Bundeskartellamt provides preliminary assessment of DFL’s 50+1 ownership rule

The Bundeskartellamt has today informed the Deutsche Fußball Liga (DFL, German Football League) of its preliminary assessment under competition law of the so-called 50+1 rule. In the authority’s view the basic rule is potentially unproblematic under competition law because of the sport policy objectives it pursues. However, the Bundeskartellamt considers it problematic that the rule’s uniform application and enforcement is currently not ensured.

The 50+1 rule was introduced in 1999 on the one hand to provide the clubs of the Bundesliga and Bundesliga 2 with new funding possibilities and on the other to limit the influence of investors and retain the club character of the sport. The rule laid down in the statutes of the DFL stipulates that if the professional soccer division is outsourced into a capital company, a not-for-profit parent club has to retain the majority of the voting rights in that company (basic rule). However, the executive committee of the DFL can grant an exemption to this basic rule if an investor has substantially supported the parent club’s football activities for a continuous period of more than 20 years (benefactor exemption).

Andreas Mundt, President of the Bundeskartellamt: “Competition law does not stand in the way of the sport policy objectives pursued by the 50+1 rule. However, DFL must ensure that the rule is consistently applied and enforced for all clubs.
Professional sport is for good reasons subject to competition rules. The economic activities of associations and clubs are subject to German and European competition law. Restricting participation in league matches to entities controlled by not-for-profit clubs undoubtedly constitutes a restriction to competition. However, restrictions of competition can in certain cases escape the prohibition of anti-competitive agreements. With the 50+1 rule DFL intends to maintain the club character of the sport and ensure a certain even balance in sports competition. These sport policy objectives can also be recognised under competition law. In its basic form the 50+1 rule seems appropriate and proportionate for achieving such goals. On the other hand we have doubts about its combination with the current benefactor exemption. Exemptions to the basic rule are generally possible. Such exemptions should be clearly defined and not directly countervene the sport policy objectives which DFL itself pursues with the 50+1 rule.”

The appraisal of the 50+1 rule by the Bundeskartellamt goes back to an initiative of the DFL. The decision requested by DFL that there are no grounds for action by the Bundeskartellamt in this matter (Section 32c of the German Competition Act, GWB) cannot be issued at this stage. The DFL now has the opportunity to comment on the Bundeskartellamt’s preliminary assessment of the matter. The clubs and investors admitted as third parties to the proceeding can also give their comments.

The Bundeskartellamt currently assumes that the 50+1 basic rule can potentially escape the prohibition provisions under competition law.

Although the rule constitutes a restriction of competition as it sets certain conditions for participation in the Bundesliga and Bundesliga 2, DFL is nevertheless pursuing legitimate objectives, i.e. to ensure the organisation of competition between membership clubs and an even balance in sports competition. Requirements of sport associations regarding participants in a contest can escape competition law if these serve the purpose of furthering certain aspects of the sports competition, but also if they serve ethical/social objectives.

DFL’s argument that it wishes to maintain the club character of the sport can be considered such an objective: It offers the public at large the possibility to co-determine a club's affairs by becoming a member and hence to participate in Bundesliga activity beyond their role as consumers.

With the 50+1 rule DFL also intends to help strike an even balance in sports competition in the Bundesliga. This is also an objective which can be recognised under competition law and the 50+1 rule in principle appears suitable to attain that objective. In its basic form the 50+1 rule prevents clubs from being able to secure more funding for sports competition by giving up control over their professional soccer division to investors, as compared to clubs which maintain their members’ power of influence.

After conducting a preliminary assessment, the Bundeskartellamt however has concerns about the current combination of the basic rule with the benefactor exemption.

If the benefactor exemption in its current version is included in the consideration, the restriction of competition appears disproportionate. This raises doubts whether the overall combination of the basic rule and exemption is suitable to achieve the objectives of the 50+1 basic rule. With the allowance of a benefactor exemption the controlling influence of the not-for-profit parent club in the Bundesliga participants affected will be eliminated and the sports activity detached from the club model. This would risk the loss of key characteristics such as membership participation in the clubs and transparency for members. Club football and an even balance in competition, which are DFL’s objectives in retaining the rule, will no longer be uniformly assured in all football clubs. This also results in a competitive disadvantage for those clubs which do not benefit from the exemption. Membership-owned and investor-financed clubs compete alongside one another. This raises doubts whether the overall rule is suitable for organising fair competition between clubs. If some clubs have better possibilities to secure equity funding than others, this is more likely to distort rather than create an even balance in sports competition.

The 50+1 rule was adopted in 1999 in the statutes of the Deutscher Fußball Bund (DFB, German Football Association, then governing Bundesliga and Bundesliga 2 as predecessors of what is now DFL), together with the possibility to outsource the professional football division into a capital company. Until then only registered not-for-profit associations could take part in Bundesliga and Bundesliga 2. The majority of the currently 18 Bundesliga clubs have outsourced their professional soccer division into a capital company, which continues to be controlled by the not-for-profit association. Only four clubs continue to be fully organised as registered not-for-profit associations, including their professional soccer divisions (Mainz 05, Schalke 04, SC Freiburg, Union Berlin). Three clubs were granted a benefactor exemption (Bayer Leverkusen, TSG Hoffenheim, VfL Wolfsburg).