Spain: The clauses of a tender which result in an abuse of dominant position by a sports federation are null and void

España - 26 / 07 / 2023

Ana Garrote, Juan Carlos de la Calle y Antonio Fabregat, del área de Resolución de conflictos: litigación y arbitraje de Garrigues

In a judgment in which Garrigues acted as legal director, the Provincial Appeal Court of Madrid confirms that the clauses in the bidding conditions for soccer audiovisual rights that constitute an infringement of Articles 102 of the Treaty on the Functioning of the European Union (TFEU) and 2 of the Antitrust Law (LDC) are null and void, although this is not the legal consequence provided for in those provisions.

On July 5, 2023, the 28th Section of Madrid Provincial Appeal Court issued a relevant Ruling for the private application of competition law by which: on the one hand, (i) it confirms the decision issued by the Commercial Court No. 3 of Madrid, which had declared that a national sports federation had abused its dominant position in the market for audiovisual rights of the Cup of H. M. the King, and on the other hand, (ii) it declares null and void certain clauses of the bidding process promoted by such sports federation for the award of the audiovisual rights of the Cup of H. M. the King for the years 2019 to 2022. Additionally, (iii) it orders the federation to pay the operator the damages caused up to a limit of 12.3 million euros.

1. Background

The Royal Spanish Football Federation (RFEF) is, by legal attribution, the entity in charge of marketing the audiovisual rights of certain sports competitions, including the Cup of H. M. the King.

In this context, in 2019, the RFEF published a tender for the audiovisual rights of the Cup of H. M. the King for the years 2019-2022 for Spain, Europe and international markets.

In October 2019, after several bidders had submitted their bids for each of the three aforementioned tenders (Spain, Europe and International Markets), the RFEF decided to cancel the tenders, and to call for new tenders with the same purpose.

In response, one of the main operators in the global audiovisual rights market -represented by Garrigues' Dispute Resolution team: Litigation and Arbitration - filed a stand-alone lawsuit against the RFEF in which, in essence, it claimed that the decision to cancel the aforementioned tenders - resorting to various strategies and relying on the bidding conditions - constituted a maneuver by the RFEF to avoid awarding the audiovisual rights to the aforementioned operator, despite the latter having submitted the best bids.

In this sense, the Court was asked to state that:

That the RFEF had incurred in an abuse of a dominant position (contrary to articles. 102 of the TFEU and 2 of the LDC) by including in the bidding conditions of the tenders certain clauses pre-directed to exclude from the market or prejudice the referred bidder. And, consequently, to declare the nullity of the clauses effectively included in the bidding conditions with the aforementioned purpose.
And that, in addition, the RFEF would have incurred in an abuse of a dominant position (contrary to articles 102 of the TFEU and 2 of the LDC) with the arbitrary and unjustified cancellation of these tenders in order not to award them to the aforementioned operator, causing serious damages that the RFEF would be obliged to repair.

On January 10, 2022, Commercial Court No. 3 of Madrid issued a Judgment partially upholding the operator's claim, declaring that:

Indeed, the RFEF would have incurred in an abuse of its dominant position in the audiovisual rights market by introducing certain clauses in the bidding process that were aimed at excluding or harming an operator in the market.
In addition, the RFEF, in the Court's opinion, had also incurred in an abuse of its dominant position by having cancelled without cause the bidding for the audiovisual rights of the Cup of H. M. the King in Spain (to avoid awarding the rights to the plaintiff operator), and must compensate the latter for the damages suffered as a result of such abuse.

However, the Court dismissed three specific claims in the lawsuit:

First, it considered that despite the fact that actually certain clauses introduced in the bidding conditions had materialized an abuse of RFEF's dominant position, the consequence of this could not be its declaration of nullity, since articles 102 of the TFEU and 2 of the LDC do not contemplate such sanction for decisions and agreements that may infringe the referred precepts (unlike articles 101.2 of the TFEU and 1.2 of the LDC, which do expressly provide for it), and there is no other consequence than the one legally provided for (the declaration of the abuse provided for in the referred precepts, with the consequent prohibition of the abusive act).
Second, it considered that with respect to one of the specific clauses whose unlawfulness the operator was challenging (a clause called "criminal liability" which, in the operator's opinion, was pre-designed so that the RFEF could exclude it from the bidding process), it could not be considered abusive in the RFEF's actions, since said clause would not have been finally applied (because, in other proceedings between the operator and the RFEF, an interim injunction had been issued which would have been appreciated prima facie as unlawful.).
And, finally, although it considered that the RFEF did indeed abuse its dominant position in the bidding for the rights for Spain, it understood that this could not be predicted with respect to the bids in Europe and International Markets since, although the cancellation could have been arbitrary (to the detriment of the plaintiff operator), insofar as new bids were called, it cannot be understood that such cancellation had an exclusionary effect on the referred operator.

Both the RFEF and the plaintiff operator -advised by Garrigues- appealed the aforementioned Judgment.

2. The Judgment of the Provincial Court of Madrid

On July 5, 2023, the Provincial Appeal Court of Madrid (Section 28), issued the Judgement No. 492/2023, ruling on both appeals.

After a detailed analysis of the controversy, the Court of Appeal dismissed the appeal of the RFEF, confirming that indeed, as the lower Court had found:

Certain clauses of the bidding conditions were "preordained" to exclude the plaintiff operator from the market without any justification, and constituted an abuse by RFEF of its dominant position in the market for audiovisual rights of the Cup of H. M. the King (in Spain, Europe and International Markets).
And, furthermore, that the RFEF's actions in relation to the tender in Spain constituted an additional abuse of the aforementioned dominant position in that market, because it reflected an arbitrary decision to exclude the plaintiff operator from that market, by means of a strategy consisting of "masking the unlawful act" by establishing a reserve price for the tender that was not real (but a means to effectively materialize the exclusion of the plaintiff operator in the event that it made the best offer in the tender).

With regard to the operator's appeal, the Judgment contains the following pronouncements that are of relevance for the private application of competition law, and to ensure the full effectiveness of article 102 of the TFEU:

Firstly, in relation to the possibility of declaring the nullity of the clauses through which the RFEF materialized the aforementioned abuse of its dominant position, the Court acknowledges that - as the Commercial Court No. 3 of Madrid had pointed out in the first instance - articles 2 of the LDC and 102 of the TFUE do not rule on the sanction applicable to decisions, clauses or agreements that constitute an abuse of a dominant position. However, accepting the arguments of the operator, it reasons that insofar as these precepts include prohibitive rules, there must be a sanction for acts that contravene the prohibition, which must be nullity ex. article. 6.3 of the Spanish Civil Code (or the one expressly contemplated in the prohibitive rules for the case of contravention).

Consequently, and in the absence of any other specific sanction under articles 2 of the LDC and 102 of the TFEU, the Court declares that the effect of the declaration of unfairness of the bidding clauses cannot be other than to declare their radical nullity.
Secondly, the Provincial Appeal Court upheld the appeal of the operator in relation to the "Criminal Prejudiciality Clause", understanding that it was indeed pre-designed to exclude the operator from the tender, and reasoning that the fact that it was not applied in the end does not prevent the assessment of the abuse in the RFEF's actions (and the consequent nullity of the Clause). In this sense, the Court declares that "abusive conduct must be declared based on the intrinsic potential to produce harmful effects for competition" since the rule (both articles 102 of the TFEU and 2 of the LDC) does not "require a successful result for the abuser, simply the action of abusing".
Finally, in relation to the tenders for Europe and nternational markets, the Court also upheld the operator's appeal, understanding the fact that, after cancelling such tenders (without giving any specific reason), the RFEF called new tenders to award the audiovisual rights of the Cup of H. M. the King in such territories, would not prevent it from considering that the decision to cancel such tenders without cause -when the aforementioned operator had submitted the best bids- would reveal exclusionary conduct (to the detriment of the plaintiff operator) equally abusive.

Regarding the compensation for damages, the Appeal Court -confirming the decision of the lower Court- understands that this should be determined in the execution phase of the Judgment (with the limit of the amount requested in the claim), since it understands that the quantification made by the Claimant lacked sufficient individualization.

The Judgment is not final and may be subject to extraordinary appeals.

3. Conclusion

In short, the Provincial Appeal Court of Madrid rules through its Judgment of 5 July 2023 a case of great interest for the private application of articles 102 of the TFEU and 2 of the LDC, confirms that the sanction that must follow the declaration of abusiveness of an action materialized in certain clauses of a tender must be the declaration of its nullity. Additionally, It confirms that, for the purposes of analyzing the existence of a potential abuse of a dominant position by a dominant operator, it is not only the potential success of the abuse that must be taken into account, but the existence or not of an effectively abusive conduct.