SRS Legal Shots: No-poach agreement in football during Covid-19 may have been lawful

The dispute in the main proceedings concerns a no-poach agreement entered into by football clubs playing in the Portuguese First and Second Leagues, with the acquiescence of the national football association, during the COVID-19 pandemic.

In April 2020, the Portuguese Professional Football League (“LPFP”) and the clubs playing in the First League published a statement announcing that no sports club would proceed with the signing of a player who unilaterally terminated their employment contract on the grounds of issues caused by the Covid-19 pandemic or exceptional decisions resulting from it. The Second League clubs announced their intention to adhere to this rule.

In May 2020, the Portuguese Competition Authority (“AdC”) issued a precautionary measure suspending the no-poach agreement with immediate effect for a period of 90 days. The LPFP and the clubs agreed to the precautionary measure.

In April 2022, the AdC adopted its final decision in which it classified the no-poach agreement as anti-competitive in breach of Article 9 of the Portuguese Competition Act and Article 101(1) TFEU and imposed fines on the clubs involved.

That decision was challenged by 28 of those clubs before the TCRS. Subsequently the TCRS referred 3 questions to the Court of Justice for a preliminary ruling.

In order to assess the compatibility of such an agreement with Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”), the TCRS asked the Court of Justice to provide guidance on the concept of restriction of competition “by object”, as well as on the scope of the principles arising from the Meca-Medina case law.

In his Opinion delivered in response to the request for a preliminary ruling, Advocate General Nicholas Emiliou proposes that the Court of Justice answer the questions referred to it by the TCRS as follows: Article 101(1) TFEU must be interpreted as meaning that a no-poach agreement concluded during the COVID-19 pandemic by professional sports clubs, with the acquiescence of their national sports association:

1) must not be classified as restrictive by object if its actual purpose was to preserve the fairness and integrity of the sports competition affected by the pandemic; and

2) falls within the scope of the Meca-Medina case law, provided that, in particular, it genuinely aims to ensure the integrity and fairness of the sports competition and is necessary and proportionate to that objective.

The Advocate General based his conclusion on the following considerations:

- Although no-poach agreements have all the characteristics to be considered, prima facie, restrictive of competition by object, it is necessary to take into account the content, legal and economic context and objectives of the agreement in question in order to ascertain whether there are specific circumstances that could call into question the harmful nature of the agreement.

- The content of the agreement (its limited scope), its context (the Covid-19 pandemic) and its objective (to ensure an orderly conclusion of the sports season) require further assessment by the TCRS.

- The no-poach agreement should not be classified as restrictive by object if its real purpose was to preserve the fairness and integrity of the sports competition affected by the pandemic.

The Advocate General based his conclusion 2) on the following considerations:

- If (and only if) the TCRS concludes that the no-poach agreement is not restrictive by object (as follows from the Advocate General's preliminary assessment), it will apply the Meca-Medina case law to determine, in light of the legal and economic context of the agreement, whether: i) the agreement is justified by the pursuit of one or more legitimate objectives of general interest which are not, in themselves, anti-competitive; ii) the specific means used to pursue the objective in question were truly necessary for that purpose; iii) the effects of the agreement do not go beyond what is necessary to achieve its objective, in particular by eliminating all competition.

- If the answer to all three questions is yes, the agreement in question is not covered by the prohibition in Article 101 TFEU.

- Although the TCRS is best placed to answer these questions, there are some features of the agreement and its context that are important: a) the limited geographical and personal scope of the agreement; b) the urgency of the matter and the uncertainty and complexity of the situation caused by the pandemic, which required measures that were simple in design and implementation and reasonably available; c) the relatively small impact of the agreement on the economic activity of the football players involved.

- The Advocate General's preliminary understanding is that the no-poach agreement was designed to limit, as much as possible, the impact on competition between the clubs involved, and that alternative measures that are equally effective and less restrictive were difficult to identify.