrust cases.

The infringement was qualified under both national law (Art. 6(1) of the Competition Act) and Art. 101(1) TFEU. According to the PCA, the fact that the Clubs are competing for players with foreign clubs (located in EU Member States) was sufficient evidence that the intra-EU trade was affected. On the other hand, the PCA was sceptical about defining geographic market as countries affiliated in FIBA Europe and the United States, and decided to narrow its scope to Poland.

Economic and legal context of the COVID-19 pandemic

It should be noted that under the applicable CJEU case law, before declaring that the restriction of competition is qualifiable as “by object”, a closer look should be made into its economic and legal context. [3] Since the subject matter of the proceedings were purchase prices (remuneration payable to players) the PCA felt compelled to refer to the CJEU’s approach. According to the Decision, the coronavirus pandemic did not justify wage-fixing arrangements as financial situation and stability should have been individually assessed by each Club.

No exemption granted

Due to the “by object” character of the conduct and its high market coverage, the PCA refused to apply the de minims exemption. Since the conduct was not covered by any block-exemption regulation, the PCA did not apply any of such regulations.

The PCA also rejected two Clubs’ arguments on the applicability of individual exemption. According to the Decision, maintenance of the Clubs’ liquidity, without any positive externalities, cannot be regarded as efficiency gain under Art. 101(3) TFEU or its national equivalent. As to the precondition of fair share, the PCA declared that this should be passed on to the players (immediate victims of the conduct) which was not the case at hand.

WhatsApp conversation – smoking-gun evidence

Among the evidence collected by the PCA during the investigation screenshots of a WhatsApp conversation between the Clubs played a key role. Notwithstanding that the conversation took place only between the Clubs, the evidence was also incriminating for the League. The participants often referred to the League’s support for their concerted action and their bilateral contacts with it. Given that no evidence questioning the authenticity of the conversation was adduced, the PCA considered it credible and based its findings on the screenshots.

Summary

Although the total amount of fines imposed on the League and the Clubs did not exceed PLN 1 million (approx. EUR 212,000), the precedent-setting character of the Decision is unquestionable. Contrary to parallel “sporting cases” pending before the EU Courts (European Superleague [4] and International Skating Union), [5] the Polish basketball case does not discuss the issue to what extent competition law can tamper with the organisation of professional sports. A possible reason for this is that the infringement declared in the Decision was committed by the Clubs supported by the League, so the PBA itself (quasi-regulator) was not involved.

Nevertheless, in course of the investigation the parties often invoked COVID-19 Guidance issued by the Basketball Arbitral Tribunal on 20 April 2020, which contained some rules of reducing players’ remuneration. Since the Decision is not final and has been appealed before the Competition Court, we may witness more detailed discussion on this issue in the course of judicial review.

Footnotes

[1Act of 16 February 2007 on Competition and Consumers Protection [ustawa z dnia 16 lutego 2007 r. o ochronie konkurencji I konsumentów] (consolidated text – Journal of Laws 2021 item 275 with amendments).

[2Case C-194/14 P AC Treuhand AG v Commission [2015] EU:C:2015:717.

[3Case C-67/13 P CB v Commission [2014] EU:C:2014:2204, para. 53; case C-32/11 Allianz Hungária Biztosító e.a. [2013] EU:C:2013:160, para. 36; case C-228/18 Budapest Bank and Others [2020] EU:C:2020:265, para. 51.

[4Case C-333/21 European Superleague Company [2022] EU:C:2022:993. Opinion of AG Rantos.

[5Case T-93/18 International Skating Union v Commission [2020] EU:T:2020:610; case C-124/21 P - International Skating Union v Commission [2022] EU:C:2022:993. Opinion of AG Rantos.

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Szymon Gołębiowski, Stanisław Szymanek, The Polish Competition Authority fines 16 basketball clubs and the national league for exchanging commercially sensitive information and colluding to terminate player contracts during the COVID-19 pandemic (BM Slam Stal / Gdyński Klub / Gliwickie /...), 20 October 2022, e-Competitions January 2023 - II, Art. N° 110696

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