The Competition and Markets Authority (CMA) launched an investigation in September 2021 and has now issued a statement of objections outlining its preliminary findings. This investigation was triggered by admissions from both Leicester City FC and JD Sports, acknowledging their engagement in anti-competitive behavior. Their actions were found to limit competition in the sales of Leicester City-branded clothing, including replica kits, within the UK.
The fine is related to the sale of Leicester City football kits and other branded clothing supplied by Leicester City to JD Sports over two and a half football seasons. According to the Competition and Markets Authority’s preliminary findings, both companies engaged in anti-competitive behavior. Expressly, JD Sports agreed to refrain from selling Leicester City-branded apparel online during the 2018/19 season and to impose a delivery charge on all orders of Leicester City clothing in the 2019/20 and 2020/21 seasons, deviating from their typical promotional offer of free delivery for orders over £70. This was aimed at preventing the undercutting of Leicester City’s direct sales.
In effect, these two competing companies formed what could be termed a cartel. They demarcated markets, with JD Sports abstaining from online kit sales for the 2018/19 season and fixed prices by JD Sports levying delivery charges, thus avoiding undercutting Leicester City’s sales. Such actions are considered grave breaches of competition law, with fines of up to 10% of the global group turnover of the involved businesses, disqualification of directors, and potential criminal penalties, including imprisonment.
Leicester City FC and its parent companies have acknowledged their involvement in the alleged arrangement and have agreed to pay a fine according to the CMA’s settlement policy, with a maximum penalty of £880k. The fine is considered a settlement discount due to the resource savings resulting from Leicester City FC’s admission and cooperation, facilitating a quicker investigation resolution.
On the other hand, JD Sports reported the illegal conduct and recognized its participation through a leniency application. JD Sports will not be fined in exchange for continued cooperation and compliance with the CMA’s leniency policy. They clarified that no current or former directors or senior management were involved in the misconduct. JD Sports has also implemented several measures to strengthen its compliance program regarding competition laws, and the Board reiterates its commitment to allocate the necessary internal and external resources to ensure these measures are integrated into the company’s daily activities.
The penalty imposed on Leicester City FC sends an unambiguous message to these and other businesses that collusive anti-competitive behavior will face repercussions.
As the football sector expands, national competition authorities have shifted their focus towards football clubs and sports gear. This shift explains the emergence of similar cases in the Western Balkans. In 2017, the Serbian Competition Authority (“SCA“) scrutinized the competitive dynamics in Serbia’s sports apparel and equipment wholesale and retail markets. They subsequently initiated action against N Sport, Đak d.o.o., and other undertakings present in retail markets due to suspected restrictive agreements. The SCA determined that all purchase agreements concluded by N Sport as the seller contained a provision stipulating prices for subsequent sales. Additionally, buyers were bound to adhere to these dictated prices.
Zvezda Forever, a Football Club Red Star subsidiary, was involved in one such deal because of their ongoing sponsorship tie-up with Puma. With N Sport serving as Puma’s distributor, this led to a contract with Zvezda Forever. However, Zvezda Forever didn’t engage in the resale of items procured from N Sport; instead, these items were used for internal purposes.
According to the Guidelines on Vertical Restraints from 2010, the Block Exemption Regulation does not cover vertical agreements with end consumers who do not operate as undertakings. This is because end consumers are not considered market participants within these guidelines. The same principle applies to the situation involving Zvezda Forever. Given that the merchandise was for internal use and not resale, Zvezda Forever cannot be classified as a market participant and was consequently not subject to fines.
As football’s landscape evolves and is intertwined with commerce, maintaining integrity in business practices is essential to preserve the authenticity and spirit of football. These cases serve as wake-up calls, urging clubs, entities, and industry insiders to champion the principles of fairness, transparency, and healthy competition. Just as fans anticipate an honest and exciting match on the field, they deserve equivalent standards off it. Ultimately, it is in the game’s and its enthusiasts’ best interests that the football industry remains a beacon of integrity in sport and business.
Authors:
Milica Novaković
Vuk Leković
