Introduction
This essay examines whether a franchise-based league model, as commonly seen in North American professional sports, can align with Article 101 of the Treaty on the Functioning of the European Union (TFEU). Article 101 prohibits agreements between undertakings that restrict competition within the internal market. In sports law, the interplay between commercial arrangements in leagues and EU competition rules has generated considerable debate. The discussion focuses on core features of franchise models, such as territorial exclusivity and player allocation mechanisms, and evaluates them against established EU jurisprudence. Due to the absence of directly applicable case law on franchise leagues in the EU context, the analysis draws on broader principles from sports-related competition decisions.
Core Elements of the Franchise Model
A franchise league typically grants individual teams exclusive territorial rights within defined geographic areas. This structure aims to maintain competitive balance and maximise commercial value. Additional elements often include player drafts and revenue-sharing agreements. These arrangements can be viewed as agreements between undertakings under Article 101(1) TFEU, as teams are independent economic entities pursuing profit. The Court of Justice has held that rules adopted by sports governing bodies constitute decisions of associations of undertakings where they produce economic effects (Case C-519/04 P Meca-Medina and Majcen v Commission). Similar reasoning could extend to decisions taken collectively by franchise owners.
Application of Article 101 TFEU
Article 101(1) captures restrictions that appreciably affect trade between Member States. Franchise-style territorial exclusivity may foreclose market access for potential new entrants, thereby limiting competition in the supply of sports entertainment. However, the Court has recognised that certain sporting rules fall outside the prohibition where they pursue legitimate objectives and are proportionate (Meca-Medina). A franchise league could argue that territorial allocations are necessary to preserve uncertainty of outcome and long-term investment in clubs. Nevertheless, the absence of an objective justification or the imposition of disproportionate limitations would render such arrangements incompatible. The Commission’s practice in cases involving joint selling of media rights, such as the UEFA Champions League decision, demonstrates that collective arrangements require careful scrutiny under Article 101(3) to establish efficiency gains that outweigh restrictive effects.
Assessment of Compatibility
Compatibility ultimately depends on whether the restrictive features satisfy the criteria of Article 101(3). This requires demonstrating that the arrangement improves production or distribution, allows consumers a fair share of benefits, imposes only indispensable restrictions, and does not eliminate competition. In a franchise context, evidence of maintained competitive balance and sustained investment could support an exemption. Yet the model’s inherent exclusion of external competition through closed membership and territorial monopolies creates a high evidentiary threshold. Without empirical demonstration that less restrictive alternatives, such as promotion and relegation systems, would fail to achieve the same objectives, the arrangements risk violating Article 101.
Conclusion
The franchise-based league model presents significant tensions with Article 101 TFEU due to its restrictive features, although compatibility cannot be ruled out where clear efficiencies are proven. The lack of EU-specific precedent on franchise structures limits definitive conclusions and highlights the need for case-by-case assessment informed by economic evidence.
References
- Commission Decision 2003/778/EC relating to a proceeding pursuant to Article 81 of the EC Treaty (UEFA Champions League), OJ L 291, 2003.
- Court of Justice of the European Union, Case C-519/04 P Meca-Medina and Majcen v Commission [2006] ECR I-6991.
- Weatherill, S. (2014) Principles and Practice in EU Sports Law. Oxford: Oxford University Press.
