Is it finally time for competition law to tackle Premiership rugby?

Professional rugby union in England continues to navigate severe financial instability that has in part, occurred because of the lack of real exposure to the beneficial effects of a competitive market place. Evolving in a market that lacks real competitive influence has resulted in a league that is commercially inefficient and that has failed to embraced innovation.

Professional sport, however, is increasingly is in the sights of the competition authorities and it is time that clubs, leagues and investors recognise that competition compliance is a strategic issue, or risk exposure to enforcement.

Here are 3 key competition law risk areas facing professional rugby union:

1. Centralised funding and revenue sharing

The distribution of league revenues from broadcasting rights bring substantive benefits, to consumers and clubs alike. However these efficiencies, and the softening of competition that they necessitate are only acceptable in the eyes of competition law if there are no less restrictive means by which to achieve them, and competition is not eliminated as a result. Clubs excluded from full revenue sharing, or subject to opaque and outdated allocation frameworks (like the P Share) are in an increasingly strong position to raise concerns about fairness and competitive distortion, particularly where the league structures also inhibit promotion and relegation or equal access.

2. Salary caps

Salary caps have a role in ensuring competitive balance and financial discipline. However, when applied without appropriate procedural safeguards, or when accompanied by a complex system of caveats, they can distort competition, restrict player movement and artificially supress wages. Caps must be proportionate and compliant with competition law. Risks are increased as player markets are cross-jurisdictional, bringing them within the scope of not only the Competition and Markets Authority, but the European Commission. This is a particularly critical consideration when labour market cases are of increasing concern to both authorities.

3. Ownership and investment structures

Private equity firms are now a firm feature of professional rugby, with the likes of CVC now owning stakes in a variety of national leagues and competitions. Cross-ownership often raises competition concerns around foreclosure, preferential treatment, governance risks and again, artificial wage suppression. Alignment on strategic commercial choices across leagues is likely to draw the attention of the regulators.

The influence of competition law on professional rugby has been insufficient for too long, and the financial wellbeing of the league is just one of the symptoms. As the governing bodies do not seem motivated to take the causes of the problems, it is time that the authorities stepped in. The future of the sport may depend on it.