soccer field

German football’s unique 50+1 ownership rule assessed as “unproblematic” from a competition law perspective

Juni 15, 2021

On 31 May 2021, the German Federal Cartel Office (FCO) provided its preliminary assessment on German football’s so-called 50+1 rule.

Background

According to the Deutsche Fußball Liga (DFL), the operator of Germany’s top two divisions (Bundesliga and 2. Bundesliga), the 50+1 rule is an important factor in “top-quality play, the highest average attendances in world football, low ticket prices and a great fan culture”. This rule is laid down in Sec. 8(2) and (3) of the statues of the DFL and also in Sec. 16c(3) of the statues of the German Football Association (Deutscher Fußball-Bund), the organisational body for German football. It prohibits investors from acquiring a majority of the voting rights in the corporations that own the professional teams in Germany – which means that club members (i.e. fans) have majority ownership. No such similar rule exists in any other of the “Big Five” leagues (the Big Five encompassing England, Germany, Spain, France and Italy).

In Germany, football (like all other sports) is traditionally played by clubs that pursue non-profit goals, with each club structured as a Verein. However, many Bundesliga clubs have long since established corporations for their professional teams and business. This is because a Verein can lose its legal capacity if, instead of pursuing idealistic goals, it is profit-oriented, and its members are then at risk of unlimited liability. This results in professional clubs in Germany being separated into two corporations since they clearly pursue economic goals, yet the sport itself is for the priority for other aspects of the clubs, such as their youth teams. For example, in addition to FC Bayern München e.V. (Verein), there is also FC Bayern München AG (Aktiengesellschaft, stock corporation). Due to the 50+1 rule, no investor may acquire a voting majority in FC Bayern München AG.

The 50+1 rule has one exception. The so-called benefactor exemption allows an investor, who has supported a single club’s football activities substantially and continuously for a period of more than 20 years, to acquire the majority of voting shares. Currently, three clubs rely on this exemption, but certain other clubs have had applications for exemptions rejected in recent years. Some of those clubs believe that the 50+1 rule violates competition law, and have repeatedly threatened to challenge the rule before the Court of Justice of the European Union (CJEU). To help resolve any uncertainty as to whether the 50+1 rule infringes competition law, the DFL asked the FCO to assess whether or not there are any grounds for action by the FCO in this matter.

The FCO’s preliminary assessment

In the FCO’s view, the basic 50+1 rule is unproblematic under competition law. The FCO found that both German and EU competition law applies to the rule and that the rule creates restrictions of competition. However, the FCO concluded that those restrictions of competition are justified on the basis of the sports policy objectives pursued by the DFL. The FCO stressed that the “DFL intends to maintain the club character of the sport and ensure a certain even balance in sports competition”. Also, the FCO’s view is that the basic rule seems to be “appropriate and proportionate for achieving such goals”. As a result, the Meca-Medina criteria, which the CJEU established in 2006, were met and the 50+1 rule in its basic form was therefore considered to be in line with both German and EU competition law.

However, the FCO expressed concerns about the benefactor exemption. The FCO indicated that this exemption may ultimately make it difficult or impossible to pursue the goals that the basic rule seeks to achieve. Among other things, the benefactor exemption may result in “competitive disadvantage for those clubs which do not benefit from the exemption”. According to the FCO, the 50+1 rule’s restrictions of competition appear disproportionate if the basic rule and the benefactor exemption are considered together.

Outlook

It is now for the DFL, as well as the football clubs and investors admitted as third parties to the proceedings, to comment on and react to the FCO’s preliminary assessment.

It will be particularly interesting to see if and how European competitions will be addressed. Although the 50+1 rule may aim for competitive balance within German football, German clubs’ ability to compete at the European level will also need to be considered. How long can German clubs keep up with French, Spanish, Italian and English clubs that are often heavily funded by external investors, and does the 50+1 rule distort competition in this regard?

At the same time, foreign ownership of clubs in England in particular is not universally popular, with many fans feeling disconnected from the clubs they support, and recent anger regarding the proposed European Super League at least in part reflecting this. Fans in other countries therefore often look longingly at Germany’s 50+1 rule, and it will be interesting to see whether the fallout from the European Super League prompts attempts to replicate the 50+1 rule in other countries supported by the FCO’s finding that the basic rule is compatible with competition law.